Passive income is money earned with minimal effort, often from investments or assets that generate consistent returns.

What can you earn from Sh 1M invested in different asset classes?

1️⃣ Infrastructure Bonds

Government-issued debt securities designed to raise funds for infrastructure projects such as roads, energy, water, and schools, often offering tax-free interest to attract investors.

✓Average return: 16.0%
✓Net return: Ksh 160,000

>> 2️⃣ Fixed Deposit

Bank savings accounts where a lump sum is deposited for a fixed term at a predetermined interest rate, offering higher returns compared to regular savings accounts.

✓Average return: 8.0% p.a
✓Net return: Ksh 68,000

>>

#SolutionSaturday

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Muturi is a 38 year-old accountant. He's married with 3 kids. He grew up in the potato county of Nyandarua in a poverty stricken household. He wore his first shoes when he joined form one at Baricho High School, where he buried himself in studies and aced out the KCSE exam. >> His love for numbers and the balance sheet saw him settle for a commerce degree in accounting. University was a new experience for him. He tapped knowledge like fish to water, with a bias for investments and wealth creation. >>

Many retirees are confronted with the reality of high inflation that eats into their savings, forcing them back to work or having to rely on their children.

At 60, energy levels have dwindled for any adrenaline pumping business. A Sh 3M lump sum payout should be invested in a laddered approach in a treasury bond for Sh 90K coupon payments every 2 months. >> SACCO savings circa Sh 2M will give annual dividends and interests of Sh 200K or thereabouts for a better quality of life.

Lumpsum payouts can also be used to purchase an annuity or income drawdown from reputable life insurance firms. >>

ZIIDI MMF by @SafaricomPLC is now admitting new users. A key takeaway from Mali MMF was "availability bias"

Frequent withdrawals for smaller expenses like hotel meals, or taxi isn't what an MMF is supposed to be. Such interrupts growth. MMF withdrawal should be thought out well. #ZIIDI MMF is a digital-first money market fund tailored for ease of access and simplicity. It offers a convenient way for MPESA users to grow their wealth through capital markets.

It allows users to invest small amounts starting from as low as Ksh 100 while earning competitive returns on a daily basis currently at 13.65% per annum. >>

As you approach your 40s, strategic financial planning becomes paramount for a secure future.

Here's a curated list of 1️⃣5️⃣ essential actions to undertake before hitting this significant life milestone:

1️⃣ Invest long-term:
Utilize your years of earning to invest in long-term instruments aligned with your financial goals. >> Overcome the initial intimidation by gradually aligning investments with future aspirations.

2️⃣ Clear debts:
Prioritize paying off education loans or any outstanding debts. Entering your forties debt-free not only lightens your financial burden but provides room for new commitments. >>

Building a low-risk portfolio on Sh 70K net salary:

As usual, we insist on 20% allocation to savings and investments, that's Sh 14,000.

~Put 9000 in an MMF
~Put 5000 in a SACCO BOSA

End of year 1:
MMF = 120,960 net average 12%
SACCO = 67,200 net average 12%
Total = 188,160

Move Sh 100,000 from MMF to T-bonds.

>> End of year 2:
MMF = 144,435
SACCO = 142,464
T-bond = 100,000 excluding 17,000 interests (transfer to MMF)
New MMF balance: 161,435

Total portfolio value: 403,899

End of year 3:
MMF: 216,378
SACCO: 226,759
T-bond: 200,000

Total portfolio value: 643,137

>>

Understanding #Savings

Savings is a greatly misunderstood aspect of personal finances. You've heard many say, "I'd rather invest than save" We shall break it down for easy understanding.

1️⃣ Rainy day kitty: Have a fund that's equal 6-12 months' worth of basic living expenses eg. rent, foodstuffs, electricity and water bills, fares, airtime or bundles, clothing etc. This kitty will save the day in case of a temporary job loss or a bad phase of business.

>> This money is best kept in a @CICGroupPLC money market fund account for the following advantages:

☑️ It earns interest daily.
☑️ It's accessible between 24-48 hours.
☑️ It's out of reach unlike a bank account.

>>

Say you got a million shillings and decide to diversify through the #NSE stock market. You research and pick the following stocks & sizes:

$BAT 500 @ 445 = 222.5K
$CARB 11K @ 12 = 132K
$KCB 5K @ 38.50 = 192.5K
$SBIC 1K @ 111 = 111K
$SCBK 1K @ 158 = 158K
$WTK 1K @ 164 = 164K

>> Assuming the boards of the companies above declare dividend payments as below, your dividend payouts for 2023 will be:

$BAT 500 @ 53.50 = 26750
$CARB 11K @ 1.70 = 18700
$KCB 5K @ 3 = 15000
$SBIC 1K @ 7 = 7000
$SCBK 1K @ 20 = 20K
$WTK 1K @ 20 = 20K

Total = Ksh 107,450

>>

The #Fourth Decade

Your 20s are carefree and you walk with a springy gait thinking the whole world worships you.

The 30s come with additional responsibilities - career & family - and figuring out how to juggle them.

