Miser, pinchpenny and stingy: Part 2

Continued from part 1

He is no doubt a hard worker and saves a lot, plans ahead and grows. After ferrying goods to City Market for two years or so, he decided to shift gears and venture into the crazy Matatu world. He bought his first Matatu and assumed the role of a driver. He didn't stop there; worked even harder and got a second one…continued working hard till he owned a fleet of around 10 Matatus. By then, the fellow was getting richer by the day. At least he improved his eating habits.

He later ventured into stocks big time, and a bit of real estate. Actually as we speak he owns several flats in Ruaka and elsewhere. He is now filthy rich but as you may guess correctly he’s still very stingy.

Someday a few years ago, I went for a house warming party for a close relative and I found him there. We enjoyed goat meat while I kept a distance from him. Just before he left he called me aside and told me that the Premio I was driving was his dream car. In his words he said it looks like a Merc. Strange man this is; you see he drives that AE 91 despite being a multi-millionaire. I couldn't help but laugh but knowing this man, I knew he was serious.

This guy does not even have a wife and kids; wait, he had a wife and a son back then but I always suspect his stinginess drove her away. I also know how badly his brothers are doing but let us not venture there. You see there are those brothers you have and you are so determined to help but they are beyond help…a story for another day. It makes me wonder because all this wealth he has and does not seem to enjoy is vanity. You see there are vultures circling around as soon as you depart to your maker and what you never did with your money, they’ll do it. They will ride the big cars, go on holiday and live largest with your hard earned money; after all they don’t know the pain you underwent when making the money.

You know majority of us underestimate the power of giving and being charitable whichever your faith…a universal concept that applies across board. Giving freely creates space to receive more. And the biblical wise man, he who wrote the Psalms and Proverbs advised us:

Proverbs 11:24-25: “One person gives freely, yet gains even more; another withholds unduly, but comes to poverty. A generous person will prosper; and whoever refreshes others will be refreshed”.

If I had all the wealth in this world and I have this brother of mine in need and I never helped him, what sort of happiness do I derive from that money? When we land in Heaven, you might be asked very simple questions; you found this guy who was hungry, did you give him food? I was naked, did you clothe me?

And my favourite verse Luke 6: 38: “Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you."

In this blog we are educating people in the spirit of giving. We endeavour to be very practical. Next, we shall venture into the construction underworld…if you have ever constructed you might flash back and relate with the posts; if you are about to construct you might learn a thing or two...but one thing is for sure; this underworld is not for the faint hearted. They once conned me in Rongai as I bought timber...poor me but I learnt my lessons the hard way. God bless.

Miser, pinchpenny and stingy: Part 1

Guest post by Samuel G. Njenga

He is one of the strangest human beings I know; surely he must be. This guy is my first cousin so I know his background and his path to his current status. He is much older than me, in his late 40’s. Some of us hail from very large families (nuclear), after all ten kids was no joke even then, but this dude has 6 brothers and 5 sisters. Theirs was a life where even basic needs were hard to come by. He finished primary school, did two years of high school then dropped out for lack of fees.

He got his first job as a farmhand to take care of a rich man’s pigs. Rich men who owned cars in the village were few and far between. I vividly remember him atop a Toyota Stout, whose front design looked like a pig. Together with the son of the rich man who used to drive the Stout, they’d pick left over foods from some big hotels in Nairobi and deliver them for the pigs to feast on. He took care of the pigs for some time till he was promoted to deliver saw dust to homes; you know the saw dust that has always been used as bedding for chicken. The rich in the village deal with strange products and services, things that the elite in Nairobi will never think of.

This cousin of mine worked his socks off for several years and was saving a lot. He eventually quit his job as a farmhand and bought an old taxi. Back then the shilling had a bit of value, it costed him 17k. Those loud-mouths in the village were even taunting him that he purchased the taxi with a bag full of coins. U know those funny taxis in the village which have seen better years; the ones when inside you feel like you are outside, very dusty and if it rains you are rained on. The starter is a set of wires, the driver has to carry water because the thing can chemka anytime. Those vehicles (if we can call them so) are just strange, what with a Mercedes side mirror, Peugeot carburetor, stools for seats and the body of a Colt…and the mabatis on the body if they ever cut you, you’d get tetanus.

As a taxi operator he started displaying strange tendencies, like eating an orange for lunch, mandazis and chai for supper, walking around in faded shirts all in the name of saving. For this man, extracting a shilling off him was tantamount to milking a bull. He was as stingy as they come. Maybe because life had previously been harsh on him.. You may have heard about that hardware guy somewhere in Kabete (his name with-held) who once collapsed and when taken to hospital, the doctor advised him to eat. I could see from far that my cousin was headed there.

Someday I met the fellow as I was heading home from high school on my mid-term. Knowing that he was doing well as a taxi operator, I requested him to buy me a cup of tea. He jokingly said (or so I thought) that we will go take tea and I will pay for it; after all the kidogo pocket money l had in my pockets would be enough for two cups of tea. We went to the café and enjoyed the cup of tea, but when the bill was brought, he insisted that I had to pay. You see I thought he was just joking but I was in for a rude shock and I ended up paying for it….

