As globally prices of basic items keep rising while incomes keep the status quo personal Financial care is becoming a key resource we need in our lives. It’s therefore important to be financially literate. This includes learning how to save resources, spend wisely, plan and budget for our money, and borrow responsibly among others.
Lesson 1: Know your Needs and Wants
The first lesson we learn in personal finance management is to be open, and know your needs and wants.
Managing finances is just a skill that any person can get. It’s not Rocket science. We all have resources around us in terms of money, time, materials, people, opportunities, etc. When these are used well they can address our
- Things are things that you cannot do without such as health care, food, education, shelter, etc.
- Wants: these are things that you can do without such as alcohol, luxuries, etc.
Remember: Pay for your needs first then pay for the wants if you have to.
Lesson 2: Make a Plan, Budget for Your Money
Most financial problems come from a lack of planning. Planning is important in our daily life. It’s a determinant of our success. Even in finances, we must plan. Why? Because it’s hard to make money but easy to spend, while the formula is in spending less than we make.
Planning is preparing for what we have, to carter for us now and in the future as well as answering our dreams and goals. This gives us an opportunity to be in control of our lives. A plan needs to be tailored to one’s needs, taking into consideration debts, household needs as well as savings goals. This relieves us from much worry and stress of uncertainty and lack in our financial life.
Use budget as a planning tool
A budget is like a coin. It has two sides
- Income (money we receive for our use)
- Expenses (money we use to spend on buying goods or services)
| Source of income | Amount |
| Total income | |
| Expenditure | |
| Total expenditure | |
| Surplus/Deficit |
Key questions to remember in planning and budgeting are:
- How do I get my income presently? How will I get my income in the future?
- How will my present and future income affect my personal spending and saving habits?
- What are my financial strengths and weakness?
- How much money will I need to put aside to pay for my urgent needs and also future needs?
- How much money should I keep in savings? What will I do with my savings (goal)?
Lesson 3: Make the Money to carter for your budget
We all agreed that we need money and we also need to know how to make it. Money like any other resource must be attracted.
- Created
- Retained
- Used well
As a business proprietor create a strong following of customers through deliberate customer care by:
- Know well the service/product you offer
- Satisfy customers’ needs promptly.
- Produce a good service
- Always be reliable and dependable
- Always exceed expectations
- Constantly seek improvement
- Avoid excuses but give explanations of failures.
Lesson 4: Save, Bank, and invest
Saving is for everyone. Saving means we keep aside some money or other resources deliberately today for tomorrow. You take a part of what you have now; keep it for use in the future. Saving is a principle; it says keep little, keep keeping it until it becomes big for a purpose.
We must save but also save in the right places, places that give us minimal chances of loss and the temptation to pick it every time we have a problem. Open up a saving account today in a financial institution. You can also save with a SACCO or ROCCA.
Ask yourself
- What will I save?
- How much will I save per week/month/year?
- When will I start?
- Where will I save from?
- Why should I save?
Lesson 5: Managing Borrowed Funds
Borrowing means making use of someone else resources/money to be refunded/paid later. It’s using what belongs to someone else now for your immediate needs/wants but to be paid later as it is (principal) or with some interest and other charges. You can borrow from:
- A friend/relative, may or may not earn interest
- A SACCO/bank, these earn interest, etc
Borrowing solves problems, especially those that need quick attention and even investment but it can also create a lot of them or make them worse.
Remember the golden rule is: try not to borrow, but if you must borrow what you need and can afford to pay back.
Always have a plan on how you are going to use and get it back. Remember borrowed money is not yours; it’s lent to you for an agreed period of time and terms. Never take a loan on excitement, peer pressure, or adverts. Forget it. You have so much at stake from borrowed money. The truth is count your stakes before you do. Now when you do still have a plan for repayment!
Avoid
- The get-rich schemes
- Borrowing from many sources to pay for your loans
- Borrowing without paying back
- Borrowing from quick money lenders schemes, Ask about the legality of the lender e.g. money lenders license, trading license, etc. Ask people around you about the scheme.
If you have to borrow, do the following
- Think through the details e.g. interest rates, loan processing charges, debt management, etc.
- Have your facts at your fingertips (answer the above)
- If you have to borrow, make it small
- Payback as soon as possible
- Read carefully the contract agreement and sign what you have agreed on
Managing Personal finances is a game we must all learn to play well.
© Allen. K. Baguma 2022
Financial Literacy Series
You can also Reach out : Contact Us 02
Also Google: http://allen baguma
Photo by: Madison Inouye, pexels-photo-2821823
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