How Much of Your Pay Should You Really Save?

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August 30, 2018

When talking about financial success and freedom, we can all agree that saving for the future takes up a big portion of that discussion. It’s a critical part of the financial success equation that needs to be addressed from the onset. So, exactly how much are we supposed to save? The answer is, at least 20% of your income should go towards your savings. This is the general consensus when looking at the general ideal rate of saving.

Here is how we break it down:

The 50/30/20 Budgeting Rule

According to the 50/30/20 budgeting rule, popularized by Elizabeth Warren in her book “All Your Worth: The Ultimate Lifetime Money Plan”, our personal net income should be divided into three distinct portions. This very basic rule divides our after-tax income as follows:

50% goes to basic necessities i.e., food, shelter, clothing, utilities, health insurance etc.
30% goes to discretionary spending i.e., lifestyle priorities like eating and drinking out, movies out, the latest gadgets etc.
20% goes to financial priorities i.e., emergency fund, savings account, retirement account etc.,

It is important to note that the percentages above are driven by your net earnings – the after-tax income. Therefore, this rule is a great starting point to determine your savings. To get a clearer picture, draw up your budget and access how much you are spending on these three main areas. To avoid being discouraged, focus on the percentage of income, not the actual amount. If you earn more and spend less than 80% on necessities and discretionary items, maintain and save the difference.

Why Save 20%?

In order to get a shot at financial independence, you will need to save at least 20% of your income per year earning a return of no less than 7% per year. To get your financial independence number you’ll need to divide your annual spending by 4%, which is considered with safe withdrawal rate. This way, upon retirement you can safely withdraw 4% of your income per year, for an indefinite period without eroding your capital investment.

A 25-year-old, for example, that would like to retire in 25 years, assuming a rate of return of 7% will need to save at least 25% of their income. Withdrawing at 4%, this 25-year-old in 25 years can sustain their current lifestyle indefinitely. This, of course, assumes that their investments will earn a constant 7% throughout the period.

Getting to 20% – an example

Assume that your annual income is Kes 1.2M, the safe withdrawal rate is 4% and you currently have no savings. If you are saving 20% of your earnings you will have accumulated Kes 24M in 29.8 years, at a 7% rate of return (See the red colored text below).

Take a closer look at this table:

At what rate do you need to save in order to retire at the age you would like?

Spending	Savings	Financial Freedom Fund	Years to Financial Freedom
Spending	Savings	Financial Freedom Fund	6%*	7%*	8%*	9%*	10%*
95%	5%	Kes 28,500,000	56.5	50.6	45.9	42.1	39.0
90%	10%	Kes 27,000,000	44.7	40.4	36.9	34.1	31.7
85%	15%	Kes 25,500,000	37.6	34.2	31.5	29.2	27.3
80%	20%	Kes 24,000,000	32.5	29.8	27.6	25.7	24.1
75%	25%	Kes 22,500,000	28.5	26.3	24.4	22.8	21.5
70%	30%	Kes 21,000,000	25.1	23.3	21.8	20.4	19.3
65%	35%	Kes 19,500,000	22.2	20.7	19.4	18.3	17.4
60%	40%	Kes 18,000,000	19.7	18.5	17.4	16.5	15.6
55%	45%	Kes 16,500,000	17.4	16.4	15.5	14.7	14.1
50%	50%	Kes 15,000,000	15.3	14.5	13.8	13.1	12.6
45%	55%	Kes 13,500,000	13.4	12.7	12.2	11.6	11.2
40%	60%	Kes 12,000,000	11.6	11.1	10.6	10.2	9.8
35%	65%	Kes 10,500,000	9.9	9.5	9.2	8.9	8.6
30%	70%	Kes 9,000,000	8.3	8.0	7.8	7.5	7.3
25%	75%	Kes 7,500,000	6.8	6.6	6.4	6.2	6.1
20%	80%	Kes 6,000,000	5.3	5.2	5.1	5.0	4.9
15%	85%	Kes 4,500,000	3.9	3.9	3.8	3.7	3.7
10%	90%	Kes 3,000,000	2.6	2.5	2.5	2.5	2.5
5%	95%	Kes 1,500,000	1.3	1.3	1.3	1.2	1.2
*Rate of return of investing savings

Source: Forbes
Read More: How to Calculate Your Financial Independence Number)

What Are You Saving For?

The above example is based on the income approach i.e., how much can you save now for the future based on what you spend today. However, you can also take another approach to determine how much you need to save. You can do this by determining what are you saving for first i.e., for example, monthly expenses and two vacations a year etc. Then, from this, you can now estimate how much you’ll need to sustain that particular lifestyle.

Both approaches will yield the same result but different lifestyle outcomes. Keeping the end in mind, you’ll need to work backward and figure out how much you’ll need to save today in order to live the life you want tomorrow. All this will, however, boil down to whether you are willing to live just above the poverty line to get that life quicker or have two homes now and delay that ‘independence’.

Can’t Save Enough?

Think again! Remember, that a little here, a little there…goes a long way. If a higher than recommended percentage of your net income goes to necessities or discretionary items, then take a look at the big spend items. There is a good chance that rent, mortgage or your daily indulgence in eating Gourmet Burgers, is the culprit. The good news is that you can quickly free up some money from discretionary spending. However, with rent or mortgage, you may have to make a big move or simply look for ways to increase your spending.

If you can’t just save up that 20% of your income, then try investing the little you can save. Invest early as getting that head start in your journey towards financial freedom will save you a lot of stress in the long-run. To get you started, start saving, buying a few shares here and there, and investing in the bond market. Long-term investment instruments can yield great returns, in the long run, to compensate for the low capital investment today. In the future, once you hit that 20% sweet spot, keep going and save as much as you can as long as you’re not depriving yourself today.

Summing Up

One thing to keep in mind is that you can’t rely on your raw savings from your income alone. Without investing your savings, inflation diminishes the value of your money over time. Ideally, we should stash our savings in an interest-earning account, compounding exponentially or any other investment that earns you a reasonable return.

That being said, developing the habit of saving at least 20% of your income will eventually land you in financial success. Having a nice savings cushion means that you’ll have more financial security. In the case of an emergency (eg. unemployment or medical costs), you’ll be able to sail through. And yes, you can have those vacations and expensive gadgets too!

Meanwhile, you can click on the following links to read more about financial planning:

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How to Identify And Protect Yourself Against Insurance Fraud

By

Irene Makanga

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August 28, 2018

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Insurance fraud can be perpetrated by fake insurance companies, legitimate companies that are not licensed to sell insurance, individuals within the insurance industry and even consumers themselves. As witnessed in the case of Evans Kasyoki. An employee of a legitimate registered well-known insurance company took out two life insurance policies on his nephew. Then killed him and sought to claim payment for the fruit of his crime.

