LAWI Enterprises

18/06/2019

10/05/2019

As you approach adulthood and start to think about your future, are you ready to be financially responsible for yourself? If you answered YES, congratulations, you’re ahead of the game! But if you answered NO, don’t worry, there’s still plenty of time to set yourself up for success.

Whether you’ve never stepped foot in a Sacco/bank or you are actively saving and investing for your future, all it takes is a little effort and a lot of patience to become confident in your financial decisions.

One awesome thing you can take advantage of is compound interest. It may sound like an intimidating term, but it won’t be once you know what it means. Here’s a little secret: Compound interest is A MILLIONAIRE’S BEST FRIEND. It’s really free money. Seriously!!!. But don’t take my word for it. Just check out this made up story of Tom and Jerry to understand the power of compound interest.

Tom and Jerry were friends who grew up together. They both knew they needed to start thinking about the future. At age 19, Jerry decided to invest Ksh 24,000 every year for 11 years (Contributing Ksh 2,000 per month). He picked investment funds / Sacco that averaged a 12% interest rate per annum. Then, at age 29, Jerry stopped putting money into his investments. So he put a total of Ksh. 264,000 into his investment funds.

Now Tom didn’t start investing until age 30. Just like Jerry, he did put Ksh 2,000 into his investment funds / Sacco every year until he turned 55. He got the same 12% interest rate as Jerry, but he invested for 26 years. So Tom invested a total of Ksh 624,000 over 26 years.

When both Tom and Jerry turned 55 the ideal age for retirement, they decided to compare their investment accounts. Who do you think had more? Jerry, with his total of Ksh 264,000 invested over 11 years, or Tom, who invested Ksh 624,000 over 26 years? Your guess is a good a mine Tom, eeh??????

Believe it or not, Jerry came out ahead . . . ksh 5,567,688.43 ahead! Tom had a total of Ksh 4,040,976.16 while Jerry had a total of Ksh 9,608,664.59.

How did he do it?
Starting early is the key. He put in less money but started 11 years earlier. That’s compound interest for you! It turns Ksh 264,000 into almost Ksh 9.7 million! Since Jerry invested earlier, the interest kicked in sooner.

What You Can Do Now
The trick is to start as soon as possible. Talk to your financial advisor about how to open a long-term investment account so you can become a millionaire, too. And remember, waiting just means you make less money in the end. So get moving Unangoja nini!!!

08/04/2019

One of the greatest sources of stress for living human beings, Industries and Governments today is debt. Debt, which ought to be an enabler, has suddenly become a pain for many; especially those who view debts as a short avenue of getting cash. The love for money and shortcuts has made many people in the modern society to forget the difference between earning and borrowing. The dangers of this myopic view continue to be felt by many who have plunged into the sea of bad debts. In fact, many have gotten an addiction to debt; always wanting to borrow at the slightest provocation to ease pressure here and there. Talk of treatment by infection!

In the last article, I talked about the importance of considering why you need to borrow and why you must borrow. Indeed both powerful and tragic decisions in the world of debts are made on account of the purpose for borrowing. I gave the analogy of debts being like loaded guns; the direction they are pointed, determines how powerful or destroyed the gun bearers become. Those who borrow for the right reasons continue to leverage on the power of debt and keep scaling the progressive heights; those who do it for the wrong reasons have continued to scratch the hair off their heads due to pressure from lenders. In today’s Talk is on one of the most cited reasons by borrowers when borrowing – “Emergencies”.

Emergencies are unforeseen situations that pose immediate risk to one’s health, property, relationships, life and general environment. In most cases, they require urgent intervention to mitigate the risks thereof or to reduce chances of a situation worsening. Most life puzzles have a financial implication one way or the other. Emergencies present such puzzles and a good number of them require money to be addressed.

Take for instance a person who injures her leg while working on the farm back at the village and is bleeding profusely. She needs urgent medical attention and the need for money begins to come up. The taxi/ambulance to transport her to the nearest health facility requires money and so is the medical bill if she does not have an insurance plan. When natural calamities such as floods strike, the situation is the same and money is usually required to sort out/prevent damages courtesy of the floods. So is the case for many other emergencies.

In most cases, when these emergencies strike, people are caught flat footed, matters money. Due to the urgent nature of emergencies, people find it necessary to borrow money from friends and family as well as other financial entities.

