Decisions that come back to haunt you

Oct 02, 2014

Whenever we make financial decisions, we may not truly appreciate what their ramifications will be in the future.


trueBy Sylvia Jjuuko

Whenever we make financial decisions, we may not truly appreciate what their ramifications will be in the future. But the truth is, decisions about money today have to be made carefully with an eye on the future.
 
If you still have the advantage of being at the beginning of your career or a start-up, you are lucky because today, you are privy to information that was not available when we launched several years ago.
 
That notwithstanding, irrespective of the stage you are in your life, you can make things right by making a fresh start regarding prudent money management.
 
There are a number of decisions made in our daily lives that can either make it easier or harder to survive during our sunset years. That is why whenever you are dealing with money, it is important to think beyond today.
 
While some factors could be beyond your control, you can attempt to deal with some of the following:
 
Career choice
 
Unlike in the past when graduates were guaranteed employment, the current status quo may not be as straight forward. This means that in some cases, people spend the early years of their working life getting by with jobs below their pay grade.
 
This will constrain their capacity to save a considerable percentage of their income at a time when they do not have huge responsibilities.
 
More so, when the underemployed finally land their dream job, their default mode could be set to spending to compensate for the previous hard times.
 
If you are lucky to belong to a category of high fliers who have rapidly climbed the corporate ladder, with the attendant benefits, it is advisable to save or invest from the start to take advantage of the aspect of compounding.
 
Avoid getting carried away by your dramatic rise in earned income, but concentrate on investing in assets that will bring passive income. The disadvantage of relying on your work pension alone will result in a drop in income during retirement.
 
Remember, the perks that accompanied your job will not be accessible in retirement. On the other hand, people who opt to venture into successful business and have some level of financial education may achieve their financial goals faster than those who chose to be employed.
 
Accommodation
 
This is one of the biggest expenses that most income earners incur. Therefore, the choice of which neighbourhood to reside and the attendant costs has a bearing on your resource allocation.
 
It makes sense to keep the cost of accommodation low so that you can save some income to either buy turn-key property or purchase land to construct a home.
 
If you prefer renting expensive accommodation that is beyond your income because you want to keep up appearances, you are not planning for the future. Building or buying a home can either be done using savings or getting a mortgage if you are sure you can handle the repayments with your income.
 
This is a financial choice that needs homework and careful thought.
 
Choice of a spouse
 
Whichever way you look at it, the spouse you choose can be a critical factor in money management. If you are not compatible as far as finances are concerned, you are bound to have conflicts over money.
 
Interestingly, there are numerous cases where prudent managers of finances attract compulsive spenders. I got some feedback recently that indicated a spouse was such a spendthrift that they scuttled all efforts to plan for the future because they could not settle until all the income is spent.
 
Couples, therefore, have to speak about finances and come up with a compromise on how to plan, spend, save and invest for the future.
 
Tracking your money
 
 If you have clocked more than a decade as an income-earner, think about all the money you spent over that period on items that you should not have.
 
You would, perhaps, be a wealthy person if you had this information then than today. It is crucial to track where your money goes to ensure that it’s saved and invested, as well as spot the areas where costs can be avoided.
 
There are a number of areas to consider, such as the size of family and type of investments. This not only makes life enjoyable, but also creates financial security for the future.
 
The writer works with Bank of Uganda

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