Activating that financial genius in you

Guest post by Samuel G. Njenga

All of us have financial geniuses in us irrespective of our levels of formal education. That is why one Njenga Karume (RIP) made it despite not having much to show in terms of formal education; he had a financial genius and business acumen. The biggest problem is that we are not bold enough to activate the financial genius in us because of lots of reasons but the biggest is the fear of failure. It is not the fearful who are rich but the bold. We must therefore overcome the fear factor.

At some point, you had a wonderful business idea. You kept thinking, suppose I try and I fail?? Learning to manage risk is far more important than playing safe when it comes to investments. My first major business venture was farming wheat in Narok. I was employed and relied heavily on a farm manager whom we had employed together with other investors. We used to make trips every weekend to check out the farms but as fate had it, rains failed and we lost everything. Second season, we invested in the same venture and the wheat did well and we were awaiting a bumper harvest, then again the rains were too much at the time of harvesting. Of course we lost again. In total I personally lost 600k and you can imagine the feeling especially for a young man earning 40k per month because even raising that money was quite something. We never lost hope but learnt very important lessons. We did a third season and recovered all the losses of the first two seasons. It is extremely important to understand the business and whenever a failure comes (it is usually inevitable), learn the lessons and move on.

But how do I start, you may ask??

You need a reason greater than reality. The power of spirit, what I’d loosely call great conviction. The reality will tell you that the road seems too long and too many hills to climb. It is just easier and comfortable to work for money than to make it work for you, after all that is what they taught us in school.

You must choose daily how the shilling that lands in your pocket will be utilized in future to either be rich, poor or middle class. That is the power of choice. Cumulatively these choices determine your destiny. Do you ever wonder why two people employed at the same time and earning the same amount never progress in parallel as far as achievements are concerned?

Choose friends who reflect what you want to be in the future or people who share your vision. Don’t listen to poor, frightened people who think that money is a preserve for some people. Have a critical look at your closest friends. Do you know they are a reflection of who you are? What do they feed your mind with? Today is furahi-day, are they calling the whole day in excited tones waiting close of business to go on a drinking spree the entire weekend. I am not against drinking because some deals occur in those places, but if you were to analyse how you spend your time, then you’ll have a clear indication of the effects friends are having on you. The power of friends.

Pay yourself first as in set aside some cash for savings / investments before you deal with all other bills. Personal discipline will ensure that you pay yourself first before paying others like government, rent etc.  If you pay everyone else first then there may be nothing left for you. Keep expenses low; ensure that your assets column keeps rising. By the way an asset generates income, so the house you are living in is not an asset (a story for another day), neither is that car that you use to go to work (this is rather obvious).

Pay brokers well. These are people who give you good advice. Pay them better than others and they’ll always offer better advice and will consider you first. This is very practical in real estate. I have a network of brokers who will always call me first when they come across a good deal.

Assets buy luxuries. Strive to buy assets that generate money and they will buy you luxuries. Never buy luxuries out of your ordinary income, say a monthly pay check.

Have heroes. People you want to emulate. Learn how they think, do their stuff and learn from them. Personally, I like those guys who have made money honestly through hard and smart work, shrewd investments and are street smart.

Be charitable. Give and you shall receive. Give free information and teach other how to make money. It’ll become a part of your life. Giving back to society can give a lot of satisfaction and of course God will bless you a hundred fold.

By the way, which class of a person are you? Let us try to answer that in the next post.

That Millionaire next door

Guest post by Samuel G. Njenga

Believe it or not, one of the most important indicators of whether you can become a financially free is how you think. Yes, a large part of financial success begins with your mind.

What are your thoughts about money and wealth? Do you think like the wealthy millionaire next door?

Millionaires are not afraid to take risks

Many of us fear change and would rather settle on the easy path - the path of least resistance. This path will never lead to wealth. Millionaires are millionaires because they do things differently from most people. They are willing to take risks (calculated ones) and responsibility for whatever the outcome.

Millionaires are positive thinkers

This does not mean that they deny that things can go wrong. It just means that by default they expect things to work out. Millionaires are realistic positive thinkers.

When they create a plan, they anticipate what might go wrong and develop a strategy for coping should that plan go south. This way they decrease their level of failure. And their high success level reinforces their assumed expectations that things will work out in the end.

