Personal Financial Planning and Self Development for those who are working and planning to retire in comfort

1. September 14, 2014 1
Personal
Financial
Planning &
Development
Dr. Oyewole O. Sarumi

2. Introduction
 Despite many people’s insistence that
retirement and old age are “a long way
off”, they still have a way of showing
up whether you’re prepared for them or
not. Every financial planner has likely
heard a multitude of reasons and
excuses why postponing retirement
planning and estate planning is a good
idea, but going into that part of life
unprepared can make it very difficult.
September 14, 2014 2

3. Opening glee
What I hear, I forget,
What I see, I remember
What I do, I understand
- Confucius
September 14, 2014 3

4. What You Need is Financial Planning

5. What You Need is Personal Financial Planning

6. What is Retirement
Planning?:
 Retirement planning refers to creating a
financial plan for yourself for after you’ve
reached retirement age. Obviously, once
you’ve retired from the workforce you no
longer have a full time income, so planning
for that eventuality when you’re younger
will help with the transition. When done
properly, retirement planning will leave you
with enough money to pay your bills and
continue your lifestyle into your golden
years.September 14, 2014 6

7. Participants Discussions
What is the difference
between:
• Financial Freedom
• Financial
Independence
September 14, 2014 7

8. What is Financial Freedom?
“Ability to meet the 3
basic needs of food,
clothing and shelter with
no debt, and your income
is greater than your
expenditure.” Sept
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9. What is Financial
Independence?
 “This is Financial Freedom plus ability
to do what you plan to do financially
without any restrictions due to work
or any other consideration.
 Here your money works for you, and
you don’t work for money anymore
till you die, and many people,
families and life and living and
growing due to your wealth.
September 14, 2014 9

10. STORY TIME
Ant and grasshopper
 This is the story of a farsighted ant and a lazy
grasshopper. The grasshopper and the ant were
good friends living in the jungle together. In the
season of spring, the ant was working hard,
stock-piling food for the rainy season. The
grasshopper was wasting time by wandering on
trees and was also advising the ant not to do
any hard work in the spring season, saying that
this is the time to enjoy yourself. The ant replied
that she was doing hard work to prepare for the
rainy season.
At the time of the rains, the ant does not have to
worry because she has planned for the rainy
days. But the poor grasshopper had to get wet
because he had not planned for the rainy days.
Today, the ant’s savings will help to overcome
the times of crisis.
WHAT DO YOU LEARN FROM THE STORY?
September 14, 2014 10

11. Brainstorm with participants:
What is financial planning?
 List your responses below:
1.
2.
3.
4.
5.
6.
7.
September 14, 2014 11

12. Brainstorm with participants:
What financial planning is in
brief?
 Setting goals;
 Making conscious decisions about
the use of time and resources;
 Preparing for the future; trying
to decide the best choice
between several options;
 Sacrificing a little bit now to gain
more later.September 14, 2014 12

13. September 14, 2014 13
 The ant is a good animal to think about as a
long-term planner. She regularly stores more
food than she consumes. She does this regularly
and often, not at the last minute, so that she can
build up wealth over time.
 Planning involves making choices. When you plan
for tomorrow, you will most likely have to give
up something today. When your resources are
limited, you must choose between different
things. Sometimes these choices are hard. In the
long run, good choices will make for a happier,
more secure life.

14. Financial Planning Why It’s
Important:
 What causes some people to feel
financially secure and others not?
 Conditions that promote financial well
being include:
 Income to meet current needs
 Savings to meet financial emergencies
 Insurance to cover major risks (health, life,
property and disability insurance)
 Savings and investment programs to meet
future goals.
September 14, 2014 14

15. The Financial Planning
Process: Develop a plan
 Navigating competently through the life
stages of education , employment or
career , marriage , home ownership ,
parenting , retirement and estate
planning -- requires knowledge acquired through
continual self-education. The conscious management of
your financial circumstances, will enable you to anticipate
opportunities and prepare for contingencies. This approach
should give you better choices when life's inevitable events,
adverse or otherwise, occur.
September 14, 2014 15

16. What is Personal Financial
Planning (PFP)?
 “Taking charge of your financial future” -
Charles Given
 “Proper handling of your cash flow and assets
to meet your objectives” – David Chilton
 “Managing your money like a business” – E.
R. Pastor
 “The process of defining your financial goals
and developing and implementing a plan of
action to achieve them”. - Barbara O’Neil
September 14, 2014 16

17. Defining Self-Development
 “Development is always Self-
Development. Nothing could be more
absurd than for enterprise to assume
responsibility of the development of a
man. The responsibility rests with the
individual. To do otherwise would not
only be unwarranted paternalism, it
would be foolish pretension…. But every
manager in a business has the
opportunity to encourage Self-
Development or to stifle it or to misdirect
it”. - Peter DruckerSeptember 14, 2014 17

18. Defining Self-Development
 “The process by which an
individual continually uses his/her
own efforts and resources to
improve his/her ability to achieve
personal and/or workplace success
or advancement”. – Tayo
Solagbade
September 14, 2014 18

