In today’s ever-changing economic landscape, where external shocks are directly felt by everyone, managing one’s personal finances has become critical if one is to keep his or head high in these turbulent times. This reality has hit home very well particularly as economies in emerging countries are struggling to recover from the impact of the ‘triple threat’ COVID-19, Climate and Conflict. Ghana is in the final stage of a debt restructuring programme and the implementation of a series of IMF initiatives to ensure a smooth and formidable recovery. As individuals feel the pinch of the economic pressure and recovery measures what are the options in ensuring that one manages his or her finances in these turbulent and somewhat uncertain period.
Head of Client Coverage at Stanbic Investment Management Services (SIMS), Desmond Bredu, shares some principles to help Ghanaians navigate through difficult times. According to Mr. Bredu, key to achieving viable financial management is the adoption and implementation of six core principles; resetting your goals, constantly reviewing your budget, Saving and investing, Insurance and a decision to earn more.
Resetting your goals
It is a regular thing for people to have weekly, monthly, or even yearly financial goals. They are goals that they work to achieve by a specified period of time if everything else goes as planned. However, in uncertain times, it is important to take a relook at these financial goals and amend them to reflect the exigencies and needs of the changing times. Doing this helps you to cope and survive in times of financial difficulties.
Constantly review your budget
A budget is not a document that is prepared and left by itself. It is and must be a work in progress. as our income and expenses change with time so should we be able to visit our budget and adjust accordingly. Doing this periodically gives us the opportunity to ensure budget remains relevant to our goals to track and keep the necessary tabs on our finances.
Save what you can and invest
As you may know, no one is born with the knowledge of investing and savings. And to really benefit from both we have to make a conscious effort to understand the two. Savings basically can be said to be setting aside some money regularly to hedge against the impact of a future spend, for example if you want to purchase a new car, you would have to set aside part of your income to be able to afford it while investing would mean make a conscious effort to grow your money over time by putting it to work in financial instruments such as bonds, stocks or a mutual fund like SIMS.
Control your borrowing
The fact that you are eligible to take a loan does not mean that you should take one. It is always prudent to stay on top of your debt. I will advise everyone to understand their financial situation before they borrow and to only borrow what they can afford if the need arises.
Insurance provides support in times of crisis and sudden loss. Understanding and signing on to the right policies has proven to be a formidable buffer to ensure financial stability. It acts as a protective mechanism that mitigates the adverse effects of unforeseen events and provides a foundation for a more secure and resilient future.
Side gigs as we have come to call them have proven to be key in shoring up our finances. Often it is not the grand things that we think about but upscaling the little things we do as hobbies could significant translate into a commercial activity, earning us unexpected income. If we take our side gigs seriously, we may just end up finding a way to make money as we sleep. Warren Buffet puts it succinctly; “If you don’t find a way to make money while you sleep, you will work until you die”.