Tips to overturn financial difficulties
By
John Blanshe Musinguzi
You have fought many academic battles from nursery
or primary one to University level. You have left University now; the remaining
battles are to find jobs and financial success.
As your about to start to earn, it is so easy to
spend without giving much thought to the future. Unfortunately, financial
literacy is not taught in schools, which leaves young adults exposed and
without the knowledge of how to manage your money when they step out into the
workforce or seek to build their own businesses.
The first step in financial planning is to identify
your goals. Your short-term goals might include buying a car, going back to
school, or taking a vacation or getting married while your long-term goal may
be to plan for your retirement.
It is very tempting when you first start earning,
and particularly where you have limited financial and other responsibilities,
for you to spend excessively on clothes, accessories, phone bills and other
lifestyle purchases. All the spending can be a serious drain on your finances.
Even though the concept of budgeting is
over-flogged, it really is the most effective way of keeping track of your
expenses. Create a budget so that you can see exactly where your money is
going. Start by adding up the essentials, transportation, food and your car
loan if you have one. There is the tendency to eat out often, or pick up
take-away meals, or to overspend on clothes and a lifestyle that you perhaps
can’t afford just yet. This is the time to commit to saving and investing for
the future. The key is to live below your means and spend less than you earn.
Use debt cautiously. It is better to borrow for
things that have lasting value such as your personal development and education,
or to buy property, rather than for clothes and gadgets. If you are in debt,
focus on paying off or at least reducing the debt with the highest interest.
Building a solid credit history from now with your bank is important. Your
employer, family and friends might also from time to time consider lending you
money. Be meticulous with repayment and don’t abuse this trust. It could be
very important when you need to borrow more significantly for your business or
other needs in the future.
Once your debt is under control, it is important to
build up some emergency savings. Things happen and it is always important to be
prepared for the unexpected and to be able to sort out emergencies without
having to beg or borrow. You could suddenly lose your job or have an emergency
that needs cash. Set a realistic savings goal and start to save at least 10 per
cent of your income in a bank savings account or a money market mutual fund.
Many young people feel that they must wait until
they earn “enough” before they start to save. It will never be enough. Don’t
wait until you have that “extra” money; start now to begin to set funds aside.
No matter how low your salary might be, save something; even the smallest
amounts add up over time.
If your responsibilities are relatively low, and
you are earning a decent salary, there is no reason you shouldn’t commit to
saving up to one third of your income. Building significant savings and
investments is the best way to weather difficult periods and move towards
achieving long-term goals such as owning property or starting your own business.
It may seem odd to talk about your retirement when
you have barely got started with work; naturally, you will not be focused on
the end of your working life which is still decades away. Even if you work for
a small business that doesn’t have a pension scheme in place, you can make your
own voluntary contributions to your Retirement Savings Account. Remember though
that a pension alone can hardly sustain your standard of living so consider this
as just part of a portfolio of investments, which ultimately should include
stocks, real estate and other assets.
Make an effort to learn about saving and investing.
There is a plethora of information in the media, books, magazines, newspapers,
seminars and the Internet that will guide you as you make such financial
decisions. Seek professional advice so that your own unique situation can be
carefully considered and appropriate investment choices can be made for you.
Your choice of a life partner is probably the most
significant decision you will ever have to make. It is important to partner
with someone whose moral and ethical values match yours. While you don’t have
to agree on every single financial issue, compatible goals and values as well
as openness and honesty do matter and will be key as you merge not just your
lives but your finances.
Most young people do not make saving and investing
a priority. Yet, the choices that you make when you are young will play a
critical role in your future financial security. Of course having to save large
sums over time comes with some sacrifice in terms of short-term comforts and
indulgences, but it is the only way to get closer to that ultimate goal of
financial security.
I wish you all the best.
John blanshe Musinguzi is an undergraduate Journalism and Communication
student at Makerere University
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