19. Defining Personal Financial
Development
 “A Conscious, deliberate and systematic effort by
the individual to manage like a business concern
the connections, opportunities and streams of
income that flows through his/her hands to meet
present and future needs while ensuring the
leveraging of oneself to enjoy continuous
progress in both work and life” – Oyewole Sarumi (2004)
September 14, 2014 19

20. Purpose/Reasons for Personal
Financial Planning.
 Meet financial goals and obligations
 Make rational financial decisions
 Take advantage of financial
opportunities
 Minimize the impact of financial threats
 Prepare for a comfortable retirement
 Achieve financial independence and
financial freedom.
 Leave an estate for survivors, loved
ones and favourite charities
September 14, 2014 20

21. Personal Financial Planning:
How to Begin and Continue.
 First, ask yourself these questions:
1. Where do I want to be in the
future?
2. Where am I now financially?
3. How am I going to get there?
Answer: You need a Good Financial Plan!
September 14, 2014 21

22. A Good Financial Plan
A GFP is a collection of seven
personal plans:
1. Income Plan
2. Cash flow Plan
3. Insurance Plan
4. Saving/Investment Plan
5. Tax Management Plan
6. Retirement Plan
7. Estate Plan
September 14, 2014 22

23. Income: Where Your Money
Comes From:
 Where Your Money Comes From
Sources of income: wages, tips,
royalties, salary, and commissions
 Income is amount earned, not
necessarily amount received.
September 14, 2014 23

24. A Cash Budget:
 A plan for controlling cash inflows and
outflows
Purpose:
 To balance income with expenditures
AND savings
September 14, 2014 24

25. Putting It All Together:
Budgeting:
 Putting It All Together: Budgeting
 Evaluate your financial health and your
financial plan
 Develop a cash budget
 Implement a cash budget
September 14, 2014 25

26. Developing a Cash Budget:
 Examine last year’s total income and
adjust for the current year.
 Estimate your tax liability.
 Identify all fixed expenditures.
 Identify all variable expenditures.
 Look for ways to reduce your variable
expenses.
 Consider the effect of credit payments
on future income
September 14, 2014 26

27. Implementing a Cash
Budget:
 Try the budget for a month.
 Adjust the plan or your expenses as
necessary to maintain the plan.
 Try the envelope system.
September 14, 2014 27

28. Expenditures: Where Your
Money Goes:
 The two major expenditure categories:
taxes and living expenses
 Fixed expenses: Expenses you don’t directly
control -- e.g., mortgage, rent, cable TV
Variable expense:
 Expenses you can control -- e.g., food,
entertainment, clothing
Where Does It Go, On Average?:
 Where Does It Go, On Average? Taxes, Food,
Housing, Medical Care The more earned, the
more spent on education and entertainment
September 14, 2014 28

29. Here is an example cash flow
tree
September 14, 2014 29

30. Good Financial Plan:
Action & Processes
 Follow the seven action steps to
construct a GFP:
1. Gather information about your finances
2. Examine your current situation and understand
your needs.
3. Establish financial goals and objectives
4. Process and analyse information collected
5. Evolve strategies and develop them.
6. Implement your plan
7. Monitor and review your plan at regular
interval
September 14, 2014 30

31. The Key Elements of
Personal Financial Planning
 Increasing and diversifying your
sources of income – especially creating
investment income e.g. dividend, rent,
interest etc. for your old age.
 Making the fundamental decision to
live within your means by spending
wisely and less than your earnings.
 Making money with money through
regular saving culture and investment
oversight.
September 14, 2014 31

32. WATCHING YOUR HABITS
FOR GOOD LIVING
September 14, 2014 32

33. What is Habit?
“A nail is driven out by another
nail; habit is overcome by habit” –
Erasmus
“To be ignorant of ones ignorance is
the malady of the ignorant” – Amos
Bronson Alcott
“Men acquire a particular quality
by consistently acting in a
particular way” – Aristotle.
September 14, 2014 33

34. What is HABIT?
“Something that you
do regularly, often
without thinking
about it because
you’ve done it so
many times before”.September 14, 2014 34

35. HABITS
In other words, Habit is :
 Constant Companion
 Greatest Helper
 Heaviest burden
 Makes one go forward or backward
 Servant of all great men & great failures
 Requires firmness, discipline & training
September 14, 2014 35

36. Limiting Behavioural
Patterns or Habits
 In Paula Nelson’s Guide to Getting Rich, we
have the 8 limiting Habits we must avoid:
1. The Mayana Syndrome – “I will get it
tomorrow” – This is for Procrastinators.
2. The Assumers – Someone somewhere is to take
responsibly for their success.
3. The Passive Players – I am not interested in
financial details
4. The Spender – “Live for today, to hell with
tomorrow, it will take care of itself”.
September 14, 2014 36

37.  5. The Cliff-hanger – Please lend me a
N1000k till I receive my salary. Never have enough.
 6. The Blamers – Put the problem with their
finance on someone else e.g. parent, spouse.
 7. The Talkers – They know a lot of financial
deals and money, but never done anything.
 8. The Victims – Having failed once, think
they had been a failure for life.
September 14, 2014 37