Millionaires cope well with failure

Failure is an inevitable stumbling block on the road to success. Every millionaire has failed at some point, and because they play with high stakes, they've probably had some very big failures. A case in point is one Donald Trump who was 900 million in debt at some point.

However, the difference between millionaires and most people is that they don't dwell on their failures. Instead, they accept them as part of life and make a point of learning from them.

They are creators, not victims

Millionaires don't passively sit around accepting whatever happens to them. If they're not happy with their current financial situation, they take action. For example, when they lose, it's highly doubtful that they spend all their energy dwelling on how much money they lost and how they'd never get it back. Instead, they are most likely thinking, "What do I need to do to right now to create enough money to be a millionaire again?"

Millionaires are leaders

A follower doesn't typically come up with a million dollar business idea. And if they do, chances are they won't act on it. Millionaires think like pioneers. Their minds are always open to the next great opportunity they can turn into a reality. And once they have an idea, they effectively harness the energies to materialize it.

If you want to be a millionaire, you should begin thinking like one. Your mentality colors your entire perspective of the world. And once you begin seeing possibilities where you once saw dead ends, you'll be surprised at how much abundance there really is to go around.

Note: We will get practical in this journey to financial education. For now we are just dealing with basic but very important concepts. For practical lessons, we will also be relating to the Kenyan scenario(s) so as not to sound theoretical. Just to caution readers that the we have a bias to real estate and most of the topics will revolve around it in future. However, other important topics like financial planning, chamas (Investment groups), Life insurance, leveraging on borrowing amongst others will be covered in due course.

In the next post, we look at activating that financial genius in you.

How To Successfully Achieve Any Goal

Goal setting involves establishing specific, measurable, achievable, realistic and time-targeted (S.M.A.R.T) goals. On a personal level, setting goals helps us work towards our own objectives—in all aspects of life (spiritual, health, family, career, business, financial-based goals etc). Goal setting is therefore an effective tool for making progress by ensuring that you are clearly aware of what you want in life. "Goals provide a sense of direction and purpose" (Goldstein, 1994, p. 96).  

Without goals, many people live life adrift thinking that life happens to them, instead of taking control and directing their lives towards a certain direction. When I was in Second Year of High School, I made a decision I wanted to become a scientist, and therefore needed to join in the university. I wrote my goal down under the cover of my every note book in school. I studied hard despite being in a "not well performing secondary school". I went out of my way, learning ahead of the teachers to finish the syllabus especially for sciences and mathematics, as the system never used to cover the syllabus. Come the National 4th Year Examination, I passed, and was granted a government scholarship to study in one of the Kenyan public university. That time, there was no parallel-degree programs offered in the four public universities in the country. There was only few very-expensive private universities. So, if you came from a peasant background and didn't make it to the cut-off mark, you were basically locked out of the tertiary education system. 

As I write this post, I am scheduled to defend my PhD by the end of next month. I think that attaining a PhD is a peak in my career advancement, which has set me on a path of becoming a great scientist.

That is the power of goal setting. It starts with knowing what you want. Once you know what you want, realise that God has already given you the ability to become, attain, achieve, acquire that. A person with a goal is quickly able to identify opportunities when they come his way. "Goal setting capitalize on the human brain's amazing powers: Our brains are problem-solving, goal-achieving machines. "Napoleon Hill said "Whatever the mind can conceive, and believe, the mind can achieve". 

"Goals convert the strategic objectives into specific performance targets. Effective goals clearly state what, when, and who and are specifically measurable." 

On the side, my wife and I have been pursuing another goal: To promote Financial Education for Poverty Eradication in Africa (reason behind this blog and facebook page), alongside another personal goal: To create a total of X USD in passive income per month that can give me the lifestyle I want even without working by the age of forty five. This means, once I achieve this goal, I can retire the following day, if I want to. Do you get my meaning?

As you watch the video below, let me ask you, what are your life goals?

Download a FREE on How to Successfully Achieve Any Goal.pdf courtesy Personal Excellence.

In the next post, we shall look at "That Millionaire next door".

