How to make your salary work hard for you

In Summary
SOME THINGS TO CONSIDER
  • Having full financial freedom has to do with personal financial planning.
  • Figuring out where your money is going is the first step towards taking control of it.
  • If overspending is an issue, figure out which categories to reduce spending and plan to start paying off credit cards
  • Put the money into income generating assets, since assets earn you money and liability burns your money
  • The rich don’t accumulate cash. They accumulate assets that generate cash flow for them

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When most people think about future careers to choose, they are always tempted to focus only on the potential salary they can earn. Most believe a decent salary gives one financial freedom.
Definitely, a big income always helps, doesn’t it? Having the money to pay all your monthly bills and going for those luxurious vacations tells all about your personal financial situation.
The reality, though, is that having a big income is not always the key to a secure financial future. As we found out, people have different definitions of what financial freedom means to them. Most believe it allows them to live comfortably.
But majority think financial freedom means earning a big salary and being able to afford such things as lavish vacations, expensive cars, boats, expensive clothes, jewelry, or luxurious homes.
To some, financial freedom is having an extra income, adding to their present income so as to boost their financial status. They search daily for low-risk, high-return investments, hoping to fall into a fantastic deal that will put them into a higher financial bracket.
Philip (he allowed us to use only his first name) works as a banker in the city earning around Sh150,000 monthly, but says the salary is not enough to sustain him, which is why he decided to operate a matatu business.
“If my salary was around Sh500,000, I would not be interested in getting an extra income elsewhere. I think it would have been enough. But I need more money to sustain my family and to settle my monthly bills.
I need to work hard to live a comfortable life,” he says during the interview with Money.
The banker says his current salary cannot guarantee him financial freedom.
“I pay for my children’s school fees and I am repaying a car loan I took last year. I also depend on the same salary to pay for the house rent and to settle other bills. It is just not enough, I think I need more cash and a better salary to satisfy my needs.” Financial freedom is impossible to achieve with the current economic hardships,” he adds.
According to experts, the road to financial freedom is private and personal. They say one cannot rely on someone or something else to pave the way for their financial security.
“Unless you are committed to setting and keeping your financial goals, there is no salary, no matter the figure, that will give you financial freedom,’ says Mr Paul Muhami, a Nairobi-based financial consultant.
He adds that obstacles like fear of failure, laziness, negativism, bad spending habits, and lack of emotional and financial intelligence can block one’s path to financial success.
“This is why it is easy to argue that someone who is earning Sh7,000 is living a less stressful life than the one who takes home more than Sh700,000. The former is used to living a simple lifestyle, and can be able to cope and save part of the little salary he earns, aiming to start some income generating activity.
However, the latter is likely to be in big debt. For poor financial planners, big salaries always attract more debt and most high income earners spend their working careers repaying loans and other debts,” he says.
Mr Manyara Kirago of First Independent advisors and author of ‘How to become a Lifelong financial Success’, says earning a big salary can give one full financial freedom, if he or she sets their goals right.
“I have five clients who only depend on their monthly paychecks while each has a net-worth of over Sh100 million. Having full financial freedom has to do with personal financial planning. Figuring out where your money is going is the first step towards taking control of it.
With a monthly paycheck, the limit to your spending is listed in black ink. It would be better if spending was below that number,” he says.
According to Mr Kirago, majority of those who earn big salaries (like members of Parliament) always tend to spend a lot of money and eventually put themselves into a big trap of debts.
“In the world of finance, there is a saying that expenses rise to meet income. And this could be true when studying how most well-paid employees spend their huge cash.
The more they earn, the more the needs and since the money they make is not enough to satisfy all their needs, they end up borrowing bad loans from banks, which take them years to repay, hence more deductions in their pay slips.”
He adds that many of those who always complain of not having enough money are those who earn big salaries but fail to manage them properly.
“It should be understood that there is no budget or spending plan set in stone.

Safaricom cleared to join Equity bank patent case

In Summary
The model widens bank’s client base
  • On average, 5,000 clients sign up for the service every day, a report released by Renaissance Capital says.
  • Through the integration of the bank’s network of over 80 branches with 17,500 M-Pesa agents, Equity is expected to increase its presence in rural areas with limited access to financial services.
  • M-Kesho enables individuals to withdraw money from their bank accounts through their mobile phone handsets.
  • The service also allows Equity customers to deposit money into their accounts through Safaricom’s M-Pesa agents.
  • It was launched in May.