38. Money Skill No.1
VALUE THE KOBOS and the
small NAIRAS
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39. The wisdom in Valuing
money….
 The necessity of work: When you
earn it, you value it.
 The importance of charity: Give away
a part of your money always.
 The need for saving: Pay yourself
from your salary monthly.
 The power of accountability: Please
Account for every kobo that comes
into your hand.
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40. Money Skill No. 2
Develop the capacity to
CONTROL where your money
goes on daily basis.
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41. The 10 Categories of Spending
• Giving – contributions to church, charity etc.
• Pay yourself – A part of your earn is yours to keep.
• Pay your taxes – it is your civic duty.
• Pay your house rent or mortgage- You need a shelter.
• Pay your household expenses –this include food,
clothing etc.
• Pay for transportation – service car, buy fuel etc
• Pay for some fun and entertainment – toys for
children, CDs, movies etc.
• Pay for your insurance – include health, life, home,
possession etc.
• Pay others – like debts
• Pay for business – this is business expenses.
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42. The 7 Millionaire habits!
 They plan their purchase – the longer the
horizon, the cheaper the purchase.
 They expect, ask for, and often get discount.
 They expect, ask for and always get a receipt.
 They always examine the receipt for errors.
 They immediately write on their receipt a
category number.
 They balance their accounts to the last kobo
 They file the receipt as soon as they get home
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43. Our Parents were right
when they told us:
“Live on less than you earn.
Invest the surplus.
Avoid debt.
Build long term security”
• IT IS SAFE IN YOUR FUTURE
IF YOU SAVE TODAY Sept
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44. People Spending Habit
NORMAL SUCCESSFUL/ADVISED
 Lifestyle spending Giving
 Taxes Savings
 Debt Debt
 Savings Taxes
 Giving Lifestyle spending
September 14, 2014 44

45. Cultivating Wealthy Habits
 The wealthy do the following:
1. They have financial goals/plan and they
follow it religiously.
2. They save habitually – use auto pilot
3. They invest habitually – use automatic
investing
4. They love to work, and work hard &
work smart.September 14, 2014 45

46. Cultivating Wealthy Habits
5. They write down and keep track of their
expenses habitually.
6. They habitually devote more time daily
to work out their financial plans
7. They live below their means.
8. They refuse the trap of social status to
display their wealth on their sleeves.
September 14, 2014 46

47. Money Management Issues
 Consider this thoughtfully please:
“93% of people reach age 65 with no
significant resources to show for a
life of work, regardless of what they
had earned. They had spent almost all
of it”.
September 14, 2014 47

48. Life Expectancy Chart*
AGE AVE. REM DISCRETIONARY
LIFE EXPTCY HOURS
 • 20 56.3 246,783.0
 • 25 51.6 226,163.0
 • 30 46.9 205.562.5
 • 35 42.2 184,964.5
 • 40 37.6 164,800.5
 • 45 33.0 144,639.0
 • 50 28.6 125,354.0
 • 55 24.4 106,945.0
 • 60 20.5 89,851.50
 • 65 16.9 74,072.50
 • 70 13.6 59,609.00
 • 75 10.7 46,898.00
**Data from US Nat. Cent. For Health Statistics, Bureau of the Census (1991)
September 14, 2014 48

49. Money Abuse Problems
 90% of all crimes are committed for money
 89% of divorces relate to money problems
 80% of families live on monthly pay salary
 Most people have insufficient money for retirement.
 Most stress is directly or indirectly related to
concerns for money
 Money problems usually result in lower self esteem
 Money problem deny options – it is a bondage to
live only on your monthly salary, even if robust.
September 14, 2014 49

50. Why People Fail Financially
 Wrong beliefs and myths about money
 Procrastination
 Failure to have a financial goal/plan
 Failure to cultivate culture of savings
 Failure to understand and apply tax laws
 Refusal to learn about investment/investing
 Money disorderliness – many of us has self defeating
relationship with money
 Failure to responsibly manage the resources we already have
well.
 Lack of respect for little money especially coins and changes
September 14, 2014 50

51. Some Money Myths
 Everything in my life would be
wonderful if only I had money coming
in.
 Financial well-being is defined by either
how much money I have or how much I
earn.
 Following a budget inhibits my freedom
of choice.
 All the big money-making opportunities
are gone.September 14, 2014 51

52.  The government, my employer or
someone else is responsible for my
welfare.
 You have to have a large amount of
money to start saving.
 Having a good job leads ultimately to
wealth
 Retirement planning is only for those
with a few years to the end of their
careers.
September 14, 2014 52

53. True Value of Money
 What is Money?
 How would you define money?
 What are the tangible and intangible realities of
money for you?
 What is the true value of money to you?
 What are you exchanging or sacrificing for the
money you are earning?
 Is your behaviour around money rational or
irrational?
Please discuss with the participants involvement.September 14, 2014 53

54. UNDERSTANDING THE
POWER OF SAVINGS
September 14, 2014 54

55. “Money saved is as good as
money gained” – Danish Proverb
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56. Time Value of Money
Three things work for you or against you in saving:
 1. The Principal Amount
 2. The Interest Rates
 3. The Time/Duration
Types of Savings:
 • Short Term
 • Emergencies
 • Long Term
September 14, 2014 56

