Managing-Personal (1).ppt

By
Dr Frederick K. Chelule (Ph.D;D.Min)
Training Consultant
Managing Personal Finance
for wealth creation, savings
and investments

“You can confront the future now
and save for your retirement or
face the music when you retire”
The Choice is Yours.

Remember/be warned:
IF YOU FAIL TO PLAN,
YOU PLAN TO FAIL!
or
IF YOU FAIL TO PLAN,
OTHERS WILL PLAN FOR YOU.

 Do not consume the seed ( your
current earnings), plant it and later
consume its fruits
 Direct your money where it should
go now so that you do not ask
later in life where it went.

Wealth ….
 “The more one earns the wealthier
one is ” .. True or false??
Wealth is a function of SAVINGS not
EARNINGS

Why plan your finances?
 To ensure you have a nest egg when
out of a job/emergency
To continue with the same standard of
living before and during retirement/at old
age.
Peace of mind
Financial freedom - get out of the rat

Introduction to Personal Financial
Management
 Personal Financial Management is
mandatory in today’s world. It provides the
means of keeping track of personal
expenses, personal debt and
subsequently helps the calculation of a
person's net worth financially.
 The following are some of the tools used
for personal financial management:
Income and Expense sheet: its
preparation is the key to personal
financial management.

Management
 It comprises of the following elements:
1. Calculation of income level:
 This is the sum of the post tax income or
disposable income, wife or husband's
income, investment income, rental income
and other sources of income.

Management
 2. Calculation of expenses. These
include:
 Expenses on grocery, medical help,
house help, laundry, basic amenities,
phones, transportation and household
expenses.
 Lifestyle expenses include expenses on
books, newspaper, clothing, personal
care, entertainment, travel, holiday, eating
out, and club or gym membership.

Management
 Fixed expenses include expenses on
house rent, children's fees, home loan,
auto loan installments, other loan
installments and insurance premium.
 Household gadgets, festivals, family
obligations and the like are included under
the miscellaneous expenses.

Management
 Person's financial net worth:
 Net worth is calculated by the difference
of assets and liabilities. Assets include
house, land, farm house, bonds ,
insurance, fixed deposits, mutual funds,
small savings, provident fund, amount in
the savings account, amount in current
account, cash in hand and other
investments.

Management
 Liabilities include housing loan, auto
loan, personal loan, consumer loan, other
borrowings, unpaid bills, credit card
outstanding and other liabilities.
 A positive net worth would allow further
future personal financial plans.

Management.
Asset: anything having commercial or
exchange value that is owned by a
business, institution or individual.
Appreciating assets are those that
generally increase in value (e.g. real
estate, stock or bond). Depreciating
assets are those that generally decrease
in value over time (e.g. car ).

Management.
 Club Account: A type of savings account a
customer “joins” to save money for a special
reason, such as holidays or family vacations.
Club accounts usually require the customer to
make regular deposits.
 Diversification: Spreading the risk of loss by
investing in a variety of savings and
investment options.
 Dividends: Part of a company’s profits it
gives back to shareholders that own stock in
the company/SACCO.

Management.
 Inflation: Inflation is the rise in prices of
goods and services. It happens when
there is too much spending relative to the
supply of goods on the market.
 Interest: The cost of borrowing money, or
the price the lender charges the borrower
for the use of the lender’s money. Interest
is also paid on deposits because they
are, in effect, loans to the bank.

Management.
 Investment: A savings option purchased
for future income or financial benefit.
 Liquidity: Refers to ease with which an
asset (something of value) can be turned
into cash without losing its value. For
example, cash is the most liquid.

Management.
 Risk versus Return: This refers to the
tradeoff between risk and return. The
more risk an investor takes in an
investment, the higher the expected return
on that investment. There is also a higher
risk of possibly losing the entire amount
invested.
 Stocks: Shares owned in a company.
The price of stocks may vary depending
on how well the company performs. The
value of the investment may increase or

Personal Financial Priorities?
 Income earning ?
 Saving ?
 Investment?
 Spending?
 Borrowing?
 Doing nothing financially

Success tips to Personal Financial
Management.
 Although making resolutions to improve
your financial situation is a good thing to
do at any time of year, many people find it
easier at the beginning of a new year.
Regardless of when you begin, the basics
remain the same.
 Here are my top keys to getting ahead
financially:
 To save and invest you need personal
discipline, sacrifice and commitment.