This fellow never ceases to amaze me. He however continued with his saving habit till he managed to buy an old Nissan to ferry horticultural products for small scale farmers to City Market. When I pass by the City Market it reminds me of so many things. I went to a high school that taught Aviation and my dad thought that I’d finally live my dream as a pilot. When I landed there, I opted to study Agriculture to the shock of my dad after I realized that everyone was fighting to study Aviation; I like swimming against the current. Immediately after high school and for lack of something else to do, I used to farm in a small scale those horticultural products on the river bed and on maturity I’d take them to City Market. So I was a customer to this cousin of mine for some time till I went to Campus. And by the way, I almost declined to go to Campus as I was really doing well with my farming. Actually were it not for my dad who actually thought I was nuts, I’d be a big rich farmer by now. I may never know whether it was a wrong or correct decision.

In the next post, I will tell you more about this strange cousin of mine; someday he told me that a jalopy I was driving was his dream car, and as of the car he drives now I’ll leave it to your imaginations.

100 million Cheque: Final Part

Continued from part 2

The Merc was no more and off it went with the flashy life. Mark thus got a bit of cash from the proceeds of the sale. He knew that the small cash available to him would make or break him; it could tip the scale between absolute poverty and recovery. Remember the story of that widow of Zarephath and Elijah and that handful of flour in a jar and a little olive oil in a jug? After much thinking, it took Mark a week or so to decide what to do with the cash. It finally dawned on him that his recovery was pegged in reviving the fortunes of his ailing firm. He thus decided to revamp the firm by investing in advertising and popularizing his services.

He went knocking on doors of companies seeking to sell his services; after all this is a skill he had acquired while selling insurance to strangers. Of course it was never easy but the guy is kinda convincing; the type that would remove a snake from its hiding (kutoa nyoka pangoni). In a few months his marketing drives started to pay off and clients starting coming. His fortunes started to change for the better. He had a clear plan on his business and set targets. On a good week, he’d make as much as half a million after expenses because he started getting high profile clients (managers and business owners).

Mark went to the back to the basics of financial prudence. He embraced the basic but simple concepts of financial management. You know most people fail to understand that the road to financial freedom is one that requires very basic knowledge. Isn't it easy to understand that you must spend less than you earn?? Anyway, he managed to dramatically improve his finances by embracing frugality.

The other big change he had in his life was to become a staunch Christian. He quit drinking and left the bad company. Actually most of his friends had already left him. He slowly got better friends and soon after walked down the aisle. Sometimes we underestimate the strength of friends and the motivation one can derive from a supportive spouse.

With better fortunes he managed to buy 2 plots at Garden estate. He built his family’s abode in one of them. The other plot he did the guest houses which were almost completed from what I saw. I noted how positive the man had become. He was constantly pausing to remind us of how God has blessed him. He could radiate the feel good factor to the two of us and I could from his tone that this was a man who had deep lying passion that can only be seen in people destined for greatness.

Then out of blues I asked him whether he finally paid himself the 100M. He looked up and told us that indeed he has never had cash in the bank anywhere close to 100M. However, the valuation of the guest houses alone together with the land was around 120M. So in his own words his wealth more than showed that he had earned the 100 Million.

Paul jokingly asked him why he was driving a Toyota Wish being that wealthy. The man rose from his seat and his response was telling, “My friends, I have driven the big ones and I can assure you that it is no big deal. In fact sometimes back I met one of my former drinking buddies who asked me what I was wishing for now that am driving a Toyota wish. Someday I’ll drive the big ones again but I need to ensure that systems are in place that generates enough to sustain the big ones”.

I realized the transformation the man had gone through and it was amazing. It took him as many as 9 years to hit the target but at least he did. I noticed how he had a grip of his life and how he had rediscovered his dream and kept it alive despite falling. Often we fall but we forget to rise up, dust ourselves and proceed with our journey with lessons to boot.

We finally left Mark’s place at 9.00 pm and it is then I remembered how tired I was but the absorbing story more than refreshed me. I left knowing that there was need to stretch my imaginations and pay myself big….a few hundred millions would do for starters…QED, isn't it?

Next post we'll talk about misers, I know one and his story is out of this world.

100 million Cheque: Part 2

Continued from part 1

After writing the 100M cheque and saying the big prayer, Mark got thinking. He always had the urge to get into consultancy of some sort and he thought it was a good opportunity to try something. After thorough thinking, he decided he’d venture into training managers and business owner from all walks of life on matters corporate governance. He however didn't have a clue how and where to start. As he was thinking up of setting a firm, he decided to apply for scholarships abroad with a view of acquiring some skills in his line of interest.

Two months after sending many applications, he got a positive response from some University in Australia. Lucky for him, the scholarship was fully paid for. He therefore, held his thoughts and plans of setting up the firm and decided to go study first. He found himself in Australia and studied for 3 years. Upon graduation he was lucky to get some job there, a contract for two years. He really worked his socks off and saved a lot of money. At the expiry of the contract he returned to Kenya as a loaded man with approx. 15M. A tidy sum for a young man in his mid-thirties. This, coupled with newly acquired skills on corporate governance and training, he was raring to go.