57. Money Skills No.3
Save Your Surplus
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58. The Problem of Saving
 Most us lack the SIMPLE DISCIPLINE
to make small daily deposits over long
periods of time. Then, we all
PROCRASTINATE getting started,
thereby wasting precious time and
millions. Thirdly, we are NOT
CONSISTENT in investing a particular
amount over a long period of time.
September 14, 2014 58

59. The flowchart to financial
stability
 If investing is the door to a secure financial
future, saving is the key to that door.
Without unlocking it, the door cannot open,
meaning that entry will fail.
 Saving is at the root of investment, as it is
only the earnings that are saved that can be
invested.
 The short flowchart to financial stability can
easily be expressed as earnings -> savings -
> investments -> prosperity.
 Many factors combine to truncate that flow
for a lot of people.

60. The power of compound interest
makes a few Naira a day grow
into enormous sums of money.
Albert Einstein says: “The
greatest mathematical discovery
of all is compound interest.” Sept
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61. Why Some People Don’t Save
 My Income is too small.
 They can mismanage or elope with my money.
 I will begin next month/year.
 I invest my savings in my business/practice
 I have a good paying job, so no problem
 Inflation will useless my savings
 I have too many problems, pressures and demand for
money.
September 14, 2014 61

62. The Amount of Money You will Earn
During Your Lifetime (NNPC Staff)
Earnings
Per month 10yrs 20yrs 30yrs 40yrs
 50,000 6,000,000 12,000,000 18,000,000 24,000,000
 100,000 12,000,000 24,000,000 36,000,000 48,000,000
 150,000 18,000,000 36,000,000 54,000,000 72,000,000
 200,000 24,000,000 48,000,000 72,000,000 96,000,000
 300,000 36,000,000 72,000,000 108,000,000 144,000,000
 500,000 60,000,000 120,000,000 180,000,000 240,000,000
 1,000,000 120,000,000 240,000,000 360,000,000 480,000,000
 1,500,000 180,000,000 360,000,000 540,000,000 720,000,000
 2,000,000 240,000,000 480,000,000 720,000,000 960,000,000
 2,500,000 300,000,000 600,000,000 900,000,000 1,200,000,000
How much of it will you keep? By setting aside a small portion of your
income monthly, you can accumulate a sizable amount of money over the
years. The accumulated cash can help you, your family, or your business
meet life’s challenges with confidence.
September 14, 2014 62

63. Assets
 ASSETS
Liquid Assets
- Cash
- Savings Account
- Current Account
(Credit Balances)
- Money Market Funds
 Investment
Assets
- Certificate of Deposit
- Shares or Stocks
- Bonds
- Real Estate
- Limited Partnership
- Retirement Plan
September 14, 2014 63

64. Liabilities
Short Term
Liabilities
- Consumer credit
obligation
- Installment loans
- Personal loans
- Accrued Bills e.g.
NEPA, LSWC,
Phones
Long Term
Liabilities
- Share loan
- Lease obligation
- Housing loan
September 14, 2014 64

65. Your Liabilities: What You
Owe:
 Your Liabilities: Are What You Owe
 Current liabilities are liabilities that
must be paid-off within the next year.
examples -- credit cards and utility
bills
 Long-term liabilities are liabilities that
extend beyond one year. examples --
home mortgage and auto loans
September 14, 2014 65

66. Evaluation of Asset
 Those who will be poor – Spend on
acquisition of liabilities.
 Those who will be rich – Spend on
acquisition of assets.
Action:
 Buy only what you can pay for.
 Don’t borrow for utilities, only for business
 Avoid debt like plague, especially foreign
loans
 Never use home for collateral for business.
 Avoid standing surety for loan.
September 14, 2014 66

67. Know Your Net-worth
 According to Stanley and Danko, the formula for Net-worth is:
1. Your Age multiply by your realized
pretax annual household income
from all sources except
inheritance.
2. Then divide your answer by 10.
3. Then subtract any indebtedness, what
remain is your net-worth.
Can you do your own to see the reality of what you are
to do in the remaining years ahead!
“You need financial Intelligence – Read, mentorship, retain
services of financial advisers” - Oyewole Sarumi (2004)September 14, 2014 67

68. How To Improve Your Net-
Worth
 Enhance your skills & have an increase in pay
 Cut down on your expenses and save
regularly
 Increase your investment and invest wisely
 Reduce your debt & fulfill payment obligation
 Accelerate your debt payment to reduce
interest charges.
 Create other sources of income – diversify
 Anticipate your needs & avoid impulsive
purchases
 Effective Management of Gifts & unplanned
Income
September 14, 2014 68

69. Common Obstacles To Earn
Extra Income
 Lack of Proper Education: Leverage yourself
 Lack of Opportunity: Search, Look, go for opportunities
 Lack of Extra – Time: It‟s scarce, create more time out of
the 24 hours available.
 Raises and Promotions are scarce: Self Improvement and
development is required.
 Health Problems: Identify the problem and get treatment.
Plan to rest/eat well.
 Being gain fully is NOT an excuse – huge opportunities are
available with wisdom.
September 14, 2014 69

