KIMISITU SACCO SOCIETY LIMITED Members’ Education: Building Financial

Security through the Sacco 8th June 2013

Objectives

To remind ourselves:

i) About the Steps to take to achieve Personal Financial Security through your Sacco

ii) About Accessibility, Utilization and Repayment of Sacco Loans

iii) The benefits of a Financially Secure worker/spouse/father/mother

iv) On how to deal with job Uncertainties of today

Financial Position “Tomorrow”

Irrespective of how much money one earns today, his/her financial position tomorrow depends: on his/her savings and investment priorities today

Financial “Experts”

Any one of us can qualify to be an expert in Financial Management at home or in the Office

i) But one thing sticks out in life: many of us preach water but drink wine when it comes to our Personal Financial Management

ii) Some of us (salaried) live from hand to mouth not because:

a) We are poorly paid but

b) Because many of us argue that tomorrow will take care of itself and so we consume extravagantly today and forget about tomorrow

MONEY

One of the most important items in our lives is money

i) With it, there is power, authority and influence and it can bring a lot of comfort

ii) Yet the same money can bring a lot of pain to some of us who have it

a) Money can break up families: arrogance, coming home late, sleeping out at will, overindulging in alcohol/drugs/gambling/women/men, etc

b) Money makes us become targets for criminals, etc

Personal Financial Planning

Personal Financial Planning : Development and Implementation of short to long-term plans to achieve Financial Security for self and family:

NB: Anybody who consumes everything she/he earns is actually committing ECONOMIC SUICIDE: the sad thing is that many salaried people fall in this category

Job security Vs Financial Security

If we lost our jobs/businesses today, can we maintain our current standards of living for at least the next six months without serious financial difficulties when still looking for another job/business?

NB: The naked truth is that a significant majority of salaried people cannot survive for two months

What is Financial Security

Achievement of a state of being able to access within your means what money can buy:

a) You can earn Ksh. 50,000 monthly and be financially secure at that level

b) You can earn Ksh. 400,000 monthly but be very insecure financially

Is Jonathan Financially Secure?

i) He lives in a good estate/house and pays his rent in good time

ii) He maintains balanced diet for his family

iii) He drives a nice family car

iv) His family accesses good medical services whenever they are sick

v) The family dresses well

Financial Security: Savings and Investment

Financial Security comes as a result of:

i) Well planned personal savings over a period of time &

ii) Prudent Investment Schemes one undertakes over some period of time

NB: For many salaried people, the Sacco has been the main source: savings mobilization and provision of affordable credit

Nobody knows about tomorrow: 1

Now we have a job: tomorrow it may be gone

Q: What insurance do we have for tomorrow if the job goes: retired, retrenched, sacked: Save more in the Sacco now then borrow and invest wisely

Nobody knows about tomorrow: 2

For those working in donor funded projects: Now the donor funds are available, tomorrow the donor cuts off the funding and the jobs are gone:

Q: What do we do if the taps to donor funding go dry before the project/contract period?: Save more in the Sacco now then borrow and invest wisely

Nobody knows about tomorrow: 3

Now we have a thriving business: tomorrow it may be gone

Q: What do we do tomorrow if the business ceases to exist?

(fire guts premises, you are declared bankrupt or thieves loot your premises): Save more in the Sacco now then borrow and invest wisely

Nobody knows about tomorrow: 4

Now we have a moneyed spouse: tomorrow she/he may be gone

Q: What do we do tomorrow if the moneyed spouse got sacked, died, got ill, got married off to another person or divorced you: Save more in the Sacco now then borrow and invest wisely

Financial Planning: Managing your debts

i) Do your debts cause you stress & sleeplessness at times?

ii) Can your debts bring a lot of pain to your family should you lose your job/business or the Lord calls you home? Auctioneers/Creditors

Are we living false lifestyles: heavily financed by loans

i) Rent we pay for the houses we live in for those who do not own their house

ii) Vehicles we drive

iii) Where our children go to school

iv) For those who drink, the type of drinks we take: beers, wines, other spirits

NB: Loans are good but only if they are used to create wealth

Life Circle for most of us Vs Financial Security

0 – 25 yrs: we are dependants 26 – 30 yrs: we are out of college, looking for a job or working 31 – 40 yrs: married and having babies, looking after them 40 yrs and above: no more babies: taking care of the ones

already born50 yrs and above: NEVER have any child in Primary School: it is suicidal You are blessed more if living in your own house You have established our rural homes if we intend to retire

home finally Fees burden for our children if any should be dwindling to zeroNB: Otherwise we may run into financial trouble when we retire