On landing in Kenya, his immediate thoughts were to actualize his dream and set up his firm and get going. Blame the devil if you may but the rich fool mentality caught up with him. He assumed that the money was too much for him to finish in his lifetime. He bought a big car and started to indulge in alcohol together with some friends. Talk of bad company. To make it worse he was still single and girls started milling around him. He thought that overnight he had become ‘tall dark and handsome’ now that the girls were looking for him. You know some of us who are as short as Zacchaeus of the bible and not so good looking get worried when all of a sudden girls get interested in you. Of course when you sit on a fat wallet you can become very tall and good looking.

No money is big money if all you are doing is spending it. Mark lost his dream and money too. One day one time, he realized that his money was tending towards zero at an alarming rate. But then it was too late when he realized so, because by the then it was only the big car remaining and some tens of thousands. He also realized that he forgot God; you see when all is bliss, it is very easy to forget your Maker especially in the days of your youth (Ecclesiastes 12:1). Someday, as frustrations started getting in, he took his bible and as he was flipping through he saw the 100M cheque. It made him more frustrated and in the heat of the moment he tore the cheque into two and threw it in the dustbin.

That night he tried to sleep but somehow he could not. In the dark of the night, he had an opportunity to look at roller coaster of a life he had lived, mistakes made, opportunities missed and lesson to be learnt. He knew that he had goofed big time. It was on this night that in my humble opinion he experienced a transformation. He rose from his bed, went looking for the torn cheque in the dustbin, took it and returned it inside his bible. This explained why the cheque I saw was in two pieces. It was a time of re-awakening his dream, at time when he asked God for a second chance on bended knees. Prodigal son returning to his father and promising to behave and become a good steward.

By then his drinking buddies had left his life, and the gold prospectors too had realized that no more gold was available. This time, the lessons were finally and painfully learnt. He was evidently at the rock bottom of a sinusoidal wave. You know they taught me about y = sin x to be the sinusoidal wave.

Mark embarked on immediate transformation by first offloading the state of the art Mercedes Benz. It had to go……after all where else would he get any reasonable cash to rebuild his life?

The final part details how he managed to rebuild his life to his present state which left me in awe. He not only became a strong Christian believer but he also adopted a business bible, same to the one adopted by Fai Amarios (he of kata pingu fame), RIP. He also walked down the aisle and he kept saying his family is a big inspiration. Curious to know whether he finally earned the right to cash the 100M cheque?

The Pros and Cons of Stocks Vs Real Estate

Guest post by Young

There are several investment vehicles promising fantastic returns and I believe you’ve heard of and, may be, you’ve participated in a few. Every investment vehicle has its own pros and cons. This is why astute investors have strategically diversified investment portfolios that make them richer and generally protect their investment. To help your understanding of real estate investment, we’ll compare it with investment in stocks.

Real estate investment is a dynamic investment that leaves greater control in the hand of the investor compared with stocks. A stock is a nominal representation of the value of your investment in a company. The more the company does well in its line of business the better the value assigned to its shares and the more money that could be made by the investor when such shares are sold or when dividends are paid. Except you have a considerable number of shares in the company, you practically do not have a say in the day-to-day running of the company or the several decisions of the board that could make or mar the company.

However, in real estate, your investment is tangible and your control is greater. You decide what to buy, where and when as well as when to sell. Your investment is relatively secure as you can buy or hold or sell without recourse to any board. Also, the level of knowledge and expertise required to control both investments varies. Without an in-depth knowledge of accounting, human resource and management, an illiterate real estate investor can still make good money.

One of the key concerns of most investors is the level of risk involved in a particular investment and the security of funds. One of the major attractions of real estate is the fact that although it does not always rise in value, it is very stable when compared to stocks. Stocks are subject to high level of volatility. In the United States, in the late 1990’s technology stocks boomed and by early 2000’s when they crashed, many stocks lost over 80 per cent of their value and some became worthless. Some stocks are practically worthless as at today. This is something that is a rarity in real estate. Real estate has the capacity to outpace inflation and it is very resilient.

Of course, real estate has its own down side when compared with stocks. The major difference is in liquidity. Liquidity is the ease and cost with which you can sell an asset and get your money out of the investment. It is much easier to sell your stocks and convert them into money. All you need do is to contact your stockbroker and within two or three days, your stocks can be converted to cash. Although there is always a demand for real estate, the time and energy required to navigate the process leading to a sale ensure that you cannot easily convert it to cash. This illiquidity is also a strength in another sense. It means that you are more likely to hold a piece of real estate longer than a stock. Whilst those trading in stocks often lose focus of the long term perspective.

Furthermore, when we compare overall returns and wealth producing capability of real estate with stocks, we begin to understand why several asset portfolios are heavily tilted in favour of real estate. For instance, the owner of a block of four-bedroom flats in an average location in Lagos or Abuja in Nigeria, may earn at least N2m annually from rents whilst also enjoying the appreciation in the value of his property. Often, when the economic environment is harsh there is a lull in the construction market as more people cannot afford to build. The consequent pressure on the rental market gives the property owners the opportunity to review rents upwards and generate more funds from their investment. Generally, maintenance costs are far below the accrued rental income.

Finally, for tax purposes, owning a piece of real estate is similar to owning a business. You have access to deductible expenses (including depreciation). Depreciation is an allowable tax deduction for buildings .If you keep a good record of your expenses when purchasing or operating a property, with guidance from your accountant, you can claim some deductions. So, back to our question: stocks or real estate? You choose.