70. Necessary Insurance
 The following forms of Insurance are
essential for most people:
 Life
 Auto
 Health
 Personal Liabilities
 Homeowner’s or Rental’s
Please investigate your insurance need
using expert advice!
September 14, 2014 70

71. What Taxes Do you Pay?
Most People pay the following taxes:
1. PAYE
2. Sales Tax (VAT)
3. Business/Company Tax
4. Real Estate Tax (Tenement Rate)
5. Utility Tax (Electricity, Telephones, Water, Road)
6. Gas Tax (Not applicable here for now)
N.B. It is criminal, dishonest & unwise to evade tax. Tax evasion can ruin
your wealth accumulation effort, business, career and life if you’re caught.
September 14, 2014 71

72. Using Ratios: A Financial
Thermometer:
 Question 1: Do you have adequate
liquidity to meet emergencies?
 Question 2: Do you have the ability
to meet your debt obligations?
 Question 3: Are you saving as much
as you think you are?
September 14, 2014 72

73. Putting It All Together: A
Review:
 Evaluate your financial health: balance
sheet, income statement, and ratios
 Define your financial goals: must know how
much you can save
 Develop a plan of action: use the income
statement and a cash budget
 Implement your plan: Just do it!
 Review your progress, reevaluate, and
revise your plan: back to the balance sheet,
income statement, ratios, and budgetSeptember 14, 2014 73

74. Question 1: Do You Have
Adequate Liquidity:
 Ratios to determine whether or not
you have enough monetary assets
(1)To pay for an unexpected large
expense or
(2)To tide you over during periods of
reduced or eliminated earnings.
 Current ratio
 Month’s living expenses covered ratio
September 14, 2014 74

75. Current Ratio:
 Current Ratio =monetary asset
current liabilities
 This ratio shows you whether you
have enough liquid assets to cover
expenses currently due.
September 14, 2014 75

76. Interpretation:
 Ratio greater than 2 recommended
 Track the trend and if going down --
make changes
September 14, 2014 76

77. Month’s Living Expenses
Covered Ratio:
 Month’s Living Expenses Covered
Ratio =monetary assets
month’s living expenses
 This ratio tells you how many months
living expenses you can cover with
your present level of monetary
assets.
September 14, 2014 77

78. Interpretation:
 The rule of thumb: 3 to 6 months of
expenses
 Factors that affect the rule of thumb:
 Available credit cards or home equity loans
 Potential for higher earnings on less liquid
accounts
 Stability of income
 Track the trend and if going down--
make changes
September 14, 2014 78

79. Question 2: Can You Meet
Your Debt Obligations?:
 Ratios to determine whether or not
you can meet current or long-term
debt obligations:
 Debt ratio
 Long-term debt coverage ratio
September 14, 2014 79

80. Debt Ratio:
 Debt Ratio = total liabilities
total assets
 This ratio tells you whether you could
payoff all your liabilities if you
liquidated all your assets.
September 14, 2014 80

81. Interpretation:
 Represents percentage of assets
financed with borrowing
 Track the trend; ratio should go down
with age
September 14, 2014 81

82. Long-term Debt Coverage
Ratio:
 Long-term Debt Coverage Ratio
=total income available for living expenses
total long-term debt payment
 This ratio tells you how many times you
could make your debt payments with
your current income.
September 14, 2014 82

83. Interpretation:
 Ratio of 2.5 or greater recommended
 Track the trend and if going down --
make changes
 Consider the inverse --the percentage
of take-home pay needed to repay
debt
September 14, 2014 83

84. Question 3: Are You Saving
As Much As You Think?:
 Ratio to determine whether you are
saving as much of your income as
you think.
 Savings ratio
September 14, 2014 84

85. Savings Ratio:
 Savings Ratio =
income available for savings
income available for living expenses
 This ratio tells you what proportion of
your after-tax income is being saved.
September 14, 2014 85

86. Interpretation:
 U.S. rate typically 3% - 8%
 Varies with stage of the financial life
cycle and goals
September 14, 2014 86

87. INVESTMENT OPTIONS
AVAILABLE TO YOU
September 14, 2014 87

88. Warren Buffet, the world’s
wealthiest investor has 2
important rule:
Rule 1: Never Lose Money.
Rule 2: Never Forget Rule No 1.
 Can You guess why he set these rule?
September 14, 2014 88

89. Wealth Creation & Building
Strategies
“ To be a millionaire, you have to think like
a millionaire” – Bassey & Company
“ Most self-made millionaires reject the big
spending lifestyles most people associate
with the rich” – Financial Guide
“ Acquisition of wealth is simply a matter
of choice, resolve, the right strategies,
discipline and habit” – George S. Clason.
“ All wealth begins in the mind” – Anthony
Robbins
September 14, 2014 89

90. Principles of Wealth Creation
 To create wealth for yourself:
1.YOU HAVE TO CREATE VALUE
FOR OTHERS
 And to maintain, secure and
increase your wealth:
2. YOU MUST SPEND LESS THAN
YOU EARN (Savings)
3. YOU MUST INVEST THE
DIFFERENCE (Investment).September 14, 2014 90