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Safaricom Ltd was Wednesday enjoined in a suit filed by a businessman who has taken Equity Bank to court over the M-Kesho banking concept.
And although businessman Hoswell Mbugua Njuguna opposed the move, Mr Justice Leonard Njagi said the country’s largest mobile phone operator had been adversely mentioned in the case.
The judge said in a ruling that Safaricom was reasonably an interested party and should therefore be enjoined in the suit for its input to be taken into consideration.
He quoted a demand letter written by Mr Njuguna to Equity saying the fact that he copied it to Safaricom’s chief executive officer, Mr Michael Joseph, was enough evidence of the partnership between Equity and Safaricom in the banking product.
Through his lawyer, Mr Duncan Anzala, Mr Njuguna said he had sued Equity Bank and not Safaricom, over alleged breach of confidence. He argued that it was better for the matter to be heard without Safaricom’s involvement.
The case, which was slated for hearing Wednesday, could not proceed after Equity’s lawyer George Sichangi said he needed time to file his reply because he had been instructed to handle the matter on Tuesday.
Equally, Safaricom, through Mr John Ohanga, said it needed time to file its response.
Mr Njuguna accuses Equity of breaching confidential information shared with two of its agents on a concept similar to M-Kesho.
Claiming that M-Kesho features contain most of the details of his concept known as Weka Usaidike, Mr Njuguna alleges that it was wrong for the bank to use the confidential information to enrich itself.
In a sworn statement, Mr Njuguna says he confided the information to Anne Kinuthia and Eric Karobia on August 10, 2006 in a bid to secure an agreement.
However, the talks ended without a deal. He says he was shocked when Equity and Safaricom rolled out their product with features similar to his creation.
Since the product was launched in May, the bank is said to have opened over 600,000 accounts.
M-Kesho customers deposit and withdraw money through their mobile phones. The bank has also introduced sheds and centres throughout the country for handling its operations instead of traditional bank facilities.
Customers also use Safaricom’s M-Pesa service to deposit and withdraw money from their bank account.
Other than stopping the bank from further use of the said information, Mr Njuguna will also be asking the court to order an inquiry on the damages for the breach of confidence.
The case will be heard on September 30.

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STARTING A BUSINESS: THE IDEA PHASE

You know you want to start a business, but what do you do next? Here's how to find the perfect idea for your business.

Many people believe starting a business is a mysterious process. They know they want to start a business, but they don't know the first steps to take. In this chapter, you're going to find out how to get an idea for a business--how you figure out exactly what it is you want to do and then how to take action on it.

But before we get started, let's clear up one point: People always wonder if this is a good time to start their business idea. The fact is, there's really never a bad time to launch a business. It's obvious why it's smart to launch in strong economic times. People have money and are looking for ways to spend it. But launching in tough or uncertain economic times can be just as smart. If you do your homework, presumably there's a need for the business you're starting. Because many people are reluctant to launch in tough times, your new business has a better chance of getting noticed. And, depending on your idea, in a down economy there is often equipment (or even entire businesses!) for sale at bargain prices.

Everyone has his or her own roadblock, something that prevents them from taking that crucial first step. Most people are afraid to start; they may fear the unknown or failure, or even success. Others find starting something overwhelming in the mistaken belief they have to start from scratch. They think they have to come up with something that no one has ever done before--a new invention, a unique service. In other words, they think they have to reinvent the wheel.

But unless you're a technological genius--another Bill Gates or Steve Jobs--trying to reinvent the wheel is a big waste of time. For most people starting a business, the issue should not be coming up with something so unique that no one has ever heard of it but instead answering the questions: "How can I improve on this?" or "Can I do this better or differently from the other guy doing it over there?" Or simply, "Is there market share not being served that makes room for another business in this category?"

Get the Juices Flowing
How do you start the idea process? First, take out a sheet of paper and across the top write "Things About Me." List five to seven things about yourself--things you like to do or that you're really good at, personal things (we'll get to your work life in a minute). Your list might include: "I'm really good with people, I love kids, I love to read, I love computers, I love numbers, I'm good at coming up with marketing concepts, I'm a problem solver." Just write down whatever comes to your mind; it doesn't need to make sense. Once you have your list, number the items down one side of the paper.