I choose a combination of the two almost on 50/50 basis. For the future I will be tilting more towards real estate.

What about you, what is in your portfolio?

In our next post, becoming a millionaire is not a wishing thing, unless in a dream or magic fairy-tales.

Involve your spouse in financial decision making

Guest post by Young

Getting your spouse involved in the management of family finances may be tough for some individuals, but this has its own benefits.

Marriage counsellors say it is important to carry your spouse along when making financial decisions in a family. In our article last week on ‘Involving family members in saving money,’ it was stated that your ability to save is vital, but involving your family in the process is more beneficial. According to experts, financial security in a family doesn't come easy, but requires adequate planning and strict adherence to saving. This, however, can only be meticulously achieved when you involve your spouse in the management of your family finances.

Experts say in most situations, there is an individual in the family who likes doing all that pertains to numbers and payments. This fellow pays the bills, manages the spending or cash flow, looks for great deals and works on spreadsheets, leaving his or her spouse out of the activities. But experts note that even though this individual is doing all of these things, there is still another money manager in the family. “No one person can do all the money arithmetic in a home, you have to involve your spouse and you will be surprised at his or her input,” says a marriage counsellor, Mrs. Anozie Love.

She notes that your spouse might not be as involved in the day to day management of your family’s finances, and explains that this is because in many cases your spouse doesn't have knowledge of how much money is in the family’s bank account. Experts note that most times, the spouse just knows how much he or she can spend on entertainment or clothes for the month and maybe a few other budget categories at his or her disposal.

According to experts, this is a dangerous approach to family finances. “No one knows what might happen to the Chief Finance Officer of the family and if something costly happens to him or her, what will the spouse do?” Anozie asks. She further asks how would the spouse step in and manage everything if something drastic happens to the CFO? Experts therefore say it is important for both spouses to manage their resources as this has great benefits. Below are simple steps on how you can involve your spouse in financial decision making, according to experts:

Budget together monthly

This is a very important in a home, experts say. They note that spouses should budget their money together each month as this will boost their savings and will trim unnecessary expenses when shrewdly done. Even though you have fixed spending in place, there are still planning decisions to be made each month for discretionary spending, marriage counsellors say. One thing you must understand is that your spouse doesn't have to be necessarily involved in the day to day finances at the level of detail as you may have, but should have knowledge of the resources and how they’re being used. When this is done, he or she will appreciate it if undertaken for mutually gainful reasons.

Review expenses together occasionally

According to experts, it is also important you review expenses incurred by the family occasionally. This could be on a weekly or biweekly basis. Professionals say while the monthly meeting is important, so is a weekly meeting about money. They note that all that this requires is a review of spending for the major budget categories and a discussion around new significant expenses needed for the month. It could be seen as a status meeting for both spouses. You may not know how much you are saving for your family by doing this until your spouse is not around. If you want to take it to the next step, you can write down the balances of the major budget categories for your spouse so he or she knows the overall state of the spending plan. “This also has a way of unifying the family, especially the couples,” Anozie adds.

Switch bill-paying duties

Let your spouse pay some of the bills. If your spouse usually is not the one who pays the bill, allow him or her give it a try for some time, but be willing to offer help if necessary. Experts say this will give your spouse a better understanding and appreciation of how important it is to be involved in the decision making process of your family’s finances. Allow your spouse to pay some of the monthly bills, but don’t overload the person who doesn't normally do this work for the family. You may give him or her a few key bills to manage, as this is a great way to involve the person and for your spouse to feel fulfilled being a good financial steward that contributes to the family.

Solve the maths together

This should not be left to one person. Engage your spouse in the maths. Allow him or her to try and calculate how the family would thrive on a limited sum for a week or month. If your spouse still can’t see the importance of his or her participation in the financial decision making, sit down together and look at your budget or create a budget if there is none. When the numbers are right there in front of your eyes, it’s easier to be involved in the family finances. He or she will be forced to make inputs, provided you are both in good terms at the time of working on the family budget.

The Good Book Says

Can two walk together, except they be agreed? (Amos 3:3, KJV). Two are better than one, because they have a good return for their work: (Ecclesiastes 4:9, NIV). Think about these wise words.

In the next post, we shall look at ‘the pros and cons of stocks versus real estate’.

Financial choices in your 20's: Final Part

Advantages of Investing in Your 20’s

Young adults often face financial challenges due to burdensome student loans, relatively low-paying junior-level positions and a lack of budgeting experience. While those in their 20’s know they are supposed to be saving for retirement, the golden years seem unimportant and a long way off compared to the consumer purchases that could be made now. For many young adults, it seems easier to put off any investing decisions until their financial situation becomes, at least theoretically, more stable. Young adults in their 20’s, however, are actually in a prime position to enter the investing world, even with college debt and low salaries or wages.

Time

While money may be tight, young adults have a time advantage. There is a reason that compounding - the ability to grow an investment by reinvesting the earnings - was referred to by Albert Einstein as "the eighth wonder of the world." The magic of compounding allows investors to generate wealth over time, and requires only two things: the reinvestment of earnings and time. The longer money is put to work, the more wealth it can generate in the future. As your savings grow  you increase capital to enable you diversify your investments from liquid to more fixed assets, e.g. buying a piece of land to develop in future of sell with capital gains.

