Budget! Who Knows the Next Covid?

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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 practised 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 budgeting.
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 downcast by the popular adage that a ‘financial principled person’ is a miser. Put your financial life into the schedule and the benefits will outweigh the cost. Don’t spend on what is not in plan. Don’t follow the trend when it’s not planned. Strive not to spend about 10% of your income on unplanned expenditure.

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 budgeting 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
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