Set SMARTER financial goals which do not need just to be SMART (Specific, Measurable, Achievable, Realistic and Time-bound) but should be SMARTER whereby ‘E’ stands for Evaluation and ‘R’ for Results.
My name is Johnstone. I am single. I am a boda boda rider based in Migori Town. On average, I save Sh500 every day after my daily expenses. I also earn Sh6,400 every month from transporting school children. I use Sh6,000 to pay Chama every month as a merry-go-round contribution. The Chama offers table banking loans that are 3X one’s shares. Currently, my shares stand at Sh12,000. I am also currently installing a vertical vegetable garden on a 50X50 plot I have leased to help boost my income. And I have a debt of Sh20,000. Kindly guide me on how to plan and invest the money I make so that I achieve financial stability, acquire an asset, and get business capital within the next 10 to 20 years.
Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money
Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money. Photo | Pool
Your saving habit is admirable and will go a long way in helping you achieve your financial goals over time. To plan and invest your money prudently, you need to adopt three fundamental strategies.
1.Tracking your money: Try to account for every shilling you earn and spend. You are not clear on how much you earn in a month save for the money you get from transporting children because it is paid once monthly. You need to have a clear record of how much goes into various expenses. Once you learn how to track your money, you will not only account for every shilling but also reduce unnecessary wastage.
2. Set SMARTER financial goals: The goals do not need just to be SMART (Specific, Measurable, Achievable, Realistic and Time-bound) but should be SMARTER whereby ‘E’ stands for Evaluation and ‘R’ for Results. Short-term goals (3 – 12 months), medium-term (2 – 5 years) and long-term (5 years and above). These will allow you to specify how much you need to earn, save, and invest within a given period. For example, you may write your goals as follows:
i). “I’ll set up a vegetable garden on my 50 by 50 plot using Sh20,000 loan from my Chama by the end of 2022.”
ii). “I’ll expand the agribusiness by leasing an additional plot using extra income/savings from my business in 2023.
iii). “In five years, I’ll expand my agribusiness by buying a plot and diversify my business by rearing chicken for commercial purposes.”
2.Diversify your investment: Besides the agribusiness, you can channel your savings to a Money Market Fund which will act as your emergency fund to cushion you against the unexpected. For example, your daily savings of Sh500 will total Sh15,000 a month and accumulate to Sh180,000 in a year, Sh376,200 in two years and Sh590,058 in three years at 9.0 per cent per year. To reap optimum benefits, you need to save consistently without sporadic withdrawals.
Learn about other profitable asset classes such as government securities and stocks that can earn you passive income as you work hard on your agribusiness and transit from being a boda boda rider.
The merry-go-round aspect of your Chama is not very helpful as the money does not grow in any way. Instead of only saving in a Chama, you can scan a number of Saccos in Migori town that support SMEs and channel the Sh6,000 used for the Chama merry-go-round. In a year, you will have accumulated Sh72,000 and Sh216,000 in three years. The Sacco deposits will act as collateral that guarantees a loan three times your total deposits and earns lucrative dividends at a minimum of 10 percent. The dividends can be plowed back for more gains. BY DAILY NATION