Enjoy the holidays without drowning in debt

2014 is almost ending. You might have made progress in some areas but in others, you have not.  Yet it is easier to make mistakes towards the end of the year when it gets busy.

According to the 2023 FinScope survey, financial health is the extent to which a person or family can smoothly manage their current obligations and have confidence in their financial future. While the year comes to a close, do not let your financial health spiral out of control this holiday season.

Experts share tips explaining exactly what you must do to salvage your finances before the end of the year.

Get a finance tool
To understand and improve your finances by the end of the year, you need a clear picture of what is happening. The best way to know exactly where your money is going and how to improve it is to get a finance tool—a budget. 
"A budget is an important instrument in terms of financial matters and financial discipline." Charles Ocici, a financial advisor, emphasises.

According to 2023 FinScope survey, the proportion of Ugandans who keep track of the money they receive and spend increased by 10 percent from the previous Finscope 2018, where seven out of every 10 Ugandans were operating a personal deficit budget. The Insights also indicated a threefold increase in the number of people who suffered unexpected events from 2018 to 2023. What then must be done, especially now when the spendthrift fever is high?

"You must have clearly stated goals for both savings and investments. What is your savings-investments target? Every month, establish that you should make this _ saving. And when December comes around, still maintain your goal," Mr Ocici states. 

"The moment the savings, expenditure, and investments are set, set aside money for the emergency expenses. A budget comprises inflows and outflows. You must exercise financial discipline in following it. Pursue the inflows diligently; obey and implement the outflows diligently," he adds.

Today, it is easier than ever to get accounting software or a budgeting app that can assist you in seeing exactly what is going on. Budgeting apps such as You Need A Budget (YNAB), Budget Planner, Money Manager, PocketGuard, Mint, HomeBudget, and Good Budget, to mention but a few, are readily available. These financial tools are available in paid and free versions.

Additionally, economist and business coach, Victor Suubi Mutebi advises that individuals can leverage insurance companies as a saving mechanism, allowing them to set money aside periodically while benefiting from the interest on their deposits.

Keep and update records    
Mr Ocici highlighted that the reason as to why most people spend luxuriously and blindly during the festive season is because of inadequate and insufficient records. This lack of financial bearing sets a trap for many as they are easily reeled in by the discounted offers, crowd effect, and peer influence.
When it comes to keeping track of your finances and taxes, the first thing to keep in mind is proper record-keeping. There is a need to routinely and accurately update your information. 

"The information you may need to consider includes: How much do you make monthly? (Income) What are you spending on? (Expenses) How much are you putting away? (Savings) What investments do you have? How much do you owe?" Mr Ocici says.
"Taxes come from several areas, one of them being profits. To confirm you made profits, you should have had a good record of your income and expenses. It is the profit that the taxman is saying, 'Give me 30%'." "However, many people are tempted to consider Value Added Tax (VAT) as part of their income. I strongly advise against this, as the consequences that arise are a headache no one should have to bear," he advised.

Concerning the crowd effect and peer influence, Mr Ocici emphasises the need to consider who your friends are, as in most cases, your spending and investment habits, as well as your lifestyle, are always in tandem with people that you associate with.

Reflect
As you update your finance tool, you will begin to see trends in your spending. Tracking your expenses will allow you to see where you can cut back and where you can spend extra money.
"For example, if you want to move from Bweyogerere to Kampala, you can use a taxi, a boda, a special hire, or even waking up very early to walk or jog to your destination. For every desire in life, there is a whole range of solutions from which you can make a choice. So for you to choose which one, it reflects how you want to spend your money." Mr Ocici says.

"If you went with a special hire every morning, from Bweyogerere to the city centre, it is unlikely that with your limited salary, you are making interest. On the contrary, when you wake up early and use the first morning taxis, you will likely get to Kampala early at a price less than 15 percent of a special hire. You will have saved all that money for you now to invest separately," he adds.

Mr Ocici further illustrates, "The same can be said for the choice of schools. Three Primary One schools charge Shs300,000, Shs500,000, and Shs1 million per term, respectively. Which one can you afford? The message is, Choose whichever you can afford as of today and save the money for the future, and when it grows, you can then transfer the child to a better class of school because your savings have improved and your income has gone up."

As such, individuals and business owners should reflect on aspects such as: Am I or my business (es) meeting my financial goals? Am I handling my finances well? If not, where can I cut back? What can I do to ease my financial burden next month? How can I boost or spend more on my savings, investments, and clearing debts?

Adjust your plan
The 2023 FinScope survey indicates that more than seven out of every 10 Ugandans have no concrete long-term financial plans. Worse still, 60 percent of adult Ugandans are not confident in their financial plans for old age. To break this injurious cycle, experts recommend this.

After contemplating the data gathered, you need to make major or minor changes to your spending based on your observations. However, keep in mind that every month is different. As 2024 closes, there are several celebrations and expenses that come along with the festive season. People should set aside money for these extra expenses by spending less than they normally would on non-essentials. 

"The mistake most Ugandans make is to save from January to November and burn out all the savings in December through parties, celebrations, and discounted sales—even for items one already has. There, you have made no difference to yourself. But just impressed your friends and relatives," Mr Ocici says.

Furthermore, Ocici advises that for businesses, the end of year is the time to review the performance of the business. This is the time to capitalise on the demand by the customers, and depending on the nature of your business and profits made, then use the discount period and benefit from the volumes. Utilise social media to boost your business' visibility now more than ever. 

"To set yourself up for success in the next year, look at how the ending year went. Ask yourself, What were my sources of income for 2024? Which of the sources performed badly and why? What losses or financial risks did I incur in 2024 that I should avoid? Were my goals very ambitious? Why? These questions point at you learning from the previous year (2024) to set goals for the next year," Mr Ocici states.
He highlights, "When setting your goals, set realistic ones backed by rigorous assumptions. It is those assumptions that determine the validity of the goals you are going to set. You cannot say that in 2024, I was making 20 million, and in 2025, I am going to make Shs60 million. Similarly, if as a school, you have been having an enrolment rate of 40 percent, and now you say in 2025, I want to transform it to 90 percent. Is the change feasible? What steps are you going to take to attain the change?  Are you going to transform the infrastructure? Are you going to hire new teachers or increase their salaries to improve the quality of education?

Have intermediate measurable milestones each month, reassess your financial strategy at the end of each month, and budget accordingly to get your spending on track before New Year's Day starts."