How Tanzanians can beat the rising cost of living

Financial experts say the challenge can be reduced by creating a budget based on one’s income.

Although many people struggle to develop and follow budgets, they can help individuals make better use of their earnings, ensure salaries cover essential needs, and avoid unnecessary debt.

Business and budgeting trainer, Mr Charles Mtega, says research shows that 93 percent of people who succeed in life follow budgets because they set clear spending goals.

He says some of the reasons people fail to stick to budgets, especially those prepared at the beginning of the year, include spending temptations and the habit of carrying large amounts of cash.

This often leads people to spend money that had already been allocated for other responsibilities.

“Someone prepares a budget but still wants to carry cash. To overcome this, it is important to set aside a specific allowance for financial assistance you provide, understand the groups of people around you, and avoid copying friends’ spending habits. This will help you save money,” he says.

He says success requires people to live below their means rather than spending beyond their income, which can be achieved through budgeting based on monthly earnings.

Budget example

Mr Mtega says a person without a budget may earn Sh6 million but spend Sh7 million, while someone with a budget earning Sh800,000 can spend Sh600,000 and save Sh200,000.

“A budget helps a person maintain discipline in essential spending and avoid using money outside their plans,” he says.

He gives an example of someone earning Sh450,000 per month, saying the amount can cover basic needs while allowing the person to save Sh40,000.

He explains that under such a budget, Sh50,000 can be allocated for rent, Sh150,000 for food, Sh60,000 for transport, Sh20,000 for electricity and water, Sh20,000 for communication, Sh40,000 for tithes and contributions, Sh20,000 for emergencies and Sh40,000 for savings or investment capital.

“However, this budget is more practical for someone living in an area with low rent,” he says.

For someone earning a net salary of Sh700,000, Mr Mtega recommends allocating Sh70,000 for tithes, Sh135,000 for food, Sh80,000 for rent, Sh15,000 for electricity and water, Sh20,000 for communication, Sh30,000 for transport, Sh110,000 for entertainment, Sh60,000 for personal expenses, Sh40,000 for insurance savings, Sh50,000 for emergency savings and Sh50,000 for goal-based savings.

Avoiding loans

Financial literacy expert, Mr Ladislaus Louitas, says living according to a budget helps people avoid unnecessary borrowing, which often arises from unplanned spending.

“A child may fall ill and require medicine worth only Sh3,000. Because you do not have a budget, you start looking for loans. That becomes unnecessary debt. If you had saved even Sh20,000 for emergencies, you would not face such difficulties,” he says.

He says many people spend routinely without planning how their money should be used.

“A budget saves you from small embarrassments of having to ask people for small amounts of money, only to be told they do not have it. You may start thinking they are stingy, yet you had the ability to save your own money,” he says.

He explains that people without budgets also struggle to repay debts because their income is consumed by unplanned expenses, leaving nothing set aside for repayments.

Where is the problem?

Some citizens say their budgets are often disrupted by the inability to control impulse purchases, including airtime, clothes, and household items.

Tabata resident, Ms Shany Marwa, says internet usage has become part of everyday life.

“Nowadays, the phone is everything. When credit runs out, staying offline is difficult because even communication has shifted from ordinary calls to WhatsApp. Having data has become essential,” she says.

She adds that another challenge was buying short-term bundles that run out quickly.

“You buy a three-day bundle, and within three hours it is gone. You buy a weekly bundle, and within a day it has finished. You realise you are spending a lot, yet not many people can set aside Sh30,000 for a monthly bundle,” she says.

Ms Mariam Juma says supporting relatives and buying household items are among the factors that disrupt budgets.

“When someone calls you, you realise the issue is within your ability, so you have to take money from your savings to help. It hurts in a way, but what can you do?” she says.

She adds that buying children’s necessities is another reason many people spend beyond their planned budgets.