Personal Finance: Financial planning made easy

It is the second week of the month, but you are already counting the remaining days to end of month. The fat salary you received barely 14 days back has ‘evaporated’ into thin air with nothing to show for it. as you count the remaining days on your desk calendar, you wonder where you will get the money to take you through the rest of the month. The situation is made worse by the fact that your little boy at home is sick and you have not even paid the family’s insurance monthly subscription. The more you try to find what you spend the Rwf500,000 salary, the more confused you get. To avoid such scenarios, one must always make a plan or budget for their finances. Like national or local governments do prepare budgets, so do ordinary citizens so that the money is spent on priority areas and we also reserve some cash as savings. This is important because we cannot predict the future and, therefore, need to be better prepared for any eventualities, and how we can manage these finances. Why plan for your finances If you are to avoid money mistakes, like one illustrated above and ensure you are financially sound, making the best plans for the insurance costs, foods and saving for your future, etc, is a must. The financial plan will help guide your expenditure, and avoid impulse buying that always drains one income, exposing them to all kinds of risk associated with being broke. Remember, making a financial plan requires self discipline to stick to and implement. Julienne Oyler, a managing director at Inkomoko Entrepreneur Development, says it is important for individuals, families and business owners to budget for their monthly expenses, and prepare for unexpected expenses like medical emergencies and a loss of a big contract. Why is this important, one would ask. “Often, people don’t plan for the unexpected which limits the options available to them to solve such issues without taking loans. So, planning for your income in advance will make it easy, more flexible for you to find areas that you can postpone to later date to meet the current challenge,” she says. Oyler notes that one needs to anticipate all of your future incomes and expenses when planning the finances. Short-term vs long-term plans The best way to plan is to set a monthly and annual budget, which should provide for a contingency for unexpected emergencies. It is recommended to have at least three months of expenses in savings to be able to weather a financial storm, Oyler says. She says, though, one must always make short-term and realistic plans if they are to succeed in this endeavour. Long-term budgets can be complex to fulfill, especially if there is no monitor plan in place. Susan Mukasano, a project supervisor at AJPRODHO, a non-profit youth organisation, says realistic plan for your income and expenditures should reflect clearly your future goals. Mukasano says one should determine your financial priorities and situation as important elements while planning for your income. That’s why experts advise against exaggeration or vagueness in your goals. Always keep a checklist handy so that you can refer to it when you want to buy something, or monitor how you are performing. This is important as it helps guide you while making future budgets, and setting priorities. However, remember the worst plan is not to have any plan at all. So, it is not too late to make that income and expenditure budget for yourself or household as you start on a journey to a financially secure future.

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Personal Finance: Financial planning made easy