Macro & Micro Money Management Made Simple

Spread the love

Read Time:3 Minute, 9 Second

The Kenyan budget begins in August of one year and continues through December of the following financial year. The government budget is an important component of all macroeconomic decision-making processes in the country. In Kenya, the financial year begins on July 1 of the present year and continues through until June 30 of the next year.

Specifically, the 4 quarters in the financial year in Kenya comprise 3 months apiece, and are designated as follows:

Q1 – July 1 – September 30
Q2 – October 1 – December 31
Q3 – January 1 – March 31
Q4 – April 1 – June 30

Budgets are the most important financial tools for allocating funds towards specific expense items, managing financial matters, and allowing for the alignment of policy objectives with societal requirements. The Kenyan Parliament is tasked with setting the budget under the rules of the constitution. Various county governments work under the broad umbrella of the national government.

The stages in the determination, approval and passage of a budget require the formulation of the budget at the executive level. There are 47 county assemblies in Parliament. Each of them is part of the approval process at the county and national levels. Implementation of the budget falls under the jurisdiction of the executive at the county level and national level. Parliamentary oversight is required to ensure the passage of the budget.

The last stage of the budgeting process is the audit & evaluation stage. It is managed by the Office of the Auditor General (OAG). This oversight office must ensure that money is spent carefully, effectively, and legally. All aspects of the budgeting process are found under Section 125 (Public Finance Management Act).

Micro-Level Budgeting

Households comprise the Micro Level Budgeting process. The first step in the process of setting a household budget is determining how much money is coming in. The income flows should include active income and passive income. With a budget of $1000 per month, households can implement a 50/30/20 rule for setting a framework.

50% of the budget can be allocated towards needs – $500
30% of the budget can be allocated towards wants – $300
20% of the budget can be allocated towards debt/savings – $200

Of course, this micro-budgeting plan does not consider taxation. It is a rough guide for determining how funds are disbursed. Expenses are either necessary or discretionary. The necessary expenses are living costs. These are inflexible expenses. The wants are the discretionary expenses. These include money for a gym membership, money for an online roulette budget, funds allocated to eating out, money for vacations, etcetera.

A properly formulated budget is the most important financial framework for managing incomes and expenses. Without a budget, it’s virtually impossible to keep track of money coming in and money going out. Savings and debt repayments are rendered null and void without a predetermined budget. Retirement planning is impossible without a structured budget.

Not surprisingly, budgets make it possible to enjoy discretionary activities that may otherwise be frowned upon. By setting an allocation of funds aside after necessary expenses have been taken care of, it’s possible to live a balanced life. The final component of the budget references debt repayments and/or savings. Every budget should be flexible to a degree, especially in the infancy stages of budget planning.

Budgets are usually designed with a future-oriented focus. If you can come out ahead at the end of the month, you are on a winning ticket. Budgets also prevent you from overspending, since you have a fairly good idea of the debits and credits.

While local, regional, and national governments tend to overspend and overtax, the same luxuries are not available to households. It is incumbent upon families to carefully manage expenses to avoid falling behind on payments.