CREATE, GROW AND PROTECT YOUR WEALTH UNIVERSITY OF NAIROBI PENSION SCHEME 2007

Transcription

1 CREATE, GROW AND PROTECT YOUR WEALTH UNIVERSITY OF NAIROBI PENSION SCHEME 2007 MEMBER EDUCATION 2016 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 1

2 CREATE GROW Set realistic financial goals and monthly savings Revisit your plan to think about growing your money Create your plan PROTECT Take steps to protect you and your family Grow your plan Plan for the unexpected Review your plan Plan your legacy Assess your plan Protect your plan Plan your money Make sense of your plan Alexander Forbes Financial Services Member Education 3 June 2016 Slide 2

3 Make your plan PLAN YOUR MONEY Managing your money Alexander Forbes Financial Services Member Education 3 June 2016

4 It s not the great temptations that ruin us, it s the little ones John De Forest 4 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 4

5 Debt What is debt Spending your money before you earn it 5 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 5

6 A few facts to consider year age group are drowning in debt Peer pressure Desire status which can be bought Easy access to credit 6 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 6

7 A few facts to consider homeowners defaulting monthly Defaulting is rife homes repossessed vehicles repossessed Alliance Group 7 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 7

8 Denial Denial does not help The deeper consumers bury their heads in the sand the deeper the problem becomes Luke Hurst, MD Debtbusters 8 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 8

9 Bad debt vs good debt! Good debt long term Home loan Study loan Motor vehicle? Bad debt short term Credit Card Clothing account Hire purchase Micro lender 9 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 9

10 The cost of debt Once in debt, difficult to get out How much do you pay the bank per month Debt carries a cost What % of your salary Are you one of the 80% 10 Alexander Forbes Financial Services Member Education 3 June 2016 For lending you the money How much is going to interest Slide 10

11 Borrowing money the math Borrow KShs from the lender Monthly repayment = K Shs 243 Interest payable over 5 years at 16% = K Shs Alexander Forbes Financial Services Member Education 3 June 2016 Slide 11 Total loan repayment K Shs14 590

12 Borrowing money Hire purchase Is it a good idea to take hire purchase? Goods only yours when payments complete Can be repossessed Ultimately more expensive Deposit = K Shs 8000 Cash price K Shs 79,890 Monthly repayment = K Shs 4790 Total cost K Shs 122,960 Interest payable over 2 years at 23.5% = K Shs 43,070 Rather save the money first and then buy the TV 12 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 12

13 Borrowing money the debt trap! Rules to avoid the debt trap Never borrow / increase your loans to pay off short term debt Pay at least the minimum instalments due Beware of consolidating your loans you will pay interest for even more years and never escape the trap Keep away from micro lenders they are expensive Beware of the credit card can you afford to pay the interest Get rid of short term debt with a disciplined payment plan Think affordability vs status Pay cash bargain! Alexander Forbes Financial Services Member Education 3 June 2016 Slide 13

14 Debt There is no simple solution Discipline is key 14 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 14

15 BUDGET MakeTHE your plan Foundation of all good financial decisions 15 Alexander Forbes Financial Services Member Education 3 June 2016

16 The budget The aim of a budget Monitors your income Teaches you to live within your means Exceeds your expenses Matches your expenses Pay for the things you need Avoid getting trapped in more debt than you can handle The power of a budget helps you To take control of your money not your money controlling you Manage expenses Reduce stress levels = peace of mind Identify possible savings 16 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 16 Become the financial director of your life

17 The budget INCOME Planning a budget Salary after tax EXPENSES Loans/rent* Other pay 0 Loans vehicle* Investment income 0 Power/water Transport Life insurance* Total income Food Total income total expenses = 2000 savings INCOME Salary after tax Clothing Cellphone Total expenses Monthly repayment = 4790? EXPENSES Bond/rent* Other pay 0 Loans vehicle* Investment income 0 Power/water Transport Life insurance* Total income Total income total expenses = deficit/shortfall Food Where will this come from? Clothing Cellphone TV set Total expenses * Fixed payments 17 Alexander Forbes Financial Services Member Education 3 June 2016 Slide

18 The budget Before you budgeted Would you automatically have assumed you can afford it? Ask yourself Is it necessary? Can you do without it? If not, where can you reduce your spending? Refer back to the budget Monthly repayment = 4790? INCOME Salary after tax Other pay Investment income Total income Total income total expenses = Where will this come from? * Fixed payments 18 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 18 EXPENSES Bond/rent* Loans vehicle* Power/water Transport Life insurance* Food Clothing Cellphone TV set Total expenses

19 WHERE DO I START? The best place to start is where you are, with what you have Charles Schwaab 19 Alexander Forbes Financial Services Member Education 3 June 2016

20 The budget Where do I start? There are three classes of people* Evaluate your standard of living Set financial goals savings for children, pension etc Prioritise your goals Determine necessity or want The haves The have-nots The have not paid for what they have Earl Wills Alexander Forbes Financial Services Member Education 3 June 2016 Slide 20

