BREAKING THE PAY CHEQUE TO PAY CHEQUE CIRCUS

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Speaker: Patrick Wameyo, ACIB (UK)

Title: Financial and Business Advisory Consultant

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Objectives:

1. Explore psychology of money to enhance members self awareness to factors underlying their financial choices
2. Explore the financial planning processes and behaviors' including expenses Management, Savings Strategies, Debt Load management
3. Wealth creation through Investments for alternative income

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Content

1. Psychology of money
2. Financial Planning - Expenses Management
3. Financial Planning - Savings Strategies
4. Financial Planning - Debt Management
5. Financial Planning - Investment Basics
6. Q&A Session

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Facilitator

• Over 29 years senior management experience in Commercial banking and Business Advisory Consulting:
• Financial literacy – curriculums, training pack, training & coaching
• Career Transition Support – retrenchment and retirment planning
• Business strategy and goal management
• Credit risk management - Strategy, policies, product & people
• Business Advisory - baseline surveys, economic feasibility assessments, Value chain analysis and
• Peer to peer boards for SME CEOs and GOLD Coaching
• SACCO supervisory reforms expert - World Bank

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An Overview

Importance of Personal Finance

Determine Current Financial Situation

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Psychology of Money

1. Financial Success and behaviours are linked
2. Financial success comes from controlling emotions
3. You must fight with your emotional and mental turmoil to make good choices.
4. Engaging in a “fools’ pursuit” is a sign of losing the emotional war.

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5. Many people “acquire articles” to gain respect (cars, home address-few examples) of others. They don’t get the respect, because the people admire articles not the owner : they too wish they owned them !
6. You should Not risk what you already for things you don’t have or even don’t need. Take calculated risks.
7. There are many ways for making money, but only one way for keeping money – by being frugal.

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8. Take risks because it pays overtime (in the long run). There is big difference between gambling and investing. It is all about how you understand the risk you take.
9. Risk and luck live side by side – you increase you luck by taking and learning from the risk (understanding risk). The world is too complex for your actions to dictate 100% of your outcomes.

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Summary of The Financial Planning Process

1. Determine your financial vision
2. Review your current situation and Identify your opportunities and Challenges
3. Determine the milestones, and targets
4. Determine activities (daily, weekly, monthly)
5. Evaluate your Ability to take risk & financial risk
6. Implement your financial plan

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“ Are There Things You Could Do Differently” !

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Life Is In Seasons

8 – 14 YRS

Primary/ Sunday/ Rights of passages

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1 – 7 YRS

Born and starts baby class & Nursery school

15 – 21 YRS

Secondary/University/Young Adult

22 – 28 YRS

Employed/visionary/Married/

children

29 – 35 YRS

Children growing up/Investments

36 – 42 YRS

Promotion/Expansion

43 – 49 YRS

Children graduate

1

2

3

4

5

6

7

50 – 56 YRS

Retirement begins

56 – 63 YRS

Quits job. Go where?

64 – 70 YRS

Who takes care of you?

71 +Bonus YRS

Still alive?

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9

10

+11

Senior Citizen – Golden years

Childhood - Adulthood

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Money work for you

Mitigate risk

Finance your goals

Create your legacy

Investments

For Your

Retirement

Convert Income into Wealth

Money Work For You

Your Protection

Your Retirement

Your Goals

Structure of Financial Plan:

Personal Details (who are you planning for?)

• Name and age of principal
• Name and age of spouse
• Name and age of each child
• Name and age of dependents

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Step 1: Objectives (Visioning)

Short term objectives

• To remove a deficit of Kes………………..
• Save Kes.100,000 in ……………………………months

Medium and Long term objectives

• Educate Peter and Mary to University level
• Own a home worth Kes. 15,000,0000 by …………..
• Make investments worth Kes. 20,000,000 by …………..

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Step 2 a : Assessment of Current Situation

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Social Structure Analysis (source of expenses)

1. Children, their ages, regular needs
2. Parental dependents, their ages, regular needs
3. Other – dependents, ages and needs

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Step 2 b: Assessment of Current Situation

Personal Financial Statement review:

1. Your income lines (all current sources of income )
2. Your expense lines (monthly)
3. Your personal use assets
4. Your investment assets
5. Your loan and other long-term obligations

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Expenses

Non-Discretionary (Cost of your choice life-style)

• Food, shelter, clothing, medical (needs), Education, transport, Utilities
• Loan repayment, Insurance premiums etc., Children , Relatives, tithe, giving etc.

Discretionary

• Wants (entertainment, other), Savings for investment

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Summary: Current Financial Situation

• Net monthly income: Ksh270,000
• Monthly budget deficit Ksh1………………
• Pension contribution of Ksh20,000/month
• Various insurance policies (home, medical, PA)
• Equity Investments Ksh0.560 million
• Money market unit trust investments Ksh.200,000
• A small food business currently operating as a hobby

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Step 3 : Recommendations

Recommendations for Short term objectives

• Identify opportunities for cutting down expenses
• Release and save at least Kse.10,000 per month

Recommendations for medium term objectives

• Complete insurance for Peter’s secondary education

Recommendations for long term objectives

• Take a mortgage and paydown quickly with bonuses
• xxxx

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Step 4 : Financing

Proposed financing for Short term objectives

• Savings to cover emergency fund
• xxxx

Proposed financing for medium term objectives

• Purchase money market funds / ETFs for liquidity
• Purchase education insurance policy

Recommendations for long term objectives

• Mortgage finance for home finance
• Bank loan for hospital construction

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Step 5: Implementing Financial Goals:

1. Determine the amount of money you spend on basic family needs
2. Determine the cost of your goals (Daily rate)

Decide how much to either save

Or to go towards paying off debt

Or to invest (in assets or int a business) directly per month

• Decide the timing of these things
• Purchase of assets to meet the portfolio target return

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Financial Plan Execution

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Debt Management

1. Acknowledge (from the financial activities)
2. Record all debts starting - smallest to Largest
3. Identify the smallest debt, shortest terms, with the highest interest rate
4. Pay it off (releases more cash flow)
5. Use the money released from waste watch to first settle debts then to investments

Investor Life Cycle

Investment Portfolios

Investments

Emergency Reserves – Liquid Assets

(cash, savings, money market funds)

Transfer large risks – Insurance

(Health, Life, Property)

Your Protection

Your Home - A multi-faceted goal

A home should be less than 25 % of your entire wealth

1. Cash and bank deposits
2. Quoted Financial Assets – Shares, Exchange Traded Funds
3. Unit Trust Funds
• Money Market Fund
• Fixed Income Fund
• Balanced Fund
• Equity Funds

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3. Unquoted financial assets (D-REITs)
4. Real Estate (including I-REITs)
5. Alternative Investments

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