Take on More Risk

An investor's age influences the amount of risk he or she can withstand. Young people, with years of earning ahead of them, can afford to take on more risk in their investment activities. While individuals reaching retirement years may gravitate towards low-risk or risk-free investments, such as bonds, T-Bills and Money Market Funds, Fixed Deposit Accounts, young adults can build more aggressive portfolios that are subject to more volatility, and that stand to produce larger gains.

Learn by Doing

Young investors have the flexibility and time to study investing and to learn from both successes and failures. Since investing has a fairly lengthy learning curve, young adults are at an advantage because they have years to study the markets, and to refine their investing strategies. As with the increased risk that can be absorbed by younger investors, so too can they overcome investing mistakes, because they have the time needed to recover.

Tech Savvy

The younger generation is a tech savvy one, able to study, research and apply online investing tools and techniques. Online trading platforms provide countless opportunities for both fundamental and technical analysis, as do chat rooms and financial and educational web sites. Technology, including online opportunities, social media and apps, can all contribute to a young investor's knowledge base, experience, confidence and, ultimately, expertise.

Human Capital

Human capital, from an individual's perspective, can be thought of as the present value of all future wages. Since the ability to earn wages is fundamental to investing and saving for retirement, investing in oneself - by earning a degree, receiving on-the-job training or learning advanced skills - is a valuable investment that can have strong returns. Young adults often have many opportunities to increase their ability to earn higher future wages, and taking advantage of these opportunities can be considered one of the many forms of investing.

The Bottom Line

Saving for retirement is not the only reason to make well-planned investments. Many investments, such as those made in dividend stocks, can provide an income stream throughout the life of the investment. Young adults in their 20’s have certain advantages over those who wait to begin investing, including time, the ability to weather increased risk and opportunities to increase future wages.

In the next post, we shall explore making healthy investment decisions.

Financial choices in your 20's: Part 2

Invest or have fun first? That is the question

Continued from part 1

Many youth in their 20’s land their first decent paying job out of college and will do one or all of four things i.e. buy a car, move out of home and/or travel (includes shopping spree) and have fun!

I personally wouldn’t mind doing all the above.

However, saving and investing at a young age has always been one of my dreams. Most young people will not understand the golden opportunities from investing unless they talk to people who have experience in investing and have good knowledge about it.

For example if one invests in a piece of property in during their 20's just imagine how much the value of that property would have increased by the time he or she is in their 30’s! 

A writer at Kenyan Daily post wrote an article of 10 great rules that will help someone remain poor. They include;

1.     Never Wake up early.

2.     Never plan to spend your money.

3.     Don’t think of saving until you have very large amount of money.

4.     Don’t engage in activities usually reserved for the uneducated.

5.     Don’t think of starting your own business until an angel comes from heaven and gives you capital.

6.  Complain about everything except your own attitude: Blame the system, the government and the bank that refuses to lend you money. They are all bad and don’t want you to get rich.

7.    Spend more money than you earn. To achieve this, buy consumer products in credit and keep borrowing from friends and employer.

8.    Compete in dressing; Make sure you wear the latest clothes among all the workers in your office. Whenever your neighbour buys a new phone, get one that is more expensive.

9.     Get yourself a nice second- hand car that costs more than three times your gross monthly pay.

10.   Give your children everything they ask for since you are such a loving parent: They should not struggle for anything because you do not want them to suffer. That way, they will grow up lazy and hence poor enough to ensure they cannot help you in your old age.

Young people are full of energy, potential and excellent ideas. Let us not waste time and start saving and investing now. However, as a young investor, don’t rush to start investing without a plan. It is a good idea to have a mentor who will guide you on this.  Always have a goal, what you want to achieve, then put down a strategy and specific activities to help you achieve it. Definitely challenges will be there but when you have the desire to invest for a brighter future, you will make it.

Orison Swett Marden states that “there is no investment you can make which will pay you as well as the effort to scatter sunshine and good cheer through your establishment”.

We wind up this great post by highlighting five advantages of investing in your 20’s.

Financial choices in your 20's: Part 1

Guest post by Young

For most people in their twenties, the idea of saving and investing seems like a lifetime away. Most people don’t start thinking about saving or investing for future until they are well into their 30's. It is important to realise that the choices you make in your 20's play a critical role in your future financial security. Here are some tips that will help you to build a solid foundation for your future.

Focus on your career

In your 20's, getting established in your career and earning a regular income should top the list of your priorities. This is the time to invest in yourself, to acquire and develop those skills that will enhance your career and boost your earnings. You might have good ideas about becoming an entrepreneur and getting rich, but the discipline of earning regular income from a job and sticking to it for a time, will go a long way in preparing you for lasting financial security.

Acquire financial education

Take deliberate steps to improve your understanding of money matters. There is a plethora of information in the media, books, magazines, newspapers, seminars and the internet that will help guide you as you make decisions.

The first step in financial planning is to identify your goals. Your short-term goals (under five years) might include a wedding, buying a car or taking a vacation. Your medium term goals (five to 10 years) may be to build a house or get a mortgage, whilst your long term goals may be to plan for your retirement and children education.

