#fail…

Do you know why personal finance plans fail?

Advertisements

They are not written. Writing is great and powerful way of keeping self – and anybody for that matter – accountable. What is important is to ensure that the plans are SMART from the onset. Lets take my budgeting goal as an example

  • Specific – Use budget to grow investments by KES 5000 monthly
  • Measurable – Allocate 30% of pay to savings & investments
  • Attainable – Yes! There are no known pressing commitments. Emergencies have been budgeted for
  • Realistic – 70% of pay is able to meet monthly tithe and expenses
  • Time Bound – Grow the portfolio monthly

They are forgotten. Or most likely abandoned. Plans are disowned when they are too ambitious from the onset. Take the example of trying to get out of major debt while at the same time pursuing a real estate property deal. Such a situation will not only cause strain to one’s pocket, the logistical / planning demands of both assignments will be mentally taxing. It is preferable to tackle one primary financial goal at a time. This quickens the pace of achieving the goal and saves a big deal on other resources.

They are not reviewed often. Reviews help identify problems, bottlenecks and loopholes. A review will reveal that the emergency fund allocation is not sufficient thus prompting one to rework plans so as to accommodate more realistic figures. Another review will show that expected cash flows did not come in within the anticipated 3 months. The budget holder will immediately be able to utilize reserves in a way that doesn’t create financial chaos.

Dave Ramsey says its about momentum. I totally agree! And hopefully the sketch below can help in setting planning, monitoring and review deadlines…

 

groups…

My first real school of money…

“Kidole kimoja hakivunji chawa” is a swahili saying that really describes the power in and value of numbers. Not so much for quantity but the benefit of two plus heads being better than one. As an addition to my previous post, allow me to share learnings from being a part of investment groups…

My first real school of money was with a group of friends whom we had gone through uni together. It’s here where I learnt to set goals, discovered the truth about books and acquired an appetite for saving. Each month we’d report how we were doing and for some reason I was the one always trudging behind on my ‘reading’ homework. Today I look back and I’m absolutely grateful for the experiential teachings that came from the lot. And though our portfolio was nothing near expansive, we did make decent returns from the stock exchange. In fact, these guys helped me engage in the baffling world of finance and to-date I still call on their help.

A couple of years later I joined another group that was more structured. Each monthly meeting was more exciting than the previous one and financial literacy became our primary focus. We all did our best to hand in our ‘assignments’; the learning – to say the least – was exhilarating! I also had the privilege of doing the group’s book of accounts. And what do you know, my accounting skills improved significantly! The greatest benefit for me was immersing myself in the world of mathematical models. Nothing near Archimedes 🙂 but stuff that was good enough to help grow my personal portfolio. Money markets which was previously a theoretical financial concept was now coming alive and the numbers were speaking astounding truths 🙂

I can’t quite call my current cohort a group as we are members of the same nuclear family. Sometimes we invest together. Other times we go apart. Most times we ran things by each other and bail one another; a silent code if you could say so. Our parents have been very instrumental in shaping our thinking and challenging us to do more with what we earn. “If you don’t take the risk, you’ll never own anything!” We are currently exploring SACCOs and trying to see how we can leverage our resources.

The benefits of group cannot be discounted. They are actually synonymous to companies that are able to bring in more revenues than sole proprietorships in the same trade. Key to the success of groups – especially because of their social setup – is patience. (1) Patience for processes; a lot of thinking, a lot of structuring, a lot of consultation is required to get it up and running smoothly. And especially because these start out as a part time venture. (2) Patience for profits; returns don’t come immediately. It takes a lot of work and sometimes paying experts. The hardest is dealing with failure. A discussion rarely broached. But patience is required to win over a loss. (3) Patience for people. All social setups call for patience with each other and with self. Patience to build relationships and figure out what works best for the group.

FIRMEnough

someone…

The tooth fairy gave a silver coin…

Do people still stash cash under their mattresses? I don’t have any memories of sleeping with cash apart from the times when the tooth fairy gave a silver coin in favour of my white enamel😉 I do, however, keep a little silver for running expenses at home. I must confess, however, that mobile money has got my system confused. You see previously I’d either get cash from the ATM or if I forgot my PIN (happened countless times) get penalized for an over-the-counter withdrawal. The logistical inconvenience – because the nearest ATM is about 5km from home & other banks made it punitive then to use their services – forced me to either wait til morning or even Monday if it was a weekend draw the cash. BUT nowadays, mMoney, eMoney or should I say iMoney / intelligent money😃 always offers ideas on how to spend it. And it doesn’t help that the gratification is instant. My accounts have gone chaotic – I feel headless – and so I’m seriously reconsidering my once effective envelope system. All the same, spending is inevitable. Key is to ensure the system chosen doesn’t sabotage saving plans…