On the other side of the paper, list things that you don't think you're good at or you don't like to do. Maybe you're really good at marketing concepts, but you don't like to meet people or you're really not that fond of kids or you don't like to do public speaking or you don't want to travel. Don't overthink it; just write down your thoughts. When you're finished, ask yourself: "If there were three to five products or services that would make my personal life better, what would they be?" This is your personal life as a man, woman, father, husband, mother, wife, parent, grandparent--whatever your situation may be. Determine what products or services would make your life easier or happier, make you more productive or efficient, or simply give you more time.

Next, ask yourself the same question about your business life. Examine what you like and dislike about your work life as well as what traits people like and dislike about you. Finally, ask yourself why you're seeking to start a business in the first place. Then, when you're done, look for a pattern to emerge (i.e., whether there's a need for a business doing one of the things you like or are good at).

They Delivered
Here's a business startup story that's a great example of seeing a need and filling it. Entrepreneur magazine is located in Irvine, California, a planned community. Many years ago, there weren't many fast-food restaurants in the business area. Most were across town, where the neighborhoods were. Two young men in Irvine found this lunch situation very frustrating. There weren't many affordable choices. Sure, there were some food courts located in strip centers, but the parking lots were really small and the wait was horrendous.

One day, as they were lamenting their lunch problem, one of them said, "Wouldn't it be great if we could get some good food delivered?" The proverbial light bulb went on! Then they did what many people don't do--they did something about their idea. Coincidentally, they purchased one of Entrepreneur's business startup guides and started a restaurant delivery business.

To date, their business has served more than 15 million people! It's neither a complicated business nor an original one. Their competition has gotten stiffer, and yet they're doing phenomenally well. And it all began because they listened to their own frustrations and decided to do something about them. Little did they know that research cites the shrinking lunch hour as one of the biggest complaints by American workers. Some only get 30 minutes, making it nearly impossible to get out, get lunch and get back on time. So while these young entrepreneurs initially thought they were responding to a personal need in their local area, they actually struck a universal chord.

That is one way to get ideas--listening to your own (or your co-workers', family's or neighbors') frustrations. The opportunities are all there; you just need to search them out. If your brain is always set in idea mode, then many ideas may come from just looking around or reading. For instance, if you had read an article about the shrinking lunch hour, and if you were thinking entrepreneurially, you would say "Wow, maybe there's an opportunity there for me to do something. I should start researching it."

Inspiring Moments
Inspiration can be anywhere. Here's another classic startup story: Ever get charged a fee for returning a video late? Bet you didn't do anything about it. Well, when Reed Hastings got a whopping $40 late charge, instead of getting mad, he got inspired. Hastings wondered "How come movie rentals don't work like a health club, where, whether you use it a lot or a little, you get charged the same?" From this thought, Netflix.com, an online DVD rental service, was born. From its start in 1999, Netflix has grown into a big business with revenues topping $1.3 billion.

Getting an idea can be as simple as keeping your eyes peeled for the latest hot businesses; they crop up all the time. Many local entrepreneurs made tons of money bringing the Starbucks coffeehouse concept to their hometowns and then expanding from there. Take Minneapolis-based Caribou Coffee. The founders had what they describe as an "aha moment" in 1990, and two years later launched what is now the nation's second-largest company-owned gourmet coffeehouse chain. Other coffee entrepreneurs have chosen to stay local.

And don't overlook the tried and true. Hot businesses often go through cycles. Take gardening. For the last few years gardening products and supplies have been all the rage, but you wouldn't consider gardening a 21st century business.

In other words, you can take any idea and customize it to the times and your community. Add your own creativity to any concept. In fact, customizing a concept isn't a choice; it's a necessity if you want your business to be successful. You can't just take an idea, plop it down and say "OK, this is it." Outside of a McDonald's, Subway or other major franchise concept, there are very few businesses that work with a one-size-fits-all approach.