The Kenyan insurance sector isn’t without problems. It is dogged with poor data management and poor scrutiny. Thus, the gaping holes in our system are making it so easy for criminals to slither without detection. As consumers of the insurance products, we can only be vigilant. Ask questions and be wary of suspicious insurance transactions to avoid being victims of this vice.

Below we have highlighted the ways to identify insurance fraud and how to protect oneself from it.

How To Identify Insurance Fraud?

Insurance fraud is very difficult to accurately detect. The very nature of the crime is subtle and very covert. Take the case of medical insurance fraud in Kenya. Most victims never learn they have been targeted until it is too late. Cartels within the medical profession are known to charge duplicitous medical services and drugs to your insurance. This makes it very difficult to detect until the card is maxed out on funds, leaving you confused on how that happened.

Here are some of the ways you can identify insurance fraud; early detection is key to prevent further loss:

(1). Demand for detailed statements from your insurer for repairs and medical services. Also, ensure you verify them for accuracy. This way you will pay for only the services you have received.

(2). Be apprehensive when approached with insurance prices that seem too good to be true.

(3). Don’t trust strangers who urge you to consult certain (very specific) medical professionals or attorneys; maybe part of a fraud ring.

(4). Stay on guard when you get unsolicited visitors or callers asking for your personal information.

How Can You Protect Yourself?

It is no mean feat to prevent insurance fraud. To reduce the risk of being a target of insurance fraud, here are some ways to protect yourself:

(a). Be an informed consumer – educate yourself about all your insurance products and learn your vulnerabilities.

(b). Don’t volunteer sensitive information about yourself to unsolicited visitors or callers – criminals are also known to befriend their victims too.

(c). Avoid signing blank insurance claim forms.

(d). Get a copy of your insurance policy – read it, understand it and know exactly what is and is not covered.

(e). Always get proof of payments- never make payments to the individual agent or broker, and always request a receipt.

(f). Purchase insurance only from a licensed agent – contact the insurance regulator to verify that the agent and company are registered.

(g). Get a biometric card for your health insurance to prevent fraud.

(h). Document (in pictures) all the damage gained from a car accident – this makes it difficult for the other driver to pin more damages later for a higher claim.

(i). Get contact information, license plate number, driver’s license number, proof of insurance and detailed billing information i.e., recipients for all medical services and car repairs, as required.

(j). Avoid discussing anything about the accident on the scene and do not admit fault or place blame.

(k). Obtain detailed billing information and receipts for all medical services and car repairs.

All In All

At the end of the day, people will always be people. Therefore, there is no perfect deterrent to insurance fraud. To many, the crime may be victimless but at the end of the day, someone may lose their life. The greed of the perpetrators continues to expand. Let’s be vigilant and wary of any suspicious behaviour when handling insurance matters.

Protect yourself and others.

Happy Building!

Image credits via Pexels.

Meanwhile, You can click on the following links to read more about financial planning:

5 Ways to Use Your Life Insurance Benefits

6 Big Risks to Your Financial Success

3 Ultimate Strategies For Financial Prosperity

Red flags For Investment Fraud & Common Persuasion Tactics

What You Can Do to Avoid Investment Fraud

8 Most Common Investment Frauds You Should Avoid

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25 Inspirational Quotes That Will Inspire You to Be Successful

By

Irene Makanga

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August 16, 2018

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Inspirational quotes have motivated many to be the best, and live the life they have always dreamed.

As entrepreneurs, leaders in our own right, and bosses, we must realize that everything we think about, we are. We tend to project our thoughts into the future. It all begins with a thought, followed by words that eventually determine our make or break actions – and ultimately, how we live our lives. This is probably why these mantras have become a celebrated part of society’s lexicon, as the power of language moves us to build self-efficacy in a personal dialogue with ourselves.

Read on to tap into the abysmal overflowing stream of African wisdom, and find a pithy saying that really speaks to your soul, motivating you to build your dream life, creating success, overcoming fear and achieving those goals.

Let’s go.

Africa

1. ‘‘I think there are a lot of people with family connections but who are actually nowhere. If you are hardworking and determined, you will make it and that’s the bottom line.’’ – Isabel Dos Santos, Angola (Source: Ventures Africa)

2. ‘The harder you work, the luckier you get’’ — Mike Adenuga, Nigeria (Source: Ventures Africa)

3. “To build a successful business, you must start small and dream big. In the journey of entrepreneurship, tenacity of purpose is supreme.” — Aliko Dangote, Nigeria (Source: Vanguard Media)

4. “The first lesson I learned was that patience and perseverance overcome mountains. What truly defines success in challenging markets is the ability to recreate oneself from one failure to another.” – Rohan Garg, Niger (Source: How We Made It In Africa)

5. “Life is about having something to give in order for you to receive. So the first capital that you need, more than money, is intellectual capital.” – Lufefe Nomjana, South Africa (Source: Abacus)

6. “Everyone has the freedom to become what they want to become. It’s up to you to build your confidence and work hard to get where you want to be.” – Chris Kirubi, Kenya (Source: Capital FM)

7. “If you have the right vision, and you take the right steps, then success is inevitable.” – Bob Collymore, Kenya (Source: Youth Village)

8. “Prepare for opportunities that don’t exist because you have the capacity for more. You accomplish this by constantly developing yourself – read and learn something daily.” – James Mworia, Kenya (Source: Nation)

9. “No matter how good a product you have, still in Africa it is your reputation that counts.” – Ivan Mbowa, Kenya (Source: How We Made It In Africa)

10. “There will be a lot of obstacles on the way. But I never look at failure as failure – I look at it as: ‘What have I learnt from what happened – so that next time I can do things better?’” – Alfredo Jones, Equatorial Guinea ( Source: How We Made It In Africa)

11. “A man cannot sit down alone to plan for prosperity.” – Nigerian Proverb (Source: Black Enterprise)

12. “In today’s world, paradoxically, it is the boldest action that is often the safest. Remaining where you are in a world that is changing so rapidly is, in fact, the most dangerous of all places to be in.” – Hakeem Belo-Osagie, Nigeria (Source: Forbes)

13. “Whether you’re a farmer, builder or engineer, the opportunities are equal: Just add a little‪ innovation.” – Strive Masiyiwa, Zimbabwe (Source: Forbes)

14. “It’s essential to draw up a “things to do” list on a daily basis and set priorities in executing them, making sure that any unfinished task gets posted to the next day’s list.” – Folorunsho Alakija, Nigeria (Source: Forbes)

