Financial planning at all levels is very key for success in one’s life. PHOTO/COURTESY
By STAFF REPORTER
newshub@eyewitness.africa
For 57 year-old Alfred Anekeya Mang’ula, finding solutions for challenges facing humanity is a calling.
This is what inspired him to study model-thinking, a practice of showcasing your thinking process by demonstrating it practically.
Models help people to better organize information, improve their abilities to make accurate forecasts and also help them make better decisions and adopt more effective strategies.
Mang’ula’s love for model-thinking is what has resulted in him coming up with his own life-success model he has christened “The balanced approach to financial freedom.’’
Through this model, Mang’ula provides lessons about success in life that touch on financial literacy, financial planning, budgeting, personal balance sheet, personal growth and education, savings and investments, tax planning and retirement planning.
For young people still in school or college trying to figure out the best approach to a successful life, “The balanced approach to financial freedom” is a sure roadmap to a successful journey through life.
Financial literacy
On financial literacy, Mang’ula who holds a Bachelor of Business Administration degree from Dublin Metropolitan University of Ireland, Bachelor of Science in Banking Management from Global Business University in the republic of Cyprus and a Master of Business Administration (MBA) in strategic management from Masinde Muliro University of Science and Technology quotes Kim Kiyosaki, real estate investor and author of global bestseller “Rich Woman.’’
According to Kim Kiyosaki;”Financial freedom is much more than having money. It’s the freedom to be who you really are and do what you really want in life’’.
Mang’ula says for you to attain financial freedom, you need to strive to acquire financial literacy adding that when you possess skills and knowledge that allow you to make informed and effective decisions on the use of your financial resources, you are then said to be financially literate.
“Financial freedom is a dream that each of us would wish to become true in our life time. This dream is elusive to many as it just remains as such, a dream,” he adds.
Mang’ula emphasizes that financial literacy entails reasonable knowledge in financial planning, real estate, insurance, academic and professional pursuit, savings, investment, tax planning and retirement.
“You do not need to be an expert in each of the above mentioned areas. You only need to seek knowledge which often comes our way without being asked to pay for it. Spare some time to listen to that insurance agent who drops by your workplace with an attempt to sell you a policy,” he notes.
Mang’ula adds that as an employee you need to create time to attend the workshops sponsored by your employer for free and also attend that Sacco education day where free knowledge is shared.
He says reading text books dealing with financial literacy like; Breaking the Chains of Poverty by Ponyochi Kunyobo; The Power of Financial Freedom by Obuya Richard; Rich Dad, Poor Dad by Robert Kiyosaki; The Richest Man in Babylon by George Samuel Clason; Think Big by Robert Kiyosaki and Act Small by Jason Jennings, increases ones financial intelligence quotient (IQ).
Financial planning
Mang’ula whose development conscious approach to life has seen him join Maendeleo Democratic Party (MDP), where he aspires to takeover the party leadership and eventually join the presidential race in 2027, says financial planning at all levels is very key for success in one’s life, noting that working without a plan is a sure way to failure.
“In contrast, working with a plan reduces the chance of failure by a great deal. Financial planning is critical because resources by their nature are limited (scarce) while needs are unlimited (numerous). If you need to attain financial freedom (financial independence) then you need to deploy two key tools. These are a budget and a balance sheet,” he observes.
He reveals that research shows that out of 100 people after retirement; 49 will be dependent on family and charity, 29 will be dead, 12 will be broke, five will still be working, four will be financially independent and one will be rich.
Budgeting
Mang’ula says budgeting is a fairly straight forward matter but requires commitment and discipline and all one requires is to open an excel sheet template on a computer titled ‘BUDGET’.
“List all your sources of income on one side and all your expenses on the other side. Come up with desired amount to be expensed on each item. At the end of the month confirm the actual expenditure per each item and establish the variance. If the variance is favourable, you know you are on the right track. If it is not favourable, establish the cause and take remedial measures,” he outlines.
“The balanced approach to financial freedom” is a sure roadmap to a successful journey through life. PHOTO/COURTESY
Mang’ula adds, the most common areas individuals are likely to spend their money on include house rent, mortgage, insurance, tax, savings, investment, transport, food, clothing, school fees, medical, entertainment, tithe and emergency kitty.
“Assign a percentage to each of these items depending on the weight you place on that area and uphold financial discipline to honour the obligation,” he clarifies.
He says as a rule of thumb there are two ways to build wealth, one is to increase your revenue streams and the second one is to cut down on your expenses.
Personal balance sheet
Mang’ula notes that a personal balance sheet is a snapshot of your financial status at any given time and it is a financial health check.
“It is a measure of your financial wellness. Part one has all your assets (What you own) listed with monetary value for each. The second part lists all your liabilities (What you owe) in monetary terms,” he quips.
The career banker who has worked with different banks in the country for more than two decades says the difference between the assets and liabilities is an individual’s net worth.
“If you arrive at a negative position, it simply means you are indebted and therefore risk being declared bankrupt. When you arrive at a positive position, it simply means your financial position is healthy,” he adds.
He explains that assets include: cash-at-hand, cash-in-the-bank, treasury bonds, treasury bills, shares and stocks, real estate, car, soft loans to third parties while, liabilities on the other hand take the form of: credit card loan, house loan, car loan, education loan, money owing to third parties and pending dowry.
