One of the biggest regrets that people have with their personal finances is:

"I have nothing to show for my 10-20 years of working despite earning a good income & even getting pay increments severally."

Why does this happen and why do so many people end up in this?👇 Let's start with why this regret happens:

1. Taking huge debts that overstretch your budget and take decades to settle.

2. Living paycheck to paycheck. Having a zero savings rate

3. Lifestyle creep. This is where an increase in income leads to a corresponding increase in lifestyle expenses

4. Black tax. Shouldering the burden of your family, relatives and friends

5. Lack of a long term financial plan.

7. Not budgeting your money. You don't intentionally tell your money where to go.

7. Financial illiteracy. Lacking knowledge on how to manage your personal finances

The most asked question in my DMs

"Let's say I have this amount of money, or I can manage to save this amount of money per month, how and where should I invest?"

This is financial planning 101

Here's the best answer to this👇👇 Once you have a decent income and you can manage to put aside some decent savings month on month,

You need a financial road map to guide you on where you should deploy your savings.

Here are 10 steps that you can follow to come up with your own financial road map.

As an investor, you have to make informed decisions that are backed up by data.

Here are my top 10 sources of data that help me understand financial markets in Kenya.

They also help me offer credible financial advice to my clients.

Steal them below👇👇 1. The SACCO Supervision report by SASRA.

Every year, the SACCOs Societies Regulatory Authority (SASRA) Publishes a report that summarizes how SACCOs are performing in the country.

This report will help you understand the SACCOs sector in Kenya and how SACCOs are run.

You can find the reports on SASRA's website

Here's a thread I did on this years report.
x.com/kahome_steve/s…

THREAD🧵

Money Market Funds(MMFs) in Kenya

What are MMFs? How do they Work?

What are the best MMFs in Kenya?

How can I join a MMF?

Let's find out below👇👇 1/ What is a Money Market Fund?

A Money Market Fund is a low risk investment mutual fund that invests in highly liquid, short term instruments.

Let's breakdown this complex definition.

Mutual fund - pooling money from different people
low risk - low probability of losing capital
highly liquid - can easily convert into cash
short term - mature in less than 18 months

Career paths have changed.

The Gig economy has produced freelancers, content creators, and other careers that have irregular and seasonal earnings.

Here's how to manage your personal finances with an irregular income👇👇 Managing an irregular income is hard because:

1. You don't know when you'll get paid.

As a freelancer, some clients take time to pay you after you have completed your task.

Some may take a month, three months, half a year or even a whole year to process an invoice and pay you for the job

When investors think of passive income in Kenya, they mainly settle for Real Estate's Rental income.

Before you take that loan to put up those rentals or buy that off plan house,

Here's why Real Estate may not be your best option for passive income in Kenya👇👇 1. Tax inefficiency:
Property owners in Kenya pay the following taxes:

a) Stamp duty - 4% of the property value

b) Capital Gains tax - 15% of the net gain

c) Land rates - For residential properties within Nairobi, unit owners are expected to pay a Property Tax of 0.115% of the property value

d) Rental Income tax - 7.5% of the gross rent received

e) VAT - Commercial buildings are subject to VAT.
VAT may also be levied on additional charges you may be required to pay along with your property purchase

f) Legal and registration fees: 1-3% of property value depending on your advocate

Almost every Kenyan investor is stuck with a plot somewhere that they are unable to liquidate.

The plots quickly turn into idle or dead assets with little financial gains

Here's why you should think twice before buying that kaploti:

1. Those plots don't generate any cashflows The piece of idle land will not generate any income for you.

Stocks generate dividend income, bonds pay semi annual coupons, real estate generates rental income.

But your kaploti will only take money from your pocket to pay land rates, maintain it, fence it...etc.

To make it worse, some people even take loans to buy idle assets. Double tragedy!

In Kenya people approach retirement planning in 3 main ways.

1. Individual pension plans(IPPs)
2. Personal investment portfolios
3. A hybrid of both

Here's how these 3 compare 👇👇 1. Individual pension plans (IPPs)

This is probably the most popular way.

You work with an insurance company or a fund manager regulated by the Retirements Benefit Authority (RBA) to offer retirement solutions.

You make a certain contribution per month, and they invest the money for you over the years until you reach your retirement age.

How do you invest in global stocks and ETFs?

You need to open a brokerage account that gives you access to global markets.

Here are the 5 options available for Kenyan investors and how they compare:

1. Interactive Brokers. Interactive brokers one is the biggest stock broker outside the U.S.

It is licensed and regulated in over 10 countries and was founded in 1978.

The company is also listed on the New York Stock Exchange.

10 Money rules that can help you simplify personal finance and investing decisions.

1. Rule of 72

Helps you estimate the number of years needed to double your money at a given annual rate of return For example if you have 10M invested, how long will it take you to double your money to 20M?

We assume a minimum required rate of return of 10% per annum

72 divided by 10 = 7.2yrs

Hence with a required rate of return of 10% per annum, it will take you 7.2yrs to double your money.

After we saw the poor performance of the T-bonds in a tap sale last week,

Moody's, a credit rating agency has downgraded Kenya's credit rating.

So what does this mean for Kenya and it's ability to meet it's financial obligations? Investors rely on rating agencies to examine the level of risk involved in lending money to a company or country.

Think of credit rating agencies as a body that keeps & updates the credit score(ability to repay debt) of corporations and governments.

Governments and corporations that are ranked lower have to pay an additional premium for the greater risk involved.