91. Investor Types
 Investor Type 1: Pre-Investor
 A pre-investor is simply someone
who isn’t investing. Pre-investors
are characterized by minimal financial
consciousness or awareness. There is
little thought of investing, and there
is correspondingly little savings or
investment to show for that minimal
thought.
September 14, 2014 91

92. Investor Type 2: Passive
Investment Strategy
 The most common starting point on
the road to financial security.
 Passive investing includes all the
basics of sound personal financial
planning: own your own home, fund
tax deferred retirement plans, asset
allocation, and save at least 10% of
earnings.
September 14, 2014 92

93. Investor Type 3: Active
Investor
 Active investors build on the foundation
of the passive investor by taking the
process to the next level and treating
their wealth as their business.
 The primary difference between active and
passive investors is the active investor not
only receives market based passive
returns, but he also gains a value-added
return stream based on skill – two sources
of return in one investment.
September 14, 2014 93

94. Wealth Building Principles
To create & Build your Wealth:
1. You must Save as an habit using the „auto pilot‟
2. You must invest and invest in diversified forms.
3. You must spend less than your total income
4. Buy only what you need and not want
5. You must leverage the following : yourself, your financial and
non-financial resources.
6. Always remember that no one succeed alone
7. Do something new innovatively – take calculated risk.
8. Give, Give and Give. – Use the “GCCP” principle.
9. Develop people, set them up for a living.
10. Give thanks and appreciate your Maker.September 14, 2014 94

95. Making Money is a
Business
Making serious money:
 Requires a mindset all of its own
 Is not a happenstance - i.e. not accidentally –
requires work.
 Not limited by Age, sex, position. Education or
location/place.
 Serious money rarely comes through monthly
salaries – if you save/invest, leverage your
position & connections you may get it
September 14, 2014 95

96. The Pathways to Wealth
1. Clear your mind of false assumptions about money and
money-making ventures.
2. Develop the mindset, beliefs and attitudes for creating
wealth, i.e. “millionaires mentality.”
3. Free yourself from the behaviour that limit your ability to
create wealth.
4. Know the principles that are essential to creating and
building wealth.
5. Understand the “Power of leverage”.
6. Choose from the many possible ways of creating wealth, the
methods best suited to your preferences and circumstances.
7. Understand the stages of wealth creation and building so that
you can know what to expect and the strategies appropriate
to the stage you are in.
September 14, 2014 96

97. Avoiding Debt
 Plan your expenses.
 Eliminate impulse purchases.
 Prudence and frugality is important
 Spend less than you earn.
 Borrow only for profit yielding projects.
 Don’t stand surety for no one.
 Develop multiple streams of income.
 Don’t wear your wealth on your sleeve.
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98. Getting Out of Debt
1. Pray about it
2. Establish a written budget
3. Make a detailed list of your assets – All
you own
4. List all your liabilities – everything you
owe
5. Establish a debt payment schedule for
each creditor – pay off small debts, and
pay off high interest rate debts
6. Consider earning additional income –
do more work**
September 14, 2014 98

99. Getting Out of Debt
7. Accumulate no new debt – live
within your means
8. Be content with what you have –
the more TV you watch, reading of
catalogue or window shopping you
do, the more you spend
9. Consider a radical change in your
life styles – sell your big house,
expensive car. Jewelries for lower
ones
10. Don’t ever give up – keep on track
– maintain the speed.September 14, 2014 99

100. Second Income Entrepreneur
 “Very few families can survive on less than
two streams of income. –Robert G. Allen
 Why is this so? The annual marginal
depreciation in real income of HONEST
workers is far greater than their annual
marginal income.
 Inflation remains at double digit, while
income is rather stagnant and even reduce
in some cases. and even reduce in some
cases.
 Standard of living of workers have crashed
and efficiency and sacrificial service suffer.September 14, 2014 100

101. Choosing A good Second Business
 It must be a business that you enjoy
doing without stress
 Should never be based on speculation
but available skills
 It should operate using own internal
system without a recourse to overhead
initially.
 Start with what is available in terms of
money, time, knowledge and equipment
September 14, 2014 101

102. Some Second Income
Opportunities for the Individual
 Gardening
 Patent: Books/Tapes
 Agrictech/Aquaculture
 Books Selling/Educ
 Books Publishing
 Education/School
 Internet trading
 Personal Writing Skill
 Immigration
Consultant
 Telecommunication
 Teaching/Preaching
 Info Tech, Web
design
 Commission Agents
 Music/Concert
 Equipment Rentals
 Drama/Stage Plays
 Creative Arts
 Property Consultant
September 14, 2014 102

103. INVESTMENT OPTIONS TO CREATE
MULTIPLE STREAMS OF INCOME
 There are three broad areas of
investments in which to create
multiple streams of income:
 Real estate,
 Paper assets, and
 Establishing your own business.
These are the primary asset classes in terms of building wealth
and residual income. Each asset class can be subdivided into
specific styles or strategies.
September 14, 2014 103

104. REAL ESTATE
 This can be divided into buy and hold,
flipping, foreclosures, single-family,
multi-family, and commercial.
September 14, 2014 104