“So how are you doing with your savings agenda?” When you share your plans with someone – whether formally or informally – they will some how find a way of keeping you accountable and what a shame it would be if you couldn’t keep a promise to self. So TELL SOMEONE about your plans and celebrate every silver saved. Celebration will help it grow🤗

“Hey! What do you say about putting money together to buy that printing machine?” If you’ve read my previous posts you’ll note that print business is a passionate dream😃 and the truth is that when a partner comes in, one can raise the other half of the cash that was but a dream. So DO IT with SOMEONE. Not only will the results be faster but you’ll learn a whole lot on joint investments.

“Savings doesn’t work…” “But why do you think so…” “Things just keep on coming up…” “Have you tried saving with a SACCO…” “Those institutions lack proper governance…”😞 Such a conversation can provide a great opportunity to share one’s positive experience about credible Savings and Credit Societies. “My SACCO has helped me take my kids to school, buy a car, and now renovate my home…” So HELP SOMEONE and don’t worry about perfect solutions. Just one thought can greatly help a lost soul.

FIRMEnough

serenity…

Life does not consist in an abundance of possessions…

Savings and investments go hand in hand. One facilitates the other and in other occasions one is an alternate to the other. The discipline is made easier when motivations are clear. It is difficult sometimes to define our intentions and so asking the question “what you’d do with a $1,000,000 inheritance” 😊 can help a great deal. In fact, this is what I’d do…

Security – I shudder at the thought of not being able to support myself. Not being able to meet my obligations. Becoming a nightmarish burden to others. I’d save the money in places that would come through in the forthcoming days or rather years…

Serenity – I have dreams of living in a place with growing gardens and inviting interiors. A place where kids can happily play and their papa can find absolute rest. So we’d rush to get that ridiculously priced and awesomely beautiful house we thought we’d never own…

Surety – this word has 2 definitions. The first is being sure about the immediate future. More or less like what’s mentioned up there under security. The other is being legally responsible for debt or obligation another. With the pocket change 😊 I’d quickly set up a printing / publishing outfit in the hope that it would also profit the loads and loads of people employed…

Catch my drift? 😊 So then is it all about amassing wealth and living the good life? Luke 12 offers some sobering perspective…

13 Someone in the crowd said to him, “Teacher, tell my brother to divide the inheritance with me.”

14 Jesus replied, “Man, who appointed me a judge or an arbiter between you?” 15 Then he said to them, Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions.

16 And he told them this parable: “The ground of a certain rich man yielded an abundant harvest. 17 He thought to himself, ‘What shall I do? I have no place to store my crops.’

18 “Then he said, ‘This is what I’ll do. I will tear down my barns and build bigger ones, and there I will store my surplus grain. 19 And I’ll say to myself, “You have plenty of grain laid up for many years. Take life easy; eat, drink and be merry.”’

20 “But God said to him, ‘You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?’

21 This is how it will be with whoever stores up things for themselves but is not rich toward God.

Back to my $1,000,000 loot 😊 story… I don’t think my desires above are greedy but I can tell you there’s stuff my heart conjures every so often that is pure greed. The greater challenge is being rich toward God. Not allowing money – or anything else for that matter – to take the place of God. My prayer “So help me God! So help me God…”

FIRMEnough

7 years…

The plan seemed good…

A couple of years ago, a friend asked me to share God’s word at her graduation. Intimidated but also intrigued by the invitation, I chose to speak about Joseph. Yes the one who got sold off by his brothers for his ‘annoying‘ dream. “Do you intend to reign over us?” They challenged. What his brothers did not know is that dreams and interpretation of the dreams would eventually place Joseph at the helm of Egypt. I could go on and on but allow me to focus on a dream recorded in Genesis 41 that led to Joseph’s installation as Pharaoh’s deputy. Hint: it gives insight to why saving is important 🙂

28 “It is just as I said to Pharaoh: God has shown Pharaoh what he is about to do. 29 Seven years of great abundance are coming throughout the land of Egypt, 30 but seven years of famine will follow them. Then all the abundance in Egypt will be forgotten, and the famine will ravage the land. 31 The abundance in the land will not be remembered, because the famine that follows it will be so severe. 32 The reason the dream was given to Pharaoh in two forms is that the matter has been firmly decided by God, and God will do it soon.

