06 Apr 2022

How to cope with the rising cost of living

Yesterday I felt a need to take some very hot masala tea at around 8.00 p.m. I am not a tea person as such and I can take weeks before taking a cup of tea. I do gallons of water, with green tea and at times purple tea to spice it up. So when a craving for tea came it had to be honored. It was a shocker for me to walk from one duka to the next and I could not get the milk. I tried several of them and to my amazement; only one shop had the packet of long life milk going for Kshs. 65.00 a packet. I just abandoned the whole mission as I only had Kshs. 50.00 and I had walked for a long distance to get to the one shop that had the milk. As I write this, my craving for hot masala tea ranges on.

Millions of Kenyans are struggling as the price of everything soars amidst fuel shortages, cooking oil and a rising cost of living all round. It feels like we have jumped out of the frying pan, only to fall straight into the fire! With cooking gas prices rising steadily in the recent past, kerosene shortages, and a dwindling charcoal market, millions of Kenyans are facing a hard choice to make between buying food or the fuel there-in.

With the cost of everything increasing, many Kenyans are likely to fall into debt as they struggle to pay bills and other commitments. Inflation is pushing up the prices of essential goods such as food, transport and utilities. More than two-thirds of people around the world are feeling the squeeze, according to new research. As the cost of living rises, the low income earners and daily wage people in society are the hardest hit.

It’s normal to experience money worries, but it‘s better to face them rather than ignore them

How worried should you be about the rising cost of living?

It is easy to feel panicky and overwhelmed by the headlines right now, which are saturated by the cost of living crisis.

While we cannot ignore the challenges people are facing, it is important to remember you are not alone. It’s normal to experience money worries, but it is better to face them rather than ignore them.

However, if you are experiencing feelings of anxiety and panic because of the news, it could be helpful for you to turn off the news and focus on your own financial situation. You may find that you are not in as much trouble as you think you are.

Where should I start to manage my finances?

Here are some tips:

  • Practice financial restraint to avoid overspending

One of the things COVID 19 taught us was how quickly our finances can be impacted and how devastating that can be without a safety net like savings or an emergency fund. Whether it is global unrest, a pandemic, or the rising cost of living, we may not be able to predict what is coming next, but we can ensure that our finances are prepared for anything. Having funds put aside for a rainy day, planning your spending, and creating an emergency plan are all ways to protect yourself financially during an emergency or disaster. Start by tracking your spending for a few weeks to see where your money is going. It is a great way to get an overall look at your spending before building your budget.

 Shop Smart, Not Stressed

When things start going south, one of the best things you can do is to shop smart and not stressed. Unfortunately, during times of instability, many people increase their spending rather than decrease it. Suddenly buying in bulk, hoarding supplies, and buying excess amounts of food and supplies became the norm during the early months of COVID. Stop yourself from falling into this trap, even if you are feeling stressed. In fact, times of stress are a great time to slow down and plan your spending. Always shop with a list, this will help ensure that you only buy what you need and will not be tempted by unnecessary purchases.

Learn to recognize how your emotions affect the way you shop. Do not let stress rule your spending. If you are feeling depressed or anxious, consider skipping the shopping for that day.

 Ensure that you have an emergency plan

Prioritize building up an emergency fund and try to start saving up for one as soon as you can. We recommend having at least 3 and preferably 6 months of essential living expenses set aside in a separate savings account for emergencies. You could do a Money Market fund. Avoid the temptation to put off building up an emergency fund. Even though you may want to pay your debts off first, the likelihood of something unexpected happening means that with no savings, you would have to rely on credit, and potentially get deeper into debt, to pay for the emergency.

  • Stay on top of your debt payments.

Trying to manage debt on top of your other financial obligations is already difficult enough. It would be even worse during an emergency if you were behind when the disaster struck. You could renegotiate the terms of your loan with your financiers and better still restructure your loans to increase the loan period but reduce the monthly instalment to help you be up to date.

  • Update your insurance policies

Make sure all of your insurance policies (e.g. life, medical, home) are always current and paid up. If you were facing serious damages, due to accidents, sickness or fires for example, not having insurance could be financially devastating.

  • Budgeting

Start learning how to budget in order to manage your money better. Creating a budget can be time-consuming, but it is a vital tool in helping protect you from inflation. Constantly reviewing your budget is one of the most “essential” things you can do to make an impact on your savings

  • Start tracking your spending.

Once you understand your spending, you can re-prioritize things. Maybe push back on buying lunches, or reduce eating out and buying takeaways to twice a week, for example. You could carry packed lunch which is equally good instead of buying food.

  • Cut back on spending

Now is a good time to check with your suppliers to ensure you are getting the best deal you can get. You could call your current suppliers and determine if they may be able to provide you with a better price for your home and business supplies.

  • Become a savvy shopper

Now more than ever is the best time to become really savvy with what you are spending on. Keep tabs on supermarket prices and stay on top of your comparison game. For example, check the prices of the same item in different supermarkets and other suppliers.

  • Maintain a Diversified Portfolio of Investments

Talking to an investment advisor or your financial advisor can help ensure you have got a good balance of investments that will ideally outpace inflation while also mitigating your risk.

  • Carefully consider large purchases.

Several purchases have been affected by Covid – as well as inflation. If you can delay a kitchen or bathroom renovation, it may be a good time to wait out the higher materials prices.

  • See what you can get for free!

There are a number of things you can do or get for free, if you are savvy about it – and if you are willing to share. There is enough for everybody so long as we share and are helping each other. We can get together with our neighbour, families, and friends and see what we can share and how much we can support one another. E.g Car pooling.

  • Ask for a pay rise

Companies are back to business and want to retain their employees. Some could be offering salary increases. It does not hurt to ask for a raise to protect you from the effects of increased cost of living. Outline to your boss your achievements over the past year with figures and evidence of your performance.

  • Plan ahead financially with expert help

Managing your finances and planning ahead can feel overwhelming when you are already facing a lot of stress in your own life or feeling it from every corner. Contact your financial advisor if you have one. If not you can contact me. They will help you with maneuvering the hard times Our First appointments are free, confidential, and non-judgmental no matter what your financial situation looks like. Preparing your finances for the unpredictability of life is crucial to maintain stability and financial wellness.

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