Management.
 Teach children about money
management to prevent them from doing
any irrelevant spending.
 Spend less on entertainment. By doing
this one can lower bad debt as well as
increase his credit rating.

Management.
 Read Proverbs 21:17- A man who
loves pleasure becomes poor; wine
and luxury are not a way to riches.
 Don't use money to make yourself feel
good.
 That type of high is fleeting. Instead, do
things that promote self-respect and
creativity so you don't have to seek those
feelings through spending money.
 Decide where your money should go

Management.
 Get Paid What You're Worth and
Spend Less Than You Earn
 It sounds simplistic, but many people
struggle with this first basic rule.
 Being underpaid even a thousand
shillings a year can have a significant
cumulative effect over the course of your
working life.

Management.
 Make sure you know what your job is
worth in the marketplace, by conducting
an evaluation of your skills, productivity,
job tasks, contribution to the company,
and the going rate, both inside and
outside the company, for what you do.

Management.
 Stick to a Budget
 Budgeting. It's not a four-letter word. How
can you know where your money is going
if you don't budget? How can you set
spending and saving goals if you don't
know where your money is going? You
need a budget whether you make
thousands or hundreds of thousands of
shillings a year.

BUDGETING
 Live within your means - don’t spend
more than you earn.
 Live below your means- ensure what you
expend is far less than what you earn.
This is the best personal financial
management policy.

BUDGETING
 Do not live above your means, for that
will mean you are spending more than
what you earn
 Make a list of all your income streams and
daily expenses

BUDGETING
 Expenses - group as necessary and
discretionary
 Find ways to cut down your discretionary
expenses
 Monthly budget - prepare and work with
one that suits you
 Consider your family needs when
preparing a budget (2 incomes, common

ALSO
 Arm yourself with financial knowledge -
seminars, books, media, experienced
financial planner
 Diversify: put some money into other
investments apart from savings and
pension plan
 Do you have dependents? - Get life
insurance
 Write a will – keep your hard earned
money within the family
 Periodically assess your portfolio - adjust

Personal debt management.
 Another vital aspect of personal financial
management is Personal Debt
Management:
 In order to keep track of pending
payments and avoid falling into the debt
trap, a number of aspects need to be
considered.
 In case of auto loan, housing loan,
personal loan and other loans one should
keep account of the loan amount, the
repayment period, monthly installment,
interest reset frequency and the amount

WHY DO WE GO INTO DEBT?
 We spend more than we earn
 We want to have what the neighbor
/colleague/friend has
 The lure of easily attainable loans
 We borrow to pay back other loans
Good Debt
 Debt for investment e.g. business, buying
shares (can be risky though)
 Mortgage (though you should aim to pay
quickly)
Bad Debt
 Debt for consumables/pleasure/luxuries

GET OUT OF DEBT AS FAST
AS YOU CAN!!!!
HOW?

Managing Debt
 Plan before you borrow; and when you
borrow for investment, not consumables
unless it is mandatory
 Maximum 1/3 of net pay in loan
repayments
 Thou shalt not covet - don’t borrow for
things you desire but don’t need
 Avoid borrowing on consumption items -

Managing Debt
 Write a list of all your debts and prioritise
payments - pay interest bearing debt first
 Pay your loans as fast as possible - the
longer term the loan, the more you pay
the better for you.
 Avoid credit card debt - it is the most
expensive; and ATM?

Managing Debt
 Avoid a ‘saviour’ mentality - you can’t
save everyone. Save yourself and your
family first!!!
 Family and friends - cheapest and most
understanding of creditors but DO NOT
EXPLOIT THEM! ;- Record your
expenses daily and plan on where to cut
down

Managing Debt
 Create a budget that suits you and stick to
it
 Are you an impulsive shopper? - Keep
your credit card and ATM card at home
 School fees - pay in monthly installments
 Use the tips on achieving financial
security

Managing Debt
NB
 In your monthly earnings :
 Pay yourself 20 % of your earnings
 Use 30 % of it for expenditures
 20% for debts
 10% for tithes
 20% for charity/community support.

Seven Biggest Money Mistakes – Avoid!
Most Common Roadblocks on the Road to
Building Wealth
Avoid these seven money mistakes and
increase your chances of successfully
accumulating wealth.
 Many Kenyans will never reach their dreams of
building wealth, being financially secure, and
being able to retire in comfort. The reason is
most often a combination of these seven
biggest money mistakes.

