Fundamentals of good personal Finance

Fundamentals of good personal Finance

A very warm welcome to iron the money the television show that gives you insights into how to improve your financial well-being as well as make your money work for you i’m ingrid nantege and today on the show we discuss the fundamentals of good personal finance now personal finance is the process of planning and managing personal finance activities such as income

Generation spending saving investing and protection now the process of managing one’s personal finances can be summarized in a budget or a financial plan and it’s this financial plan that will analyze the most common and important aspects of individual financial management today on the show we’re discussing on rather focusing on breaking down the most important

Areas of personal finance and joining me to do all this is none other than a financial consultant at mg consulting maxwell gachuhi you’re very welcome it’s always a pleasure having you on the show maxwell thank you so much ingrid happy women’s day happy women’s day thank you very much so i can’t even think of a better person to have this conversation on good

Personal finance with than you but to set the ball rolling over that help us get a better understanding from the um from the basics yes when we talk about good financial management what exactly are we focusing on what does it entail all right so ingredient i’ll begin by appreciating that majority of us kenyans would say they say people who have a hundred thousand

And more are less than seventy nine thousand majority will fall in between twenty to fifty thousand and most of the time when you talk about personal finance or coaching the first thing is when you tell them to work on the budget they will say is there’s no need to work on a budget because my money is over even before i finish writing that budget but that’s the

First place to begin with so proper personal finance begins with us working on a budget it begins with us accounting for every single penny that comes into our hands yes so basically what you’re talking about is planning planning planning planning is king absolutely perfect now if we’re to move on when we talk about the fundamentals behind good personal financial

Management if we talk about the strategies if you’re advising someone out there who’s trying to get their money in order what would you say are the best strategies or steps that they can put in place all right so the first thing i would say is i want you to work from your goals remember ingrid i could have come who could have come from the same mother born on the

Same day went to the same school achieved the same uh degree but my life would be different from years in the sense that i have my own personalities so my goals will not match your goals right and that’s true for all of us so one of the things we need to start is by coming up with our goals because goals will help us allocate our monies to the right priorities

Most of the times in grid you will get a parent who the child is maybe in grade four and they had a trip and the trip shows up on 18th then the child reminds the dad in the evening that tomorrow we’re going for a trip then the father says what do you mean a trip how much two thousand why can’t they plan this trip right end month right it’s not because he cannot

Afford it’s because he did not prioritize now if we have goals of course education for me would come on top family is there on top as well and there are many other things that we prioritize so that when my money comes i am allocating these things to what is most important now let me say because every time we talk about a budget people feel like maxwell wants us

To deny ourselves that’s not the thing actually it’s a budget that will help you get those things that you know make life sweet or exciting right for instance if i like buying good suits i can’t afford to buy one every other month right but i can plan myself in such a way that every three months then i can afford one and what will i forgo maybe i’ll decide let

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Me forgo my lunch and i’ll be packing lunch and coming with lunch to town so it’s a goals that will help me achieve the things that are important and the things that are there to me yeah so the first one is goals then the second one like we said is the budget but most importantly to reinforce that budget is what we call tracking you need to track your money right

And i keep saying this ingrid if i asked you when your salary comes in white goes you’ll tell me about trent you’ll be telling me about transport or fueling your car you’ll tell me about the car maintenance those things that are big we know but ingrid you might forget to tell me that every day you buy a cup of cappuccino from java twice a day you’ll forget to

Tell me that you know uh every thursday i have to pass by this shop and they always have this nice craft and always buy one every week those are the the cost elements that will not see so at the end of the day we are wondering where does my money go you know it’s like witchcraft i keep losing this money right until you track it and then you realize the person

Who’s been stealing cappuccino exactly the person who’ve been stealing from you is the person you see on the mirror every morning right here now marcel at the top of this conversation actually you mentioned something so apt you said a lot of people will argue that what are you talking about budgeting when my money is finished before i even start right and then

Here you are telling us that you need to think about saving you think about making goals in fact depending on who you talk to they’ll also talk about investing they’ll talk about emergency funds so even putting that in place what are the components or rather what areas are a must when it comes to thinking about managing your personal finances and how do you even

Go about portioning your income what does that thought process look like all right first let me see especially for those of us who are coming out of campus because i realize when we we get out of school and we get jobs you know it’s very interesting and it’s a joyous day when you earn that money today probably everyone gets it by bank but back in the day you get

Your money in cash and it felt so good you go to your room and you just throw the cash up you want to make a train but having said that uh the first thing we need to do is to realize even though these things are many and i will not say that the journey on wealth creation is simple i will not say it’s easy if you want to make mussels you have to go to the gym when

You feel like and when you don’t feel like and the same applies to these uh wealth creating muscles we have to build them when we feel like or when we don’t feel like and that’s why the plan comes in so maxwell will talk about you need to pay yourself first now people sometimes ask what do you mean paying myself first i’ve already been paid but ingrid when your

Salary checks into your account that is not your money that’s why you’ll end up paying your landlord you’ll pay for school fees you will send money maybe to your parents or relatives uh you’ll put money aside to give arms or to the poor you put money aside to buy your dashing outfits we pay everyone else apart from ourselves and by the time we get to the end of

The budget there’s nothing to pay people need to start paying themselves fast the best way to appreciate yourself is to pay yourself fast and i like using the example of a government the government wants to earn money fast so what they do in grid they don’t wait for you to get your salary then tell you ingrid you know there’s a national bank near where you work

