Dr. NG’ANG’A GACHARA, PhD. Tuesday, (MKIM,ICPAK,ICPSK,OPI-AFRICA,ISO) January 29, 2019
STRATEGIC PERSPECTIVE
FUNDAMENTAL QUESTIONS?????!!!!! • “Mastering • How will I look like during my last third (1/3) of age (61yrs-90yrs)? others is • How and Where will I spend my strength. retirement life (features characterizing Mastering retirement)? yourself is true • How far am I in terms of achieving my power.” retirement objectives? • Do I really work or am I on job? • Why am I broke and I always working? Lao Tzu (th century BCE) was a philosopher of ancient • What have I been working for (Visible China investments)?
What is Financial literacy? • Personal financial literacy is the ability to read, analyze, manage, and communicate about the personal financial conditions that affect material well-being.
It includes the ability to discern financial choices, discuss money and financial issues without (or despite) discomfort, plan for the future, and respond competently to life events that affect everyday financial decisions, including events in the general economy.
The main reason why most people feel that ‘’money is never enough’’, and continue to live from pay- check to pay-check, is because they have not yet mastered the art of using what they have to increase their means.
PERSONAL FINACIAL PLAN • To create a viable personal financial plan is a lot like building a castle from scratch. One must start with a single stone from the foundation, all the way to the top most floors. The biggest mistake most people make is that they keep holding on to the wrong mentality; that they have to start with substantial amounts so as to have sensible financial assets.
PERSONAL FINACIAL PLAN Cont’d • The truth is, if one has any source of income, no matter how big or small, they have the ability to start building their wealth. Every one of these small efforts to save or invest little by little, forms the foundation of your financial freedom; a privilege that comes with a better life, the ability to help others, stability and financial security in retirement, among others.
FINANCIAL FREEDOM KEY MAXIMS 1. To strive to spend less than you earn (living within your means). 2. To make savings a priority in your budget. 3. To always have a set of financial goals that you are working towards achieving. 4. To consider one’s needs in retirement early enough, and to start saving for the sunset years.
MAKING PASSIVE INCOME
• Do you work for money or Money works for you? • How much dividend did you make last year (%*Share capital)? • How much interest on deposit did you make last year (%*Deposits)? • Where have you invested not spent your borrowed money from the sacco?
Why is saving important? • The good thing about cultivating a savings habit is that it always pays off, and allows one to sit back and watch as their financial resources work for them. Combining a consistent savings program with the passage of time can add considerable accelerating power to your savings through compounding, that is, the gradual accumulation of earnings that happens when you reinvest your gains from time to time.
Why is saving important? Cont’d • This means that with a little financial prudence and a measure of self-discipline you can build up your savings a lot faster than you would think. Hence, it goes without saying that every beginning no matter how small it is has the power to transform one’s finances for the better. • Where your personal finances are concerned, your security depends on the small choices you make with your money. Every financial worry you want to banish and financial dream you want to achieve comes from taking small steps today that put you on a path towards your goals.
Basics that one needs to know in financial literacy: how to track where my money goes and make money choices • that get me to my goals. how to make a spending plan that will get my bills paid on time • and allow for saving. how to find thrifty ways to spend my money for my goals, not • keep up with neighbors. how to set aside money for non-monthly expenses and • emergencies that come up. how to teach the children in my life about earning, spending, • saving, and giving. how to make a system to keep my financial papers and records • where I can find them.
Basics that one needs to know in financial literacy Cont’d….: how to read my paycheck stub and know how many exemptions • to claim for taxes how to file my taxes and claim tax credits and refunds to build • my net worth how to create an income plan to manage what I make now and • find ways to make extra how to make a debt plan to prioritize what I owe and get it paid • off faster how to keep my savings safe and use basic investment tools to • make my savings grow how to build wealth and net worth by reducing my debts and • building assets
Basics that one needs to know in financial literacy Cont’d…….: • how to get and understand my credit reports and start to build or re-build good credit. • how to know my insurance coverage (health, home, car) and how to get claims paid. • how to get a free checking and savings account at a bank or credit union and keep it OK.
REMEMBER • The first and worst of all frauds is to cheat yourself. – Philip James Bailey English Poet 22 April 1816 - 6 November 1902
THE JOURNEY TO FINANCIAL FREEDOM ‘’ Financial planning is not an End but a means to an END of financial stability and security ’’
Develop a winning attitude • Poverty of the mind is the greatest obstacle to financial independence. It is often expressed as ‘’I can’t,’’ or ‘’It is impossible’’!. • Cemeteries are filled with dead dreams because of our natural tendency towards pessimism.
Develop a winning attitude Cont’d • ‘Your thoughts, feelings, and visualized imagery are the organizing principles of your experience. The world within is the only creative power. Everything you find in the world of expression has been created by you in the world of your mind, whether consciously or unconsciously’.
What is an asset? • An asset is defined as any money invested with an intention of generating cash flow streams from it over time or that has a capital growth component.
What is a liability? • A liability is defined as money owed to others whether borrowed for business or own use.
What is an expense? • An expense is any money spent on operations, consumption and is usually spent to facilitate the attainment of a certain objective.
What is income? • An income can be defined as any money received from a certain investment or employment. i.e. salary, wage, dividends, interest earned, etc.
What is a revenue? • A revenue is defined as money received from a sale of a certain asset or merchandise. i.e. sales, proceeds realized from sale of an asset, etc.
What is personal expense diary? • A personal expense diary is book where one is supposed to be recording any money spent in the course of the day. • The book should be recorded on a daily basis through out the month religiously. • It helps to track one’s spending habits and re-adjust accordingly.
What is personal income statement? • Personal income statement is a monthly schedule showing your incomes and revenues net off expenditures. • It shows whether one has a saving in the month or lived on borrowed cash.
What is personal balance sheet? • A personal balance sheet is a schedule showing what one owns in form of assets and what one owes to others in form of liabilities. • It is shows one’s investments and also what other people owes to him/her. • In a nut shell, it shows one’s net-worth.
What is a personal budget? • A personal budget is a statement detailing how somebody is planning to spend his disposable income. • The spending could either be on consumption, operations or investment.
TIMELY FINANCIAL ADVICE “Knowledge comes, but wisdom lingers.” Look after the pennies and the pounds will look after themselves. Don’t spend what you don’t have. Buy low, sell high (stock/shares market rule). Money can’t buy you happiness. Before putting your money into any venture, always make sure you have done enough research on all factors affecting the venture. You can’t go wrong with bricks and mortar.
“There are no mistakes, no coincidences. All events are blessings given to us to learn from” Elisabeth Kubler Ross. << THANK YOU AND BE BLESSED >>
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