8 Signs You're Scoring an F in Personal Finance
By Andrew Ekwang
Failing a class in school is one thing. Failing your financial goals as an adult is another. Here's how to earn an A-plus in personal finance.
Everyone agrees that math, English Language and the science subjects are so important that ministry of education confirmed they should be compulsory. Now imagine in your adult life all aspects as school subjects, Personal finance would be so important that you must make compulsory to master. Ever wondered what it feels like scoring an F in any or some of the compulsory subjects! - more like suicide. Don’t commit that suicide with Personal finance. Am no guru in this Personal finance issue, but I’ve learnt a lot in the past few years and just feel it’s my responsibility to share these insights of avoiding an F in this very crucial subject.
1. You don't have an emergency fund.
In life, you should expect the unexpected, such as the sudden increase in cost of living, sickness or even loss of a job (some will call this negative thinking but it’s a fact). The last thing you want to do is be caught off guard and be forced to rely on credit from friends, money lenders or a bank loan that could get you into deeper financial trouble.
Establish an emergency fund of at least three to six months of expenses. And don't delay. You should start building your emergency fund as soon as you get your first paycheck ok if you are already late, as soon as the next paycheck. This will not be an easy task so you better of starting small and training yourself to respect the practice.
2. You don't know how much you have in your bank accounts.
Have you ever slotted in your card in that ATM machine, and the next message you get is “Can’t perform this Transaction due to insufficient funds”. Or paid by check and got called back the check bounced because of insufficient funds in your account. If you haven’t count yourself a little luck if you have you know what it feels like.
To ensure you'll never write a check for more than what you have, you should always know how much money you've got in all your accounts.
To ensure you'll never write a check for more than what you have, you should always know how much money you've got in all your accounts.I love Ugandan banks they make getting an overdraft on personal accounts a little uneasy, so you can’t exceed your 0 balance level unknowingly unless is for loan repayment delays or charges. But if you're running your household like a business and balancing your cash regularly, that shouldn't ever be a problem. Consider using easy to understand money management software like Microsoft Excel to help manage your finances more closely if you two or more accounts with many transactions in a month.
3. You don't understand the difference between a want and a need.
One of the biggest impediments to getting our personal financials in order is the inability to properly distinguish between our wants and needs. Understand that when taken down to the most basic level, all of us have only four or five primary needs. Those needs are food/water, clothing, shelter, transportation, and health care. Everything else is a want. After you ensure the needs and secured sit-down and properly priorities the wants include there the personal savings (emergency fund) at number two or three.
4. You don't know how much money you spend.
It's pretty simple: The amount you save is the difference between how much you make and how much you spend. But it's tough to save anything if you don't know how much you can afford to save. That's why it's important to take a critical look at your expenses so you know exactly how much money you are spending. This will never be exact considering the unexpected events like sickness, or relative or friend calling for bailout.
Audit your expenses by writing down everything you spend your money on for a couple of months. The trick is to be as detailed as possible. Try to capture even the smallest purchases. Here is a budget worksheet to help get you started. When you finally have a figure compare with your earnings and factor in your savings. Remember even though you don’t follow this by the book, it’s better to stay in the know.
5. Your tastes exceed your spending capability.
Understand that this is not a problem so much as an excuse. Kind of like your son arguing that he's getting an F in his class subjects because the teacher doesn't like him. When your expensive tastes starts impacting your ability to save, you're in for trouble you need to look for a way, stop or at least reduce then trim it down. If your tastes exceed your budget, ratchet them down a notch or three and stop making lame excuses.
6. You can't say no.
Many people do understand the difference between wants and needs, but they have trouble saying no anyway. Being able to say no is a crucial skill in the world of personal finance. Those who can't will always have the most trouble keeping their personal finances on an even keel.
Master the art of saying no, a little trick master first the things you already have, from there whenever you see a product you feel you want, ask yourself if you already have something similar if so give it to yourself that it’s the reason you will not buy that today, practice it for some time and you will see the difference.
7. You're an impulse shopper.
Impulse buying is a nasty habit, can become an addiction that can best be cured slowly but surely by careful planning.
Establish a household budget. Before going out to shop, know exactly how much you will be spending at each establishment and make a shopping list before you go to the supermarket or the mall, if possible carry exact cash and leave home the ATM card, if you use a credit card it might need you to be a little more faithful to the shopping list. In short, think before you buy.
8. You worry about what others think about you.
People who worry about what others think of them suffer from a desire to keep up with the latest trends. There are many reasons why people do this, including: the urge to advertise their success in life (be it real or imagined), the desire to have what others have, and instant gratification. Whatever the reason, once they reach the checkout counter, they tend to ignore this little slice of reality: Unlike the celebrities they tend to follow (who have also seriously cut down on spending recently), they probably may not or can't afford it.
Andrew Ekwang is SMEs Trainer with Analyst Business Solutions(Finance and operations)
