No quick fixes for a bad financial situation

By Sylvia Juuko

Kent, an auditor in a prominent hotel in Kampala, is dealing with what he considers the most challenging financial circumstances of his life. A number of poor financial decisions have seen his debts spiraling.

He is currently servicing two loans  alongside a long list of creditors including family and friends. To make matters worse, two loan sharks are baying for his blood.

Servicing his financial obligations takes up about 80% of his monthly income. Unfortunately, he used some of the loans for bad investments which he had to abandon.

Amid this financial pressure, he is juggling two jobs, supporting a string of dependants and can barely take care of the basic household needs.

Fortunately, he secured two plots of land and property in the countryside. Kent’s state of affairs may ring true for some of us. And for most people in such situations, a quick solution for getting out of such quagmire is appealing.

However, anyone who has dug themselves into such a situation or an even more adverse state than this anecdote cannot get back on the right financial footing overnight.

Such financial situations are caused by poor planning and weak money management habits especially extravagant expenditure and improper use of borrowed money. But this does not mean that one cannot start over.

If you acknowledge responsibility for the bad financial decisions, this action plan could guide your financial makeover.

Identify a course of action

Any decision made should be against a background of your current life situation, relevant information, skills, earning opportunities and goals. Kent’s most urgent needs include paying his debts and meeting his living expenses. If there is a possibility of renegotiating his loan repayment, it can ease the pressure.

That aside, he needs to utilise the  pieces of land by identifying crops that will bring quick returns to supplement his income. He can also consider growing food for household consumption. As a matter of urgency, he needs to expand his earning capacity and put in extra hours to get extra income to pay off debts.

Make harsh decisions

Challenging times usually require painful decisions. While it’s advisable to seek counsel from a number of trusted people, you have to make the final decision and take responsibility. Examine your expenditure and determine items to eliminate or reduce, as long as they are not life threatening. This action will allow you to control your short term difficulties.

Assess money beliefs

Examine your values related to finances. Do you consider feelings related to money on the basis of factual knowledge or influence by others? This is likely to influence whether you spend now or later in order to save. Assess whether your financial decisions are influenced by social pressure, need for luxury items or basic household needs.

As such, it’s important to remember that the various stages in your life cycle influence your financial choices and actions.

If you do not deliberately pay attention to the nature of financial decisions you make, their short and long term impact and the risks therein amid the prevailing economic conditions, you are likely to endure financial pressure for long.

The writer works with Bank of Uganda

Personalfinance222 @gmail.com