How To Prepare A Personal Balance Sheet (Networth Statement)

A Personal balance sheet, also called a net worth statement or statement of financial position, reports what you or reports what you or your family owns and owes. This statement provides a summary of assets and liabilities that one has at a particular time. So, whenever you want to find the state of your finances, this statement will give you an answer. It will tell you whether you are doing good or bad.

This is how you go about preparing a personal balance sheet:

Step 1: List What You Own (Assets)

Do you have anything of value? List it here. Cash (at hand and in the bank) combined with other items of value are the foundation of your current financial position. Assets can be grouped into four:

• Liquid assets

These are cash and items of value that can easily be converted to cash. Money in current and savings accounts is liquid and available for current spending. Surrender value of some insurance products such as endowment assurance policies can be borrowed if needed.

• Real Estate

Includes a home, rental buildings, or a piece of land that a person or family owns. The current value (also referred to as market value) of these properties needs to be determined by qualified Property Valuers or Appraisers.

• Investment assets

These include investments such as stocks, unit trusts, bonds, treasury bills, and any business you own. Since investment assets usually fluctuate in value, the amounts listed should reflect their value at the time the balance sheet is prepared.

• Personal possessions

Motor vehicles and other personal belongings such as furniture, home appliances are in this category. While these items have value, they may be difficult to convert to cash. They can be listed in the balance sheet at their original cost. However, their values need to be revised over time, since a three year old car, for example, is worth less now than when it was new. Some other personal items might increase in value such as rare jewelry thus you may wish to list such items at their current value.

Step 2: Determine Amounts Owed (Liabilities)

Liabilities are amounts owed to others but do not include items not yet due, such as next month’s rent. Liability is a debt you owe now, not something you may owe in the future. Liabilities fall into two categories:

• Current liabilities

These debts must be paid within a short time, usually less than a year and includes items such as utility bills, medical bills, insurance premiums, school fees arrears, cash loans and credit card payments.

• Long-term liabilities

These debts are usually paid in full until a year later. Common long-term liabilities include auto-loans, educational loans, and mortgage.

Step 3: Calculate Net Worth

A net worth is the difference between total assets and total liabilities and it provides a measurement of your current financial position. Net worth is the amount you would have if all assets were sold for the listed values and all debts were paid in full.

Two things you should know about Net worth:

1.     If the total value of assets is larger than the total value of liabilities, you will have a positive net worth. However, your net worth is not money available for use but an indication of your financial position on a given date.

You can increase your net worth by:

§  Increasing your savings.

§  Reducing your spending.

§  Increasing the value of investments and other possessions.

§  Reducing amounts you owe by paying off your debts.

Please do understand that you may have a positive net worth and still have financial difficulties. Having many assets with low liquidity means you do not having the cash available to pay current expenses.

2.     If the total value of liabilities is larger than the total value of assets, you will have negative net worth which means you are unable to pay your debts when they are due.

I believe you can now prepare your personal balance sheet. Most personal finance management software’s (e.g. budgetpulse.com) has an integrated net worth function. Make it fun to discover how much you are worth. If you find you are positive, great, focus to increase your net worth. If you find out you are under water, do not despair. Set a goal to get out of debt and improve your financial health.

Our next post will look at setting goals.

Budgeting - How To Manage Your Finances With A Spending Plan

Personal budgeting is about managing your finances through a spending plan. It is one of the effective ways of achieving your financial goals and dealing with most of your money problems. Do you sometimes wonder where your whole income has disappeared to even before mid-month? Or some days you leave for work in the morning with some cash and in the evening your wallet or purse is empty. You have no clue as to where your money has disappeared to. You just don't want to admit you squandered it. Or, someone just borrowed you for ‘not so urgent needs’ and you gave it, because for you, it is just money, and not so valuable.

Likewise, do you get frustrated by your inability to achieve your financial goals because you can't find money to get to it? No matter your good intentions to set aside some money every month towards savings, you always find yourself with nothing. Probably your expenses are higher than your income, meaning that you are living above your means, and simultaneously accumulating debt (the money has to come from somewhere to fill in the gap). You need to start using a monthly budget (spending plan) and you will be amazed on its power to help you live within your means. Likewise, you need to find ways to make more money, if what you earn is not enough to take you round the month. Note, there is no income that is so small that it cannot be budgeted for.

