Financial Strategy · Next Level Life · Personal Finance

TEN levels

Image result for 10 stepsThere is now a number to Financial Independence and experts have placed it at 25 times of one’s annual expenditure. Yes, you read right, 25 times! This means that if your monthly (family) expenditure is KSh15,000 ($150) per month, you need to have KSh4,500,000 ($45,000) in savings to safely say that you and yours are financially independent. I haven’t done the math neither do I have the courage to do it even though Resolution 316 (see previous post) alludes to that. I am busy, however, trying to figure out my ‘real’ monthly expenditure. It’s an exercise I haven’t done in years but reckon that if I monitored every detail, I could be able to find and repair areas of leakage.

AndroMoney. I am so glad I came across this personal finance tool available on mobile and web platforms that helps individuals manage their finances. It is simple to use, has accounting fundamentals built within it and most importantly generates reports. Can you imagine getting your cash flows displayed on bar graphs, pie charts and trend analyses in amazing colours and all for free? With the current raw data of two months, my spending patterns are being revealed, red flags are already up and it is becoming easier to say no to chocolate – which by the way – I track independently. Dentist’s orders! 🙂

Tracking expenditure on a daily basis is no joke. It takes a lot of willpower but so does any struggle for independence. What excites me about this subject of financial independence is that it has now been broken down in levels. This makes it easy for journeyers to identify where they are at with their money and find ways of getting out of negative situations or moving into better positions.

  1. Financial Dependency is where living expenses and / or debt payments exceed income. Am I living beyond my means? What do I need to do to bring down my expenditure? Or how can I make more to ably meet my (family’s) needs?
  2. Financial Solvency is where one is current on all debt payments and bills without depending on anyone else. The use of budgets (however simple) cannot be overemphasized in making this possible
  3. Financial Stability is similar to financial solvency but also includes having 3 – 6 months in emergency savings. Building such a fund is not easy but stashing away the cash in an interest-bearing facility – with time – makes the journey meaningful
  4. Debt Freedom. In this level, one is either completely free of debt or free of high interest debt or has paid all debts except mortgage. I think this is the hardest stage to leave, but if other people have left it, then anyone else can
  5. Freedom from Employer is the ability to move from a higher paying, stressful, less satisfying job to a lower paying, less stressful, more satisfying job without affecting your retirement benefits. Frugality makes this possible
  6. Financial Security. In this phase, one leans on cashflows from investments to meet annual basic needs and can survive for some time until another employment is secured. It is therefore imperative to begin to think of investments from the Financial Dependency level. I stumbled upon David Bach the other day and he says one of the reasons why people don’t invest is because they feel they don’t have enough to start. “If you can buy a cup of coffee for $5,” he argues “then you can invest”. KSh300 ($3), for example, will allow you to purchase from the Nairobi Securities Exchange 100 Mumias Sugar Company Shares. Bach strongly advocates for participation in real estate
  7. Financial Flexibility is the halfway point to full financial independence i.e. you have 12½ time of your annual expenses in savings. Can you imagine your emergency fund growing to this size?
  8. Financial Independence is the level with which this article begun with and you may wanna scroll up to take it in once more 😉
  9. Financial Freedom. Next Level Life YouTube series, from which these levels of Financial Independence have been drawn, describe this level as having more than 25 times in cashflows from investments. Perhaps 50 times!
  10. Financial Abundance. In this level, one has more than they will ever need and even if the economy plummets, life will go on as usual. I bet philanthropists lie in this level. That doesn’t mean we cannot give. I think giving is a virtue we can all pursue in all seasons of life

EASY? Even after reading this stuff for a second or third time, I find some of the concepts (especially the latter ones) quite difficult to actualize. Baby steps! Baby steps. It is also very easy to get fixated with getting to Level 10… But remember the Lord your God, for it is He who gives you the ability to produce wealth, and so confirms His covenant, which He swore to your ancestors, as it is today. ~ Deuteronomy 8:18

picture credit here

Financial Literacy · Personal Finance · Senate Resolution


Hello There!

