My name is Derrick. I am 25 years old. I am running a boda boda business and, so far, I have 8 bikes. However, I am broke daily. My cash flow is as follows:
Income: (300×8) per day for six days in a four-week month.
Loans: 4,072 weekly (11,500) monthly
Benjamin Cheruiyot, the Engagement Lead at Abojani Investments, a personal finance and investments advisory firm, says:
It is important that you do a trail of your daily earnings in order to have a proper estimate of the total monthly take-home.
Considering the nature of your earnings, chances of expenditures that are unaccounted for are very high.
Unless you have a disciplined view of finances, it is easy to spend impulsively on entertainment, items, eat outs and social concerns.
Your earnings indicate that you total an estimated Sh57,600 per month. It is, therefore, obvious that you should have sizeable savings as your expenses are about 70 per cent of your income.
I suppose the undisclosed expenses are food and shopping amounting to Sh11,000 monthly, which is reasonable.
Your total expenses being: Sh12,000 on rent, Sh11,500 on loan repayment, Sh3,900 on water, electricity, and Wi-Fi. Your daily savings of Sh800 amount to Sh19,200 monthly, based on the working days you have disclosed.
Your savings plan should be attached to a goal. Currently, it is foggy or undefined. That is the reason you still consume the savings in unaccounted-for expenses.
You should have a goal, like upgrading to a taxi by mid next year, or a matatu. Since you have not given details of what you have accumulated so far, it may not be easy to appraise your intended purchase.
However, you indicate that you spend nearly as soon as the money hits your account. One factor for this is easy access to these savings.
Savings on mobile phones are prone to unplanned use since you have easy access. You can deposit and withdraw at will.
A good savings avenue for you is a Sacco. This will help inculcate a habit that leads to a more optimistic outlook of your personal finances and at the same provide the chance for dividend earnings.
If you are able to save Sh10,200 monthly in the Sacco’s back-office savings (Bosa) account, you will be able to plan for medium-term goals like another business, or home ownership.
For example, you can accumulate Sh120,000 by June 2025, and borrow up to Sh600,000 for purchase of a plot.
Or you could accumulate Sh120,000 then borrow Sh600,000 for a second-hand but good-conditioned saloon car for taxi business.
With average net earnings of Sh1,500 a day from the taxi, you should be able to clear the Sacco loan in another four years at Sh17,000 monthly and use the balance to seek comfortable payments towards a plot outside town for your own house.
With a well thought-out plan and disciplined savings, you should be able to achieve your dreams within four years.
I would encourage you to approach a Sacco that can help you realise your dream. Going the shylock way is ill-advised due to the strict conditions they outline as they often prey on desperate, unsuspecting young people like you.
Whenever you consider expanding your fleet of motorbikes, it is important to read the small print in the package being offered to you.
This means checking what the actual interest rates are, what processing fees are, what penalties involved in case of late repayments.
At the same time, you might want to analyse the total amount of debt balance you have against your motorbikes.
How many are fully paid and how many are unpaid? Check the routes you have placed them on; which ones have high traffic and which ones are returning on investment made?
When you get to a situation where some bikes are constantly paying for the others, you might consider selling some to offset your pending debts while maximising output on the profitable routes. Quantity is not always profitable.
You may buy cereals in season and prepare food only once for two meals. Doing this will save you some money. Channel Sh9,000 into a money market fund as a buffer against uncertainties.
The daily interests also give you assurance of stealth growth and boosts your inner confidence, thus an optimistic view of life.
This will also accumulate to Sh57,000 by December 2024, or Sh120,000 by June 2025, at 12 per cent net annual interests.
Easy access to savings should not tempt you to withdraw at will. Take advantage of your current single status when you have very minimal responsibilities. It is not the plan that fails but failing to plan.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered on this column