The main purpose of preparing a spending plan is to help you:

• Live within your income.
• Stay out or get out of debt.
• Spend your money wisely.
• Reach your set financial goals.
• Prepare for financial emergencies.
• Develop wise financial management habits.

Steps To Preparing A Personal Budget

A personal budget means matching the income one gets with the expenses, in order to reach the financial goals set in advance. Preparing a budget is not that difficult, but still it could become a hassle. Try to make it as simple and as easy as possible, and you will find the personal budget a great tool for keeping your finances under control.

Step 1: List And Total Your Monthly Net Income

Total up every net income you receive in a month. The income should include all of the resources, such as monthly salary, earnings from interest, earnings from rent, business income etc. Bonuses, gifts, or unexpected income should not be considered until the money is actually received. It's better to have money left over than be caught not being able to pay your bills because you factored in money that you weren't sure you'll receive. My wife and I personally use such out-of normal month income towards building our emergency fund.

Step 2: List And Total Your Current Monthly Personal Expenses

The expenses should include all spending - purchases, monthly bills, insurance, hospital bills, savings etc' List all your monthly expenses as they are now. Include also weekly, quarterly, semi-annually and annually expenses. Do not forget discretionary expenses such as Books, Magazines, Entertainment, Impulse purchases, Snacks, Dining, Vacation and Travel and Membership fees. You can know how much to allocate these if you track your expenses for several months, and then use the average as a guide.

Step 3: Subtract Your Current Expenses From Your Current Income

Take the total current expenses and subtract the sum from the total current net income. If, on paper, you have money left over but in reality you are living close to the edge or falling behind, then you have not accounted for everything or some of your figures are wrong. Examine your budget for inaccuracies and make corrections. Use of a budgeting software like dsbudget can help a lot. I personally prefer a software that is web-based like budgetpulse.com, so that I can upload data wherever I am (including on the go using mobile phone).

Step 4: Identify Where To Make Changes In Your Budget

Once you have an accurate idea of where all of your money is currently going it is time to make changes for the future especially if there is more going out than is coming in. Your options include increasing your income, decreasing your expenses by simplifying your life, or a combination of the two.

As you prepare and make the changes in your budget, do not forget to include money for your financial freedom account (FFA), or purse fattening account (PFA), creating an emergency fund, paying for personal loans and credit card debts, insurance premiums and retirement. After you are through matching your income and expenses, monitor your progress every month.

Our next post will look at personal balance sheeting.

Three important Tools of Personal Finance

To achieve financial independence and freedom as outlined in our previous posts, it is crucial to learn 3 key tools and apply them all in harmony in your day to day life. These are:

1. Budget – spend less than you make, so that you can save more. Invest your savings in assets to get you more income;
2. Balance sheet – own more than you owe. Learn and understand the difference between assets and Liabilities. This is important key for your cash flow (income); and
3. Life plan – know what you want, what are your life goals. Write them down; make plans how to get it. Focus and act inspire of fear or circumstances (that is called faith). Remember you aim at nothing and you will achieve it. The contrary is also true.

Our upcoming posts will detail these 3 tools, and give practical examples of how you can apply them to your life.

Personal Financial Management Part 2

Part 2 (Continued from Part 1)

More on passive income:

• Money working for you - Investment earnings from financial instruments (stocks, bonds, T-bills, money markets, mutual funds, owning mortgages and other assets that can be liquidated for cash
• Business working for you – Generating income from businesses where you do not have to be personally involved (rental real estate, network marketing (e.g. Forever Living Products among others), royalties (e.g. books and music), licensing your ideas, becoming a franchisor, owning storage units, coin operated machines i.e. any business that is systematized to work without you.

