Financial literacy refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. Raising interest in personal finance is a novel focus in the DecideNow mentoring program at ACFODE.
During our third and fourth, mentoring sessions, the youth expressed the need to have guidance on money, money acquisition, sustenance and use. We decided to take them through the finance game, challenges, benefits and how to generally manage finances.
Peter Makee an accomplished businessman in Kampala as well as Ms. Rita Atukwasa,a business lady and executive director of Institute for social transformation formed the mentoring panel for this session.
Peter, once a very humble small barber shop owner in Kamwokya, had had his business expand in a span of just few months to present day spacious and famous Exotic Unisex saloon with branches around town.
“To be financially literate is to know how to manage your money. This means learning how to pay your bills, how to borrow and save money responsibly, and how and why to invest and plan for retirement.” Rita explained.
She added that in finance, there is something called budgeting and one should have the ability to budget.
Among the skills learnt are the following main steps to achieving financial literacy. These include learning the skills to create a budget, the ability to track spending, learning the techniques to pay off debt and effectively planning for retirement. To have a successful budget, one must plan for it and a successful budget plan comprises of how to follow a monthly spending plan, ways for lowering your monthly bills, how to distinguish between short-term, medium and long-term goals.
The lack of financial literacy or financial illiteracy may lead to making poor financial choices that can have negative consequences on the financial well-being of an individual. Financial literacy helps individuals become self-sufficient so that they can achieve financial stability.
“Effective budgeting demands that you are honest with yourself and put together a plan that you can actually follow. The more time and effort you put into your budget today, the better you will be able to maintain a life-long savings habit.” Peter said.
As a successful businessman, Peter said saving is an essential component of good budgeting. Using a savings account allows you to prevent emergencies from draining the money you need for monthly bills and slowly enables you to build a reserve for making large future purchases.
Learning from what Peter said, I got some tips which included setting up a portion of your income to automatically go to savings and not leaving a savings account as your last financial priority.
I noted that business owners like Peter use their own savings, loans, stocks and other sources for startup capital.
After starting a business, the work has only begun. Staying competitive in a business requires keeping an eye on trends and adapting to changing consumer demands.
“One way entrepreneurs overcome their financial hurdles when starting out is by gathering venture capital,” Peter explained. He emphasized that personal finance is the science of handling money. I noted with interest that personal finance planning tips include devising a budget and as a matter of fact, it’s never been easier to manage money. Secondly creating an emergency fund. Pay yourself first to ensure money is set aside for unexpected expenses.
Thirdly limit debt. To avoid debt getting out of hand, don’t spend more than you earn. Lastly, you should be able to plan. Make plan and plan to save for retirement too. Investing is only one part of planning for retirement.
One should also be able look into the future and evaluate other sources of income. You may need to adjust your funds, accounting for market lows and investments, however, above all, the most important tenets of personal finance is systematic saving.
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