A very close friend of mine always reminds me of how his first human resource manager contributed to the current financial mess he is in. Management analysts have rammed it in severally 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 ATM 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 of 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 pick pocket.” He quips. 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. This is to mean it needs more gas inorder to move. Efficient management of the little traces of gas in his payslip is also required.
There are steps to build your wealth again if you are in a similar situation or are just in your early stages of your new career. The most important step is putting a cap(limit) on the current debt levels that you maintain. This will enable you work towards clearing the existing debt first. Avoid too much entertainment,travel, or holiday in between the year that will put a strain on your already shrinking net pay. Track the leaking holes in your budget that make it hard for you to decipher on a Monday morning where your money was spent during the weekend.
A diplomatic request to your HR to raise your net pay by a certain margin would save the day. Look out also for new lands where the grass is greener(not yellow). There are some job switches that attract lower pay due to the size and volume of clients that your new employer handles. You could lease out or rent out the car and house and squeeze yourself into a middle income settlement. This move will increase rental income that gets into your bank account hence easing out your bank loan repayments.
Are you still in the early stages of your career? You are at a vantage point to build an enormous cash estate and wealth portfolio because of the ample time and knowledge in your hands at this stage. This is what you could do.
First and foremost, you ought to know that life insurance is the floor of all investments that you will ever acquire. Reason being that, 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 during that period when one is incapacitated and unable to take part in gainful employment. This way, all investments that you build with your net pay in the proceeding steps will be left unscathed.
The next thing that one should acquire is a bank savings account to save for 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 bank savings account now you can have the confidence of shopping around for stocks in the NSE. The trick of the day here is to invest in well managed companies having solid growth strategies and efficient levels of company reserves. Banks are rated as the best listed stocks to pick because of their 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 December and hold them assets to be liquidated in retirement. Remember to seperate from the investment fund money to cater for basic bills and little entertainment. Again there is no point of having assets yet you cannot get to work and back or put meals on the table or vent out some stress over some chosen weekends.
On the sixth year of your career with the same expenditure on basic bills one could confidently draw up a lumpsum cheque to a preferred fund manager to purchase a unit trust. The trick is to stay here as long as you can be 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 kshs 30000 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. At this stage auditors could be having one eye on the unaudited market. When kids do come in, 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 education has 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 units, but it is not easy. It can only happen if you value seeing the numbers grow. But remember that the floor of all investments is an insurance plan. A story goes of an employee working with a reputable organization who had her son hospitalized 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 KES 3Million 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 KES 2Million that she pays upto 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 she had initially aqcuired. A family medical package and a personal accident cover would have just come in handy. Procrastination did it all. Anything could happen between the time you ask for to think about an insurance investment and the time you actually sign for the plans. The insurance plans will not take away the emotional loss one feels but it does lessen th financial burden on your shoulders 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 come out clearer than that.