By Brian Uringi
The Financial literacy or understanding money is the ability to make informed judgments and to take effective decisions regarding the use and management of money. Improving financial literacy is an important response to the growing complexity and pace of change in modern life. The opportunity to take advantage of increased competition and choice in financial services; financial literacy can yield positive, tangible and lasting results for individuals, families and the broader business community. The benefits include greater personal independence, wellbeing and improved economic prosperity. Businesses benefit from improved staff welfare and consequential improvements in productivity.
The financial services market will also operate more efficiently when consumers are better informed and more confident in exercising the choices available to them. As individuals, we are also changing and our personal financial circumstances are becoming more complex. In countries like Uganda, debt is commonly used to increase the convenience of daily life and help us achieve long-term goals such as buying our own homes, cars and some instances that do not make sense to me personally like wedding loans though I am not judging those who walk that road. Uganda’s population age has changed, it is my prayer that we have superannuation and other investments, and more likely to fund our retirement from more than one source. While these changes bring more choice and flexibility to our lives, they also bring greater responsibility to understand and protect our money. People with good financial literacy skills are in a better position to meet these responsibilities by being better equipped to make informed decisions about their money, plan for their financial needs and achieve their financial goals.
Before one can go into business and especially during your tenure as a businessperson, it is important to understand money and what money is and how it works. Even as a non-businessperson, understanding money as a person is very vital. Young people for example, are less confident than adults when it comes to managing money, reflecting their relative lack of experience. However, these days because of the availability of knowledge especially for the urban populace they’re reasonably well informed about good money habits, even if they don’t always put them into practice, and they’re keen to learn more.
It makes sense that young business people start saving a small amount of money small amount regularly from the beginning is the best way to save money, but how many business people or people generally can save regularly. As human beings we are all businessmen and women whether you know it or not because even if you are not doing business and work for the government for example, when you go for an interview you are selling yourself. So, technically you are a salesman or woman without even knowing it. In business you have to consider returns and risk when choosing an investment that is a paramount aspect in understanding money. There is no clear-cut definition to understanding money. To understand money, requires one to examine a number of money concepts and apply these concepts to different financial situations that we will encounter in our lives. More important than anything you have to learn from your experiences from dealing with money anything less than that will keep taking you in a circle of failure.
Many times, people know about saving but have the wrong attitude towards saving. When you have the right attitude towards saving money you will overcome the hurdles and temptations that come with spending money. When you start thinking about say your retirement, unforeseen circumstances that crop up in life you will develop a keen sense and start learning the ropes of money, better to teach yourself especially when you look deep inside of you and start asking questions about money for example. The key to successful saving is to start early, no matter how small the savings. Saving is closely related to budgeting. Budgeting is the tool which assists people to understand their capacity to save.
Once people establish that they can and want to save, they need to decide how to save. Through this process, people learn to identify what best suits their individual needs. As well as deciding how much to save and how often, issues such as automatic pay deductions, rates of interest paid, fees and charges, terms, and ease of access of different types of accounts, need to be considered. Through successful saving, people are more likely to have an improved ability to cope with unexpected expenses or financial emergencies. They can also experience less stress and uncertainty regarding their ability to meet their financial needs, particularly as they progress towards meeting their financial goals. The confidence and skills people acquire through successful saving also means that they can be better equipped to understand the costs and benefits of different financial products, and the relative ability of those products to meet their needs. This is an important skill that can translate into greater awareness, confidence and ability to understand and engage with investing and setting long term financial goals, such as paying off a home or saving for retirement
Budgeting is a simple activity that helps people to track their income and expenses. It also has considerable flow-on benefits beyond its immediate intrinsic value. By understanding day-to-day finances, people are able to judge whether their spending is essential or optional and to think about ways to save as much and as regularly as they can by making a plan and setting some goals. Goals can be anything from saving for something important, getting debt under control, saving for a deposit on a home, investing, or saving for retirement. Through successful budgeting, people can also experience more confidence and satisfaction in their ability to take greater control of their day-to-day finances, and the skills they acquire are transferable. Increased confidence and ability to budget can, in turn, develop into greater awareness, confidence and ability to understand and engage with a range of other money management issues, including saving. The benefits of using a budget to put savings to good use and increase broader money management skills can help people achieve financial goals that have significant and lasting value.
Spend a lot of time thinking about financial information before making a financial decision. Does it make sense to financially live for today without thinking about the next day? That question can only be answered by each individual differently because much as I would like to give my opinion, I rather that we all ponder to such questions individually.
When you start to see that your business cannot move forward or is being restricted by your finances, that is a good time to start questioning your understanding of money. Take for example, financial institutions that may come in or that you may go to, to get help to move on ahead, you have to understand the pros and cons of such assistance because more than anything it is the financial institution that is going to gain more in this situation, given they are going to get more but to what level are you willing to take that risk. If you are trapped in over spending, you have to know that this is a weakness and understand ways of how to kick the habit. Successful budgeting is the key to good financial management.
Investing means making money work harder and investments don’t have to be big to be worthwhile. Investing is one way that people can make the most of their savings. Through successful saving, people can learn many of the skills they will need to invest successfully, such as the ability to assess rates of interest paid, fees and charges, terms, and ease of access of different types of investments. Many people use these skills to become investors, although they may not see themselves that way. If people have a separate savings account, are paying off a mortgage on their own home or are members of a superannuation fund or a circle, then they are investors.
Besides the skills acquired through successful saving, there are other important issues to consider before investing. These include: risk and return, which will be reflected in the interest rate paid, the spreading of risk also known as diversification, and the quality of the information on which the investment decision is based.
Through a combination of skills and knowledge, including being able to get and accurately assess information and advice, understand rights and responsibilities, identify high risk schemes and avoid scams, people can develop the ability to understand the costs and benefits of different investment products, and the relative ability of those products to meet their individual needs. For many people, successful investing is the key to security and choice during their working lives and in retirement. We will continue with this discussion next time. Until then, try and get a better understanding of money. To understand money, you need to understand the concepts and implications. God bless.
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