Kenyan author breaks down family finance planning in easy steps

The Jones 10-year Family Timeline

Year (age)

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Dad (Mr. Jones)

35

36

37

38

39

40

41

42

43

44

45

Mum (Mrs. Jones)

33

34

35

36

37

38

39

40

41

42

43

Peter

5

6

7

8

9

10

11

12

13

14

15

Jane

3

4

5

6

7

8

9

10

11

12

13

Failing to plan is planning to fail, the saying goes. Dr. Stephen Covey in his book 8 Habits of Highly Effective People writes about living with the end in mind. It involves planning and just not simple planning, but strategic planning.

Allan Bukusi, a leadership trainer and the author of the book Family Strategy says one of the ways of living with the end in mind is developing a family strategy. He defines a family strategy as a tool that integrates your (whole) life into a single development plan in the context of your family. The leaders of the home (Dad and Mum) use the family strategy to decide the best approaches the family can use to face the future, how it (family) should get prepared and what the family can and should plan to achieve. A family strategy is also a very useful tool in creating, building and passing on wealth to the next generation.

Your family’s strategic plan – step one

The starting point is sitting down as a family and coming up with a family philosophy. 

Dr. Manu Chandaria, a Kenyan industrialist has been an entrepreneur for 63 years. When he came back to Kenya after his Engineering studies in the United States, he joined the small family business – Kalu Works – that made cooking pans and pots. The small business catered for the needs of about 50 family members. Resources were stretched. They owned only one family car. “My father sat me, my brother and two cousins down and told us we needed to create wealth for the family. My father was uneducated but he had a vision for the family – to create wealth,” reminisces Chandaria.

In creating a strategy, the first thing a family needs to do is come up with a Family Philosophy that begins by defining who the family is. It could be nuclear or even extended. Some families include siblings, cousins, parents and even nieces and nephews. Once the family is clearly defined, you do a SWOT analysis of family members and the family in general. “SWOT enables you to understand and appreciate the resources you have available in your family and opens your eyes to how they can be effectively deployed to build and power the family future,” explains Bukusi.  

Other things in the family strategy will involve defining values and beliefs that will guide the family, and creating a family vision, mission and purpose. “You need to determine your family expectations, hopes and dreams in life,” says Bukusi.

Family timeline – step two

Now that you know what your family looks like and have defined your family philosophy, the next step is putting all your plans down using a Timeline. Pictures are an excellent way of visualising your plans. This involves mapping out the ages of all your family members to help you identify celebration points and possible crisis points. The timeline also helps you see small and incremental changes in the family’s life. “With time, these small changes become major changes that affect the family relationships, resources and roles. Over time, if the realities are not kept in check and resources not prioritised or changes not planned for, crises emerge,” he says.

For example, from the Timeline, the Jones family can have an overview of their children’s schooling pattern and plan for it. In 2015, their daughter Jane needs to start kindergarten and in eight years, their son Peter will be going to high school. Something interesting about the Jones family is that when both parents are in their forties, the children will be teenagers! That comes with a lot of emotional and psychological demands. Teenagers also consume a lot. They need clothes, gadgets and to socialise. The Jones family must put that into consideration and ensure they are able to meet the psychological and financial demands that come with that phase of their lives.

Financial strategy – step three

From the Timeline, the Jones family is now able to come up with a financial strategy that will help them get money for the various needs they will have in their lifetime – based on the Timeline. The Financial Strategy has to have four mini-strategies: Income and investment strategies, savings plan and expenditure plan. The income strategy defines how the couple will earn their income – either through employment or business. If the couple (husband and wife) are both employed, they should discuss how they can earn more. 

“A strategic parent says, ‘I am currently earning $100 a month. At this rate, I cannot hope to facilitate the betterment of the family or my children's dreams. I need to develop myself to increase our family income to earn $150 a month if Junior is going to get his college dreams.’ Such a parent may develop a strategy to take part of his current earnings to pay for night school and earn a college degree that will enable him to earn more money for Junior's education before Junior gets to college,” says Bukusi.  

An investment strategy involves creating wealth for your future comfort and family inheritance. This involves buying a home, investing in property for rental, having a pension plan or taking up life insurance. Since you will have your family Timeline, you can tell when you will retire and how much longer your spouse has to work. The Investment strategy is tied to your savings plan. What happened if one spouse loses his/her job? What about an illness that requires specialised treatment? Does your family have a safety net?

The fourth element is the expenditure plan that is known as an operational plan that lists your regular monthly expenses like food, fuel, rent, clothing etc. This part of the budget helps you live within your income. “Living within your means living within 60% of your family. 40% should go towards the other three strategies: income, investment and the savings plan. “As you get better at financial management, you will be able to live within 40% of your income and invest the remaining 60%,” explains Bukusi.     

Action plan – step four

Now you have your family, a vision, SWOT, a timeline and a financial plan. What next? Bukusi says your action plan needs three things:

  1. A prioritised “To Do List” of objectives drawn from your goals. For example, open a saving account or sign up an education policy to pay for high school education.
  2. A scheduled program of activities that realise those objectives
  3. An operational budget allocating resources to facilitate those activities.

“There needs to be a corporate family goal setting, action planning and review session with clearly assigned responsibility set for each member of the family,” advises Bukusi.