15. “I grew up in poverty, but I always saw it as a challenge. The good thing is that you can surmount a challenge if you are willing to pay the price. The price is hard work.” – Reginald Mengi, Tanzania (Source: Forbes)

African Diaspora

1. “The battles that count aren’t the ones for gold medals. The struggles within yourself—the invisible, inevitable battles inside all of us—that’s where it’s at.” — Jesse Owens, USA (Source: Wikiquote)

2. “If there is no struggle, there is no progress.” — Frederick Douglass, USA (Source: Mental Floss)

3. “It’s not the load that breaks you down, it’s the way you carry it.” — Lena Horne, USA (Source: Wisdom for the Soul compiled & edited by Lary Chang)

4. “We are all gifted. That is our inheritance.” – Ethel Waters, USA (Source: Happy Black Woman )

5. “Success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome while trying to succeed.” — Booker T. Washington, USA (Source: Quote Catalog)

6. “I hated every minute of training, but I said, ‘Don’t quit. Suffer now and live the rest of your life as a champion.’” — Muhammad Ali, USA (Source: International Business Times)

7. “Whatever we believe about ourselves and our ability comes true for us.” – Susan L. Taylor, USA (Source: Happy Black Woman)

8. “Success is liking yourself, liking what you do, and liking how you do it.” – Maya Angelou, USA (Source: Business Insider)

9. “You’re only the boss if you put up your own money. If you don’t put up your own money…I don’t care how much they offer you, you’re nothing but a supervisor. It’s not yours.”— Damon Dash, USA (Source: Exclusive Motivation)

10. “There is no magic to achievement, it’s really about hard work, choices, and persistence. ” – Michelle Obama, USA (Source: Awaken The Greatness Within)

To Sum Up…

In this article, you’ve got a chance to gain some inspiration and insight from these inspirational quotes gleaned from various African leaders and entrepreneurs across the globe. I hope this has helped you not only learn but also celebrate the abysmal knowledge we have within our community as presented by these amazing sayings to help you move forward.

Be Inspired!

Meanwhile, You can click on the following links to read more inspirational quotes:

5 Inspiring Quotes On Wealth & Money

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All You Need to Know About Credit Card Interest Rates

By

Irene Makanga

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August 9, 2018

0

The interest charged on credit cards depends on your interest rate and outstanding balance; you can avoid interest entirely by paying your balance in full.

Credit cards deliver great financial freedom by addressing the diverse priorities and lifestyles of different people. They provide a lot of benefits and spending power to cardholders helping them achieve their personal and financial goals. Even with all the benefits accrued from holding a credit card, the interest rate on credit card debt is, 14% at most. Not to mention fees such as cash advance interest, late payment interest, over-limit fee and annual fees. Sounds like a money trap! It’s already tough out here for anybody. Seriously, how is anyone expected to get ahead with that sort of baggage?

Credit Card Interest Rate

Credit card interest is typically expressed as an annual percentage and is the fee paid for the privilege of borrowing money. It is important to note that some banks may choose to calculate interest on the outstanding balance on a monthly basis and others on a daily basis. Since credit cards are a part of day-to-day life for most people, it is important to understand the effects of interest on your personal finance.

How Does Credit Card Interest Work?

Let’s break down the numbers for Wanjiku who has the option to maintain and pay the minimum payment required by the bank or add a little extra on top of her monthly payments.

So let’s assume that the minimum repayment required by the bank is 5% of the total amount billed or KES 500, whichever is higher. Wanjiku is cash-strapped but she can manage to pay an extra KES 5,000 on top of her minimum monthly payments. Each month Wanjiku is charged 14% annual interest on outstanding balances. So, each time Wanjiku makes a payment, part of the payment goes towards paying down the interest and the principal.

The first month of Wanjiku’s credit card debt with the 5% minimum repayment looks like this:

Principal: KES 500,000
Payment: KES 25,000 (5% of the remaining balance or KES 500, whichever is higher)
Interest: [KES 500,000 x 14%] ÷ 12 months = KES 5,833.33 (Simple Interest)
Principal Repayment: KES 25,000 – KES 5,833.33 = Kes. 19,166.67
Remaining Balance: Kes. 480,833.33 (Kes.500,000 – $19,166.67)

These calculations are done every month until the credit card debt is paid off. In the end, Wanjiku will have paid KES 650,590 in total over 10.3 years to absolve her of the KES 500,000 in credit card debt. The interest that Wanjiku pays over the 10.3 years totals KES 150,584 higher than the original credit card debt. Not bad.

However, now let’s take a look at how much less Wanjiku will end up paying by simply adding KES 5,000 on her monthly payments.

With an additional KES 5,000 on her monthly payments, Wanjiku now pays a total of KES 596, 901.32 over 3.4 years to absolve the KES 500,000 in credit card debt. Wanjiku ultimately pays KES 90,840 in interest. The extra KES 5,000 saves Wanjiku about KES 59,744 and reduces her repayment period to 3.4 years – that’s a 6.9 years dramatic drop.

How Can You Reduce Your Credit Card Interest Rate?

It is now evident from Wanjiku’s example that any additional payments you make to your credit card debt counts. Her action to pay more than the minimum repayment has resulted in drastically reducing the time and also lead to lower interest charges. Remember, that regardless of the interest on your card, you can reduce the interest rate you’re charged in three ways:

Paying your balance in full every month (or within the interest-free period) rendering your interest irrelevant as it does not get charged at all.
Making more than one payment in a month to shrink the overall average daily balance
And finally, paying more than the minimum repayment like Wanjiku did, if you can’t pay the balance in full.

How is Interest Rate Determined by the Bank?

Interest rates vary from bank to bank whereby an issuer may:

Have a single interest rate for all customers i.e., 14%, being the cap rate.
Have a range – for instance, 10% to 14% – your specific rate depends on your creditworthiness.
Offer a standard rate added on the CBR rate – for instance – an issuer may quote an interest of 4% above the CBR rate.

It is important to note reward credit cards often come with higher rates than a standard card.

Other Fees

Most credit cards agreements have other fees aside from interest such as cash advance interest, late payment interest, annual fee, joining fees and over the limit fees. These fees vary from bank to bank or issuer to issuer.

Cash Advance Interest

A cash advance allows a user to access a short-term loan at the bank or ATM through your credit cards credit line. It is quite convenient for users but also quite expensive.