That's one of the reasons why U.S. treasuries have a return of about 5% while Kenyan bonds have a return of about 12%

It's more risker to lend to the government of Kenya that to lend to the U.S. government.

Taking a mortgage in Kenya ranks 1st in the 1,000 ways to kill your financial future.

While mortgages in most developed countries are regarded as good long term debt,

In Kenya, they are the exact opposite.

Here's why it makes no sense taking up a mortgage in Kenya Let's start with the basics:

Mortgages in the western world (let's use the U.S in this example) are highly encouraged and even regarded as good long term debt.

This is because the average mortgage is at 6% and the the benchmark asset (the S&P 500) has averaged a return of 9% per annum between 1957 - 2023

Hence it makes sense to go the mortgage route instead of paying 100% cash for your house.

It is cheap/affordable/good debt.

In 2023, Kenyans borrowed KES 2.3B daily on Fuliza.

Nowadays, debt has become so accessible with many digital lenders offering soft loans in just a few clicks.

Let's talk about Debt & debt management

A thread🧵 There are two kinds of debt

1. Good debt - Used to finance things that will increase in value over time

It may qualify to be called an investment

These include mortgages and student loans

90% of Kenyans save their money in the wrong saving avenues.

These include:

1. Banks' saving accounts
2. Banks fixed deposit accounts with low returns
3. Chamas that do merry go rounds
4. Mshwari Lock savings account

Instead of these, there is a better alternative👇 Where should you ideally save your money and what should you consider when choosing a saving avenue?

1. Security of your funds. You don't want to save your money in a place where there's a high likely hood of you losing your money.

2. Greater returns than inflation rate. The CBK has the normal inflation rate in Kenya at around 5%(plus or minus 2.5%)

Hence you want to save your money in an avenue where you can easily beat the inflation rate while exposing your money to very little risk.

Treasury bonds are a great asset for financial planning.

You can pay rent, earn a monthly income or settle any monthly expense from the returns of Treasury bonds.

Through bond laddering you can have a bond that pays passive income each and every month.

Here's the explanation: Treasury bonds is simply a financial asset where investors lend the government money for a promised rate of return on their capital.

Bonds have the following superior advantages:

1. Fixed and predictable returns

Once you buy a bond at a yield, say 15 per cent, the bond retains that return until it's maturity.

Meaning that you will get that 15% return per annum until the bond matures.

The life insurance penetration rate in Kenya is a worrying 1.3%

Many people consider life insurance a SCAM, a PRIVILIGE for the RICH or something that only OLD people should consider.

In this thread I answer the Most Frequently Asked Questions about Life Insurance

A Thread🧵 What is Life Insurance?

It is a contract between an insurance policy holder and an insurance company.

The insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured persona or after a set period.

One of the biggest regrets that people have with their personal finances is:

"I have nothing to show for my 10-20 years of working despite earning a good income and even getting promoted a couple of times."

Why does this happen and why do so many people end up in this?👇👇 Let's start with why this regret happens:

1. Living paycheck to paycheck. Having a zero savings rate

2. Lifestyle creep. This is where an increase in income leads to a corresponding increase in lifestyle expenses

3. Black tax. Shouldering the burden of your family, relatives and friends

4. Lack of a long term financial plan.

5. Financial illiteracy.

6. Taking huge debts that overstretch your budget and take decades to settle.

Instead of saving money in your bank's saving account, save in a Money Market Fund

Instead of using fixed income funds for long term investing, invest directly in T-bonds via CBK

Instead of using an education policy to save for your kid's education, combine a term life + an investment product like a MMF

Instead of relying entirely on Individual Pension Plans to secure your retirement, create your own personal portfolio as a backup.

Explanations below👇 1. Save in a Money Market Fund. Ignore banks' savings and fixed deposit accounts.

Here are the benefits:

1. Earn higher interest rates on your savings above the inflation rate.

2. You can withdraw your money any time you want without penalties unlike in your fixed deposit account.

3. Your money is still secure as MMFs invest in low risk assets meaning you can hardly lose your money

CBK floats bonds every month. That means there are a lot of bonds to invest in.

How do you decide which bond to invest in?

Here are some of the factors that you should consider:

1/ Type of bond.

Infrastructure bonds are tax free and very lucrative to investors. 2/ Type of sale.

You have more control over the price in a primary issuance than in a tap sale or a reopened bond where you may find yourself paying a discount price or a premium price.

3/ Maturity of the bond

This determines when you will get your principal back in case you hold your bond to maturity

Thread🧵

Life insurance is one of the key components of wealth protection.

It's also very key in wealth succession/estate planning.

Payouts are tax free & cannot be contested in court.

In this Thread we discuss the role of Life Insurance in wealth protection Let's start with the basics:

What if life Insurance?

It is a contract between an insurance policy holder and an insurance company,

Where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period.

Money Market Funds vs T-bills

A question that is often asked by many:

"Since MMFs mainly invest in T-bills, why can't I invest directly in T-bills and get the *full gross return* before management fee is deducted?"

Here is how MMFs compare to T-bills👇👇 Before we even talk about returns, a MMF has an edge over T-bills because of the following reasons:

1. Liquidity

With a MMF, you can access your money within 2 days of asking.

For T-bills you have to wait until the maturity of the paper since T-bills aren't traded in the secondary market like T-bonds.

Hence a MMF is more liquid than T-bills

Although T-bills have shorter tenors of 91 days to 365 days hence still score high on the liquidity rankings.