By Richfield A.
In 2016, I was invited
to speak at a seminar on finance held at KNUST Campus on the theme GROWING YOUR
FINANCE. The participants were mainly students who practically were not income
earners. With this background, the
subject appeared quite intriguing and I knew much was expected from me.
When I began the
interactive section, which usually prefaces my presentations, I got to know
that the participants had basic theoretical knowledge on certain financial
principles. One lacking aspect was that they thought those financial principles
were to be practiced after school or when they grow old. Growing your finance
include living with good financial principles which should become a habit – it
should be developed over time to become a lifestyle.
Focusing my presentation on the need to appreciate those identified principles, I spent some time on the subject of budgeting because its familiar yet difficult to do. Preparing a budget is a primary step to preparing for your financial wellbeing – saving, investing and getting out of debt. As important as it is, a greater percentage of people, both the literate and illiterate hardly do. At times, those who budget does it in their mind; it’s never penned down.
Developing a budget and working with it is a tough task for beginners. Spending within your means – and resisting the allure of borrowing – requires self-discipline and a sense of purpose. Sticking to a financial plan is key to improving your savings, increasing your investment opportunities and making you financially healthy. One of the commonest consequences of not budgeting is carrying the burden of debt.
The outbreak of coronavirus has
presented the need to include a line for contingency (savings) in our budgets.
In as much as the concept is upheld, the following reasons may prevent you from
Insufficient Income – Many
Africans live hand-to-mouth; incomes earned could only be used for feeding. The
practice of spending income before it is earned is a usual norm and many
victims have been struggling to break this chain of bandage. However,
insufficient income should not bind you from preparing and sticking to a
budget, rather it should be a cause. Amazingly, people with insufficient income
predominantly spend with plan (budget) on their last pennies left.
What’s the benefit? – Budgeting
won’t heal your financial wounds overnight. It should be noted that it just the
earlier steps to your financial freedom. It may not directly add a specific
amount of cedis or naira to your cash since it’s not a source of income.
Budgeting is a catalyst to improve one’s income. Working with budgets may be
challenging within the short term but will be fruitful in the long run.
I might be a miser -Don’t be down casted by the popular adage that a ‘financial principled
person’ is miser. Put your financial life into schedule and the benefits will
outweigh the cost. Don’t spend on what is not in plan. Don’t follow the trend
when its not planned. Strive not to spend about 10% of your income on unplanned
It may be irritating –
Budgeting may seem like limiting your freedom of enjoying life. Your
imaginations may present it as putting your own self in a financial prison
where you will not have the flexibility to acquire the things you like. Not
buying things you want because they are not budgeted for might cause
displeasure, but it worth it.
Impulse buying – Buying of goods without planning to do so in advance, as a
result of a sudden whim or impulse is a bad habit. Not only addicts suffer from
impulse buying, many people acquire luxuries and incur certain expenses that
could be deferred. It could be severe to the point that victims may use debt to
finance their purchases once their impulses are activated. I recommend that
people should change from impulse buying to impulse investing.
Before you spend income
earned during this Covid-19 era, make effort to prepare a budget. In your
budget, make provision for contingency cost. This can be done by increasing
your saving or putting about 5% of your income into a special saving to cater
for contingency and emergencies. Who
knows the next crisis?
The writer, Richfield A.
Quarshie, is a Consultant and Executive Director of DEQ Change Foundation