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ARE YOU BROKE? HERE IS WHY. (Number 5 will shock you)

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Do you constantly need more money despite having a steady source of income? Here is how you can identify some common reasons for financial challenges and some tips to overcome them.

  1. You don’t track your spending.

    It is easy to remember how much income we have made but we also need to remember where and how much we spent. The easiest way to know where your money goes is by tracking your spending. Keep a record of your spending; with time, you can tell where you can save, and based on your goals, you can tell where you need to spend more. If you run a business, divide your spending into fixed and variable costs. A fixed cost is an expense that does not vary with changes in sales or production volumes like rent, while a variable cost varies with sales or production volumes like commissions and raw materials. Sorting expenses into variable and fixed costs allows you to focus on the variable expenses you can reduce or control.
  2. You don’t have a budget.

    A budget helps you plan your earnings and expenses, avoid missed bills or commitments, and prevent overspending. Most of the budget items recur monthly like rent, bills, and transportation. Some are quarterly like school fees and some are yearly like insurance. All you need is a plan in the form of a budget.
  3. You don’t have an emergency fund.

    Without an emergency fund, your budget plan may be disrupted and disorganized when an emergency comes. When a sudden and unexpected event, like the illness or passing of a loved one, occurs, it can wreak havoc on your financial stability. It’s important to be prepared for the unexpected and have a plan in place to ensure that you and your loved ones are taken care of during difficult times. Don’t let unforeseen circumstances catch you off guard – save money for emergencies even though you can access an instant loan from Tala.
  4. You are over-indebted

    If you find yourself having no money after paying off debts, then you may be over-indebted. Overindebtedness means that debts exceed income. This may lead to taking a loan to pay off another one, termed “robbing Peter to pay Paul” and it may also lead to loan stacking. Loan stacking refers to getting approval for multiple loans simultaneously within a short period. There are ways of coming out of indebtedness like the debt avalanche method – organizing your debts from highest to lowest interest rates and focusing on paying off one account at a time while maintaining minimum payments on the others. Another method of getting out of over-indebtedness is the snowball method- To pay off debts effectively, it’s recommended to start by paying off the smallest loan first. Once that is taken care of, the money previously used for that payment should be rolled over to the next smallest debt. This process should be repeated until all accounts are paid off.
  5. You spend or give frivolously

    “If you can’t afford it, do without; if you must have it, work for it.” ~ Caroline Mutoko. What is your relationship with money? If you are a spendthrift, consider saving before spending. Prioritize rent, bills, and shopping before doing any other expenditure. For the ones that give too much to relatives and friends, budget for charity; that way, you can comfortably say “No” to requests that come after your budgeted charity is depleted. Prioritise who you must give to and avoid short-notice money requests. Track your expenses to understand where your money is going and take control of your spending. Overspending can lead to over-indebtedness.
  6. You need more money

    It’s not just about controlling spending, but also optimizing earnings. You may have a budget, have discipline in your spending, and even save some money but not meet your financial goals. You may want to increase your income.

Being low on cash does not necessarily mean being impoverished; sacrificing short-term luxuries can lead to long-term prosperity. We hope that the points above are helpful. Tala provides more than mobile loans in Kenya, it also provides financial literacy material like this. Tala is creating an impact beyond loans.

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