Find us on Google+ My Sensible Cent: October 2013

Thursday, October 31, 2013

The KNBS Must be Wrong on Reporting a Reduced Cost of Living

I really love statistics, especially when it  "shows" that: "The cost of living, in Nairobi Kenya, in the month of October dropped 6.4 per cent compared to September."

Whether or not the Kenya National Bureau of Statistics 'cooked' the figures is an argument for another day. The least convincing, however, is the reasons for the said reduction in cost of living.

KNBS say notable reductgions in the prices of kerosene, electricity, and cooking gas contributed to the change. Seriously?

“During the month, housing, water, electricity, and other fuel index declined by 0.16 per cent over the same review period,” said Zachary Mwangi, acting Director General, KNBS.

KNBS further observes that although forex adjustment charges increased from Sh1.39 to sh1.46 per Kwh (I really do not know what that mean), fuel cost adjustment charges on the other hand decreased from sh5.43 to 5.18 Kwh of electricity consumed.

For them, “This led to slightly lower cost of electricity in October 2013 compared to September 2013,”.

During the month, they say, transport index decreased marginally by 0.05 per cent mainly due to reduced prices of petrol and diesel.
Now I wouldn't argue about the reduction in transport, as I am yet to own a car. But for public transport comuters like us, the change in transport may only be attributed to luck.
The reduction in prices of gas and electricity is the joke of 2013. After the Government/treasury slapped the whole nation with a VAT on almost anything, what shocked me most was the sharp increase in gas and electricity prices.
In September, I refilled my 6kg gas cylinder at  ksh.1150. Come October, i was forced to part with 1350 for the same amount of gas. If thats a price reduction, then a pitty my primary maths teacher.
Again in September, I paid ksh. 630 for 44.9 units of electricity while in October, 2013, i paid ksh. 650 for 38.8 units of electricity.
My message to statisticians, you can cheat me on matters politics or relationships but when it come to money, it pains.
I now understand why so many people lost faith in pollsters who projected a landslide victory for then PM, Raila Odinga, only for him to be floored UhuruRutu alliance in the first round.

Tuesday, October 29, 2013

The 5 Golden Steps of Personal Finance

There are numerous words, phrases and quotes associated with personal finance, including investment options,  saving, budgeting, bonds, IRAs, loans, mortgages, refinancing, shares, credit score, debt, social security, mutual funds,  stocks, stock market, bond market, financial goals, portfolio balancing, insurance, interest rates and enterprenuership. Which is the reason most of us have trouble understanding personal finance.

I think futher complicating this important issue beyond our understanding, is one of the reason most of us languish in poverty and debt.

That said, if you really want take control of your finances and  manage your money better, you need to be familiar with these terms.

I know, it sounds scary and crazy, but believe me it is not as complex as you have been made to think, if you can remember this equation:

Make More  Money+ Spend Less + Save as Much as You Can = Better Money Management

In this post, I would like to make your financial management easy to understand and undertake. And to be honest, I think it’s fairly easy to understand what personal finance  is once you put aside all the big words the so called gurus and financial advisors throw at you.

Financial Planning

Now, whether your aim is to increase your net worth, become debt free, retire early, payoff  college loans or credit cards, or simply to better your money management skillsy, you need an action plan.
Personal finance planning comes down to 5 steps. Get them right and you are golden.

1. Assessing Your Financial Situation. First, you need to sit down and figure out your financial situation, how much you earn, how much debt you have, what is your expenditure, how much you have managed tsaved up etc. You can employ a software to do that, or you can do it the old fashion way using pen and paper. It doesn’t really matter how you do it, the important thing is that you do it.

2. Setting Up Your Financial Goals . Just like all other areas of life, financial goals will help keep you on track. The goals can be short term, medium term or long term. For a biginner, I would start with very small and achievable goals that can be accomplished fast. Reaching short term goals are easier and helps boost  your confidence, giving you more motivation to keep going for the long run. A short term goal, for example, can be saving money to pay off a small credit card loan.

3. Creating a Financial Plan. The plan is simply your road map for achieving the goals set up in step 2. It's your  blue print, your guide. It doesn’t have to be complex. Simply write down what you need to do in order to reach each of your goals. For instance, if you owe $600 on the credit card you are trying to payoff, and you want to pay it off in 12 weeks time, you will need to save $50 weekly.

4. Taking Action. You can plan until the cows come home, but if you don’t act, your dreams are not going to be realised.  The most important part here is discipline. You must be committed if you want to accomplish your goals. Following our previous example, you would, come what may, put  aside $50 every week so you can pay off that credit card in 12 weeks time.

5. Monitoring & Changing the Plan if Necessary.Your car unexpectedly breaks down and it will cost you a $2000 to fix it, your working hours get cut down, life is hectic and no matter how much you plan, unexpected things will happen and you will have to deal with them. Now, you can either allow it ruin your plan, or you can simply re-examine your financial situation and make necessary adjustments so you can proceed. Nonetheless, if you want to reach your financial goals, you need the second choice.