105. OWN BUSINESS
 This can include many strategies such
as infopreneuring, hard goods, retail,
and intellectual property to name just
a few. It was Oscar Wilde that said:
“It is better to have a permanent
income than to be fascinating”.
September 14, 2014 105

106. PAPER ASSETS
 This include holding equity in companies
(stock or shares), bonds, treasury bills,
unit trust funds (mutual funds), hedge
funds, exchange traded funds,
commercial papers, life assurance
endowment policies, Multi-manager
products, which include unit trust multi-
manager funds, unit trust funds of funds,
linked investment products and wrap
funds etc.
September 14, 2014 106

107. The 7 types of Paper
Investment products
You have 7 types of paper investment products to
choose from:
• 1. A share portfolio;
• 2. Life assurance endowment policies;
• 3. Unit trust funds;
• 4. Multi-manager products, which include unit trust
multi-manager funds, unit trust funds of funds,
linked investment products and wrap funds;
• 5. Hedge funds; and
• 6. Exchange-traded funds.
• 7. Bonds – Government & Companies
September 14, 2014 107

108. Definition of 'Hedge Fund'
 An aggressively managed portfolio of
investments that uses advanced
investment strategies such as
leveraged, long, short and derivative
positions in both domestic and
international markets with the goal of
generating high returns (either in an
absolute sense or over a specified
market benchmark).
September 14, 2014 108

109.  Legally, hedge funds are most often
set up as private investment
partnerships that are open to a
limited number of investors and
require a very large initial minimum
investment. Investments in hedge
funds are illiquid as they often require
investors keep their money in the
fund for at least one year.
September 14, 2014 109

110. The 3 Great Money Mountain
 The Real Estate Mountain – Find it,
Fund it and Farm it
 The Investment Mountain – Screen and
filter it, Time in and Time out.
 The Marketing Mountain – Targeting
(finding hungry fish), Baiting (creating
irresistible bait) and Life-timing (creating
life time customers).
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111. Record Keeping:
 The three reasons for accurate record
keeping
 Preparing taxes
 Tracking expenses
 Providing information for others to use in
the event of an emergency
September 14, 2014 111

112. Record Keeping (cont’d):
 The two steps of record keeping
 Tracking your personal financial dealings
 Storing your financial records in an
accessible manner
September 14, 2014 112

113. Ways to Track Expenditures:
 Using checks and credit cards: Those
expenditures leave a paper trail
 Using cash: Record expenditures in a
notebook or ledger
 Generating a monthly income and
expense statement
 Using computer programs to track all
financial transactions
 Learning what and where to keep
records
September 14, 2014 113

114. Taxes:
 Keep all tax-related receipts and
records for 6 years.
 Always keep accurate tax records in
the event of an audit.
September 14, 2014 114

115. CHOOSING HAPPINESS AS
THE PRIORITY FOR THE DAY
September 14, 2014 115

116.  The Decision To Be Happy Is
Actually The Decision To Stop
Being Unhappy.
"The pursuit of happiness is a most
ridiculous phrase; if you pursue
happiness you'll never find it." C.P.
Snow
September 14, 2014 116

117. Money Will not bring True
Happiness
“70% of Americans thought they would be happier if they
could earn only USD 37 more a week”.
 This is what is called the “IF ONLY” trap – e.g.
 “If only I had a new car, I would be satisfied”
 “If only I lived in that house, I would be contented”
 “If only I had a particular job, I would be happy”
The list of “Ifs” is endless, can you give some more?
September 14, 2014 117

118. What Money Will Not Buy!
MONEY WILL BUY:
 • A bed, but not Sleep
 • Books, but not Brains
 • Food, but not Appetite
 • A house, but not a Home
 • Medicine, but not Health
 • Amusement, but not Happiness
 • A crucifix, but not a Saviour
Please note that Money cannot get you everything in this life, so be
careful how you look for money!
September 14, 2014 118

119. Instructions To Those Who Are
Rich or Will Be Rich
Do not be conceited – Money tends to produce
pride in most owners.
Put no confidence in your Assets – all could be
gone in hours.
Give and give generously – use the “GCCP”
principle of giving.
Husband & Wife openness – Be honest and
open on your finances.
September 14, 2014 119

120. The Twelve Measure of Financial Success
Adequate insurance for major
disasters
Money to educate your children
Meaningful portfolio of
investments
Money to pay all your bills
Resources to purchase a home
Money set aside for emergenciesSeptember 14, 2014 120

121. Enjoying comfortable lifestyle
Financial independence
Maintenance your chosen lifestyle
throughout your retirement years
Freedom from financial stress
Legacy for children/charities
Peace of mind.
September 14, 2014 121

122. Those who are faithful in Finances
& Personal Development?
He or She will:
 Spend wisely - spend less than you earn.
 Avoid debt like a plague
 Seek counsel/advise from experts/wise
men
 Live a life of absolute honesty
 Generously Gives
 Work hard/smart.
 Save and Invest
 Train and teach children on money
management
September 14, 2014 122

