Personal Finance- A Story about protecting what you value.

The first time I met Peter was when I had a meeting with his partner Njoroge, who I was meeting to discuss his personal finance. When Njoroge introduced me I could tell from his side smile that he was one of those people who didn’t think you need help with personal finance. 

He laughed and joked with Njoroge that he must be paying him too much if he needed a coach to help him spend his money. I gave him a brief of what I do, and he dismissed me with the dreaded “I’ll think about it”

A few months later, I got a call from a number I didn’t know. Truecaller identified him as PO. I really find it annoying how people have initials as their ID on Truecaller, how should I know who is calling? PO was Peter Odipo, he wanted to meet me to discuss business. At first, I didn’t know what exactly he needed to discuss but, in my business when someone is ready to talk business, I make myself available. 

Went we met, we laughed at how he had changed his mind about my services, but he quickly got to the point. He wanted to discuss his finances, and even though he had laughed a few months ago, he discussed the advice I gave his partner, and he would like to make some plans. He wanted to ensure he retired into the life he wanted and that’s why he needed to sort out his finances for his future. 

The Introduction meeting

Peter was the CEO and founder of a successful software development company. He earned about 800,000 per month and Njoroge was the sales and marketing manager who ensured whatever software that Peter developed was promoted and sold in the market. 

Their main market was in west Africa and Europe. Peter was the main developer who traveled all over the world to grow the business. The business was doing very well, it was contributing to the economy and improving the lives of over 20 families who were employed by the company. 

Peter as the founder of the business had taken some personal loans to start and scale up the business. He had a devoted wife Olivia Njeri, and two children; 13 and 6 years. Olivia had a job that paid her 80,000 per month. 

Peter and Olivia liked the soft life, living in a townhouse in the Nairobi suburbs and paying a mortgage of 120,000 per month. The children went to international schools with the Cambridge curriculum. Peter was a good son, he sent his mother money monthly for her upkeep in homabay and paid for his sister’s college in Australia. 

Olivia was not Peter’s family’s favorite, she was strong-willed and didn’t always do what Peter’s mother asked of her. She was from a different community and some traditions didn’t make sense to her. She did try to accommodate but some were really not worth it.  

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It was a rainy Friday afternoon when I got a call from Njoroge. Peter had been involved in a fire. He was working at the office late and there was a fire caused by an electrical fault in the office. He was alone in the office and had not known there was a fire until it was too late. 

Peter tried to escape the office, but the fire had spread quickly, and the smoke was too much. He had sustained 75% burns on his body with smoke inhalation in his lungs. He was found unconscious when the fire was put out. 

Upon arrival at the hospital, they required a deposit of 500k to admit him. In just a few days, the hospital bill had escalated to two million because they had to do several major reconstruction surgeries, and he had gotten infections on the burns. 

During the period he was in the hospital his family and friends started a medical contribution campaign. Olivia, his wife, and Njoroge, his partner had withdrawn all the money they had in their savings account to pay the bills. 

In addition, Olivia’s relationship with her in-laws was strained because she was the next of kin, and she had the final say on Peter’s medical decisions. Even though she consulted widely with the family her decisions were not always agreed upon by Peter’s family. 

When I learned about the accident, I also realized that Peter had not informed his family and friends of our meeting. 

For Peter’s protection, I advised him to purchase medical insurance. Medical insurance for him and his family up to a limit of $5 million covered accidents and illnesses. This was such a relief to the family financially because then the medical bills would be sorted. 

Unfortunately, Peter succumbed to the injuries and infections 30 days after the accident and passed. 

“From birth to age 18, a girl needs good parents, from 18 to 35 she needs good looks, from 35 to 55 she needs a good personality, and from 55 on she needs cash.” – Sophie Tucker

Olivia and her family organized the funeral, she managed to fly in Peter’s sister from Australia and give him a good send-off according to his traditions and his mother’s wishes. 

A week after the funeral I called Olivia for a meeting. At first, she declined to meet with me because she was still mourning and didn’t want to entertain me, however, I insisted and agreed to meet her in her home. 

