I recently wrote an article on Saving For Retirement where i demonstrated how Ksh. 20,000 saved monthly for a period of thirty three years from age 27 to age 60, you would have savings worth a whopping Kenya Shillings 19,735,720 assuming a conservative 5% annual growth rate.
Jennifer writes in to say that, like most Kenyans, it is very difficult to find that kind of money to sock away each money, what with elctricity, rent, fees and food to pay for. However, except for those barely making enough to make ends meet, most of us can find areas in our spending where with a little frugality we can cut back on expenses and save a little money for the future.
As an example, it is possible to cut back on some of the expenses below and save some money.
- Airtime. By using sms a little more to communicate with friends and family instead of calling each time, it is possible to reduce your monthly mobile expenditure. Total savings: Ksh. 1,000
- Electricity. Try better management of electricity utlisation at home and you could see a significant reduction in you monthly bill. Total savings: Ksh. 500
- Shopping. By being more frugal during your visits to the supermarket, you can cut out some “Wants” without affecting your quality of life. Total savings: Ksh. 1,000
- Eating Out. A lot of people spend a substantial amount each month eating out at fast food eateries especially on weekends with the kids and occassionaly a nice dinner treat. Try eating out less offten and use the savings to beef up your monthly savings. Your health and that of your family will definitely appreciate the fresh home-cooked meals. Total savings: Ksh. 2,000
- Pay TV. Do you really need 60 TV stations when you only get home past 7pm each night and go to bed by 11pm? Is football that important to you? Try choosing a bouquet with fewer TV channels and read a book once in a while too. Total savings: Ksh. 3,500
- Fuel: Despite the rising costs of fuel and the maddening Nairobi traffic, a lot of us still spend unnecessarily on fuel on short trips and through inefficient driving. Try walking when your destination is not too far or take a matatu once in a while. Total savings: Ksh. 1,000
- Weekday Lunches. If you skipped lunch once in a while or carried a snack from home, you could make some good savings. Cutting back on that Ksh. 300 lunch at Kosewe’s a few times a month can net you some savings that will tide you over in future. If your spouse also did the same, you could double your savings. Total savings: Ksh. 2,000
- Personal Care. While getting pampered at the salon is something to look forward to every weekend, it does quickly drain your purse at the current prices being charged in Nairobi. Cutting back on these grooming sessions and buying fewer cosmetic products can generate good savings for you. You can replace these with a massage from your partner at home. Total savings: Ksh. 2,000
- Gym membership: Do you pay a monthly membership fee at your local gym then show up hardly 4 times a month due to lack of time or lack of willpower to go after a hard day at the office. Try paying for the membership per session instead of monthly so that you only pay for what you use. Total savings: Ksh. 3,000
- Movies: With the current prices charged at the movies easily going beyound the Ksh. 1,000 mark for a night out at the movies for a couple, it is a good idea to stay home some weekends and watch DVDs instead or read a book. Total savings: Ksh. 1,000
- Nights out. The biggest money guzzler for most Kenyans is the amount spent on Friday nights and over the weekend at their favorite entertainment spots. With prices for a Tusker going as high as Ksh. 200 in some places, it is not difficult to see that this is an easy place to find savings. Just by staying home on some days and bonding with your partner, you can save a bundle per month. Total savings: Ksh. 3,000.
TOTAL SAVINGS: Ksh. 20,000
Investing this amount at 5% interest over 27 years will see you retire a millionaire many times over. And savings can be found also through quitting smoking, spending less of clothes and toys etc depending on each person’s circumstances. And savings need not be Ksh. 20,000. Even a modest sum of Ksh. 5,000 invested over the same period will grow into a tidy sum of Ksh. 3.3million by the age of 60.
Do you think you can find areas to cut back on?
My Road To Wealth 
Surprisingly, the cheaper toys that i bought for my son are the ones he seems to like the most and have lasted the longest too. I remember spending 4,000 bob on a remote controlled car that barely made it into its second week. My wife and I also made the mistake of buying expensive baby clothes when our son was younger and he outgrew all of them faster than we could buy them. Now they are all gathering dust as our second born was a daughter. Sigh!
An interesting piece on the CNN website shows that frugality and cutting back are the new buzzwords for most Americans.
“There’s less pressure to keep up with the Joneses,” says J. David Lewis, a financial planner with a fairly upscale client base in Knoxville. “They’re driving cars longer. They’re finally dropping their memberships to the country club they belonged to for 10 years but hardly ever went to.”
I don’t agree with this theory in terms of practicality. Too many unknowns (risks).
Rather than living within your means why not just create the means?
Cheers.
🙂
@Maishinski
The debate between “Spend Less Than You Earn” and “Earn More Than You Spend” is a timeless one. I however see no reason why the two should be mutually exclusive. As a matter of fact, my greatest breakthrough came as a result of earning significantly more and at the same time embracing the concept of spending wisely. I do not advocate cutting back on all the things that bring joy to a person’s life and I, for one, continue to enjoy my life as before, only this time having budgeted for the expense
J.D Roth puts it quite nicely that:
“There are only two things you can do to gain more wealth: spend less and earn more.
Spending less is something that you can do right now with little or no effort…. if you can learn to reduce your wants, you can trim spending by a shocking amount..Develop a frugal mindset. Live simply.
Earning money is the other half of the wealth equation. If you can increase the amount you earn, you will accumulate wealth more quickly.”
While finding ways to boost your income, examine your current spending habits. You may just find that you have more than enough to invest.
JK
Can you please adress the topic o how to invest! How can I invest a sum of Ksh.20000 wisely?