Seven Biggest Money Mistakes –
Avoid!
1. Having a Thirty-year Mortgage
 Where do you find the money to build
wealth? Try looking at your mortgage.
Millions of people think nothing of paying
for their home over 30 years, even
though the average homeowner ends up
paying two-and-a-half times the purchase
price of the home by stretching the
payments out this long. Having a 15-year
mortgage instead of a 30-year mortgage
can save you large sums of money and
help you build wealth.

Avoid!
2. Giving Control of Your Money to
Someone Else
 If you're not involved in your day-to-day
family finances, you're putting yourself at
risk.
 If you're married and you let your spouse
handle all the financial matters without
giving your input, you're at risk if your
spouse dies or becomes seriously ill or if
you divorce.
 Know the details of your family's finances,
investments, debts, retirement savings,

Avoid!
 Don't turn your investments and financial
affairs over to a broker or financial
consultant without keeping abreast of
what is being done with your money and
being involved in investment decisions.
Never give total control of your money to
someone else.

Avoid!
3. Not Controlling Spending Leaks
 The reason so many people in Kenya are
in so much debt is because they dribble
their money away in small, barely
noticeable amounts.
 Like drops of water dribbling through the
hole in the dike, the loss is barely
noticeable, but over time the hole in the
dike gets bigger and bigger.
 By the time the water is gushing through,
the damage is done.

Avoid!
 The same is true with spending leaks. It's
a lot easier to plug a small hole than to
ignore the drips and look over your
shoulder later and see a huge tidal wave
of water coming your way in the form of
unmanageable debt.
 If you're ever going to accumulate wealth,
you must control spending leaks.

Avoid!
4. Not Setting Goals
 If you don't know where you're headed
and how you plan to get there, you'll
probably never arrive.
 To accumulate wealth, you need a plan.
 To be motivated to save money, you need
something specific to save for.
 To succeed in accumulating wealth, write
your goals down and visualize them,
whether they're a relaxing retirement, a
mortgage-free home, or an unforgettable

Avoid!
5. Incurring Too Much Debt
 If you're spending all your money paying interest
on credit cards and installment debt, you won't
have enough left for savings.
 When you buy on credit and don't pay the
balance off at the end of the month, you end up
paying much more for your purchases. A
KSH.12000 big-screen TV can end up costing
you KSH.25000, but you'll never know it
because the true cost is hidden in your credit
card payments.
 Pay cash and stay away from credit card debt if
you want to accumulate wealth.

Avoid!
6. Cashing Out Retirement Funds
 Many people end up cashing out their
pension balances when they change jobs.
Still others take out loans against their
pension balances, permanently reducing
the amount of earnings they would have
accumulated.

Avoid!
7. Not Saving Enough for Retirement or
Starting Too Late
 When you're in your 20s and 30s, it's easy to
think you have all the time in the world to
accumulate wealth and save for retirement.
 The truth is, you'll have to save a lot less if you
start now and give your earnings time to
compound.
 If you're over 40 and you're behind on your
retirement savings, you'll have to save much
larger sums to ever catch up to where you
should be.
 Start saving early, and save at least 20% of

Ten Rules Of Poverty – you should avoid
them
1. Never wake up early
2. Never plan how to spend your money
3. Don’t think of saving until you have real
big money
4. Don’t engage in activities usually
reserved for the “uneducated”
5. Don’t think of starting a business until an
angel comes from heaven and gives you

Ten Rules of Poverty- you should avoid
them
6. Complain about everything except your
own attitude
7. Spend more than you earn
8. Compete in Dressing and other
popular items.
9. Buy a second hand machine that costs
more than three times your gross
monthly pay

Personal values and money
management
make save
spend grow
Core Personal values

Personal values and money management/
Jewels of financial Health
NB. If you enjoy going shopping there
is something seriously wrong with
your values.
Essential values for effective money
making and wealth creation:
 Patience
 Reflective living
 Godly living
 Contentment
 Self Control/Discipline

Personal values and money management/
Jewels of financial Health
 Generosity
 Commitment
 Self-Sacrifice
 Focused life
 Long term vision
 High but managed ambitions
 Persistence- it wears out resistance
 Positive view of life


Planning for Retirement
START EARLY

PLANNING AND SAVING
It starts with the person in the mirror

FINALLY….
 1.Have BIG Dreams
 2.Start now with what you have where
you are
 3.NEVER give up
 4.Surround yourself with people better
than you and are positive in life.
 5.Consistently add value
 6. Trust in God

End
 Thank you all and God bless you.
 Dr. Frederick Chelule

Managing-Personal (1).ppt

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