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