So why are cash advances so expensive? Here is why:

Cash Advance Fees. Some banks charge a flat fee per cash advance, while others charge a certain percentage of the amount accessed. Other times, you may find that some banks charge a percentage with a minimum amount – such as 6% or Kes. 1,000, whichever is greater.
Cash Advance Interest. Interest on cash advances is costly in two main ways: (1) Interest on cash advances starts accruing immediately – no grace periods like what you get for purchases; and (2) Cash advance interest is often higher than the rate charged on purchases.
ATM or Bank Fees. The financial institution that handles your transaction or the owner of the ATM or bank in which you access the advance will charge a fee too.

All these fees added up, amount to cash advances being quite expensive and not worth it when you have other options such as Mshwari and the like.

Late Payment Interest

Late payment interest is levied when payment doesn’t reach the card issuer before the due date. The interest levied varies across credit cards and depends on outstanding fees. Most local banks charge an interest of 5% of the total outstanding balance.

Late payment of credit card debt has serious consequences to missing a payment or paying late, which result in:

Raised credit card interest rate to the penalty rate
The inclusion of the late payment in your credit history and ultimately affecting your credit score

Over-Limit Fee

An over-limit fee is a fee charged when the cardholder’s balance exceeds a prescribed credit limit. Some banks may automatically decline to execute transactions that are over your credit limit, while others give you the option to opt into such transactions and then add hefty fees. Some banks in Kenya may charge a percentage for over-limit fees i.e. 0.5% of the credit limit, while others may charge a flat fee of KES 1,000 or more.

Annual Fee

The annual fee is any fee charged on a yearly (annual) basis. The most common annual fee is the fee charged for simply having the credit card. Some banks charge as much as KES 6,000 for simply holding their card. You are probably wondering why anyone would want to have a credit card with such a high maintenance fee. Well, that’s because cards with high annual fees have bigger rewards – big spenders recognize this as they know they will earn rewards that will outweigh this fee.

Joining Fees

The joining fee is the fee charged upon registration for the credit card which varies from bank to bank and the type of card you have applied for. Some banks don’t charge anything, while others may charge as much as KES 5,000.

What’s Next?

If you must have a credit card in your life then do the following things:

Find a low-interest credit card
Avoid interest rate entirely by taking advantage of the interest-free periods
Getting a lower interest rate on your credit card by paying the balance in full, making more payment within a month or paying more than the minimum repayment required on total balance.

Overall, many Kenyan’s don’t like credit cards because they are afraid of the penalties and the high annual charges. Although credit cards can be bad for your overall financial health, they are great for big spenders as they provide great rewards. The astronomical fees that banks charge simply don’t make sense if you have savings elsewhere. Therefore, if you already have a card, pay all your balances on your credit card as they can get quite costly if sustained for very long periods of time.

Meanwhile, You can click on the following links to read more about debt:

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If You Want to be Rich – Start A Business

By

Irene Makanga

-

August 2, 2018

0

Start a business today and take advantage of one of the most powerful ways to make you more money and help you build significantly more wealth. One truth of investing is to follow the lead of those who are building some serious wealth. So what are the really, really rich people doing?

I know one thing for sure is that they are NOT:

⊗ Working for someone else

⊗ Making safe investments in interest rates and earning dividends from large companies.

√ What they are doing for sure is owning a business or many businesses that not only build a solid foundation of wealth but generate huge financial windfalls.

Before you embark into entrepreneurship, here are a few things to consider:

Chances to Break Success

Society likes to celebrate the success of those among us who have made it big in entrepreneurship. However, it is not reasonable to think that you have a strong likelihood of becoming one. Statistically speaking, out of the all the entrepreneurs in Kenya, not all of them get to be the big winners of the entrepreneurial world. Only a handful succeed. Nevertheless, with entrepreneurship, you have a higher probability of earning more compared to salaried individuals. Keep in the mind that, the wealthiest households’ primary wealth is business and shares in businesses.

To start a business, you’ll need to work diligently at one thing, and when it succeeds, you will gain the needed confidence to start more businesses with great success. Here, are a couple of things that can increase your chances significantly:

Adopt a producer mentality. The goal is to shift your mindset from being a consumer to being a producer. The goal of a producer is to create (valuable product or service) and earn from this creation rather than consume.
Know and work towards increasing your daily rate. Calculate your daily worth and approximate how long it will take you to get there. For instance, if you earn Kes. 5,000 per day, it will take you 200 working days to make you a million.
Use your talents, gifts, skills and abilities. Then, cultivate them and surround yourself with people that support you.
Surround yourself with wealth. Wealth of ideas, positivity and great people. Do not underestimate the subtle influences of negativity on your life. After all, you are a product of your environment which can deeply affect your general life performance.
Sacrifice everything. You must be willing to pay the price (risk) of comfort and other things that may be holding you back to reach.

Chances of Failure

It is commonly reported that 90% of all start-ups fail. This statistic fails to define failure and also does not consider the time frame. Regardless, it is true that a majority of the businesses do fail and much of the success or failure of a business depends on the entrepreneur, the nature of the business and the specific circumstances.

Therefore, do not be discouraged. In the world of entrepreneurship, failure is not all bad. Starting a business and watching it fail does the following things for you as an entrepreneur:

Early failure teaches you that the business didn’t have the potential for long-term success
Early failure also spares you significant expenses and frees you up to pursue more valuable opportunities
Failure, in general, teaches you valuable lessons which can apply to future opportunities
Starting again after failure increases your chances of success, the second time around

Entrepreneurship As A Source of Wealth

The bottom line is that entrepreneurship can make you rich; however, there is certainly no guarantee you’ll be able to build some ‘serious wealth’. You know, the kind that people rave about. Entrepreneurship is not an easy path, and therefore not a shortcut to “get rich” as most people think. However, it does offer significant potential to get you rich.

Entrepreneurship is the best investment you can make – because ultimately, you are investing in yourself.

Image credits: Top, by Rawpixel via Pexels

Meanwhile, You can click on the following links to read more about building wealth:

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How to Balance a Cheque Book

By

Irene Makanga

-

July 24, 2018

0

If you use a cheque book, you need to know the basic additions and subtractions to keep it balanced. This basically means you record all transactions i.e., deposits (additions) and withdrawals (subtractions), made to your accounts. Many of us with cheque books hardly seek to reconcile our accounts at the end of the month. Doing so once a month will help you keep track of what you’re spending and uncover any errors or incorrect charges. Ultimately, this could help you catch fraud (If any), avoid overdrafts and other penalties, catch mistakes and keep track of your money.

What You’ll Need

To keep your cheque book in balance, you’ll need:

A recent bank statement
Receipts
Your personal register – basically, its a list of account transactions done over the month/period in question.