Hope May is treating you well.

I had really hoped to blog last month especially because April was Financial Literacy Month. Well at least in the United States. Canada too has a financial literacy month but has its activities scheduled for November. Its vision: strengthening the financial well-being of its citizens. Through its National Financial Literacy Strategy – COUNT ME IN – the country strives to help its people manage money and debt wisely, plan and save for the future, and prevent and protect against fraud and financial abuse.

April still afforded me the exciting privilege of speaking with two separate groups on the fundamentals of financial management. As a student of personal finance, these opportunities continue to help me understand how money works. In the first group, it was clear that while the basics of finance prevail, each individual or family has a different money journey and life circumstances can either improve or compound the journeys. With the second group, I got to add to my notes that money decisions in marriage should never be made with the intention of disenfranchising another (spouse or children).

In one of the speaking engagements, the patron loved the idea of a financial literacy month and I agree that it would be great if we encouraged a culture of speaking about finances in our homes, in our churches and in our places of work. There’d be less strife and more progress, I think. Reading through U.S. Senate Resolution 316, I am convinced that, despite and in spite of the existing taboos and courtesies around money, the world needs to pay more attention to financial literacy.

[Congressional Bills 108th Congress]
[From the U.S. Government Printing Office]
[S. Res. 316 Agreed to Senate (ATS)]

  2d Session
S. RES. 316

        Designating April 2004 as ``Financial Literacy Month''.


                             March 9, 2004

   Mr. Akaka (for himself, Mr. Allen, Mr. Sarbanes, Mr. Corzine, Mr. 
Santorum, Mr. Kohl, Mr. Thomas, Mr. Johnson, Mr. Kennedy, Mr. Schumer, 
 Mr. Levin, Mr. Lautenberg, Mrs. Murray, Ms. Landrieu, Mr. Durbin, Mr. 
 Inouye, and Mr. Crapo) submitted the following resolution; which was 
                        considered and agreed to

        Designating April 2004 as ``Financial Literacy Month''.

Whereas only 26 percent of 13- to 21-year olds reported that their parents 
        actively taught them how to manage money;
Whereas a 2002 survey by the National Council on Economic Education found that a 
        decreasing number of States include personal finance in their education 
        standards for students in kindergarten through grade 12;
Whereas a 2002 study by the Jump$tart Coalition for Personal Financial Literacy 
        found that high school seniors know even less about credit cards, 
        retirement funds, insurance, and other personal finance basics than high 
        school seniors did 5 years ago;
Whereas 55 percent of college students acquire their first credit card during 
        their first year in college, and 83 percent of college students have at 
        least 1 credit card;
Whereas personal savings as a percentage of personal income decreased from 7.5 
        percent in the early 1980s to 2.3 percent in the first 3 quarters of 
Whereas today more than 42,000,000 people in the United States participate in 
        401(k) plans;
Whereas a 2002 Retirement Confidence Survey found that only 32 percent of 
        workers surveyed have calculated how much money they will need to save 
        for retirement;
Whereas only 30 percent of those surveyed in a 2003 Employee Benefit Trend Study 
        are confident in their ability to make the right financial decisions for 
        themselves and their families, and 25 percent have done no specific 
        financial planning;
Whereas between 25,000,000 and 56,000,000 adults are unbanked, i.e., not using 
        mainstream, insured financial institutions;
Whereas millions of people in the United States derive great benefits from the 
        wide variety of products and services offered by the financial services 
        industry in the United States, and such financial products and services 
        allow individuals and families to build homes, start businesses, finance 
        educations, buy cars, and meet the everyday needs of everyday life;
Whereas expanding access to the mainstream financial system provides individuals 
        with lower cost, safer options for managing their finances and building 
Whereas a greater understanding and familiarity with financial markets and 
        institutions will lead to increased economic activity and growth;
Whereas financial education has been linked to lower delinquency rates for 
        mortgage borrowers, higher participation and contribution rates in 
        retirement plans, improved spending and saving habits, higher net worth, 
        and positive knowledge, attitude, and behavior changes;
Whereas financial literacy empowers individuals to make wise financial decisions 
        and reduces the confusion of an increasingly complex economy;
Whereas personal financial management skills and life-long habits develop during 
Whereas personal financial education is essential to ensure that individuals are 
        prepared to manage money, credit, and debt, and become responsible 
        workers, heads of households, investors, entrepreneurs, business 
        leaders, and citizens; and
Whereas Congress found it important enough to ensure coordination of Federal 
        financial literacy efforts and formulate a national strategy that it 
        established the Financial Literacy and Education Commission in 2003 and 
        designated the Office of Financial Education of the Department of the 
        Treasury to provide support for the Commission: Now, therefore, be it
    Resolved, That the Senate--
            (1) designates April 2004 as ``Financial Literacy Month'' 
        to raise public awareness about the importance of financial 
        education in the United States and the serious consequences 
        that may be associated with a lack of understanding about 
        personal finances; and
            (2) requests that the President issue a proclamation 
        calling on the Federal Government, States, localities, schools, 
        nonprofit organizations, businesses, other entities, and the 
        people of the United States to observe the month with 
        appropriate programs and activities.

