What you need to know:
More than ever, there is a culture you must cultivate around money to give your money direction. Financial planning is telling your money where to go as opposed to asking where it went
Each person needs a roadmap to achieve their financial objectives.
In this era, many are adapting to the old adage of, “When the going gets tough, the tough get going.” This is as a result of the tough economic times.
These troubling economic times awakened by the Covid 19 pandemic have left many people struggling to operate budgets. Some people believe one must have a lot of money to go into financial planning. pondering what lies ahead and how this can impact our financial situations.
More than ever, there is a culture you must cultivate around money to give your money direction. Financial planning is telling your money where to go as opposed to asking where it went.
Personal financial planning processes may feel like a hard nut to crack despite the fact that it will help you reach different stages of your life.
I once sat in a group where someone said he counts on the spouse to buy bread.
When he is on the wall, his wife buys bread. Others say they plan money for one thing and then suddenly; a child gets sick and they must spend on medical bills.
Mr Keith Netwuwa, says he hardly buys anything for the children on his way back home.
“I used to do all the shopping at home. But nowadays, I openly tell my wife that I don’t have money to buy bread or tomatoes,” Mr Netuwa says, noting that at that point his wife does some of the shopping.
He adds: “It is something I have learnt to do intentionally. This helps me stay focused on things I have to buy such as shopping for home at the beginning of every month and paying utility bills.”
With such a plan, comprehensive planning is possible even projecting years into the future. However, it can also safeguard you against life’s surprises in form of emergencies.
But how do you remain on top of the game in terms of personal finance planning with all fixed costs and emergencies?
Lydia Mirembe, manager corporate and public affairs at the Uganda Retirement Benefits Regulatory Authority (URBRA), says it is critical to have different saving pots.
“One for daily or fixed expenses, the other for emergencies and one for retirement among others. These can come in handy. We have so many fixed costs, but there is always a rainy day waiting. We need to save something aside for emergencies like sickness, bereavement,” Ms Mirembe says.
Mr Ronald Mayanja-Omugalanda, business development expert and managing partner, Ability Explored, Ltd says planning one’s finances takes personal discipline.
“It is something that we teach people every day but people don’t do it. Yes, they know what it takes but they don’t do it practically,” Mr Mayanja says.
Below are some tips to plan your finances.
In addition to discipline, have a practical plan that should be drawn in either soft or hardcopy. This plan is commonly known as a budget. It should clearly show what item to spend the money on and how much it should be.
“Making a daily tracking of incomes and expenditures to inform you of the actual financial picture. This is closely followed by a commitment to the budget to avoid spending out of the budget. It is advisable to learn to say ‘no’ to requests out of the budget. Unnecessary outings ought to be avoided too,” he explains.
He adds that one is supposed to save and invest as part of financial planning. Savings are the first resort when emergencies knock on the door.
“Investment is a good way to let one’s money grow and multiply. But what investment are you making? Are you investing in liabilities or assets?” He asks, noting that liabilities take money out of the business while assets bring money in the business.
This means you should avoid impulse buying as much as possible. This is commonly called the bandwagon effect.
To curtail this further, one needs to avoid window shopping.
“Naturally, human beings tend to buy what they see or have seen. The items we see in window shopping tend to speak to us and convince us to buy them,” he says.
“Financial planning requires sacrifice or opportunity cost to achieve financial goals. I relate this so easily with delayed gratification. It is better to save now and enjoy in the future than to spend it all now and suffer tomorrow,” Mayanja adds.
Remaining on top of the game
Prof. Waswa Balunywa, Principal, Makerere University Business School (MUBS) says that personal finance planning requires one to look at their incomes.
“The most important point about saving is what your income is. Try as much as possible to make sure that you earn a high income. Get the knowledge and skills. Work hard so that people appreciate you and give you a good pay,” Balunywa says.
“If you work hard to increase your income, tame your expenditure. There are people who get their salary and spend 10% of it in the bar. This means you have a problem. Or where somebody has been working for two years and they buy a car. This is an expenditure, or you borrowing to buy a car- a car depreciates in value,” he adds.
These are decisions which people take that cause them unnecessary problems hence making them increase their expenditure.
He encourages people to work so hard so that you can be good at what you do and earn a good salary. Watch out what you are spending on. Do not be tempted into persuasive buying because your income varies from other people.
“If you have a good income; save. Where do you put your savings?” He asks. Do you put it in the bank to lose value? Do you buy insurance? May be you buy a building or land. You need to put it into an investment.
Mr Mayanja concurs that it starts with hard work. Some jobs that require hard work pay well. Amidst the hard times, some individuals and companies can remain on top of their game.
Retained earnings are another addition.
Evaluate financial statements
Some people monitor and evaluate their financial statements and pre-plan to ensure they manage their finances well.
“Embrace financial discipline. Have a budget and stick to it. Monitor and evaluate your performance. Don’t stop learning. Money is a very hard subject to monitor. Set clear targets of what you intend to receive and spend among others,” he says.