Live within your means

It is very tempting when you first start earning, and particularly where you have few financial responsibilities, for you to spend excessively on clothes, accessories, new gadgets, mobile phone bills. All these can be a serious drain on your finances at this stage if not carefully considered. Look over your income and monthly expenses. Create a budget so that you can see exactly where your money is going and make adjustments where necessary.

Be cautious about borrowing

It is better to borrow for things that have lasting value such as a home or an education rather than for consumables such as gadgets and clothes. Give yourself a deadline by which time you would have paid off or at least reduced the most expensive debt, usually credit card or store card debt. Pay your bills on time so that you can build a solid credit history from now. This will be important when you need to borrow more significantly in the future.

Pay yourself first

Once your debt is under control, automate your saving. Even if money is tight, try to have atleast 10 percent of your monthly income (all that you receive, be it salary, wage or gifts) transferred to savings or to a mutual fund account through a direct debit. Start small; you will be surprised how quickly this builds up. If you are more aggressive, you can push the savings up to 40% and live on 60%, especially when you are young and single.

In your 20's, you have the luxury of time. Even where you make mistakes, there is time to recover as your investment earnings grow over several years; this means that if you are consistent and disciplined, your savings will be able to grow significantly. Remember too, that this is the time to travel, pick up new skills, and have new experiences before you have larger responsibilities to take care of. Time is on your side; so enjoy it.

Start investing to meet your goals

Historically, the stock market has out-performed other types of investments over the long term, but it comes with some risks. If you don’t own any stock, the market continues to present an opportunity to purchase attractive stocks at decent prices. If you don’t have the time or expertise to select stocks and you have only a small sum of money to invest each month, a stock market mutual fund may be the ideal investment to meet your medium and long-term goals. Better still; put your money in real estate. Buy pieces of land within 20 km of cities or near upcoming towns (County HQRs) and speculate. In Kenya, nothing is paying better than this, and in fact real estate has made young millionaires than any other sector within the last decade. It is only difficult when you have not started, or at least, don't know what you want. But before investing in real estate, due diligence is necessary. 

Seek guidance and wise counsel of a trustworthy person who is already investing in the field you want, be it stocks, money market or real estate. However that does not underscore the importance of your own research and seeking knowledge in the field.

It may seem odd to talk about retirement when you have barely got started with work; naturally you are more concerned about your job and not the end of your working life which is decades away. As soon as you start work, you will be eligible to contribute to a Retirement Savings Account (“RSA”) through your Pension Fund Administrator (“PFA”) You have an edge if you start to invest regularly for retirement from now, and you have a better chance of building a significant nest egg with relatively little effort.

Accommodation is often a challenge. Even if you are fortunate enough to have a free roof over your head provided by your parents or other family members and friends, you can contribute to family expenses on items like utility bills. You can also set aside some of the money that you would have had to use for rent to build up equity towards getting a mortgage so that you can own your own home.

Earn your independence

It is the desire of every parent to ease the path for their children and most children will embrace this gladly. Whilst it’s nice to get a lot of help from your parents, don’t let it get in the way of your attaining financial success. Earn your independence and start to take charge of your financial life. Your parents provided you with an education; now you are no longer a child; your finances are your responsibility.

The habit of managing money is more important than the amount. It is not how much you earn that matters, it is how much you keep. The key to building a solid foundation for future financial security is to have a budget, save, invest regularly, and control your debt. The choices you make now, will largely determine how your life will be in the future.

We shall pick up from here in our next post. Please share a link of this blog to any young adult you know. FE might just be the answer they are looking for to shape their financial future.

Of inherited land and selling: Part 2

Continued from part 1

Alex is a smooth talker, no wonder he actually always had a way of convincing even the toughest of the fairer sex and of course his stint as a pastor gave him a chance to horn this attribute. Typical of him to first mention religious matters and keen to know how I was doing in that regard. After laying the base with the religious niceties he dropped the bombshell. Of course I knew of how he sold his inherited property, bought a cheaper plot, build the mabati house and squandered the rest. So when he narrated how he had this nice business idea that I buy a taxi, he runs it, grow the business into a fleet of taxis bla bla; it was never lost on me what he had gone through.

And so I asked him, “How comes you never thought of buying that Taxi with the cash you had after sale of the ½ acre plot?” He was quick to answer, “of course I had thought of that but opted to start the business of importing mitumbas which unfortunately never really kicked off and somehow the cash I had kept diminishing to a point where it dried up mysteriously” I knew I was in a scenario where I had to wriggle my way out because in all fairness I never felt that buying a taxi would amount to a worthwhile venture, not with him as the main guy. Actually, the idea of entrusting my good friend with a business having known his history was the last thing I’d entertain.

However, this was a friend in dire need of help and leaving him in that status would not be good. And so, I floated an idea to him that in my opinion seemed workable and practical. I told him of a housing development we were undertaking and that I’d recommend him to the Project Manager just to assist him source materials. Just to go round looking for the best deal for sand, ballast, quarry stones, cement and any other material the guy could get just for some small commissions. Interestingly, he accepted that idea and as we speak he is a broker sort of and doing just fine. At least he can feed and clothe his family and even educate the kids.

Whenever I speak to him he wishes he’d turn back the hands of time especially due to the lost time but at least he is now much more positive about his life and earns an honest living. He claims he’d can never sell anything he inherits as he is convinced that there is a curse on ‘that land’. Of course he hopes that there is more land to inherit form his mum but it may not be the case.