Olivia’s home in the suburbs was beautiful, we sat outside in the rose garden with well-manicured grass. She offered a hot cup of brewed coffee and homemade scones. Olivia was small boded and well-dressed in a flowing dress that looked very comfortable. She was soft-spoken, and you could tell she had gone through a tough time from the bugs under her eye the and the somber facial expression. 

She was easy to talk to, and when I introduced myself as Peter’s personal finance advisor, she was curious to hear from me because she said that Peter had mentioned needing to talk to someone like me but had not confirmed if he had. 

Peter’s Personal Finance Plan

I asked her what her financial plans were. As she balanced tears in her eyes, she inform me that she had already started looking for buyers for her home. Since she couldn’t afford the mortgage payments, she would have to move.  

She was also looking for different schools near where they will move to for the kids because she couldn’t afford their current schools. 

The business would wind up because Peter was the key man in the business, nobody in the company would be able to do what he did at the company for continuity. Njoroge was talking with lawyers about it. 

She also needed to get another job to complement her income as they would not be able to sustain a living on her salary only. From the proceeds of the house and business, she plans to settle the loans Peter had taken. 

By the time she was done with listing her plans, she was sobbing softly, asking God why he took her husband away. She however quickly wiped her tears away and put on a strong face when her daughter came outside to ask her something. She said she had to stay strong for her children who were also struggling with the loss of their father. I empathized with her for the burden she had to carry.

I was glad to be the person who might provide some hope in the situation. From my meeting with Peter a few years ago, he had made plans for everybody. I took her through his financial plan. 

An emergency fund for which he had put Kshs. 100,000 in a money market fund and was saving 10,000 per month, in the last 5 years, it had accumulated to Kshs. 900,000

Whole Life insurance policy which he contributed 20,000 per month. This will give Olivia who was the beneficiary a lump sum of kshs. 15.7 million.

Term life insurance protects the business in case the key man is not there anymore to perform his duties. it ensures the sustainability of the business and pays off the business loans, in case something happens to him. For a 10 years term, Peter paid 10,000 monthly for the beneficiaries who were Njoroge and Olivia will get kshs. 11.5 Million. This would cover the loans and assist them to hire a new CEO and a team of software developers to replace Peter’s duties and continue with the business.

Life endowment/ Education policies for the two children and his sister provided for them to continue their education in the schools they were in already. Peter paid Kshs. 30.000 per month into this life cover.

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Olivia would get a lump sum of kshs. 2.6 Million from his life policy. She can choose to use this amount to cater for current school fees for the children and sister. 

In addition, it would also cater for future school fees to be 4 pays at the beginning of every school year. Peter had chosen a payout when the 13-year-old is joining university when the 6-year-old joins Junior high, and when his sister joins university. This sorts out the school fees for the children in the future amounting to Kshs 3.1 Million in total.. 

Business continuity insurance; as a business owner, Peter had also considered the loss of the office assets in case of fire, theft, and other perils. The office had many computers, furniture, and partitioning. All these got damaged in the fire. 

For the continuity of the business, Njoroge and Olivia would need to purchase new furniture and computers. This would be covered in the office asset cover to the value of the assets insured. 

Other Insurance covers that Peter purchased were home insurance covering the building and content of his home.

Motor insurance for the vehicles both for private use and business.

“Economists report that a college education adds many thousands of dollars to a man’s lifetime income – which he then spends sending his son to college.” – Bill Vaughn

Additionally, Peter had written a will, which was with his lawyers. To grow his money, he invested in Treasury Bonds and stocks, indexes, forex, and property. He had apartments and houses both complete and off-plan which generated rental income. 

In his will, he had indicated how the money would be distributed because he didn’t want his wife and children put out after his death. 

There was an amount put aside for a school for disabled children that he was supporting in homabay. 

It was important for him to make sure that they had an amount for retirement, and he planned trips around the world with his wife, so he included a request in his will that she go even if he was not present.

Olivia was so overwhelmed with the information I gave her that she cried on my lap for an hour. 

In my experience as a personal finance advisor, I have not come across someone who has such an elaborate plan. It got me thinking, about my plan and how I envision my future for my family whether I am here or not.