How to Prepare a Personal Register

If you don’t have a personal register, this is how to prepare one. A personal register will probably have six dedicated columns for the following information:

Cheque number
Date of the transaction
A description of the transaction i.e. to whom the cheque was written and/or for what
Amount of withdrawal or payment – jot down the exact amount
Deposits – be detailed and include your salary and any other deposits even cash gifts
Balance – start with the opening balance (which is the closing balance of the previous month) then systematically add (any deposits or interest payments from savings/investments) or subtract (withdrawals, payments, and bank fees) transactions.

With this document on hand, enter all transactions into your personal register each and every time you transact. This includes ATM withdrawals, M-Pesa and online bill payments and debit card purchases.

How to Balance Your Cheque Book

Here is how to reconcile your bank account on paper:

Add up all your deposits and withdrawals listed in your personal register.
Assess if the total amounts (deposits and withdrawals) in your personal register match the amounts on your bank statement.

Balanced or Not Balanced

There are only two possible outcomes a balanced amount or unbalanced. If the amounts:

Match i.e., balance, then your work is done. Your chequebook is now balanced.
Don’t match i.e., not balanced, double check everything again to verify the amounts and additions. It is easy to make mistakes with such transposing numbers, so it’s a great idea to check again.

Unmatched Amounts

After double checking and your amounts still, don’t match, this is the best course forward:

Simply fix your own mistakes i.e. those times you took cash out at the ATM and failed to record it.
If you can choose to believe the bank, adjust the balance in your own register to agree with your closing bank balance. When doing this, remember that your actual balance may be much less than what your bank account reflects if you have any outstanding cheques.
Get in touch with your bank for review of your transactions – do so if you think a transaction is unauthorized or contains an error. Then look for further instructions from your bank on how to correct the problem.

Cheque Book Common Mistakes

Here are the most common mistakes when keeping a cheque book:

Forgetting to record each transaction and forgetting to record when it happens
Issuing worthless cheques i.e., bounced cheques – they are quite costly and should be avoided. To be safe, you’ll need to know how much money is in your account and the best way to do this is by balancing your cheque book often. This way, you will have an accurate number if you have any outstanding cheques.

Bottom Line

It is always advisable to regularly review your bank statements and compare them with your own records. This way you can verify that you and your bank are on the same page.

Meanwhile, You can click on the following links to read more about financial planning:

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Financial Coaching: What Is It and How Does It Help

By

Irene Makanga

-

July 17, 2018

0

Financial coaching is guiding one through a financial journey by taking on a collaborative educational approach that empowers one to achieve financial independence.

There is no big secret to building wealth, just simple principles to get you there. As such, the biggest problem for many isn’t knowing, its actually getting things done. Things can only get done by taking the small actions that add up to achieving financial independence. Thus, financial coaching seeks to bridge that gap between knowledge and completing actions. This way, the financial coach will take you through a continuous coaching process to try to change negative habits – similar to the approach of a personal trainer.

What is Financial Coaching?

Financial coaching is essentially having individual sessions with you in order to ‘coach’ performance improvement to meet financial goals. In a collaborative coaching relationship, financial goals are mutually set by the coach and the client and monitored in a process largely driven by the client. Through this ‘coach’ performance improvement approach, you receive the much-needed encouragement to drive positive behaviour change, a boost to self-control and flexibility to change strategies as behaviour changes. This is why coaching is so well suited for wealth building programs such as ours.

How Does it Help to Build Wealth?

Financial coaching gets results as it looks beyond education, rendering financial advice and investment strategies. The financial coach looks at the financial habits – thus bridging the gap to ensure positive financial behaviours. The following are the main aims for a financial coaching:

Address any immediate issues (place plugs to the sinking ship)
Improve long-term financial behaviour – identify negative financial behaviour, help you practice new behaviour and monitor behavioural changes over time.
Facilitate you to set and achieve financial goals
Facilitate decision making, provide tools, resources and referrals.
Target clients with a minimum level of financial skills and experience

With all these things in place, the collaborative educational relationship changes the behaviour around money and ultimately empowers you to achieve freedom.

How Financial Coaching Gets Results?

Financial coaching focuses on you – not the instruction being delivered. This might be identifying the obstacles to good financial management. This can be identifying areas to reduce spending to create more savings or help you get out of debt, and understanding your emotions around money. Financial coacting still teaches the essential principles behind wealth building such as risk management, leverage, competitive advantage, mathematical expectation, continuity of income, proven investment principles, techniques and much much more. However, all this knowledge is incomplete without good habits to maintain to help you move forward with whatever plans you may have.

Bottom Line

When you feel confident about their finances, you want to take charge and plan more for their future. You are better equipped to make decisions on their own because you move in primed and perfectly able to understand investment product information. Looking forward, positively and unafraid to make those hard financial decisions.

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7 Rules For Never Being Broke

By

Irene Makanga

-

July 13, 2018

0

In my early 20s, I acquired a different perspective on financial well-being from being broke. I learned three things:

There is an enormous difference between looking like you have money and actually having money.
The real-life consequences of unplanned purchases and the importance of living within my means.
I became willing to do anything to make sure I was never broke again.

Here are my 7 rules for never being broke:

#1 Learn to Say ‘No’

Shortly after realizing that I couldn’t afford my tuned up lifestyle, I learned the truth about being broke. Living so close to my means meant that I was always just one step away from being left completely desolate i.e., one day off work or one prolonged illness could get me there. For a while, I struggled to say ‘No’ to those nights out, shoes, and other inconsequential things. But once I got over the stigma of saying ‘No’, life became a lot easier for me. I cut back on everything unnecessary to my existence.

I know that a ‘Yes’ life will open a lot of new opportunities, adventures, but it also comes with increased chances of bad decisions. Bad decisions always have consequences. So strike a balance and have a real conversation with yourself before you lose yourself to worldly things. Don’t live to please people – know thyself.

#2 Increase Income, Decrease Spending

Live below your means and progressively increase your income. In retrospect, I now realize that spending three-quarters of my earnings on clothes, shoes, transport and eating out is absolutely ridiculous. What was I thinking? Unfortunately, I wasn’t. Amazingly, I never crunched the numbers to see the real cost of my life would be. Now that I’ve been broke, I realize the importance of living below my means and striving to systematically increase my income and decrease spending. Learning to truly live below my means and have those side hustles.

Doing these things will give you more freedom to save and prepare for the future. The bigger the gap between income and spending, the better. As ultimately, we seek to invest the difference. Putting your money to work will earn you more and more over time – if properly done. This doesn’t mean putting your money in a low-interest earning account. It means we invest in things that will earn us more than we had before i.e., an investment account, starting a business or even an education to get a better job.