A “Crying” Net Salary

Net salary which:i) Does not bring smile to a worker’s faceii) Brings dishonor to one: In late 1970s an MP

committed suicide because a crying net salaryiii) Pushes one to go for an advance or

emergency loan a week after pay dayNB: Such a person is on her/his way to being

declared bankrupt: a liability to the Sacco, employer and family

Savings at the Sacco: Unwithdrawable Deposits

Boost your monthly unwithdrawable deposits at the Sacco now so that you smile all the way to the bank tomorrow:Avoid being Mr/Mrs/Miss/Ms Minimum Contributor

Jane & Jemimah

i) Jane who is in this Sacco has said NEVER to increasing minimum monthly contributions, which is currently Ksh. 3,000

ii) Jemimah who is also a Member here has accepted to increase her monthly deposits from Ksh. 3,000 to 7,000

iii) In 3 years time, Jane and Jemimah have deposited Ksh. 108,000 and Ksh. 252,000, respectively in the Sacco.

Q: An expatriate going back to his country is selling a prime plot at Ksh. 750,000. Who between the two will qualify for a loan from this Sacco and purchase this property?

Other Forms of Savings: Walking towards Financial Security

i) If you have a car, avoiding driving if you can: some of us are addicted to our cars

ii) Avoiding taking self or children and to high cost schools or colleges if it is a major strain on you

iii) Using credit cards only if it is necessary and you have the financial ability to pay as you use it. Many of us have been made slaves because of credit card debts

iv) Window shopping: buy quality but cheaplyv) If you have a big project, purchase items in bulk

Some Forms of Investment: Walking towards Financial Security

i) Money invested in shares & stocks of reputable companies

ii) Money invested in Treasury Bills & Bonds

iii) Money invested in income generating ventures, eg SMEs (Small and Medium Enterprises: supermarkets, petrol stations, restaurants, schools, posho mills, farming, etc

iv) Investing in real estate

v) Investing in Unit Trusts, etc

Economic disparities through organized savings & Investment

i) Mr. Talas is a Sales Clerk and earns Ksh. 40,000 per month

ii) Mr. Kodip is an accountant and earns Ksh. 250,000 per month

iii) These two people are members of a Sacco and have worked for 13 years each

iv) Mr. Talas has bought a five acre farm where he grows maize, put up a nice house and has dairy cattle and two posho mills through Sacco loans

v) Mr. Kodip drives a state of the art car, pays Ksh. 50,000 monthly rent in an up-market estate. He and his family live large now

NB: Mr. Talas has saved a lot in the Sacco, accessed Sacco loans and used the same well because he has postponed none-essential consumption now for a better more enjoyable life tomorrow

Helping your Sacco to Create Wealth

i) Mobilize huge deposits

ii) Patronize the Sacco as many times as you can

iii) Borrow and invest wisely then Service your loans as and when they fall due

iv) If you had a FOSA then nobody would take a loan through a chq then deposit that chq in another Financial Institution

NB: The Sacco will make more surplus and have more in store for the Members

Do not be a Liability to Guarantors

Do not make any of your guarantors to carry your financial obligations: pay up all your loans:

Who said that if you lose your job then you pass over your liabilities to your Loan Guarantors

Do not take a loan if there are strong rumors that retrenchment is at the corner, the donors are just about to suspend funding the project where you are working or you have received your second written warning letter, unless your own deposits are adequate to secure the entire debt

Attitude towards saving now

Some people do not want to increase their savings and they have been heard saying:

i) My salary is still not where I want it to be

ii) I will start saving when I have a spouse and child

iii) My spouse is saving for us

iv) I will inherit my parent’s properties

v) I came to this world naked, and naked I will return to my maker, so why this stress of increasing my savings?

When & Why take a Sacco loan

i) Take a loan only after identifying a feasible project

ii) Take a loan only if your salary can allow you to have reasonable net

iii) Never take a loan because you have already cleared the previous loans

iv) Never take a loan because the Sacco has surplus funds to lend

v) Avoid taking development loan but use it for consumables

vi) Never take a loan for raha – women/men, alcohol, tourism, gambling

vii) Never kill yourself with loans by borrowing money from everywhere: Sacco, Commercial bank, MFI, Shyloc

Conclusion

i) Personal Financial Management is all about financial discipline. It starts with what your vision is for self and family both in the short and long run

ii) Good Personal Financial Management helps in Sacco growth as loans will be used well and repayments done in good time

iii) This discipline makes you an asset to the family, your employer and the nation at large because through savings, you mobilize funds for investment which helps in economic growth