Someday I asked my old man the reason why anyone who sold inherited land around our village always squandered the cash. He told me that it had an interesting history around it. The land was acquired after the infamous Mau Mau war with the colonial masters. It claimed many lives and some people were maimed and all that. When our great grandfathers got the land, having been active fighters, they pronounced a curse on it; that it must never be sold outside the family and it must be passed on from generation to generation. Any sale had to be within the family. It is therefore the case that anyone who sells to anyone outside the family will therefore never help themselves. An interesting perspective but I opted not to engage my old man further on the matter.

Some very strange stories around my village regarding fellows who have sold inherited land. The funniest was this guy who sold the small piece he inherited. He called the villagers from all walks of life, bought them 5 goats, dug a big trench and jumped over it, leaving the villagers on the other side of the trench. The trench and the subsequent jumping was a symbol of him having the crossed the divide from poverty to riches. He waved the villagers bye and zoomed off into riches leaving them to enjoy the 5 goats to mark the big occasion. Sad part is that he left his family as well only to return back after 1 year having squandered all the cash. Of course he found the wife had already left and got married to someone else and moved on with her life. His only brother accepted him back and gave him some shelter….interestingly it was a story reminiscent of that prodigal son in the bible; I guess these things started way back. Pretty sad that they never learn from other's past experiences. Someone told me that this is tantamount to get bitten by a dog which is chained somewhere.

A friend of mine once told me that the reason these villager have failed to do anything worthwhile with the cash is the fact that they are not used to big money. Obviously if you are playing in the league of maximum ten thousands and all of a sudden you have a windfall of a million, the natural reaction is to assume that you are filthy rich. Most become very generous and get to shopping sprees, get away with some nice girls and assume life will always be like that. Certainly no big money remains big if all you are doing is spending; the net result is a shot back to reality and destitution which is much worse having come from the crest of a sinusoidal wave.

Let our people learn, that whatever you have worked hard for and is acquired through your own sweat, you can freely sell but what you acquired by way of inheritance, you need to pass on to the ones behind you.

Next we shall look at some business practices which are not so good that are attributable to business men who are seemingly doing well; think micromanagement (know when to let go), blowing your own horn as opposed to that of the team, leading as opposed to managing, amongst others.

Of inherited land and selling: Part 1

Guest post by Samuel G. Njenga

I met this friend and neighbor in a burial of my cousin in shags. He had requested for a meeting with me after the burial citing a very important issue he wanted us to discuss. I took him to the local shopping center and we got into a café, ordered tea and some mandazis. I was very eager to hear from this longtime friend of mine.

Alex has been a buddy of mine since we were kids. We were born the same year, grew up in shags together, played childhood games together and went to school together. I vividly remembered how he used to pass by our home early in the morning so that we head to primary school together, carrying our books in paper bags and carrying our food in those Kasuku boxes. Life was hard but we really enjoyed. Simple times and simple days when my biggest ambition was to become a pilot beyond schooling; of course I never became one, but I guess someday I’ll buy a helicopter and learn how to fly.

The Alex in front of me was a former shadow of himself; it seemed life had really harassed him. His was a life of extremes. In his later years of primary school he became a rebel child, beating up other kids and generally misbehaving. He later joined bad company and decided to pull out from school. His mum got so disappointed and kind of gave up on him, after all he never knew a father figure having lost his dad when he was barely two years of age. Alex later graduated into a village thief, stealing chicken and cows and whatever else he came across. Of course he was always being looked for by law enforcers due to his stupid acts of stealing. He survived several attempts to lynch him. After all, the villagers knew him and thought that he would reform at some point.

Things got worse when he started abusing hard drugs. This combined with his criminal tendencies finally landed him in jail where he stayed for four years. By then we had lost contact as I had left shags for my campus life and later got employed. After serving his term, he returned home only to find that the society had sort of rejected him. It was a frustrating life for him up to a point when he attempted to commit suicide. He however never succeeded and was rushed to hospital and survived. When I heard of his suicide attempt, I felt that I needed to do something and went looking out for him. I managed to convince him to join a rehab. Sure enough after several month of rehab he came out a totally changed person.

He started doing menial jobs and joined the church. Being a survivor, he grew in the church and eventually opened his own church. However, the church never lasted for long and it closed down around two years ago.

Alex’s father had left some 3 acre piece of land and the mother held it for sometimes till sometimes last year when she decided to subdivide the land and give each of his 6 sons a piece. My friend Alex got his share of ½ acre somewhere in the interior Kiambu. He is a man of many ideas and life having not gone as planned; he decided to sell his ½ acre. When I asked him why he made such a decision, his explanation was simple. He had planned to purchase some 1/8th acre in a not so prime location with the proceeds of the sale, and then build a mabati house with the balance and whatever remains; he’d start a small business. Sure enough, he bought the plot and built the mabati house. That is the last I heard of him till he started looking for me.

The guy I saw in front of me never looked like he ever came across ‘big money’. He held his chin and started his story. Of course the bug that has bitten so many of my village mates had finally bitten my friend. The last time I went to the village, I found like 70% of my immediate neighbours had sold the small plots and moved. So many new faces around our home area coz majority of the youthful guys have sold the small inherited plots in search of better life and dubious business ventures. So sad….that the story my good friend Alex used to give me of villagers who sold their land and messed up was about to unfold…that proverb about the firewood in the rack laughing at the firewood in the fire, without knowing that it is next in line???…some direct translation here.