EASY? Money conversations are not the easiest to have but we must resolve to the have them. Dialogue increases our financial knowledge and help us make better financial decisions. Financial literacy is not limited to adults. Children who receive an early education are able to develop positive habits and attitudes that help the manage money throughout their lives. There is a lot of acuity in Resolution 316 and all the personal finance crusades out there and here 🙂 And yes! How much better to get wisdom than gold, to get insight rather than silver! ~ Prov.16:16

Dorothée Loorbach · Personal Finance · Web Articles

TEN things

In the next few weeks, I plan to post a series of articles dubbed ‘risky‘. The intention is to guide the development of personal financial strategies by examining risks that could cause great harm and distress to our physical, emotional, social, financial and spiritual well-being if not properly managed. Specifically, I will explore 5 risks that touch on strategy, debt, reputation, lifestyle and citizenry. For this bi-week, however, I share a captivating TED talk by Dorothée Loorbach and my reflections from her presentation.

Dorothée speaks of inherited convictions that led her to not managing money properly. Life obligations later taught her that money is important and a useful means to taking care of herself and loved ones. She goes on explain that money equals time and we must consciously spend it. If not, we will end up giving so much for so little yet we could actually make more money and have some good time left over. In her journey, Dorothée also realizes that money equals value and that self-worth is not determined by a high charge-out rate but viewing ourselves as people who are well deserving of a seat at the table.

What people say doesn’t matter is a statement that has never made more sense than it did in this TEDx episode. “It’s nothing really personal.” Dorothée says. “What people think and say about me comes from their view of the world. However, if people is you then what people say matters.” We must be kind to ourselves and know that our responses – not circumstances – define us.

REITs, derivatives, cryptocurrency are terms that sometimes make me shy away from reading business finance articles.  I am sure Dorothée may have at one point shared my sentiments but discerned it important to engage in the world of finance if she was to survive. After putting in the work, Dorothée realized that it’s really simple. That everything she’s learnt could have been learnt from her grandmother. Spend less, Earn more, Invest wisely, Value self. She acknowledges that it is not that easy because Parkinson’s Law which states that our expenses will always rise to match our income always comes into play. Her call is for listeners to do whatever it takes to break this law and my call for you at this point is to do whatever it takes to watch the clip 🙂

Day and night I felt this blind panic. I couldn’t breathe. There was no way out. I was suffocating. So the first thing and the only thing I could do was breathe.Being broke sucks and I absolutely relate to Dorothée’s narration but love more what she says next. “I freed my mind and I made a decision that I was going to be successful in my direction of my purpose. I found my focus. I stopped sabotaging myself and I became successful.” Do you know what that success strategy involves? Staying broke. Dorothée shares a quote by Epictetus where he which puts forward that wealth consists not in having great possessions but in having few wants. For her it is time with her daughter and self. I need more time to think about mine but hope one day I too can say money is not important.