33 “And now let Pharaoh look for a discerning and wise man and put him in charge of the land of Egypt. 34 Let Pharaoh appoint commissioners over the land to take a fifth of the harvest of Egypt during the seven years of abundance. 35 They should collect all the food of these good years that are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food. 36 This food should be held in reserve for the country, to be used during the seven years of famine that will come upon Egypt, so that the country may not be ruined by the famine.”

37 The plan seemed good to Pharaoh and to all his officials.

*   *   *

56 When the famine had spread over the whole country, Joseph opened all the storehouses and sold grain to the Egyptians, for the famine was severe throughout Egypt. 57 And all the world came to Egypt to buy grain from Joseph, because the famine was severe everywhere.

🍎Verse 36 makes good food for thought especially the end of it …so that the country may not be ruined by famine…

FIRMEnough

3 months…

Saving for a rainy day…

I REMEMBER WHEN OUR FRIDGE – of many years – CALLED IT QUITS ON US… ‘She’ had been complaining for a while and we tried to get many ‘fundis’ to fix it but to no avail. It was when the meats, the beans, the veggies begun to thaw that we knew we were in serious trouble. The provisions were two last us another two weeks but being the middle of the month, it caught us flat broke! There were two options, use traditional methods of preservation (make water fridges and smoke whatever could be smoked) or two, get another fridge immediately.

Thankfully, I had a credit card and rushed to the nearest retail outlet. I recognized, though, that my card had a limit and should another emergency situation come up, there was no possibility of managing. I was also now well aware that a credit card is not something you flaunt for your peers to recognize your status but it had the evil possibility of channeling huge penalties and ugly interests my way. I paid it off in the immediate weeks following the acquisition with saving for a rainy day making divine sense!

Over the years I have tried to build an emergency fund, but as my previous post allude, it’s a huge struggle. Still I try and have achieved considerable wins through saving in places where frequent access to cash is restricted. The challenge has been finding ‘accounts‘ that deliver decent returns. In addition, figuring how much of my monthly pay to save has been a challenge.

Experts say that you need savings equivalent to three months worth of monthly expenses. This implies that you need to have an almost accurate picture of how much you spend in a year so that you can work it back to three months. A year? Yes because this helps you see the irregular or adhoc expenses that do not necessarily happen in a ‘regular’ month. It also means that you have to consistently save towards the fund. 3 months may seem insurmountable but the great thing about personal finance is that you get to set your own timelines. If you feel this goal can be achieved in 3 years, then commit to consistently saving amount X. This way you’ll be paying yourself first before you disburse the rest of your earnings. Don’t be discouraged by the fact that what you can keep aside doesn’t even represent 5% of the monthly target, just do it consistently. And by month 3 of consistency, your statrment will reflect an increase that will give you the impetus to do better, faster 👛

FIRMEnough

saving…

Every dollar counts…

My next few posts will be on savings and investments; an area that I have long struggled with especially the investments part of it. The dreams always seem to be bigger than what’s available or what’s humanly possible. Still, my goal is to grow in this area and one day look back and say it all made sense. Today’s post focuses on savings and why I never bothered with it earlier in my life…

One, I didn’t think it was necessary. In my schooling years, my parents did everything to ensure we had what we needed. What I didn’t know is how hard they toiled! I salute them for saving, for borrowing but most importantly for loving us. Nothing greater! When I begun working, I expected that my parents good fortune would follow. The youthful mind is so naïve I must reiterate. A stifling debt situation is what made me realize that if saving was my thing, I would not have needed to sink deep.

Secondly, I didn’t have much to save. I wasn’t earning much and even five years into the job, it still felt so little. I now know that it will never be enough or rather I need to see it as enough. But putting away a burger’s worth into savings then didn’t make sense. “It would take hundreds of years to get anything done…” I thought. Seasons of lack is what taught me that every dollar counts. It is now amazing to watch pocket change grow into something that either holds the rain or makes the sun sunnier 🙂

Finally, I didn’t think it was worth saving. My savings never seemed to yield anything. The bank seemed to be charging more than they were giving in interest. Also the future seemed so intangible and living in the now is what made (still makes) sense. I pulled out of investments before they matured. The result – unripe fruit. I trusted the flow and failed to do my own research. I have fought a long battle with regret. I chose movies over business news and for this reason it was hard for me to see good investments opportunities.

My story is different now. I am now trying to save consistently and boy! don’t I have to fight with the desires of my living room. I am an interiors freak ❤ ❤ ❤ I am also saving with a plan because without one all seems meaningless. You wake up one day and squander every bit of it because you can’t see the point to it all. When you label a fund say education fund, it both clarifies and motivates your vision. Finance has become an exciting area of study and especially when I get to prove a theory right!

FIRMenough