One of the best ways to determine whether your idea will succeed in your community is to talk to people you know. If it's a business idea, talk to co-workers and colleagues. Run personal ideas by your family or neighbors. Don't be afraid of people stealing your idea. It's just not likely. Just discuss the general concept; you don't need to spill all the details.

Just Do It!
Hopefully by now, the process of determining what business is right for you has at least been somewhat demystified. Understand that business startup isn't rocket science. No, it isn't easy to begin a business, but it's not as complicated or as scary as many people think, either. It's a step-by-step, common-sense procedure. So take it a step at a time. First step: Figure out what you want to do. Once you have the idea, talk to people to find out what they think. Ask "Would you buy and/or use this, and how much would you pay?"

Understand that many people around you won't encourage you (some will even discourage you) to pursue your entrepreneurial journey. Some will tell you they have your best interests at heart; they just want you to see the reality of the situation. Some will envy your courage; others will resent you for having the guts to actually do something. You can't allow these naysayers to dissuade you, to stop your journey before it even begins.

In fact, once you get an idea for a business, what's the most important trait you need as an entrepreneur? Perseverance. When you set out to launch your business, you'll be told "no" more times than you've ever been told before. You can't take it personally; you've got to get beyond the "no" and move on to the next person--because eventually, you're going to get to a "yes."

One of the most common warnings you'll hear is about the risk. Everyone will tell you it's risky to start your own business. Sure, starting a business is risky, but what in life isn't? Plus, there's a difference between foolish risks and calculated ones. If you carefully consider what you're doing, get help when you need it, and never stop asking questions, you can mitigate your risk.

You can't allow the specter of risk to stop you from going forward. Ask yourself "What am I really risking?" And assess the risk. What are you giving up? What will you lose if things don't work out? Don't risk what you can't afford. Don't risk your home, your family or your health. Ask yourself "If this doesn't work, will I be worse off than I am now?" If all you have to lose is some time, energy and money, then the risk is likely worth it.

Determining what you want to do is only the first step. You've still got a lot of homework to do, a lot of research in front of you.

HOW TO START A BUSINESS FROM SCRATCH

Are you driven to create the new business that you have been thinking about or are you just bored with your job and think that a new business will be less work?

Okay, so you have a great idea for a business start-up, but how far are you willing to go to make that idea for your new business into a money maker as opposed to a dream?

There are many questions that you have to ask yourself when you decide to Start your own business. You have to be totally committed to the idea and willing to work through any problems. If you think that your startup small business is going to be easy, think again. It is difficult, but rewarding at the same time. You have to be prepared to meet any and all challenges that lie ahead or your business will not be a success.

When you have your own small business, expect to work hard and long hours to get your business going. You will be on your own, without anyone holding your hand along the way. The profit that you expect to make may very well be in the future as most businesses do not turn a profit in the first year. But, if you are strong willed and determined to succeed in your business, you will be successful.

Running your own business start-up is not only financially rewarding, but personally gratifying. You are working for yourself, to make yourself rich instead of working to make someone else money. Those who are the most successful in the United States are those who have an entrepreneurial spirit. There is an old saying – “You never get rich working for someone else.” This is true. If you want to be truly successful, you have to have the gut to start up your own business, but be prepared to take on the challenges as well as reap the rewards.

Commitment is key to being successful in your own business. Before you start looking for business finance, be sure that you are totally committed to success. You need to be committed and passionate about your business idea and be willing to give it most of your time. You should start a business that you love, that you will want to continue to work on because you believe in the idea and the need for the business. Remember – if you are doing something that you like, you will never really work a day in your life. Those who succeed in their own business love the business that they are in and enjoy the work that it takes to build the business idea into reality.

Before you start your own business, ask yourself these questions:

  • - Can you put in the time it will take to make your business successful?
  • - Are you able to take on the challenges of a new business?
  • - Do you have people who will stand behind you with your new business, such as family and friends?
  • - Take this short quiz to see if you are the entrepreneurial type.
  • - Get a hold of potential clients or customers and talk about the business to determine their interest.
  • - Do a marketing study such as offering sample products or services on a trial basis to see the general interest in your business. .
  • - Research your competitor’s businesses so that you can better understand your own business prospects – learn their strengths and weaknesses and see how you
    can capitalize on strengths and eliminate the weaknesses in your own business.

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