Inflation and Personal Finance

A small road map to re-assess and re-plan your finances for inflation

Inflation is on the rise again. Due to recent geopolitical activity and covid-19 disruptions, most basic needs are now pricier than they have ever been. Inflation is pounding hard on Kenyan families, with the prices of food and transport reaching all-time highs. A loaf of bread retails at Sh60, and a 500ml packet of milk retails at Sh70. Inflation. The current prices are the highest ever recorded in the history of Kenya. According to experts, inflation is here to stay, at least for the foreseeable future. The effects may have long-term effects on your finances if they are not well managed. We think it is a good time for consumers to reconsider their overall financial plan.

If you feel a stretch in your finances, you are not alone. This situation is the case all over the world. If you want to safeguard your investment portfolio or your financial future, here are some tips to help you re-assess and re-adjust your finances.

Calculate your inflation rate

 To better understand your spending habits, you should monitor your personal inflation rate. Perhaps it’s time to reconsider and purchase that bicycle—if you drive to work regularly, you must be paying more for gas this year than last year.

How to calculate your personal inflation rate.

First of all, you need a figure for your monthly spending last year, for example, sh50,000 and your current expenditure, let us say you now spend Sh60,000. 

Subtract last year’s monthly expenditure from this year’s spend. Divide the difference by last year’s monthly spending. This figure is your inflation rate.

Get wise with your budgeting.

A monthly budget will help you plan for every cent. Knowing when your money is coming in and going out, you can plan decisively and identify new areas where you can easily stretch your budget and save or invest.

Budgeting to plan for inflation requires an eagle eye detail to identify all the areas where you can save and invest. You need to be strict and avoid what you don’t require.

Regulate what you spend on.

With the current upward trend in inflation, you need to exert a level of discipline and only pay for what you require. Save or invest whatever money you don’t require. Do not let inflation and unnecessary fees use up your livelihood. Buy food in bulk to regulate your mobile money fees. The transaction fees may seem minimal, but if you take a deeper look, you will find out they count a lot. 

Stick to your long-term investment plan.

With the volatility of markets increasing every day, stocks and other investments such as cryptocurrency are braving a rough patch. The smartest move is to stick to your long-term investment plan and not panic when the markets do. Long-term investments will safeguard your future, especially in retirement.

Stick to saving and investing.

Do not cut back on savings due to the current crisis. Stick to the course, and you will be in a better position in the future. The current economic status is volatile, you need to safeguard your future by saving and investing wisely. Cutting back on savings is only a short-term fix that will cause financial strain later on.

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