EASY? Listening to the experiences of others definitely makes the burden light, the journey easier and perhaps even enjoyable. Okay enjoyable is a stretch. Staying broke (and other financial disciplines) is not for the fainthearted but Dorothée shows us that it is possible. The truth, however, is that breakthroughs can sometimes take longer than we anticipate. But isn’t it encouraging to know that… God will meet all your needs according to the riches of his glory in Christ Jesus ~ Philippians 4:19

Emergencies · Financial Strategy · Personal Finance

RAINY days

A couple of months ago I attended a personal finance workshop that challenged us to set aside 18 to 24 months in emergency savings. 18 months was too much an ask and my mind settled for the renowned standard of 3 to 6 months. Today’s market realities, however, reveal that desired work and business opportunities do not come as easily as it was during the Industrial Age. It can take longer than 6 months to get re-absorbed into the employment sector or land that big-ticket client after a major customer exit. Rainy days may easily turn to extended periods of heavy storm and unprecedented fog. Building a 24-month fund – in light of this – sounds decent but what about the attractive investment opportunities one would like to take advantage of or the pressing financial obligations requiring attention? Perhaps a longer term personal finance strategy would go a long way in managing financial exigencies.

Let’s consider the example of large corporations who as part of their occupational health and safety policies have documented guidance to prepare for and respond to all emergencies. Their commitment is towards the safety and well-being of it’s people and communities, the timely resolution of emergency situations and the protection of company and personal properties. Underpinning this practice is the Emergency Management Cycle model that allows organizations and individuals alike to anticipate disasters likely to affect them and think of ways of reducing impact or preventing the disasters altogether. A personal finance lens would probably describe the phases in the cycle as follows:Emergency Management Cycle

  1. Mitigation: How can financial emergencies or their damaging effects be prevented? Budgeting is a financial discipline that goes a long way in averting unnecessary financial pressures. Another mitigation strategy would be to annually take out medical, property and / or life insurance for meeting regular and adverse circumstances
  2. Preparedness: How can we prepare to handle financial emergencies? Core to financial preparedness is financial literacy which empowers individuals to make informed and effective spending, earning, saving / investment, protection and borrowing decisions. Individuals with a basic or advanced grasp of financial concepts manage money better
  3. Response: What actions should be undertaken during financial emergencies? Anxiety can make the brain lock either temporarily or for abnormally long periods of time. Defining – in advance – possible emergencies that could occur and their corresponding responses (including reaching out to family or friends for help) can quickly avert further devastation. Another culprit to inaction is wanting to keep up appearances.  Whilst responding to financial distress can be a very humbling experience, the resulting benefits make the process all worth it
  4. Recovery: What actions should I take to return to (a safer) normal? Restoring one’s physical, emotional, economic and social well-being is the goal of this final stage. Severe debt or financial loss can cause depression and even suicide. Part of a successful personal strategy is being open to counselling, psychotherapy and other professionally prescribed assistance. These medical approaches will not only calm the body, mind and spirit but also bring fresh and exciting alternatives to living

EASY? When I begun this blog and up-to the time of conceptualizing this series, I did not foresee any emergencies. All views were from the simple-heart of a personal finance enthusiast. I  am currently dealing with an uneasy situation and relieved to have one or two things in place. Still, I am anxious. Researching for this article has helped me appreciate that disasters exist through time and I need not beat myself up or anyone else for that matter. I choose to respond in faith that God will bring everything to a new and peaceful normal. That said, I can’t think of a better closing for this piece than “By faith Noah, being warned by God concerning events as yet unseen, in reverent fear constructed an ark for the saving of his household…” ~ Hebrews 11:7a

