Navigating a year of spending with ease

While money is spent daily, many of us only receive our earnings once a month. This creates a disconnect that can derail even the best intentions. Financial literacy expert Patrick Wameyo suggests that the key to bridging this gap is to put a financial plan on paper.

This short-term planning process not only manages your immediate needs but also provides the clarity required to secure your long-term ambitions.

Despite its importance, he observes that many people struggle with financial planning, for example, by setting too many objectives without measurable outcomes. A plan should lead you to a specific outcome.

“If your objectives compete for the same amount of money or are unclear, it is no longer a plan. A successful plan has smart, measurable objectives and a clear method to track progress,” he says.

When tracking finances, Patrick recommends starting by measuring the amount of money spent and what it has achieved. He notes that many people forget to do the latter.

To ensure that you stick to your plans, he advises putting up an emergency fund. Ideally, he recommends keeping at least six months of expenditure in an easily accessible instrument like a money market fund. This prevents you from using the money allocated to a goal towards emergencies; a buffer fund also stabilises you between seasons and payments.

“Most people don’t fail because they don’t plan. They fail because resources intended for specific goals are redirected to emergencies,” he says.

A challenge in financial planning is being able to spend, save, and invest and respecting the allocation to each. The ideal is to keep money out of reach, either in the bank or in a separate account, so you don’t spend it.

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He says that since saving precedes investment, the challenge is between saving and spending. Setting realistic spending depends on circumstances and age. Someone living with parents can save up to 70 per cent of their income, while someone living independently may be able to save 30 per cent. Having a child changes your saving capacity.

When it comes to tools, Patrick suggests something as simple as an Excel spreadsheet. However, he states that a budget is only a tool; the real work is the behaviour of reviewing it frequently and adjusting when necessary. If it doesn’t work, move the plan to another year when the money is available. He further says that good habits are driven by psychology, and motivation comes from seeing that your plan is working.

“A budget can never be strict because the environment changes. You must be realistic,” he says.

Reviewing the plan monthly, reassessing long-term goals quarterly, and overhauling annually ensures it stays relevant.

He observes that in many African households, children are rarely shown how to plan financially, which can make self-motivation harder for adults.

He offers a tip for a less stressful financial year, saying, “Do what you need to generate the money, and do what you want to do with it. Stress is always a part of life, but clear planning minimises it.”