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Investment Guide: Secure Your Financial Life, One Coin at a Time

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A very close friend of mine always reminds me of how his first human resource manager contributed to his current financial mess.

Management analysts have rammed it several times that the human capital is the vital cog in the wheel of entrepreneurial growth, expansion and success.

It is so appalling that my friend was never taught how to manage money at the initial stages of his financial services career. Money was just dumped into his account every 22nd of the month without a single word or warning against wastage and plunder of that vital ingredient to successful living.

Today, he boasts a shrinking payslip and a bloated outstanding loan balance, thanks to his first human resource manager.

“At least I have a roof over my head, I do not have to evade real estate agents calls every end month, I can move from one base to another without being rained on or having to share a seat with a marauding pickpocket,” he says.

Besides having the luxury of a car and a house with the assistance of lending institutions, my friend is worried stiff about his child’s schooling and his fast advancing retirement age. Reason? His career has run out of gas. Efficient management of the little traces of gas in his payslip is also required.

Steps to building your wealth

There are steps to build your wealth again if you are in a similar situation or in the early stages of your career.

The most important step is limiting debt levels. Avoid too much entertainment, travel, or holiday in between the year that will strain your shrinking net pay. Track and seal the leaking holes in your budget.

A diplomatic request to your HR to raise your net pay by a certain margin would go a long way. Look out also for new areas where the grass is greener.

There are some job switches that attract lower pay due to the size and volume of clients that your new employer handles. You could rent out the car and house and squeeze yourself into a middle-income settlement.

This move will increase the rental income that gets into your bank account hence easing out your loan repayments.

If you are in the early stages of your career, you are at a better position to build an enormous cash estate and wealth portfolio because of the ample time and knowledge available to you.

First, you ought to know that life insurance is the foundation of all investments that you will ever acquire. Should calamities like death, disability, injury while at work or travel, critical illness occur to your life, an insurer will undertake to pay for any hospital costs incurred when you are incapacitated. This way, investments that you build with your net pay in the proceeding steps will be left unscathed.

Next open a account to save an amount equivalent to your six months net pay to cater for future emergencies should a job loss or retrenchment come your way.

After building enough reserves in your savings account now you can have the confidence of shopping around for stocks at the Nairobi Securities Exchange (NSE). The trick is to invest in well-managed companies with solid growth strategies and efficient levels of reserves. Banks are rated as the best-listed stocks to pick because of their strict financial monitoring and control policies.

Pick stocks every year for five years during the last quarter of every year when markets are depressed (Oct-Nov-and-Dec) and hold them as assets to be liquidated in retirement. Remember to separate from the investment fund money to cater for basic bills and little entertainment.

On the sixth year of your career with the same expenditure on basic bills one could confidently draw up a lump sum cheque to a preferred fund manager to purchase a unit trust. The trick is to stay there as long as you can be able to raise enough capital for real estate business. At this point, if kids have not yet knocked in one could still be surviving on Ksh30,000 to cater for normal day to day activities.

With the prospects of increased salary hikes, one could save for a project closely linked to your area of study. At this stage, groups of young doctors could set up a fund to start up a clinic then a hospital. Auditors can have an eye on the unaudited market.

When the kids come, education plans could come in handy should your funds still be tied up in investments. In this case, insurers will undertake to pay for your child’s school fees in exchange for small premiums. That way your wealth does not reduce just because school fees have to be paid for. The idea is to maintain or grow your wealth levels exponentially with time.

And the cycle continues. Since more money is still coming, your money machine is growing. You add more bank savings, more stocks, more unit trusts, more real estate, but it is not easy. It can only happen if you value seeing the numbers grow. But remember, the floor of all investments is an insurance plan.

Insurance as a defence

A story is told of an employee working with a reputable organization who had her son hospitalised due to an injury sustained in a road accident. It was unfortunate that the doctors were struggling to save the young man’s life despite the first-rate medical facilities in the hospital she had booked her son in.

The lady was billed a total of Ksh3 million and the double tragedy was that she ended up losing her son. Having exhausted the cover limit provided by her employer, she was extended a loan of Ksh2 million that she pays up to date. The impact of this is that it affected her net pay and to continue maintaining her earlier lifestyle she was forced to deplete her bank savings, sell off her stocks of shares and land.

A family medical package and a personal accident cover would have just come in handy. Procrastination did it all. Anything could happen between when you ask for time to think about an insurance investment and the time you actually sign up for the plans.

The insurance plans will not take away the emotional loss one feels but it does lessen the financial burden and helps you carry on your life without financial difficulties.

The happening of one calamity can bring down even a stable enterprise, especially when reserves have to be touched or assets sold off to pay for bills. The message cannot be clearer.

Read >> Why the president needs a HR adviser

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MAINA GACHANJAHhttp://www.businesstoday.co.ke
Maina Gachanjah is a Marketing Consultant at Juhudi Investments Consultancy. Email: [email protected]
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