#3 Learn to Appreciate What You Have

I realized long ago that I was never going to get ahead without appreciating what I had. In fact, I never really started making progress until I learned the hard way that there are no quick fixes. Quick fixes, always materialize to nothing. Things unravel real quick as you squander what you have because you don’t appreciate it. Life has no quick fixes, just amazing lessons, and for those willing to learn, grow and never look back.

Without gratitude, you will never learn to recognize what you have, appreciate it and enjoy it – truly. Learning to be content with what you currently have been given unlocks marvelous lessons that will guide you when you do have plenty. Ultimately, this is why you’ll always hear me saying “You can’t keep asking for an increase while doing things that cause you to decrease.”

#4 Do the Math & Plan Ahead

Realize now that only you can solve your own financial problems. As I look back, I realize that I would have probably been much better if I had learned to invest and slowed down a bit. I don’t regret anything though, because a better decision then would have led me to another path. For instance, I wouldn’t have taken the time to major in finance. I always thought that finance was this wild beast that couldn’t be tamed.

Now that I work in finance, helping others, I see many people struggling with it too. Many people believe that personal finance math is beyond their abilities. I mean many of us here can solve the Pythagorean theorem but can’t draw designs on their own personal finance. The math here is more basic like 1+1 is 2 because ultimately things must add up – where plus and negative signs have real-life meaning. So, do the math and plan ahead for all the money that you intend to spend and save. It is always advisable to look at your numbers often as they will reveal how well you are applying your financial knowledge to building wealth.

#5 Have Goals

Having no goals in life is like setting sailing without a compass. If you want something, the first step is knowing what your final destination is. Looking back, I had a vague idea of where I wanted my life to be. And because I never sat down to write what exactly I wanted, my destination was neither here nor there. When you are aware of your goals, nothing will stop you from going and getting them. So the best advice I can give you here is that whenever you are facing the situation where you are broke, regularly review and keep in mind your goals and they will nudge you on to achieve.

#6 Avoid Debt

I am glad I never took on debt earlier on because our economy penalizes for late payment and default. Debt can really cripple your life and really destroy your chances of improving your life. Don’t mess with this beast unless you truly understand it well. If you don’t have to, don’t get into it.

Most importantly, do not ignore debt if you have it. Sweeping your problems under the proverbial rug only sends increasingly threatening letters to your mailbox from your creditors. Ignoring stuff like this is the worst way to go about it. Treat debt with the seriousness it deserves.

#7 Time Is Money

This is a very common saying, but many of us do not really realize how important it is until later on in life. If I had saved all the money I was so liberally spending on things I really didn’t need, my balance sheet would look a lot different now. Over the years, with compound interest, I would have had the chance to retire 10 years earlier living the life that I want. Now, I am busy giving and throwing away all the clothes and shoes I accumulated in my early 20s. They are out of fashion and no longer to my taste. Purging has made more conscious of the missed opportunities I wasted. Having a better understanding of myself now, I could easily have started a business with that money. The time to save is always now – a little here, a little there goes a long way.

So here’s my conclusion…

Being broke is draining and demoralizing but don’t let it keep you down. Fortunately, as with all things, it’s a matter of time. You just need to be patient to get the life you want and make a meaningful effort to get you there. Make the right choice today – to never be broke again!

Meanwhile, You can click on the following links to read more about financial planning:

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Leverage: Are You Thinking About Borrowing To Invest?

By

Irene Makanga

-

July 5, 2018

0

Borrowing to invest is known as leverage, and can be quite effective in building wealth, businesses, and incomes. Leveraging enables investors to increase their returns when markets are rising but can yield devastating returns when the markets fall. For instance, should an investor take on 50% leverage, i.e. borrowing an equal amount to initial equity, he/she will be able to generate 2.0x the investment return. Thus, borrowing increases risk and can expose an investor to greater losses.

Here are the four ways to leverage your money, some of which you may already utilize:

Leveraged Home Ownership

Borrowing to buy a home in a mortgage is the most common form of leveraging. Through mortgaging, homeowners build equity as they pay off down their mortgage while at the same time, reaping the benefits of an appreciating asset. However, mortgages can be devastating investments if the mortgaged property depreciates in value beyond the equity accumulated. When you decide to sell, you might find yourself in debt considering the down payment plus equity accumulated during the period, less all the expenses that go into selling a property i.e. sales commission.

How It Works

The effectiveness of leverage in homeownership can be achieved as follows, in the simplest terms:

You put a Kes. 1 M down payment on a Kes. 10 M house. If the house appreciates in value by 10% over the next year. You could walk away from this deal with Kes. 11 M (not accounting for commissions and other erroneous expenses) if you choose to sell after a year. Thus, in one year, you made Kes. 1 M on your initial investment of Kes. 1 M. So although the house itself increased in value only by 10%, your personal return on investment is 100%. On the other hand, if the house depreciates in value beyond the equity you have managed to accumulate, you may achieve losses on sale.

Risks & Notes:

Interest rate risk on the mortgage could rise. Always asses the pessimistic and optimistic scenario of every investment you make. Here, seriously consider the details of your contract – floating or fixed interest rates – considering if you could still meet loan repayments if interest rates rise or fall?
Income risk should always be considered by mortgage takers – in the event of sickness, injury or redundancy. Consider ways in which you can retain your property or make gains in the event of anything.
Mortage holders are eligible for tax relief.

Leveraged Business Investment

Business debt is a truer form of leverage as you can borrow with the expectation of earning an income, which makes interest on the loan tax-deductible. Interest risk on top of the capital risk increases the risk exposure of any investor. If the business capsizes and there is nothing to sell, then bankruptcy could be imminent. We have all heard tales of business owners losing everything and others becoming wildly rich in achieving their goals with good business investments. Ultimately, nothing wagered is nothing gained.

How it Works

The effectiveness of business leverage can be achieved as follows, in the simplest terms:

Similar to the above example, you can invest in Kes. 1M down on a $10M business idea. The business can make Kes. 1M/year. You can use this income to help make loan payments. However, the success of this all depends on the business – you may find that there is capital appreciation i.e. having a loyal customer base and good reputation. These things may enable you to sell your business for more than Kes. 1M. This overall gain on the amount can be expressed as a greater return on investment on your initial investment of Kes. 1M plus loan payments.

Risks & Notes:

Do your own due diligent and meet with your business mentor. In business, learning from others mistakes is the best way to get an idea of what to expect. Keep your ears peeled for tales of woe, as well as tales of abundance.
In business, capital risk is always present as your business may fail or revenues may not be able to cover the debt. It is always advisable to have a cash reserve set aside for this specific problem to avoid liquidation or eventual bankruptcy.