Your 40s have a clearer direction of where you want to go. >> You realize that lessons learnt early in your youth must be implemented. You have a different level of risk appetite. You are conservative - can no longer stomach the roller coaster of speculative stocks or forex swings. Simple treasury bonds or fixed deposits are your thing. >>

Sometimes people get preoccupied looking for the most advanced strategies to build wealth.

In reality, doing the simple things consistently right will get you 90% of the way there.

Complex strategies like forex trading are just an icing on the cake. While interacting with budding wealth seekers, they wonder why I preach simplicity. You see, my methods are so simple that anyone can perfect.

But success in investment isn't just about duplicating strategies. Anyone would be wealthy like Buffet since his methods are very clear.

Let's do our finances differently in 2023. Financial independence is within your means. A little change of attitude towards money - an abundance mindset - even on moderate income should help you develop a healthy savings & investments habit. >> If you can spare Sh 20K p.m, allocate Sh 5K to your SACCO long term deposits, Sh 5K to a money market fund, Sh 10K to a bank account (to save up to Sh 50K for investment in GoK treasury bond).

From side hustles, spare Sh 4000 monthly to buy 100 shares of either KCB or NCBA. >>

James has Sh 300K he doesn't intend to use now until August for his wedding reception expenses. Jane, his bride-to-be, wants to use the cash to shop for the event clothing and engage a planner. The total cost amounts to Sh 1.2M and includes a honeymoon trip to the Seychelles. >> They hope to raise half the balance from friends and family. James has saved Sh 25K monthly from January '22 from his Sh 85K salary. He can raise another Sh 200K in the next 8 months. Jane will hold a bridal shower sometimes in June. >>

Family gatherings discuss everything else but finances. That uncle who took your certs & a badly written CV many years ago & went mute is no longer the richest among you. The renegade brother whom everyone loves to hate is richer. All are too proud to ask him how he did it. >> Nobody knows that sassy sister Suzzy owes her brand new Mazda to a Mubaba. Her salon business can't guarantee that, at least not now. Kimani is lost in thoughts suffering in private, thinking of the loan cash he lost to land scammers last month. His daughter Jeni sat her KCPE. >>

The moment you get a call from your bank that you qualify for a loan or top up, Murife run away and fast.

A loan is not the biblical manna from heaven. It is something that is tediously applied for on need basis. When you get an unsolicited loan offer, they are looking to... >> ...make a passive income source from you. Whether that loan will be to your advantage or disadvantage is none of their business as long as they are assured of you paying back.

If you didn't sit down, planned your finances & decided you needed a loan, don't accept any prompting.

Lifestyle creep is regressive.
nation.africa/kenya/life-and… LIFESTYLE CREEP 🧵

Lifestyle creep, also known as lifestyle inflation, is a phenomenon that occurs when, as an individual spends more resources on their standard of living, previous luxuries become seen as necessities. >>

Pursuing financial independence is not about hating your job & not wanting to work.

It’s about understanding the value of your time & wanting to spend it doing things that fulfill you.

The ability to design your life the way you want without worrying about having to make money. Your current job has the potential to set you free from the intricacies linked to it - waking up on alarm, suffocating corporate culture & longer working hours.

Use your financial literacy skills to build an impenetrable wealth creation machine from the many salaries you earn.

Many investors consider equity funds, balanced funds & money market funds as boring. They don't see "some action" on their portfolio apart from the monthly reflection of value or crediting of interests. When you don't see the moving parts of a system, you don't understand...

>>2 ...how it works. These funds are considered as "mattress" accounts for their relatively low return. What investors fail to appreciate is the transfer of RISK. You cannot have your cake & eat it.

Unlike direct stock investment where things tend to get a bit more exciting...

>>3

You become rich in your mind before you become rich in your bank account.

The first step to financial independence is to actually want it.

And believe it.

A guy sought help on stock market investing & joined our Masterclass in April. He shared his "starter" portfolio below ⤵️ You don't need a lot of cash to be an investor. A little amount invested monthly will grow your portfolio to levels you can't believe it's possible.

Even a Ksh 3000, 5000 or 10,000 stock portfolio will make you walk taller than most because you've set your eyes on the prize.

#SolutionSaturday

"What matters is what you keep, not what you earn" 🧵

We look at two cases.

1️⃣ John earns 300K per month.

2️⃣ Mary earns 50K a month.

John spends as follows: Mortgage & Car Loan: 150K. He saves 50K monthly in an FD earning 8% interest annually.

>>2 Mary spends up to 30K & is able to save 20K monthly.

Is John saving more compared to Mary? NO!

He only saves 16% while Mary saves 40%

John is a busy professional (an insurance executive) & has no time to actively manage his money. He leaves it to a fund manager.

>>3

#SolutionSaturday

Get Serious About Saving! 🧵

If you ever doubted the importance of saving, the #Covid19 pandemic made it clear just how necessary a financial cushion can be. Many people had trouble paying their bills since the pandemic began & couldn't build emergency...

>>2 ...savings by mid this year. That’s why we should get serious about saving - even if you think you are already in a comfortable financial position.

@TheAbojani often encourages people to follow a 50-30-20 rule when dividing up their take-home pay, with 50% of your income...

>>3