Next post, I shall tell you what he told me and I felt like giving him a pin to pinch himself back to reality.

Retiring into the unknown: Part 3

They will give you a wheelbarrow after 30 years of loyal service

Continued from part 2

We all would want to live our sunset years at peace and enjoying the money hard earned during our more youthful years. Picture watching your grandsons and daughters grow and letting your sons and daughters live comfortably without having to bog them down with your needs. Sounds good but it is not always rosy for majority occasioned by very poor planning, if any planning at all. Majority of Kenyans become dependents at old age when poor health takes a toll on them and all they can do is reminisce of the good times, recount unfulfilled financial goals and blames it on their kids, after all they utilized all the money as you educated them, clothed them and provided food for them. Sounds logical to say that they are the ones who ensured you never got rich, mind you it is a God given responsibility to take care of them. The expectation of people with such a mentality is that when the kids do well, it is payback time and they must take care of you during old age. However, we all know that it is not always the case especially when your kids start to see you as a liability.

So what do we need to do to prepare well for retirement?

1.            Understand that the Pension that you shall get (if any) will be of minimal value by the time you receive it and it will only help you keep afloat. I know of a guy who was a provincial prisons commandant (quite a big post) and all he got as lump sum payment for pension was a mere 2M and he receives monthly pension of 20k after working for 30 years. For such a guy, having not invested or even built a family house, his idea was to go to shags and use to 2M to build a house and survive on the 20k monthly pension for recurrent expenditure…wow.. What I know is that by the time you receive your retirement package (many years down the line), the amount will have been eaten up by inflation such that the value will be so minimal, and you won’t believe it. So quit relying on this amount…it should only complement your other cash if at all you’ll wait to retire at 55 years.

2.            Big Mistake: You retire and assume that you shall start a business that will keep you busy and earn you some cash? At least we know from some earlier posts that 90% of businesses fail within their first 5 years….you need lady luck to smile at you to succeed in your first attempt on business at 55 years. Succeeding on this one is like the proverbial camel going through the eye of a needle story…unless you success is written high up in the stars (one in a million chance). So brother /sister, start doing business as early as you get a chance, in your early years you can afford to fall flat in your first attempts, dust yourself and rise up…after all business is not for the faint hearted.

3.           Don’t you underestimate the power of saving and investing and especially when you are young and have all the time in this world. Picture saving consistently 5k per month (very modest) for 20 years…..simple calculations add to 1.2M …now assume you save 5k per month for the first 5 years, 10k per month for the next 5yrs, 20k per month for the next 5 years and 30k per month for the last 5yrs…..adds up to 3.9M…

Suppose then you introduce the element of investing you savings above…even if you got a modest profit of 25% per annum on you investments …compounded…I don’t want to imagine how the figures would be….20M…30M..50M perhaps.

Surely, you must do something..be it stocks, unit trusts and Treasury Bills..whatever..but so something

4.            Remember how important it is to buy appreciating assets… I once bought a plot in Syokimau like 10yrs ago at 80k..back then there were wild animals. But where did the wild animals go to…Imagine if I bought like 6 plots at the same price. I hear the current price could be 1.5M…*6 = 9M ….sounds juicy.

Go to Maasai land….where you can get an acre at 30k and hold for 10 yrs. They might label you a speculator..whatever.. but it is the forces of demand and supply in our crazy world of real estate that makes you the money…fundamentals notwithstanding.

5.            If you are able, you might get to this level where you have some rental units. It is not so hard. Somewhere in your working life, you can afford to take a big loan, buy a nice plot somewhere. Even if it means doing a single unit per annum..for 15 years you’ll have 15 units each getting you a rent of 15k..and that means at the age of 55 and above, you’ll not need to go round your sons and daughters places with a begging bowl. Heck, you will even afford to have something they’ll inherit, small fights notwithstanding, and a few generations will remember you for your hard work. Occasionally, you will even afford to organize some get-togethers for your big family and you eat some goats. Tell those grandkids who will care to listen about how life was when you were young and how organized you were.

But look at it this way. You might get to level 5 above when you are 40 years of age. I don’t see why you should even continue working as most educated slaves do. Therein lies a smooth transition between employment life with its own challenges and an independent life where you can dictate your schedule. How sweet it is to get off the shackles of employment at around 40yrs…It is very possible only with proper planning and taking practical steps towards early retirement.

Life does not follow a straight path and am sure some of us are in our 20s, 30s, 40s and 50s. Most importantly, we need to prepare for our later years and you surely must be able to do something well in advance before the day of reckoning when they bid you goodbye and give you a wheelbarrow and some gumboots. After all, how many are even lucky to get there especially with downsizing of companies, retrenchments thereon, contractual jobs and general job insecurities all over….prepare for that rainy day because chances of it coming are much higher than you think.

We will now break for a while and resume our lessons in the new year. When we resume, we shall look at inherited land, selling the same and crazy repercussions. It is our sincere hope and desire that we shall learn and most importantly practice what we learn.

Merry Christmas and a happy, blessed New Year 2013 to all our readers and followers. You are blessed!