Tuesday May 27 2014

How to budget your money

One-thousand Shilling coins. With a budget, one

One-thousand Shilling coins. With a budget, one knows how much money to expect, and how much to spend. Photo by Rachel Mabala 


It is budget season in East Africa. The different Finance ministers have already given the public a sneak preview of what the country budgets will look like. In my line of work, the contents of the country’s budget are a key driver of business decisions. Our clients both individuals and companies are keenly interested in these budgets.

It is intriguing that while I am tuned into this country budget stuff at work, I absolutely hate the concept of operating within a budget in my personal finances.

The word budget conjures up bad memories. I first heard the word budget from my parents in the 18 months following the 1986 regime change in Uganda. My family came upon hard times in the aftermath of the events of January 1986; indeed for us that change was fundamental and not just a change of guard, if you get my drift.

Daddy belonged to the old guard and the change in leadership had far reaching consequences for the family including learning to live on a budget.

It was a difficult and confusing time for me as a teenager, having to deal with the change in “status” and the drastic adjustments to our lifestyle. I am still shocked by my aversion to working within a budget seeing as these events happened over 25 years ago.

In my sub-conscious making a household budget and living within it is associated with hard times. You see, during that time, we had to make lists for everything that had a financial angle, we were forced to prioritise our needs. At the end of every school holiday, you made a list of your requirements for the school term, you ensured that you itemised everything in order of importance.

One particularly painful memory of my secondary school days is of my dad crossing out 80 to 90 per cent of the items I had on my list. I vividly remember the sinking feeling of going to school each term with the bare minimum of requirements, fearing that my friends would like me less due to my change in status.

As a direct result of this bad patch in my life, every time I attempt to draw up a budget and stick to it, I find myself in a foul mood or in a state of fear and acute unhappiness. What is particularly intriguing about this poor attitude of mine is, despite the fact that we as a family were a casualty of a regime change, the discipline of having and sticking with a budget is a good thing and is fundamental to wealth creation.

Furthermore, I know that the principles of wealth creation do not change just because one has been through a hard time. Looking back on those times, I can confidently quote the saying that “What does not kill you makes you strong.”

Last year I was visiting a friend, when one of her children run downstairs into the living room in a state of despair and utter horror.

Apparently, the satellite (cable) TV service provider had discontinued the family’s account due to non-payment of the monthly subscription. The next 45 minutes saw the entire household undergo a meltdown, with frantic phone calls made to the father who was at work. To this family, the disconnection was a crisis. I was amused; I had a flash back to my childhood, I saw myself in those children.

Working with budget

Operating within some form of budget is a key to wealth creation. So I have come up with a solution to my personal “trauma” concerning budgets.

Thanks to advice and guidance from my mentor I now have targets around how much of my income I need to put aside for saving and investment. I have over the years cultivated the discipline of observing these targets.

Interestingly, once I make this monthly deduction, I automatically manage my expenses within whatever amount of money I have left, a skill I perfected in those tough years between 1986 and 1996. I do not feel sad about cutting back on any expenditure due to the commitment to wealth creation and nobody in the family has “died” because we can not have this or the other.

So, what is your excuse for not having a budget? Remember budgeting is a key principle of wealth creation.

The writer is Standard Chartered Bank’s head of financial markets in East Africa.