picture credit here

Goal Setting · Loss · Personal Finance

TOUGH times

Image result for tough times don't last but tough people do

I cannot think of a better time to set sound goals than during tough times. This is because the mind is devoid of romantic aspirations and experimental – almost foolish – ideas that usually abound in easier times. Life is no longer seen through red-coloured lenses and the heart is desperate for a way out. “I wish I could win the lotto…” could easily be one of the proclamations but what really is the chance of winning? One in a million? Isn’t it better then to sit with pen and paper in hand and come up with a game plan? And no it doesn’t have to be complex but a simple exercise of completing the sentence…

If I had money, I would:

  1. Pay my overdue rent
  2. Settle my debts with Peter and Paul
  3. Move the kids to a better school
  4. Pay for Loretta’s knee surgery
  5. Invest in building a block of flats

The exercise – which works equally well in easier times – elicits both real needs and real desires. Every good thing possible must be done to meet real needs. If not, you will be thrown out of your home and possibly have your household goods auctioned. The goal then is not just paying the overdue rent but finding tenable ways of surviving tough times. Opting for a cheaper abode, setting up an emergency fund or cashing in on a skill set could be some of those plans.

Real desires will show you where you want or could go in the longer term. The work is in figuring out how to get there. Owning a block of flats is an idea that came through when I had hit rock bottom. I am in a better place now and still wracking my brain on how to get ‘THAT’ parcel of land. Some days I save aggressively, other days I draw out all my savings. Some days I invest aggressively, other days I shudder at my poor decisions. It gets better with time. The savings eventually grow, the investments begin to make sense and the dream is no longer blurry.

That said, financial loss can get to catastrophic magnitudes and throw off even the best of us.  We completely deny the fact that we fell victim to a ponzi scheme. We get extremely angry with cronies who invited us to a costly deal that went sour. We hope against hope that ‘serekali‘ will bring to justice the bank that went under with our hard earned cash. We mourn for days at the destruction of our home by the torrential flooding. Why? Why? Why? If not answered properly, this incessant questioning can have depression hold us hostage.

Moving on may require that help of a professional kind is obtained. Counselors offer a confidential and nonjudgmental space where individuals (and families) can get assistance in managing stress, redirecting disturbing emotions and setting goals afresh. Some countries – like Australia – offer free financial counseling services and have counselors with extensive knowledge in law and policy including consumer credit laws, debt enforcement practices, bankruptcy and insolvency regimes, industry hardship policies and government concession frameworks.

EASY? Definitely not! But isn’t it great to know that there is help for the downtrodden? The internet also offers thousands of personal finance articles that open us to the skills, experiences and ideas of others and could be useful for recovery. We, as well, have the invitation to… approach God’s throne of grace with confidence, so that we may receive mercy and find grace to help us in our time of need. Hebrews 4:16

photo credit here

Debt · Goal Setting · Personal Finance

SMART goals

Ever wondered who developed the SMART criteria of goal setting?

In 1981,  George T. Duran wrote a paper on how to write management goals and objectives. His aim was to guide top executives in helping their teams meet performance targets. The approach has since expanded to individuals who use it for their personal growth.

What areas then should one focus on when developing their goals? In his LifeScore Assessment, Michael Hyatt gives 10 possible areas of focus on i.e. Intellectual, Emotional, Physical, Marital, Parental, Social, Vocational, Avocational, Financial and Spiritual. And if you are honest with the assessment, you will find that the graphical presentation of results display the real areas where goals are needed most.

Financial management – and a key reason for this blog – is one of the areas that I continue to seek growth. It can be overwhelming, however, to work one’s way through graduate school, try knock off (large) debt, and save up for a home deposit all at once. And because of the weighty monetary inputs, the pursuit of one financial goal can easily sabotage the success of another. The best option would be to deal with one goal at a time and preferably the most desperate one.