What I have found interesting are those who cite emergencies as the reason for borrowing when actually, they have no emergency on their hands. Many borrowers have referred to rent, shopping, fuel, farm inputs and school fees as emergencies. This is misleading! Even though the lender will advance you the funds on account of emergencies, the real damage of the debt falls on you. One key characteristic of emergencies is their unforeseen nature. We all know when house rent will fall due, when shopping and fuel are likely to be depleted. Likewise, when we have children or ourselves in school, it has never been rocket science that school fees will fall due when schools reopen or a new academic calendar/semester begins. The same is the case for farm inputs. Referring to these reasons as emergencies is farfetched.

I’m not by any stretch of imagination insinuating that you should never borrow to pay rent, to go for shopping, to buy fuel or farm inputs or to pay school fees. All these things may be important. However, maturity is the day you come to terms with the reality that all these reasons can be foreseen and something done about them to mitigate against the likelihood of incurring costs and debts to finance them. Many people have plunged into the sea of bad debts because they created many emergencies around them to justify borrowing. Suddenly, everything in their life became an emergency including repayment of existing debts! If you can prevent incurring costs associated with debts, why not?

Plan for your foreseen expenses in advance, have a savings plan, consider education and health policies, invest to widen and deepen your income streams. When you do these and look for ways of creating an extra coin, you begin to reduce the number of future emergencies that are not real emergencies. Even when the actual emergencies come, they find you better prepared and you stand a better chance of avoiding to incur debt related costs. Be wise….

KEY POINTS:
• Difference between earning and borrowing
• Considering why you need to borrow and why you must borrow.
• Plan for your foreseen expenses (i.e have a savings plan, Insurance policies).
• Look for ways of creating an extra coin.

Kindly like our page for more of this.

07/04/2019

TIMELY BORROWING

Have you ever borrowed money to address a need only for the money to be given to you when the need is no longer there? Have you borrowed to purchase a piece of land only for the loan to be ready when the land is already taken?…Or to purchase fertilizer only for the money to be released when the planting season is over. Maybe you needed to take advantage of a slump in the share prices of a listed company and invest in it but the money came when the share prices had already risen. Maybe you saw a car being sold at a throw away price and rushed to your lender only for the processing to take so long that the money was given to you when the car had already been sold or the seller had changed his mind. All these are scenarios that face many borrowers. I’m tempted to ask; what did you do with that money?

For many borrowers, this position does not seem dangerous until things get out of hand. Many are delighted that at least they have the money and that the loan was not declined. One of the most dangerous things in the world of money is to have money without a plan; it is worse when the money is borrowed. It is advisable never to trust anyone, including yourself with money whose purpose is not defined.

The thing is this; we all can budget for money, any amount! If I gave you a million bob, you will not fail to get what to do with it, will you? So is the case for ten millions and so on. This human tendency is what makes it risky to have borrowed money whose purpose has been overtaken by events. But, just how dangerous can it get? Borrowed money often comes at a cost; if it’s a bank loan, the interest starts counting from the day of disbursement and the other upfront charges are already incurred. Within a short span of time, many of such borrowers have found justifications to spend the money on other ‘well deserving’ needs. In most cases, such needs are consumer based…Or will you go without food when your account is loaded? After all, how much will food consume from a whole chunk of loan money? Before long, they realize that what was once a chunk of money is no more!

Money is like that. For many people who lack the discipline required, availability of the money in their accounts relaxes their efforts of making money and accelerates their need generation; they create more spending ideas. Once the money is done, the reality of loan repayment sets in and begins to erode their spending power. To maintain the former living standards, such people inevitably resort to short term borrowing which is expensive and addictive. Salary advance and shylock books begin to bear their names. They get trapped! I have been there before and a good number of my clients trace their debt trap to such scenarios.

So, what to do? Prevention is always better. At all costs avoid getting yourself in such scenarios. Before borrowing, it is important to consider your lenders Turn Around Time (TAT). This is the time it takes from when one makes the application to when one gets the money. The nature of your need should dictate the nature of facility to borrow; if the need is urgent, the solution should also be urgent. Always ask about how long the process will take and give a reasonable allowance of time. If the TAT is longer than the need period, do not borrow! Most borrowers ask about their ability and swing into the paperwork only to be frustrated by the waiting period.

If you find yourself in such a case, your survival depends solely on your financial intelligence. If you are lucky to have another pending and well analyzed opportunity that can utilize the money and bring returns that make sense, then you can utilize the money in that manner. Seeking for help from wealth creation gurus might help but time is an important factor to consider. Converting such money to subsistence use is catastrophic. For those who are not properly exposed to financial intelligence, you are better off returning the money and bearing the small costs than risk facing the impending debt trap.