Leveraged Real Estate Investment

The idea to borrow to invest in real estate takes on both business and home ownership strategies of leveraging – rental income and value appreciation. The only drawback to this investment strategy is that there will be times when you don’t have tenants to help you pay up the mortgage. Eventually, cash-strapped or not, you will have to come up with the resources to finance the loan. Also, losses are also another risk to consider when it comes time to sell off real estate.

Risks & Notes:

Income risk should be considered. What is your plan to manage it? Have extra cash reserve on hand for days when income isn’t forthcoming to cover loan payments.
Conduct your own due diligence or consult a real estate agent/financial planner and find out how leverage works and draw up a pessimistic and optimistic return scenario for your investment.

Leveraged General Investment

The attraction behind investment leveraging is best achieved when the interest rates for borrowing are low. In leverage investments, gains are magnified and this can be quite addictive. One needs to be cautious because no matter how impressive the numbers are, they can all evaporate when multiplied by a single zero. If you choose to take this route, then ensure that you adopt a long-term investment strategy which will give your portfolio enough time to recoup from any market dips.

How It Works

The effectiveness of investment leverage can be achieved as follows, in the simplest terms:

Leveraging investments can be quite complicated as experienced investors love to use derivatives, futures contracts, and swaps to magnify returns. Here, I wouldn’t want to complicate this for you guys. However, put simply, ensure that your returns are more than the interest you pay for the borrowed funds i.e. If your investment makes 8% or Kes. 80,000, and you subtract the Kes. 30,000 in net interest expenses, your gain is Kes. 50,000. If you express the Kes. 50,000 as a return on your investment of Kes. 1M you just made a 5% return. If you can find someone to loan you money at 3%, then you are good to go.

Risks & Notes:

Take on a long-term investment strategy to allow assets to appreciate and recover from bumps and corrections in the market. This is particularly important since leverage magnifies both losses and gains, creating bigger swings within your portfolio – don’t panic!
Do you own due diligence or consult with a financial planner to asses your exposure and ensure that you aren’t trading a losing account.
We have established that leverage magnifies gains and losses, therefore, your capital is always at risk. You may lose far more than you bargained for with margin debt. Always be careful.
Trust your gut – go for it – leverage is very risky. It takes a strong unflinching investor to not break a sweat out of worrying about debt. If you think you can do that, then you are good. Trust me, it’s a rollercoaster ride you don’t want to get on. If you know you can’t handle it, choose to be healthy and adopt a stress-free investment plan.

Bottom Line

Everybody wants shortcuts to building wealth, and debt is the fastest way to get there. Personally, I’m not advocating for it. However, I can write about it to draw attention to some of the concerns with leveraged investments. Before investing, you should strongly consider what can happen if you hold securities for longer than a day and whether the extra risk fits with your financial goals. Most of all, can you handle the extra the roller coaster of making leveraged investments.

Overall, be careful with the money you are investing!

Meanwhile, You can click on the following links to read more about investing:

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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How to Evaluate The Quality of a Stock for Long-Term Value Investing

By

Irene Makanga

-

June 27, 2018

0

Value investing is an investment strategy which generally involves buying stocks that trade for less than their intrinsic value. As such, value investors actively seek to buy undervalued stocks, mispriced by the market, in the hopes that the market will catch on and give an opportunity to profit. Rather than seek for quality, it is human nature to buy the market dregs and hope for heroic rebounds forgetting that a bad buy will eventually translate to a bad sell.

So you are now probably wondering, how can we identify quality stocks i.e. wonderful companies? After all, a stock isn’t all about the price you see but rather a whole value-creating machine with cogs churning every day. You can start off by seeking out the answers to several of these questions which are based on the value tenets by Warren Buffet. According to the value tenets, a stock must be:

Stable and understandable
Have long-term prospects
Be managed by vigilant leaders
Be undervalued

Here is a breakdown and the questions you’ll need to ask yourself as you determine stock quality:

Rule 1: A Stock Must Be Stable and Understandable

Stability is important in determining a companies value as a steady growing company is always ideal for long-term investors. Ultimately, we would like to see a steadily increasing book value, steady or declining debt/equity ratio and growing earnings per share. Will all these things to look, you’ll need a company that is understandable. This way you will be able to understand how any change in strategy or product will affect earnings. This way, you can make a good decision on whether to either buy, hold or sell.

Has the company avoided excess debt?

Warren Buffett would like to own a company where earnings are being generated from shareholder’s equity as opposed to borrowed funds. We use the debt/equity ratio to asses this as it shows the proportion of equity to debt the company is utilizing to finance its assets; higher ratio signifies for debt rather than equity. High debt level compared to equity can result in volatile earnings and high-interest expense. To tighten the noose a little, consider only long-term debt as opposed to total liabilities in your computations. The Debt to Equity Ratio is calculated as follows:

Debt/Equity Ratio = Total Liabilities ÷ Shareholder’s Equity

Note: A steady or declining Debt/Equity ratio that is below 0.5 is ideal

Rule 2: A Stock Must Have Long-Term Prospects

For value investing to be successful, a stock must have long-term prospects. The ability of a firm to survive over time relies on various things: (1) competitive advantage; and (2) growth/sustainable profits. Companies with long-term prospects must continue growing and generate sustainable profits, as we have established in the previous section.

Do the company products rely on a commodity?

Warren Buffett considers this a very important question as he tends to avoid companies that have products/characteristics that are indistinguishable from their competitors or rely solely on commodities such as oil and gas. The aim here is to buy value and there is more value in purchasing companies whose characteristics are hard to replicate – commonly referred to as economic moat or competitive advantage. The wider the moat, the tougher it is for competitors to gain market share and annihilate it.

Rule 3: A Stock Must Be Managed By Vigilant Leaders

Even as a novice investor, you can easily assess the quality of management using two-yard sticks: (1) how well they have run the business (2) how management has allocated capital over time.

Are profit margins high? Are they increasing?

To achieve assess the first yard-stick, we will need to look into profitability. A companies profitability relies on two things:(1) profit margin and, (2) consistent increase in profit margin. Profit margin is computed by dividing the net income by net sales. A get a good picture of the company, go back at least five years and assess the year on year profit margins. A high-profit margin is a sign that the company is executing its business well and increasing margins means that the company is efficient and successful in controlling its expenses.

Additionally, profitability needs to also be assessed in comparison to the competitors. How what has the competitors accomplished – changes in market share, expenses levels and also the competitive advantage.

Does the Company Have Any Growth Prospects?

