PERSONAL FINANCE & BUDGETING Where it ALL begins

Presented by Salum Awadh Business & Financial Consultant 10th August 2012

What will be covered?

What is Personal Finance? Context of discussion Key components of personal finance Personal budgeting Challenges we face in achieving better personal finance management What needs to be done A simple process for developing your personal financial plan

What is personal finance?

Is all about financial decisions done at an individual or family level In economics it all starts with the household, here it all starts with YOU It is all about how an individual/family makes money, how it is spent, and how it is saved. The decision is made in the context with current & future needs, as well as financial risks that an individual is exposed to Personal finance vs corporate finance

Context
Current inflation at 17.2% Less than 20% of Tanzanians are formally banked Insurance penetration is less than 10% Social security/pension coverage is 3% or less Tax evasion is unlikely (PAYE, VAT) Default is very high (credit reference bureau) Informal borrowings (highly expensive & highly risky) Limited understanding of investment opportunities and how to invest (equity markets, debt markets, other investments) Low or lack of savings Legal compliance and how it fails

Key components
Personal income Social protection Budgeting

Investing

Taxation

Savings

Personal debt

Personal income Salary (about 3 million people in the formal sector) Personal business (more than 2.7 million in informal sector) Government support NONE Terminal Benefits

Budgeting What you spend on How you spend How you plan

Taxation Income tax Withholding tax Property tax VAT etc

Personal debt Formal borrowing (Banks, micro credits, etc) Informal borrowing (highly devastating )

Saving Formal channels Informal channels

Investing
Investment portfolio Stocks & bonds Government securities Real investments

Social protection

Pension/reti rement plans Insurance Estate planning

Personal budgeting
A financial plan indicating your income, expenditure, and savings You can use simple tools such as excel sheet, pen&paper, ipad, etc

Simply..
What you earn

How much

Fixed expenses Debt repayment Where you spend on Non-basic Retirement Acquiring assets etc

Future plans

Surplus/de ficit

How you deal with deficit

Challenges for personal finance planning

Limited knowledge on personal finance Lack of enough public awareness on personal finance Lack of enough advisory services Not taught in school Some parents being wrong role models Lack of personal drive to learn High dependence ratio (cant save)

What can be done?

Hiring a financial consultant Online support & tools Addressing systemic issues (issue of access to key financial services) Attending Workshops & seminars

INCREASING FINANCIAL LITERACY.

Simple process of developing personal financial plan

Selfassessment/family Setting financial goals Develop a personal plan Implement
How much you earn/you get from your benefits What you own What you owe Retiring? Getting a job? Investing? Buying a property? Paying tuition fee? How to increase your income How to cut costs Where to invest? etc

Discipline

M&E

Monthly

What if you decide to start your own business?

Developing a business idea Legal framework Doing market research Developing a business plan -Operational component -Marketing component -Sales component - Management component -Financial component -Risk component

For your personal finance & investment advise

Salum Awadh Email: sawadh@ssc.co.tz www.ssc.co.tz Mobile: +255 786 092920 / 656 006 106