Real estate
Mang’ula says investment in real estate encompasses purchase of plots, land, houses and buildings in general adding real estate is one of the sectors of the economy that is very promising.
“The good news is that once you acquire land either vacant or with a building on it following due process, you are more guaranteed the value to continue appreciating,” he explains.
He says it is advisable for individuals to invest in land in their early stages of employment as this will ensure that by the time they are ready to retire the value of the property will be good enough to afford them adequate wealth.
“Also have a strategy where you aim to always be owner occupied. You can choose to construct your own house or you can purchase ready-made house on mortgage terms. This will ensure that as you service the loan, the house remains yours free from debt,” he advises.
Mang’ula says the purchased or built house will keep appreciating in value with time and this helps to cut down on rent expense and in the event you no longer stay in that house, you are able to rent it out to earn you rental income.
He says the government offers incentives to persons with mortgages (mortgagors) since interest on mortgage is an allowable expense for tax purposes.
Insurance
Mang’ula reveals that investing in insurance policies is a sure way to success noting that insurance companies provide investment vehicles through which individuals can grow their wealth.
He says insurance companies have a variety of products at your disposal which include short term, medium term and long term and one may opt for a suitable term depending on their age.
“Some packages include partial maturities where the beneficiary is paid part payment after one third of the agreed period then after two thirds and lastly the full payment with bonuses,” he adds.
Mang’ula observes that insurance investment vehicles also covers risk against death and such a policy therefore guarantees the next of kin sum assured in the event of death before expiry of the agreed period.
“The government also provides incentives on policy premiums since they are treated as an allowable expense for tax purposes,” he explains.
Academic or professional pursuit
The banker says human beings need to embrace holistic growth by pursuing investment in real tangible assets and in academic/professional growth which can not only help to generate income but also boost individual’s mental development.
“I refer to this arrangement as balanced approach to growth,” he emphasises. He says one needs to determine at what level of education one is employed.
Financial freedom is much more than having money. PHOTO/COURTESY
“Assuming that you get employment with ‘’O’’ Level or ‘’A’’ Level certificate, after working for two years, one should pursue a professional course in an area relevant to the field of employment. This may be banking, insurance, marketing or accountancy as getting professional certification will increase your chances of career growth,” he avers.
He adds once you acquire a professional status, you need to give yourself a break of say two years and focus to invest in property and thereafter you need to enroll for a degree course.
“Armed with a professional certificate, you stand to enjoy some exemptions in various units you will have passed at your professional course level. This will mean that you finish your first degree in a shorter period,” he adds.
Mang’ula says once an individual attains a first degree, they need to take a break and invest in real estate for another three years and after that they would ripe to pursue a master’s degree.
“Armed with academic and professional certifications and a good performance track record, you stand high chances to be considered for middle level management as well as senior level management,” he elaborates.
Savings
Mang’ula notes that you cannot expect to be successful in life if you are not ready to save.
“As a rule of thumb, purpose to set aside 10 percent of your total income as savings. You need to open a savings account separate from your transaction account where your monthly savings will be deposited,” he stresses.
The banker adds it is advisable to accumulate savings equivalent to six months expenditure, savings he adds will act as emergency kitty while at the same time earning you interest income.
“Once you exceed the prescribed six months equivalent of your monthly expenses, the surplus can be channeled to investment,” he recommends.
Investment
Mang’ula says investment is the action or process of investing funds with the expectation of some benefit(profit) in the future.
“This could entail putting money in real estate, placing funds in fixed deposit account, purchase of insurance cover, purchase of stocks, purchase of treasury bills/bonds and trading in goods/services,” he adds.
He insists that the other area of investment worth putting your money is enhancing your academic and professional capability and also reading as many books as possible.
Mang’ula notes apart from attending as many free workshops and seminars as possible, he adds it is advisable to diversify your investment portfolios.
Tax planning
Mang’ula a consultant with Alfabetty Global Consultants says tax planning is part of a successful journey in life. He adds that taxation involves two elements; tax avoidance and tax evasion explaining that tax avoidance is legal while tax evasion is illegal.
“Tax avoidance amounts to tax planning and frees finances that would have otherwise been paid to tax authorities,” he avers.
Mang’ula notes that tax deductible contribution to retirement benefit schemes, contributions to a registered home ownership savings plan, mortgage interest deduction, conducting business using a corporate entity so as to enable deductions of business expenses, insurance reliefs for individuals with life cover exceeding 10years are good examples of tax avoidance.
“When you observe any of the above, you build retirement benefits and at the same time reduce taxes payable,” he explains.
Retirement planning
The banker says when you pursue financial freedom, you need to remain focused on the objective even in your retirement.
He says at the time of retirement your income should be kept at between 70% and 90% your pre-retirement income, make a wise choice between defined contribution and defined benefit schemes depending on your circumstances, make a choice between annuity and drawdown schemes based on your situation and keep yourself active in order to maintain health benefits.
He says even in retirement you need to keep learning and he quotes Henry Ford who said; “Anyone who stops learning is old, whether at 20 or 80. Anyone who keeps learning stays young.’’
Mang’ula adds it is advisable to retire in a small town where you can easily fit in the local community and this will provide you with company and secure you from loneliness and depression.
“The journey to financial freedom calls for sacrifices in the present to enjoy in future. It calls for postponing your enjoyment in the present to the future,” he concludes.