Without savings, it impossible to invest, and opportunities come and pass (Ecc. 9:11). Even if you are going to leverage funds, most financiers require you first put down your commitment (e.g. 30 %) before they can lend to you. So, despite the amount involved, it is good to develop this habit. Open a separate bank account (Let's call it Purse Fattening Account (PFA) or Financial Freedom Account - FFA) and put there at least 10% of all money you receive (wage, gift or whatever income). This money can only be invested, never spent! For a Christian, it is good to tithe (also 10 %) as worship to God, for his work and to support the Great commission (Mal. 3:8), meaning you have only 80 % to live on. This means you have to simplify your life by living below your means. The more you can save in the PFA/FFA account e.g. 30 % instead of 10 %, the more funds you will have to invest (Ecc. 11:2). If you are in debt, 20 % should go to repaying debts, and never at the expense of the 10 % supposed to go to PFA/FFA. Getting out of debt is not easy and often requires a fight, but the freedom that comes with it is so worth it (Ps 37:21; Prov. 22:7). Mortgage payment should not exceed 35 % of your income. Budget Allocations – Depends on individual, it is up to you to customize to your situation. But do not compromise. Remember, the habit is more important than the amount.

How we have been Programmed/Conditioned in life about money determines how we think. How we Think, determines how we Feel, Act and thus the Results we get. In other words, the Roots determine the Fruits in a cause and effect relationship. The Fruits are the financial situations we find ourselves in.

God has given every one of us potential at birth in the mind to create, manage and grow things that you desire - including wealth. We exist in 3 forms [Spirit, Soul (mind) and Body]. Before you can achieve anything in the physical world, you have to design and create it in the mind. Spiritually speaking, God has already blessed us with all that we need to succeed in life in the Spirit, and it takes faith (James 2:17) to get these things to manifest in the physical, i.e. praying and acting in faith in God the Creator, The Master Designer, The Intelligent Being! But do not be cheated, God will not do things that man (yourself) are supposed to do. He (God) is rather waiting on you to change your attitude, think and act by faith in spite of fear or the appearance of the situation, and you will get the results you desire. But, if you keep mismanaging your finances with a Spenders motto of “It is only money” and “What goes round comes round”, choosing immediate gratification instead of long-term balance and same time keep on praying, trusting and waiting on God for financial breakthrough, I can tell you without a doubt, you will wait forever. This is where most Christians are mistaken and no wonder many are ignorant, because they lack understanding of God's principles (Hos. 4:6). God do not contradict his word. Miracles happen where the ability of man reaches limit. So do not sit and wait for God to budget your income, track your expenses and balance your books. You have to do it yourself. If you lack wisdom, ask him (James 1:5). Note that, wisdom is application of knowledge, with understanding (Prov. 4:4-9). 

We are creatures of habit. The habit of managing money is more important that the amount (Luke 16:10). So, one should be disciplined and persistent with the above plan and percentages despite the amount. Do not compromise even with 100 Euros/Shillings - put 10 Euros/Shillings to your PFA/FFA. If only you saved and invested at least 10% of all the money you received over the last 1 month? What of the past year, decade? Do the Maths yourself!

Nowadays we have technology like M-SHWARI (mobile saving and credit), M-PESA (mobile money transfer) and M-KESHO (mobile banking) in Kenya for example which we can utilise to make our financial management more efficient. We can also utilise free software like Excel templates, dsBudget and Budgetpulse.com among others.

Where attention goes, the energy flows and the results shows. Focus on the four factors of Net worth: Income, Savings, Investing, and Simplification. Learn, Act and you will get Results.

Do not risk your principal, invest it in secure places under the wise council of those who are wise in handling money (Prov. 21:5; 15:22), and not the allure of tricksters in get-rich quick schemes or establishing a business you are not skilled in.

Money is a big part of life, and when you learn how to get your finances under control, all areas of your life will soar - confidence, happiness, relationships and even health. Either you control money, or it will control you.

Learn how to budget your income and track your expenses. This is fun for an individual and for a couple. Discussing finances openly as couples, making it fun tracking your net worth and strategising on how to minimise expenses, increase savings, where to invest so as to maximise your passive income enhances your communication and your relationship flourish. Many marriages are breaking because of financial disagreements. Two cannot walk together unless they agree (Amos 3:3). Harmonise your goals and strategise how to achieve them. Be accountable to each other. You will be surprised how much you can achieve in one year together (Ecc. 4:9) when you start doing things following these principles. 

Above all, put your trust in God who gave you life, health and strength, and trust him to supply all your needs (Phil. 4:19; Matt. 6:33). Do your part, prepare your land for the rain and plant your seeds on time, then leave the rest to him!

In the next post, we shall look at the three important tools of personal finance.