Uh there’s kcb near you where you work these are bank details once you get please put in 26.7 percent of that money in taxes in our account if they did that they would be broke right so i’d like for us to take the same tenacity and commitment that the government has to ensure that when i’m paid before i see my money let that 10 percent we are usually advised

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10 percent is a good amount to put aside fast for savings and investments all right let that money be separated if you know your personality you’re like maxwell and you like to make people happy that when i get that money i will uh want to interest really we say rudishia willi pauling i want to get that money less than 10 percent because usually what happens

Is i will i will work with what i get but if that 10 percent is there might decide let me use it today next month i will begin so we need to put that money aside first uh so that we are paying ourselves now these other things of we’ll talk about emergency fund uh we’ll talk about future investments we’ll be based on our discipline to do that and like i said or

Rather let me say it again and let me say it well wealth creation ingrid is a skill that any person under the sun can obtain it’s a skill that anyone understand can learn regardless of their educational background the community they come from regardless of every other thing if we are committed this is a skill that all of us can learn so you asked about how we

Would split money so there’s a formula i would like to use for those people who are starting out just in case i don’t know what should i do so there’s this formula we talk about 50 30 20 right right 50 30 20. so the 50 should go to your uh needs okay okay rent school fees the transport for me to come to work all those things that are important for me to work

Including rent should be within that 50 percent then the 30 percent will go to want remember even when you talk about savings and investment we’re not saying that you live a miserable life we don’t want to to take you to the life of a mona to live in a monastery we still want you to enjoy life but we want you to do this with your goals for the future in mind

Right then we’ve got 20 percent that will go to our retirement and pension skins now having said that 50 30 20 is a guide it’s not cast in stone we don’t have to work with it i wish i knew this when we were leaving school because it will have given me a template on where to start but having said that maybe 50 30 might not work for me because for me to get to work

At 7 am i need to live near the city so rent will be expensive so you will play around with those figures but now you already know we must put aside 10 percent for savings and then i need to do something also for the pension and maybe insurance right insurance is very important especially if your your employer is not giving that to you right yes so maxwell

With that said and i’m so glad you’ve even given us a formula because that’s usually really helpful in guiding you know with figuring out those portions because a lot of people struggle and i’m glad you’ve also given us that flexibility but i’d also like to speak in real time in the fact that we’re now actually heading to an election period and we know the sort

Of impact that usually has on businesses i would even go as far as the economy right a lot of the times people will say oh people blame a lot of things on the economy right so with those realities yes first of all does that economy even have an impact on our personal finances let’s start there and how can people plan for this election period what should they put

In mind fantastic so let me start with the element of blame one of the reasons or one of the hindrances to personal finance growth is refusing to accept my responsibility all right ah maybe i want to feel like oh you know i’m the firstborn i have to send money home i have to do this i have to take care of my siblings until we get to a point where we don’t blame

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Everyone anyone and look to ourselves for uh we are the masters of our destiny right we are the captain of this journey i need to look at okay this is what has been handed to me how can i work with what i have and most of the time ingrid if you study life of successful wealth builders across the world these people most of them actually come from a disadvantaged

Background right because sometimes it’s that emotion that commitment that drives us to want to build a better life for ourselves and for our children so people need to take responsibility for their own it’s how you spend your money it’s how you divide that money it’s it’s you lacking the discipline to say let me have this self-gratification for the next six

Months and deny myself uh you know buying lunch in town and carrying lunch or parking lunch and save that money and at least start some investment right right so in regards to the elections one of the things i hope kenyans have learned is that things will happen that we’ve never thought about or would never plan for and that’s why we need to create what we call

An emergency fund right because it’s it’s unfortunate that some people lost their job during this pandemic and they couldn’t afford rent for the next month because like we said our paycheck is in the negative and of course with lizard we have to measure we’ve done all that all right so we need to create that emergency fund now someone will ask me maxwell i have

Loans to pay you know and i have this yes we have them and uh like we say in my tribe all these things are ours to deal with so please put some money aside and start building that emergency fund because we don’t know about tomorrow elections can be very unpredictable right and during the last election when we had repeat elections there are many businesses that

Stalled and i don’t think we’ve really ever quite recovered from that and i am sure in grid we are talking to young people like myself and you who are in these small businesses we need to put some emergency funds so that in case your business is affected you can maintain your office or you can maintain the people who are working for you for three to six months

Without you borrowing money so we need to build this emergency fund for the family for the family finances we need to have a room in our house that is called the emergency fund and this is the example like using if we have this government inspector who can show up to your house any day and you have to accommodate them that’s a government policy when they come

And you only have five bedrooms so one is let’s say rent the other one is school fees the other one is uh groceries let me call them groceries then we have what’s i mean transport and clothing so those are five rooms they’re occupied if this government inspector shows up like emergency fund will he’s a government inspector he shows up without warning you have

To accommodate him what does that mean it means we’ll either give him money for clothing money for rent money for school fees or we will stay without food and that’s why it’s important to have that extra room called emergency so that when he shows up kids are not inconvenienced because there’s no school fees you’re not kicked out of your house because you cannot

Afford rent so we need to plan with these emergencies in mind we pray that god will deliver us from them but in case they come we need to have something that can give us some cushion right brilliant brilliant advice at this point we’re going to take a very short break but don’t go anywhere because as you’ve seen we’re handing out nuggets today when it comes to

The fundamentals of good personal finance you can be a part of the conversation by sending your feedback to our social media handles at metropol tvke on facebook instagram and twitter i’ll see you on the flip side you

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Fundamentals of good personal Finance By Metropol TV Kenya