According to a 2017 USA Today article, paying down debt continues to be one of the top 10 pressing financial goals for Americans. Not much statistic may be available on the stress levels that private debt has on Kenyans but the rising public debt levels could be an indication that the mwananchi could be suffering. The ‘get-out-of-debt‘ goal therefore looks like a good example to broach in this article and the SMART criteria is a good planning tool for this case.

  1. Specificwhat do you want to do? Just saying (better if you can write) that you want to get out of debt is not enough. You must define the exact debt so that it is a visible tackle for the mind e.g. pay off my outstanding 4 year car loan of KES 550,000.
  2. Measurablehow will you know when you’ve achieved it? If there are goals that cannot succeed without measurement, it is financial goals. Using a loan amortization schedule (available for free on MS Excel) is a good place to start. With it, you can plug in figures and find a combination that works best for your pocket e.g. an increase monthly loan repayments from KES 15,000 per month to KES 25,000 will reduce your loan period by 22 months and most importantly save you from paying an extra KES 82,000 in interest.
  3. Achievableis it in your power to accomplish it? Goal setting is a very dreamy process that can result in overly ambitious targets. Achievability will check whether you really can pay the extra ten thousand without getting into liquidity problems i.e. unable to meet other monthly obligations such as rent and utility bills. Achievability will also reveal some extra stashes of cash that could tremendously bring down the debt. Note that an increase in debt repayment by KES 1,000 only (US$10 at the moment and an amount that may be thought to be negligible in light of the loan amount i.e. US$5,500) can make a significant difference to a debt situation.
  4. Realisticcan you realistically achieve it? If the yes, feel free to go ahead with the goal. If no or unsure because of a major restructuring at work, it would be good to have a Plan B such as selling the car. It may not fetch as much as you purchased it for but if the adverse situation does happen, it will save you the huge headache of having an obligation that you can barely manage.
  5. Timelywhen exactly do you want to accomplish it? The loan amortization schedule mentioned above can help you set new deadlines. Not lazy deadlines that drive you downhill but ambitious ones that keeps you pressing on the gas pedal.

The actual goal would then read ‘Pay off my outstanding KES 550,000 car loan by June 25, 2021 through increasing monthly repayments from KES 15,000 to KES 25,000 and checking quarterly progress against the revised loan amortization schedule.’

EASY? Probably not as the process may be a little too detailed but it is much easier to work with a defined money goal. Remember “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.’” Luke 14:28-30

photo credit here

Goal Setting

2019 goals

Set your 2019 financial goals yet?

Stuck and not too sure where to start?

Why even bother?

Related image

I love setting goals (any kind) and had my 2019 ones ready by 12.15.18. I enjoy the dreaming part most as it allows me to venture into lands my mind would not ordinarily wander. It is in the execution when things may get rough particularly if a goal requires significant change in habit.

Why bother? Every time I sit to map out my dreams, I see exciting possibilities. Possibilities that make my eyes glisten and my heart dance. What if I managed to graduate before my 40th birthday? What if I could travel to Canada for holiday? What if? I self-actualize in some seasons and in others mope about my year-long lazing. Life! The greater truth, however, is we receive more traction when we pursue defined goals.

TRACTION [trak-shuh n] The deliberate and prolonged pulling of a muscle, organ, or the like, as by weights, to correct dislocation or relieve pressure.

Stuck? I too was stuck on money areas to focus on this year and chose to revert to my previous ones. What if, however, we could tailor our goals around the key areas corporate organizations use to measure their performance?

  1. Income: look for ways of increasing our earnings
  2. Expenses: get rid of unnecessary costs that could be surrendered to useful gain
  3. Assets: use these resources to put money in our pockets (read legacy)
  4. Equity: deliberately learn how to invest in the securities exchange market
  5. Liabilities: set a good plan to offset the debt that rob us of a good night’s sleep

EASY? Goal setting is a definitely easier process than execution but… In the same way, faith by itself, if it is not accompanied by action, is dead. James 2:17

photo credit here