Patrick Baah Abankwa’s thoughts … How to manage financial excesses


Welcome to another week of financial learning. I have been away for a while, and I noticed a few things on the break that I would like to share in today’s epistle.

Managing your personal finances is a deliberate and disciplined effort that requires constant reminders.

Financial experts agree that while people have much more money today than they did generations ago, the amount of knowledge on how to manage that money hasn’t kept pace – not at all (Maura Fogarty, 2012).

Thulasimani Munohsamy, in his paper titled ‘Personal Financial Management’ explained that “taking charge of planning and managing our finances, and putting it into practice is very important for every individual.

“This is not only to set up our household budget, but also to save, invest as well as plan for our retirement.”

Many people decide to be financially disciplined after public lectures, but soon lose their way after a few weeks. This is because managing money is more of a mental challenge than physical. One of man’s dilemmas is always exploring to find a magic touch for managing our income ‘supernaturally’. Unfortunately, that quest has never been successful.

According to Towanda Mitchell, financial management is handling our financial situation in a responsible manner to achieve financial independence (UMBC Money Matters Seminar, n.d)

Financial independence should be the ultimate aim of everyone on earth. It frees the mind of having to think about the possibility of basic necessity survival the next day.

It is not attained by doing what everyone does. The thought of financial independence reminds me of the favourite quote by Henry Wadsworth Longfellow. Henry said, “The heights by great men reached and kept were not attained by sudden flight; but they, while their companions slept, were toiling upward in the night”.

This quote speaks against everyday excuses that most people subscribe to in the pursuit of savings and investments.

We need to start building mental toughness on how we manage our income at all times.

Learning to keep track of money coming in, and tailoring the use of this money to fit expenses provides a systematic way of utilising income (Joseph Wilner, 2009).

In this article, I will start a series on some of the ‘hows’ to effectively manage our income. This advice goes to both the employed and self-employed.

The first major ‘how’ I want to discuss today is drafting and using your personal budget.

Planning is the process of making a proper laid down procedure of doing things and following them to achieve the expected objectives or targets (

A personal budget simply means having a laid down apportionment of how you intend using any income you receive.

The purpose of a personal budget is to be disciplined and stay within your means.

The personal financial plan often dictates how a person lives his life, and what decisions to make as an employed staff or self-employed individual.

A personal budget is an ongoing progress that changes in the course of our life. It is an evolving plan that changes as we grow in our career path and move on in our life stages.

Dave Ramsey, a nationally syndicated financial radio talk-show host, promotes the use of personal budgets for personal financial management.

Writing down every cedi you spend on various items often provides individuals with a shocking picture of how they spend money.

A financial plan should have specific goals in sight. Goals such as building a yearly investment worth GH¢20,000, buying a piece of land for development to mention a couple.

This plan needs to be reviewed as the circumstances change: for example, getting started on a professional course, getting married, buying a house, and raising a family.

The changes go hand in hand with our level of income and financial commitments.

Each stage of life comes with some painful financial readjustments which will impact some aspects of our lives negatively.

A classic example is how much you spent in calling your girlfriend; and when you are finally married, staying in the same house.

The quota on call credit might reduce, but another expense line like baby diapers for your child will be on the receiving end.

As our life goals and financial status changes, we have to actively review our financial plans to see if we will be able to achieve financial goals within the given timeline (Career Success for, 2006).

Having a personal budget helps us to create a comfortable life, with the assurance of a protected future and freedom to spend money to keep us happy – especially in retirement.

Thulasimani adds that having a financial plan enables one to improve their standard of living, which leads to good health and financial stress reduces considerably.

Besides that, it also enables the individual to take better financial decisions – which reduces poverty, reduces debts, and increases savings and investments (Bimal Bhatt, 2011).

The second ‘how’ that I would like to talk about today is Lifestyle.

What you buy with your income, the attire you wear, the type of car you drive, the electronic gadgets you use at home etc., all collectively form your lifestyle.

“Managing your finances may seem like rocket-science when you frequently end up short on cash, even when you don’t remember spending much. Of course, the major contributing factor to how much you spend and save up is always the kind of lifestyle that you lead. Some people may make less than others, but end up having more in their savings,” according to the Editorial unit of THE UPCOMING MEDIA.

Lifestyle plays a critical role in how we spend our money.

Depending on what you value, you may spend more or less based on what you enjoy doing, collecting or purchasing.

Some people lead busy schedules which do not afford them time to cook, and thus they spend a big portion of their income on takeaways.

Some people also prepare comfort over financial goals, and would therefore take a ‘dropping’ at every opportunity as against what they can afford.

Never try to act above your financial level.

Miscellaneous items including beauty products, snacks and grocery shopping form a big chunk of what some working class people spend their wages on.

There’s nothing wrong with that – as long as their financial goals are being met.

Another line of lifestyle that some spend so much on is Leisure. Investing in leisure time is an essential part of life, as it helps people cope with their busy lives and allows them to take a breather.

However, it must be done in moderation and not at the expense of financial goals. In choosing your preferred type of leisure, remember your pay check.

Setting a cap of your income for leisure is the financially wise decision to make, as it will keep stress at bay and also help you save up in the long run.

This again buttresses the importance of the financial budget I spoke of in the first ‘how’.

Instead of trying to earn more money or build a five-bedroom house, a significant number of people need to make do with less in order to achieve their goals.

Giving up that big house can help decrease expenses and enable people to satisfy financial independence.

You always need to remember that it is your life!

You are at liberty to spend your money anyhow you want to, but remember there are consequences for every financial decision we make today.

The consequences will not affect only you. They will have impacts on your next generation even in your absence. Think about the next generation as you plan your life financially.

We will meet again next week to learn other ‘hows’ of managing our financial excesses.

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