The Five Ultimate Ways to Master Your Money

The Five Ultimate Ways to Master Your Money

‘Side hustle’ investments are on the rise today as more people grapple with the rising cost of living.  A wave of small businesses like boda-bodas, and food stands are increasingly popular among a new breed of investors, many of whom raise capital through day jobs, as they yearn for ways to supplement their income to meet their needs.  

In our age multiple incomes are not only an option, but a necessity for survival, says financial experts Mary Matama and Livingstone Mukasa during our conversation with them in our Mastering Your Money webinar. 

“To survive in Kampala, you need about 5 million UGX, but the average salary is 1 million UGX. There is a huge gap, so people are driven to do a bit of Chakala, a bit of trading because what they are earning is not enough.” said Mukasa.  

While earning more is important, it alone is not enough to achieve financial stability. A 2022 report on taxation and business environment estimated that about 55% of entrepreneurs that started business in the last five years, had since closed shop.  

Without vital financial management skills and discipline, we can find ourselves stuck in a cycle of financial struggle, regardless of our income level. Let's explore some key strategies that can help you unleash the power of financial discipline and set yourself on the path to financial success. 

1. Set Goals for Your Money  

Establishing clear financial goals is one of the most effective steps on your journey to mastering your money. According to Matama, the examples of high-earning sports figures, who go broke after 3 to 4 years of retirement, should serve as a reminder of how important it is to plan adequately for our earnings.  

“Instead of blindly pursuing multiple income streams which may or may not lose your money, take time to study where you are putting your money and why, and what are the likely chances if you lost that money, you could still handle crucial responsibilities like your child’s education, your mortgage or having an emergency fund?” 

Expert Tip: 

Break your goals down into smaller, actionable targets, and regularly track your progress. This will keep you motivated and focused on your financial journey. 

2. Practice Personal Financial Management  

Before you manage the income and expenses of multiple business streams, ensure that you can manage your own. For Mukasa, this begins at home.  “Plan an efficient home. If your home is wasteful, teach your children and your partner to minimize leaks.” Utilizing a budget is a crucial step to achieving this.  

Matama explains that staying on top of your money using a budget allows you to be in line with your financial goals. “Tracking your financial activity with a plan and budget does not depend on how much you make but it allows you to identify how much you need to achieve your financial goals and helps inform you on how much you need to earn or where you can cut on spending.” 

Expert Tip: 

The general rule is to live below your means and align your expenses with your financial goals. Online apps like BOU’s Money Calculator can help you with your personal financial management; to allocate funds to different categories such as housing, transportation, groceries, and entertainment.   

3. Manage debt strategically 

Many people fall into a debt trap when they acquire unsustainable lines of credit. Debt, if not acquired for the right reasons and managed appropriately, can hinder your financial freedom (ability to sustain your lifestyle for the rest of your life) and drain your resources. 

When considering debt, Mukasa advises that your financial plan should prioritize achieving financial freedom. This means your plan should increase assets over time and reduce liabilities. If you decide to borrow, keep it strictly for investment purposes which can earn money faster than the rate of interest on loans. Avoid borrowing for consumption.   

Expert Tip: 

Develop a plan to tackle your debts, starting with high-interest ones. Consider consolidation options or negotiating lower interest rates. Make regular payments and avoid accumulating more debt. By effectively managing your debt, you'll free up funds for savings and investments. 

4. Embrace smart investing 

Investing is a key component of wealth accumulation, but it is not a one size fits all. “Determine what kind of investor you are and at what stage” says Mukasa. “Go into business playing your strengths and minimizing your risks. I am on the record telling people that when you are starting out with fewer resources, you need to park your money where it can accumulate until you are ready to go to the market to play it big.” 

Once you’ve determined the type of investor you are and what stage, ask yourself the following questions about the investments you’re about to make: 

  • How much do you expect to earn from this business?  
  • What kind of interest does it offer? 
  • Over what period will you be investing? Is it a short term or long-term investment?  
  • How does your investment fit in with your asset mix?  
  • What is the cost to buy, sell or hold the investment?   

Expert Tip: 

“If you are still growing your investment muscle; earning 1 million UGX and saving 10%, you can put money in companies like XENO or in voluntary savings with NSSF. Prioritize assets that have a cash flow component to them. However, if you have a solid income, prioritizing cash flow will lower your returns.” - Livingstone Mukasa 

5. Never stop learning 

The aim of mastering money is to increase your productivity. In the ever-changing world of business and financial management, staying informed by reading books, attending seminars, following financial blogs, or engaging with business communities will better equip you to make informed decisions and adapt to changing circumstances. 

Financial experts, Mukasa and Matama termed this as paying school fees. “Starting a business has school fees, if you are trying to change career you pay school fees.” As you gradually move from one to multiple income streams, diversifying your investment portfolio or even leveraging technology, come ready to embrace the ‘fees’ to become master of your money.  

Expert Tip: 

Applications like XENO help you achieve your financial goals like a pro. Simply plan, automate your savings and invest your money in a diversified portfolio based on your personal risk tolerance and financial goals.  

By implementing these strategies and embracing financial discipline, you can take control of your finances and pave the way for long-term prosperity. Remember, mastering your money goes beyond just increasing your income; it's about developing the skills and habits necessary to manage debt, set financial goals, and make wise investment choices. 

So, if you find yourself trapped in a cycle of financial hardship, it's time to shift your focus. Develop financial discipline and start your journey today. 

Start from as little as UGX 10,000 or KES 500

Saving money is an excellent first step toward financial freedom. Start your journey today.