21 The budget Some things to remember Experiment with cheaper buying options Look to increase your debt repayments When should I start? 2016/06/03 08:27 AM Now Procrastination is your enemy 21 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 21 Note every expenditure keep receipts Plan for holidays, car repairs, vet bills, emergencies The sooner you begin, the sooner you can reap the benefits

22 The budget But please don t.. Try keep up with the Joneses Spend unless you have it 22 Alexander Forbes Financial Services Member Education 3 June 2016 Create so much debt that you need to borrow to get through each month Slide 22 Borrow money to pay off existing debts

23 The budget What about the money you thought you had 15-20% of your income is spent on things not accounted for Where did my money go to 23 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 23

24 The budget Use your budget to find your missing money Mortgage loan (20 Monthly repayment Interest payable over 20 years Total repayment Increase monthly repayment by Loan term reduces to 15 years Total interest saving Paying your loans off early means more money to save for retirement Reinvest the monthly loan repayment 5% over 5 years Total cash saved by YOU By saving after your debts are settled means more money for your future 24 Alexander Forbes Financial Services Member Education 3 June 2016 Slide

25 In summary 1 Debt is spending your money before you earn it. 2 Debt carries a cost. 3 A budget is the foundation of all good financial decisions. 4 Determine what is a necessity to set realistic financial goals. 5 Saving after your debts are settled means that you will have more money for your future. Consider putting this extra money towards your retirement savings. 25 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 25

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27 What is Retirement? A time of change A time of adjustment A time of challenge

28 You can be young without money, but you can t be old without it Tennessee Williams US dramatist Alexander Forbes Financial Services Member Education 3 June 2016 Slide 28

29 Change, Challenge & Adjustment Retirement IS: A Time of Adjustment a new lifestyle A Time of new opportunities pursue hobbies etc A time of fun and enjoyment more time for spouse, partner, grandchildren

30 Financial Planning for Retirement Alexander Forbes Financial Services Member Education 3 June 2016 Slide 30

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32 A Minefield of Decisions Need to educate yourself in retirement planning in order to understand your options properly

33 How much debt do you have? Will this debt be settled before retirement? You need your retirement fund to create income Should not be used to settle debt Points to Consider before Retiring

34 Points to Consider before Retiring Is your house paid off? Car - need to be replaced? Any alterations to be done? Slide 34

35 Budget Have you calculated a new budget for retirement? what expenses will appear/disappear? Need to compare required income with actual income is there a shortfall? will expenses reduce after retirement? Pensioner Concessions Will any exist?!

36 Effects of Inflation K Shs buys Car Motorbike Bicycle 2010 Shoes 2025

37 Pension Options Single Life Joint Life With pension increases Income drawdown Slide 37

38 Choosing a Pension This depends on your personal circumstances Factors influencing your choice: Health Inflation Size of capital sum Income requirements Longevity Spouse Dependants

39 What are the major risks in retirement? Living too long (possibly running out of income) Longevity risk Inflation risk Pension income not keeping pace with inflation Consumption risk Consuming more than what your financial plan can sustain Investment risk Making inappropriate investment decisions Slide 39

40 Wills A Will is essential Bequests Distribution as per your wishes Other instructions Do you and your executor know where your Will is currently situated? Should be reviewed at retirement Avoid complications

41 Health Care 60% of Medical Claims occur after age 60 Save now for your medical care OR Include in your retirement budget

42 Use of time Alexander Forbes Financial Services Member Education 3 June 2016 Slide 42

43 Use of Time Hours Worked per day Days Weeks Hours per annum What are you going to do now? Remember - Boredom Kills!!! Alexander Forbes Financial Services Member Education 3 June 2016 Slide 43

44 Use of Time Do you require an additional income? Re-employment Full-time Part-time Temporary

45 Because if you do you will have a happy retirement filled with fun, laughter, love and fulfillment! But Most of All!!! Plan! Plan! Plan!

46 Questions Slide 46

47 Disclaimer While Alexander Forbes Financial Services (ME educator) does its best to give you information that is current, fair and accurate in this presentation, because of the evolving legal and technical environment which could affect the appropriateness of particular facts, we cannot guarantee it. We cannot be held liable for any loss or damage you may suffer, directly or indirectly, as a result of anything contained in this presentation. Anyone who uses this information does so at their own risk. Your final choices about your retirement and long-term financial security are your responsibility. Please don t use this presentation as the basis for any financial decisions. Instead, get advice from a qualified financial adviser about your specific needs and circumstances. The information in this document belongs to Alexander Forbes. You may not copy, distribute or modify any part of this document without the express written permission of Alexander Forbes Financial Services (ME educator). 47 Alexander Forbes Financial Services Member Education 3 June 2016 Slide 47

48 Financial Advisory and Intermediary Services Act (FAIS) Any guidance, opinions or proposals expressed by the presenters are for information purposes only and are not intended to be advice as contemplated in the FAIS Act, 37 of Alexander Forbes will not be liable for any damage or loss suffered because of any action taken by anyone attending this presentation, based on the presentation or any discussions about it. FAIS no Alexander Forbes Financial Services Member Education 3 June 2016 Slide 48