Financial skills and literacy have always been important skills for someone to have—I mean, how to budget, how to recognize priorities, how to invest… But for many Ugandans, these skills have never been taught or passed down. Many of us don’t know what it means to invest, what it means to budget our finances to guarantee we don’t run the risk of bankruptcy; instead, we spend on impulse, we invest in liabilities instead of assets, and we outright buy what we want instead of what we need. Our financial literacy, to put it plainly, is terrible.
But while I would love to share the wisdom of finances in detail, that would take more than just one article(self-help books are never lucking in volume). So today, rather than dumping all the research in one go, let me share with you a few habits that Ugandans shouldn’t be doing if they want to secure a better financial standing.
One of the biggest mistakes we make is lifestyle inflation
—when our income increases, so does spending. Many Ugandans immediately upgrade their lifestyle as soon as they start earning more, whether it’s moving into a fancier neighborhood, driving a more expensive car, or splurging on the latest gadgets–we simply take it that since our income has increased, we can afford more and thus spend more. The problem is that this leaves us stuck in the same financial cycle, living paycheck to paycheck despite earning more.
Instead of falling into this trap, a smarter approach is to maintain the same standard of living while channeling extra income into savings, investments, or business ventures. For instance, let’s say someone gets a salary increment from UGX 1,000,000 to UGX 1,500,000, instead of upgrading to a UGX 700,000 rental, they could continue living in their UGX 400,000 apartment and invest the difference in a SACCO or a small business…this way, they can use the extra income to bring in more income instead of just burning it all.
Another common issue is the lack of budgeting.
Many Ugandans handle money without a plan, spending blindly and wondering where it all went by the end of the month; and it happens to the best of us–tou make money, a substantial amount but at the end of the day you keep wondering where it all goes with nothing to show for it. This often results in unnecessary debt, unpaid bills, and constant financial stress. Why? No budgeting. When you have no budget, you don’t know what exactly you are to spend on, and more importantly, which is more important to spend on first. So you end up paying for whatever catches your eye until the finds run dry with some major prospects left hanging.
The key to breaking this cycle is creating a structured budget that prioritizes essentials like rent, food, and utilities, while also setting aside money for savings and investments before allocating funds for discretionary spending. A good example would be someone earning UGX 1,200,000 who decides to set clear limits—UGX 400,000 for rent, UGX 200,000 for food, UGX 200,000 for savings, UGX 100,000 for transport, and the rest for other needs. By sticking to this plan, they gain better control over their finances. Sure, they might slip here and there but they will have cleared their essentials.
Then there’s the dangerous habit of relying on debt as an emergency fund.
Many Ugandans take loans not for genuine emergencies but to finance luxuries like vacations, expensive parties, or flashy electronics. This creates a vicious cycle where one is always repaying loans, barely making ends meet. Instead of constantly borrowing, it’s crucial to build an emergency fund with at least three to six months’ worth of expenses. And I understand, not everyone makes enough to just drop a big chunk of their earnings to a separate account in one go, but think about, a quarter every month can set you up for an emergency that might drop by anytime. That way, when unexpected expenses arise, they can be handled without sinking into debt. Imagine someone who saves UGX 100,000 per month for 20 months instead of borrowing UGX 2 million for a trip—they can enjoy their vacation stress-free without the burden of repayments hanging over their head. Besides, that money too can be invested for further income.
Impulse buying is another financial pitfall that keeps many Ugandans in debt.
The thrill of discounts, sales, and social pressure often leads people to spend money on things they don’t really need. Supermarkets, online stores, and even friends can tempt one into making unnecessary purchases, anyone who has ever gone out with the boys or just a friendly outing knows this–you swear you won’t spend much but then everyone is ordering this and that and you just can’t be left out. To curb this habit, it helps to follow the 30-day rule—waiting a month before making any big purchase. Often, the desire fades, and the money remains intact. Picture someone eyeing a UGX 500,000 smartphone on impulse. If they wait a month and realize their current phone still works fine, they’ve just saved themselves from an unnecessary expense…I know this fast hand, I have a thing for buying new computers even when my old ones are still perfectly fine, but then again, we all have our addictions 😅.
Another mistake is investing in liabilities rather than assets.
Many people believe that buying an expensive car or the latest furniture set is a good investment, but in reality, these things lose value over time and drain finances rather than build wealth. Instead of spending UGX 10 million on a luxury car that depreciates withing the month, one could use that money to purchase land for example, which appreciates in value, or invest in government bonds that generate passive income over time. With this change in mindset, Ugandans can start putting their money into things that bring financial security instead of financial burden… Invest your money somewhere so that it build more value as you continue your daily hustle.
Spending on wants rather than needs
is another habit that leads to financial instability. A need is something essential, like rent, food, or transport, while a want is something that’s nice to have but not necessary, like designer clothes, frequent restaurant outings, or unnecessary subscriptions. And it’s always the cheap ones we ignore that add up to huge amounts of cash down the drain…a 2k here, 5k there, some ka fast-food delivery because you don’t feel like cooking the matooke at home and by the time you account your money, a huge chunk of it is no where to be seen and nothing to show for it.
Thus, differentiating between the two–need and want, can make a huge difference in financial stability. Someone spending UGX 200,000 every weekend on nightlife, for example, could decide to limit it to once a month and instead invest the saved money in a business or savings account. That simple change could eventually lead to long-term financial security.
Another major issue is relying on a single source of income.
Many Ugandans depend solely on their salary, which is risky because if they lose their job or business slows down, their entire financial structure collapses. A wise move would be to diversify income streams through side businesses, freelancing, or investments. Consider someone earning UGX 1,500,000 monthly who starts a poultry business on the side. If that business brings in an extra UGX 250,000, they now have some financial backup, reducing dependency on their main salary.
Finally, there’s the issue of the “Black Tax”—financially supporting extended family at the expense of one’s own financial security.
While helping family is important, overextending oneself can leave them struggling. It’s understandable , neglecting family and relatives comes with a lot of side eye and bad mouth from the afore mentioned family but then again if you pour your whole basket out, how will you survive? Will you also resort for garnering help on end like the rest? Setting financial boundaries and finding sustainable ways to assist relatives is a better approach.
Instead of constantly sending UGX 100,000 to a relative in need, for instance, one could use that money to fund a small business for them so they can generate their own income. Sit them down and devise means for them to generate some income that they can sustain, and while it might come at a cost, the cost will be a one time investment other than being the family ATM.
In other words, financial freedom is not about earning millions (it does help things though), but more about managing what you have wisely, millionaires lose their wealth all the time. Breaking these bad financial habits can set Ugandans on the path to financial stability and success. Start by budgeting, saving, and investing in assets, and avoid impulse spending and debt traps. Remember, it’s not how much you earn, but how well you manage it that determines your financial future.
