Friday, December 05, 2014

Let's talk personal finance- Part 1

When i read my blog these days, I feel disconnected from it as much of my experiences then were those of a carefree young 20 year old something with a lot of insecurities. For this reason, i was unable to keep updating the blog but then my blog has to take some new turn that of my 25- now years. I have changed a lot, made a lot of mistakes, lost friendships, made new friends, loved and lost. I hope to catch up on lost time of not blogging on my life as i should have.

Something interesting happens once you leave school and start working; independence. Independence means freedom and freedom has responsibilities. When I was in school, my parents catered for all my expenses, monitored my friends, monitored my activities and were generally responsible for your living.

After school, those responsibilities shifted to me. I was very happy with the freedom but freedom comes at a cost; always. Be prepared.

Anyway, let's go to the topic of the day, finances

I got my first permanent job when i was about 25 years old. My starting salary was not enviable, but still decent for the kind of pay, i hear people getting these days.

I am now self employed and I would like to share a few tips for how i got to where I am and survived the first year of not being permanently employed. I am not rich, but again, i depend on myself for a living.

What i should have done/not done:

Joining A SACCO
I did not join a SACCO when i first started working. A SACCO works to pull resources together and gives you ability to borrow at least 3 times of your savings. While most SACCO members are joined together by something common, these days there are SACCOs that accept general membership. Members guarantee each other loans.

Joining a SACCO immediately one gets a job can have many advantages. If i was only contributing Kshs. 10,000 each year for the 7 years that i was working, I  would have been able to save at least Kshs. 840,000 and i would have been able to borrow Kshs. 2.52 Million (3 times of my savings). That amount is sans the interest that SACCOs typically give of between 5-12%..

The other advantage is that you cannot withdraw this money whimsically, the process of withdrawing your money may take even 3 months! The person who mentored me into joining a SACCO advised me to put part of my bonuses in the SACCO to make for lost time. I would refer you to this blog article if you are interested in learning more about SACCOs

Word of advice; If you are newly employed, join a SACCO.

Not taking advantage of business opportunities

A lot of business opportunities have come up during the time that i have been employed. The most important of them I think I would have benefited is the MPESA agency business. MPESA is about 6 years old now, i was working when the agencies were rolling out and Safaricom was looking for agencies. I should have done my research about the agency business, i could have accessed funds through my payslip and I didn't. Those, who did are now reaping great benefits as MPESA continues to rely on its agencies for deposits/withdrawal. I am sure, Safaricom will continue to us its agencies and distribution network for rolling out new products in the market.

Buying a car

I bought my first car in 2009 (2 years after employment) and it has been a great lesson for me. First, the car i bought was an 1800cc. The car would turnout to be costly, for a city that has serious traffic. Any car that is more than 1500 cc tends to be a fuel guzzler especially in Nairobi where there is a traffic problem. On a normal week, I was spending about Kshs. 4,000 from Monday to Friday, add weekend and i easily spent Kshs. 20,000 a month on fuel.

With the salary I was earning at that time, I should not have bought a car at that point or  I should have bought a car that was 1300 cc.

I also did not learn about car maintenance and therefore ended up paying for it dearly. At one instance, my car radiator burst and i had to replace it. All this because i did not know about car maintenance.

What i should have done was seek guidance from people who had owned cars before on the right car to buy and also on maintenance. Unfortunately, most of the mechanics we have in Kenya are quacks and will take every opportunity to give you wrong advice or sell you the wrong kind of spare parts. There are genuine shops especially in Industrial Area, buy your stuff there.

Also, I was very liberal with who drove my car. As long as you knew how to drive, had a driving license, you could drive my car. Big mistake. Not everyone who knows how to drive a car, should touch it. Infact, my personal rule now, is that I am the only person that drives my car. Reason being, most people will not take care of your car as you do and you can never know when went wrong. When things go wrong, you are on your own.

I will write about the things I have done well with my finances and other lessons i have learnt in Part 11.