By Sylvia Juuko
If you wake up every morning to exchange your labour or sell products for money, you have every reason to manage the money well and ensure that it accumulates.
The key to doing this is not get into the trap of routinely drafting long wish lists but committing to change particular money habits within a time frame.
In attempting to make changes to your money habits, avoid becoming too strict. Balance prudent money management with occasional treats as a reward for sticking to your plans.
As a start, ask yourself how much money you really have. This can be in the form of assets and liquid cash. If you have no idea how much money you have, it is very easy to live a lie i.e. living beyond your means. Once you know your financial status, you can begin to make choices that suit your situation.
For example, having some cash in the bank that you can draw to buy a fancy item may not necessarily mean that you can afford it, especially if it will leave you struggling during the month. In this regard, before you make impulse purchases ask whether you can afford them.
Another equally important approach is to consider how much income you need to meet your monthly expenses. Many people go through life with no idea about their monthly expenses.
If you have no idea, you will not be able to figure out if you are generating enough income to cover your expenses. You can’t improve your financial position by simply complaining that you are always in the red, yet continue to get up early to earn the same amount of income.
You can only make this a reality by reducing your expenditure or getting more work to generate extra income to cover your expenses.
Thinking about what you want to do with the money you earn before you get it is another useful way of managing your finances.
This can help you prioritise. If you are extravagant, you can cut out some items as long as they aren’t life-threatening. This allows you to set aside something every month to take care of emergencies or a cash squeeze.
If you can hardly cover your monthly expenses, it is a challenge to think and plan beyond the monthly cycle. However, the only way to change the way we view and manage our finances is to think beyond today. Once we learn to make long-term financial plans and decisions, we are setting a firm foundation for wealth creation.
This should be firmed up with questions of where you want to be in six-months, a year or 5-10 years. Once you have listed items/goals related to where you want to be in the long-term, you can begin to work towards making that dream a reality.
If you want to have lunch money tomorrow, you don’t spend all the money in your wallet today.
This means the money choices you make today will have a bearing on where you want to be in the future.
Whenever you are tempted by an attractive spending option, resist the urge by focusing on how far you’ll be straying from your future financial goals.
Throughout this period, your plans should match the changes in your lifestyle, which can have impact on your income and expenditure. For example, constructing a house, kids starting school, starting a family, new business or marriage etc.
Ultimately, you can make a difference this year through making a deliberate decision to improve your financial wellbeing.
This should be driven by your long-term view that will guide your choices so that you can secure that income that will move you from your current hand-to-mouth existence to a situation of financial security.
The writer works with Bank of Uganda