123.  My Happiness Does Not Require
Favorable Events, Interactions, Or
Any Particular Stimulus.
September 14, 2014 123

124. Let Go Of Judgments
 The Secret To Happiness Lies Not
In The Events, But In Our
Response To Them.
"Man is the artificer of his own
happiness." Henry David Thoreau
September 14, 2014 124

125.  We Cannot Choose The Events
Around Us, But We Can Choose
Our Reaction To Them.
September 14, 2014 125

126. Be Present
 Unhappiness Does Not Exist In
The Present Moment. It Only
Exists As A Regret About The Past
Or Worry Toward The Future.
September 14, 2014 126

127. Be Grateful
 My Life Is Filled With Endless
Wonders Every Hour Of Every
Day. The Only Time I Am Unhappy
Is When I Take These Things For
Granted.
"Happiness isn't something you
experience; it's something you
remember." Oscar Levant
September 14, 2014 127

128. Create Strong Social
Connection
 The risk we associate with authenticity
is illusory. The more we nurture our
true selves, remove our masks, and
allow uncensored expression, the more
our relationships and surroundings will
support our true selves.
"Happiness is when what you think, what
you say, and what you do are in
harmony." Mahatma Gandhi
September 14, 2014 128

129. Live With Contribution
 Find at least one way, each day to
make another person happy. It could
be as simple as a kind word, a
personal acknowledgement, giving
anonymously, or allowing someone in
a rush to get ahead.
"The only true happiness comes from
squandering ourselves for a purpose."
William Cowper
September 14, 2014 129

130. Serve A Purpose Greater
Than Yourself.
 By giving happiness you experience
happiness.
September 14, 2014 130

131. STORY TIME.
The stories help participants to see simple
examples of one person who plans and
another who does not.
September 14, 2014 131

132. John’s story
 John is a salary earner who earns $ 400 a
fortnight. He plans his household purchases and
searches for the least expensive groceries. He
saves daily with Bank. The savings allow him to
borrow from bank rather than the moneylender if
he needs a loan. By examining what money came in
and out of his household regularly, he was able to
save enough each month to put his current savings
into a fixed deposit to earn more interest. When
his child got sick he had savings to withdraw to buy
medicine. He is also saving for his daughter’s
wedding in three years. It is to be a collective
wedding with some other families in her village so it
will be less expensive than other types of
weddings.
September 14, 2014 132

133. Sarah’s story
 Sarah is a salaried worker who earns $750 a
fortnight. She likes to buy lots of tea and is always
buying ice-cream for the kids. Sarah does not save.
When his son joined university she had to borrow $
200.00 from the moneylender at 1.00 per month
for each $ 10. Then she borrowed from her
brother to keep her household going. She buys
household necessities at the last minute and has to
pay higher prices. Her father suddenly got ill. She
could not pay for the hospital and borrowed money
from her neighbor. She has a lot of debt that is
eating away her earnings.
September 14, 2014 133

134. September 14, 2014 134
How do John and Sarah think differently
about money?

135. Pathways to Self-
Development
 According to Tayo Solagbade,
there are 10 ways you can use
Self -Development to become a
high-flyer both at work and life.
 They are listed and to be
discussed by all participants
September 14, 2014 135

136. Self-Development
 Develop a Magnificent Obsession –
whatever obsess you will possess you, and
eventually makes you.
 Take Control of your Relationships – Two
things will make or mar you: the book you
read and the people you move with.
 Please, become an ANT! - Embrace hard-
work and working smart.
 Learn Patience and Learn from
experiences – It is a virtue you need to
learn.
 Seek new and Different Experiences .
Be grateful when things go wrong. Smile at
adversity and learn and look for new
opportunities.
September 14, 2014 136

137. Self-Development
 Win over Difficult Colleagues/Bosses or
do something you dislike. Do the opposite
 Become a Student in “UHK” i.e. University
of Hard Knocks a.k.a the “real world’.
 Stop Worrying and Start Living. Wherever
you are, be there. Love what you have, even if
it is =N=20.00 only. Develop respect for little
things in your hand.
 Clone Yourself & Share, be a coach &
people developer. Replicate your life in
others.
 Be Hungry and Stay Hungry – Compete
against yourself.
September 14, 2014 137

138. Words of Wisdom
“To know and not do is not yet to
know” - Buddhists
September 14, 2014 138

139. An Encouragement Tonic
“All tasks are difficult
before they become
easy”– Persian Proverb.
September 14, 2014 139

140. The Threesome U Need!
“The price of success is HARD
WORK, DEDICATION to the job
at hand, and DETERMINATION
whether we win or lose, we have
applied the best of ourselves to
the task at hand”.
- Vince Lombardi
September 14, 2014 140

141. A Comforting Tonic
“The best time to have planted
a tree was 20 years ago. The
second best time is TODAY” –
Chinese Proverb
September 14, 2014 141

142. An Assurance Tonic
 It is never too late to
start for U!
 Fear Not!!
 Just Do Something
today!!!
September 14, 2014 142

143. Attitude Determines Altitude
“If ye be willing and obedient,
ye shall eat the good of the
land: But if ye refuse and
rebel, ye shall be devoured
with the sword:”
September 14, 2014 143