DEBT REQUIRES PLANNING

 I recently counselled a young man who was heavily in debt and that is why I realize that the problem of debt management can not be taken for granted. A recent article in the New vision showed that 70% of Ugandans survive on debt. From a financial literacy perspective this requires deep analysis. If this is the case, the questions include do all Ugandans know how to utilize debt? Do they have the capacity to negotiate good loans terms?  Are they able to run  their businesses smoothly? Where do they borrow from?

It is good to note that debt is good when used for the right reasons. For examples banks discourage a loan that is for consumption. A good loan is one where the borrower wants to expand their business or buy an asset. A loan is good when put into production. However in the news I saw an article where a person borrowed for betting .(This is equivalent to an addiction) . In a nation where over 70% of Ugandans are below the age of 30 years responsible debt management is critical. Many youths are wired to spend on even ventures that they have not researched. Others invest in get rich schemes that promise instant returns. There is a company that collapsed last year and many Ugandans lost money yet some had borrowed heavily. 

This shows that all topics in financial literacy are interrelated such as personal financial management, business management, financial services and investment. Actually to develop a financially literate population we should be at the forefront of training individual Ugandans about responsible financial literacy. We should reach a point where Ugandans have confidence in negotiating loan terms and put the loans to good use. If not we shall continue to hear cases of Ugandans who lose their valuable property to loan sharks. Even government funds for the youths have been abused by the beneficiaries due to diversion. Some youths or beneficiaries think such funds are "gifts" and therefore use it for consumption.

HOW TO PLAN FOR DEBT

1.Personal financial discipline is key. Without discipline the loan funds can be diverted to unplanned ventures.

2.Avoid excessive borrowing. Some microentrepreneurs borrow more than they can afford.

3.Keep track of expenses so as to track expenditure

4.Have a responsible financial advisor. There are so many financial advisors in banks and other institutions who can guide a borrower.

5. Pay attention to the terms and conditions . Many Ugandans have lost their property to loan sharks because they can not effectively read the terms and conditions.

The wise use of debt is both critical to individual borrowers and the nation at large. When debt is put into good use it is a blessing . There are so many sad stories in society where lack of financial guidance has cost some borrowers. The above discussions point to the need for responsible borrowing.

Phillip Kiryowa

Finance and Leadership Coach

+256752615916