One of the most important responsibilities of a company’s management is capital allocation. This is the decision of where to deploy a firm’s access capital. As investors, it is our job to ensure that management is making intelligent decisions for capital allocation as it has a great effect on long-term investment returns. The easiest and simplest way to proxy returns from investments why multiplying the company’s reinvestment rate by the business’ return on capital.

Return on Investment Capital

Return on capital measures the return that an investment generates for capital contributors across the board, i.e. bondholders and stockholders. For example, if a business reinvests 50% of capital at a 20% ROIC, then a 10% incremental return can be reasonably expected on the investment you make.

Return on Investment Capital (ROIC) = (Net Income – Dividends) ÷ Total Capital

Most importantly a business does not need to have strong growth prospect through reinvestment of capital within its ranks to generate value for investors. There are some businesses out there that are stagnant but still making solid investments in other areas. With such companies, what you need to look for is:

It’s excess free cash flow generated that can be invested elsewhere
Its strong competitive position and the unlikely to deteriorate in the near future

It is important to keep in mind that many businesses have no choice about whether or not to reinvest, i.e. capital-intensive firms that must reinvest all their cash flows just to maintain the current competitive position. A great example of such a company is KQ. Also, there are other areas of capital deployment mergers & acquisitions, debt repayments, dividend payments and share repurchase decisions. All these encompass the vital capital allocation decisions that management make at a more complex level.

Overall, as investors, it is our job to ensure that management running our company makes the best use of our capital to maximize our returns. Which brings us to the next question, what is our return on equity?

Has the company consistently performed well?

Here we look at the return on investment for shareholders which is depicted in the Return on Equity (ROE). The Return on Equity measures the rate at which shareholders income on their shares. Buffet uses it to assess whether a company has consistently performed well when compared to other companies in the same industry.

The Return on Equity is calculated as follows:

Return on Equity (ROE) = Net Income ÷ Shareholder’s Equity

Rule 4: A Stock Must Be Undervalued

This is the most difficult assessment you’ll have to make as you’ll have to determine the company’s intrinsic value. The problem lies in the fact that a company’s intrinsic value is usually higher than its liquidation value. Liquidation value is the actual worth a company is sold for if it is broken down and sold for parts – does not include intangible assets i.e. brand.

Is the company stock selling at a 25% discount to its real value?

Notwithstanding, we can still try and estimate a company’s value using various company fundamentals – earnings, revenues, and assets. With this estimation, we measure it against the market capitalization (current total price) and only move ahead if the value is at least 25% higher than the market capitalization. Warren Buffett has gained a lot of success in estimating a company’s value. Here is a there is two simple valuation technique that Warren Buffett uses to estimate company value:

Comparison of Market Value to Book Value – ideally trading at least 25% lower than the book value.
Price to Earnings and Price to Book Value Method as highlighted below.

Price to Earnings Ratio

The price to earnings is a measure of the current price share relative to its earnings.

Price to Earnings (P/E) = Market Price Per Share ÷ Earnings Per Share

Note:

A high P/E suggests that investors are anticipating higher growth
A low P/E suggests that the company is doing well relative to past trends
Companies with negative earnings have no P/E ratio

Price to Book Value

The price to book value is a measure of the price you pay for every shilling in book value of the business. The aim for every value investor is to have as much as possible in book value for every shilling since it is a measure for the safety of your investment.

Price to Book Value (P/BV) = Market Price Per Share ÷ Book Value Per Share

Where: Book Value per share = (Total Assets – Total Liabilities) ÷ Number of Shares Outstanding

Note:

A higher P/BV translates to low safety (typically above 1.5)
A low P/BV translates to higher safety (typically below 1.5)

A word of caution here, as you seek low P/BV, analyze all the company fundamentals for any signs of trouble. To be safe, compare the ratio with industry counterparts to know where the company lies.

Now we put the P/E and P/BV together by multiplying the price to earnings (P/E) with the price to book value (P/BV). The ideal product should not be higher than 22.5 as it is a strong indication that the stock might be undervalued. The reason for this is that low P/E indicates a high return, while a low P/B is an indication for high safety.

Summary

Again, these are the four rules for investing in stocks according to Warren Buffet. The aim is to buy for the long haul – 5 years at the very least. For this reason, we must pose some fundamental questions to test a companies resilience to withstand the market. Ultimately, we seek to buy a wonderful company that meets these criteria and only purchase based on what we think it is worth – not the market.

Meanwhile, You can click on the following links to read more about investing:

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NewsWeekPRO

NewsWeekPRO

Company

The 50/30/20 Budgeting Rule

Why Save 20%?

Getting to 20% – an example

What Are You Saving For?

Can’t Save Enough?

Summing Up

How To Identify Insurance Fraud?

How Can You Protect Yourself?

All In All

Africa

African Diaspora

To Sum Up…

Credit Card Interest Rate

How Does Credit Card Interest Work?

How Can You Reduce Your Credit Card Interest Rate?

How is Interest Rate Determined by the Bank?

Other Fees

Cash Advance Interest

Late Payment Interest

Over-Limit Fee

Annual Fee

Joining Fees

What’s Next?

Chances to Break Success

Chances of Failure

Entrepreneurship As A Source of Wealth

What You’ll Need

How to Prepare a Personal Register

How to Balance Your Cheque Book

Balanced or Not Balanced

Unmatched Amounts

Cheque Book Common Mistakes

Bottom Line

What is Financial Coaching?

How Does it Help to Build Wealth?

How Financial Coaching Gets Results?

Bottom Line

#1 Learn to Say ‘No’

#2 Increase Income, Decrease Spending

#3 Learn to Appreciate What You Have

#4 Do the Math & Plan Ahead

#5 Have Goals

#6 Avoid Debt

#7 Time Is Money

So here’s my conclusion…

Leveraged Home Ownership

How It Works

Risks & Notes:

Leveraged Business Investment

How it Works

Risks & Notes:

Leveraged Real Estate Investment

Risks & Notes:

Leveraged General Investment

How It Works

Risks & Notes:

Bottom Line

Rule 1: A Stock Must Be Stable and Understandable

Has the company avoided excess debt?

Rule 2: A Stock Must Have Long-Term Prospects

Do the company products rely on a commodity?

Rule 3: A Stock Must Be Managed By Vigilant Leaders

Are profit margins high? Are they increasing?

Does the Company Have Any Growth Prospects?

Return on Investment Capital

Has the company consistently performed well?

Rule 4: A Stock Must Be Undervalued

Is the company stock selling at a 25% discount to its real value?

Price to Earnings Ratio

Price to Book Value

Summary

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