How to live within your means and not feel limited

A woman is pictured carrying shopping bags in this undated photo. To avoid financially depressing yourself, you can opt to save for an item instead of taking it on credit. PHOTO | COURTESY

What you need to know:

Top five money tracking apps you can use:

  • Money
  • Monthly Budget Planner & Daily Expense Tracker
  • Bills Reminder, Budget & Expense Manager
  • Fast Budget
  • Money Manager, Expense & Budget

Last week, Kenyans on Twitter diverted from the usual social media banter to share the bad financial decisions they have been making. As thousands of tweets went viral, it slowly emerged that many Kenyans do not know how to live within their means.

One user shared how they once lived in a rental house at a cost of Sh11,000 even though they only earned a salary of Sh13,000 per month. This case is not in isolation. In plum neighbourhoods, people rent expensive servants quarters simply to look uptown and polished.

Also, some Kenyans fail to adjust according to their means when times get rough. For example, popular lawyer Harun Ndubi is currently facing possible auctioning after failing to pay rent. Last month, he moved to court seeking orders to stop his landlord from evicting him and auctioning his property to recover rent money.

He started defaulting on rent in April and owes Sh 414,000. When this story broke, a social media commentator offered a word of advice to the lawyer. “Live within your means counsel. Move to a Sh25,000. You’ll owe no one an explanation!”

This might seem like a reasonable move, but it is often easier said than done. Mobile loans that are accessible by simply downloading an app and credit cards provide freedom to spend on more things than an income would ordinarily allow. So how can you start living within your means?

The envelope method

Identifying the total amount you make every end month and the total amount you spend is the first step to living below your means. Once you receive your pay, keep receipts and records of how you usually spend money until your next monthly pay.

In one column, list all your expenses and amounts used. In another column, list all the must-have expenses. These should include basics such as food, rent, transport and emergency.

Try to limit your spending to these items for a period of 30 days. You can use the envelop method. Get physical envelopes and label them with each of your expenses. You can label the envelopes as groceries, utilities or transport. Put money in each envelope.

For example, you can put Sh5,000 in the groceries envelope and Sh6,000 in the utility bills envelope. You will stop spending on an item once its envelope runs empty. You can also use apps such as Spend Track which monitor your utilities, communication, domestic, entertainment and transport expenses, investments, rent, dividends, salary and bonuses, as well as your general assets and liabilities.

Do you need it?

“Living within your means does not mean being so frugal that you end up depressing yourself. But it also means that you’re not living from paycheck to paycheck or getting negatives in your salary,” says financial planner Mercy Muthoka.

For example, you don’t have to take an expensive mortgage for a maisonette simply because the bank is willing to give it to you when you can acquire a simple three-bedroom house without going into debt. “The trick is to cut your needs and wants into the right size.

If you’re buying a car, don’t get a fuel guzzler on loan just to look cool if you can buy a small budget car that won’t puncture your pockets,” she says.

Copying the Joneses

Resist the pressure to fit in. To avoid financially depressing yourself, you can opt to save for an item instead of taking it on credit. For example, if you go shopping and find a really nice smart television set, start a savings plan for it instead of taking it on credit. Apart from saving you the pressure of repayments, you will build a goal-oriented money saving method. You may however need to boost your income. Don’t just settle at living below your income.

“Living below your means will give you additional cash for savings. But you can accelerate your drive towards financial independence by finding additional sources of income. These could be additional careers or side hustles,” says financial analyst and trainer Reuben Kioko.