Where to From Here?

Start by browsing, use our page links to find specific topics of your interest. You will find advice, tips, and step by step guides on everything from ways to make that extra cash, save for and on everything life throws at you, becoming debt free, insurance credit cards, early retirement and much more.

Read, learn and act. That is a sure way you are going to get your personal finance in order and become a better manager of your money.

9 Ideas on How to Succeed in Business

Architect John Kithaka began his journey in business immediately after high school at age 18. A small farming venture in his rural Kenyan hometown with US$70 as capital from pocket money his parents gave him, built his foundation in business. Today, at 40, Kithaka is the CEO and founding member of the Fountain Enterprise Programme (FEP) Group of Companies.

The group, made up of 18,000 Kenyan shareholders, has made investments in 14 companies worth $18.3 million in the financial, media, hospitality and education sectors. Despite running several successful ventures while in university and immediately after graduation, Kithaka established FEP out of a “burning desire to create a club of tomorrow’s billionaires”.

Kithaka draws a lot of inspiration from his profession as an architect, insisting that he never invests in anything until he has laid a solid and unshakeable foundation. He also must have a picture in mind of what the end project will look like and whether it will be sustainable several generations down the line.

Speaking to How we made it in Africa’s Dinfin Mulupi, the charismatic entrepreneur shared his advice to other entrepreneurs on how to be a success and maybe even a billionaire.

1.Think entrepreneurial: In an era where young people aspire to be wealthy and live in the fast lane, Kithaka advised that there is only one way to get there: through entrepreneurship. “We need people who don’t think of just being a pilot but also owning the plane; owning banks not just being bankers; and owning the hospital instead of becoming just doctors,” he said.

2. Do not go it alone: The FEP Group has 18,000 shareholders and expectations of being worth hundreds of billions (Kenyan shillings) by 2016 when its businesses mature. Kithaka argued that one of the biggest mistakes African entrepreneurs do is “going it alone”, a culture he said needs to change. “Billionaires never have a business called ‘mine’. Are you in cooperation with others such that you can get out and that business will run smoothly?” Kithaka said entrepreneurs should tap the power of many and engage positively with each other. “Great minds don’t compete, great minds pull together,” he added.

John Kithaka, CEO FE

3. Seize opportunities: The world’s most successful people, whether in business or politics, have made it because they recognised opportunities only few could see and turned challenges into breakthroughs. Kithaka recalled that while he was at university, the government announced that food prices at the university cafeteria would be increased. “I knew for sure, students would not be able to afford the food. I saw an opportunity glaring. When schools reopened, I transferred a kiosk I had in Nairobi town and brought it to the main campus to offer students alternative food. That was the beginning of my breakthrough. That was a real opportunity,” he said.

4. Work smart: “From mathematics I know, no man can make himself a billionaire by working hard,” said Kithaka. “It is only by working smart that you get there. You would need to own companies that make billions,” he explained. Everywhere in the world, Kithaka said, it is the poor who work very hard and very long hours looking for money in the wrong places.

5. Get into business early: Since his passion has always been in entrepreneurship, when he joined university, Kithaka had to make a choice between getting a first class (equivalent to an A) or coming out rich. “I was very sure I did not want to be an employee and therefore I was not keen on getting a first class. I did business while I was in school, bought a car and even registered my own architectural firm two years before graduation,” he recalled. By the time he graduated, his architectural firm had a good reputation and work experience and he was well on his way to establishing the FEP Group.

6. Invest in sustainable ideas: According to Kithaka, if you can’t see your business or wealth 70 years from now, then there is a problem. “You need wisdom in what you are doing such that 70 years from now you will have a solid base. In your mind, you should make sure that your business will not collapse in your old age.”

7. Be committed: It sounds like a cliché but Kithaka argues that his success was inspired by a vow he made, and stuck with, before turning 18. In his last year of high school, Kithaka promised his father that he would never ask for pocket money again. “It was a commitment that I would look for my own money. This was an inner drive. I did business and by the time I joined university 18 months later, I had three years worth of school fees,” said Kithaka.

8. Put your money to work: Kithaka noted entrepreneurs should go looking for ideas, not money. According to him, the poor look for money and take it to the bank where it will be safe, while the rich see the bank as the place to borrow money. “People don’t have money problems, they have idea problems. All you need is an idea and you will go to the bank and they will give you money,” he added.

9. Think long-term: When Kithaka started calling people in 2007 to invest in FEP and gave them an idea of what the group would achieve by 2016, it was only those who could see nine years ahead that invested.

“Wisdom goes for visionary people and visionaries are those people who see [further] than others can. You either see it or you don’t. A true investor understands tomorrow,” said Kithaka.

[Courtesy - How we made it In Africa]