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Things You Need to Know Before Investing in Bitcoin

By
Irene Makanga
-
0

Bitcoin continues to gain momentum among investors globally,  despite the fact that the warnings signs keep getting louder. 

What is Bitcoin?

Bitcoin, trading as BTC, is the first decentralized currency, built with digital coins that you can send through the internet. Decentralized means that there are no middlemen i.e. banks or governments, the coin isn’t subject to any regulation or tied to any specific country.

Bitcoin was introduced back in 2009 by the mysterious Satoshi Nakamoto. Since then, its value has been rising and now has a current market capitalization exceeding $100 Billion.

How Bitcoin Works (Under the Hood)

At the forefront, bitcoin is merely like a computer program or mobile app that provides a personal digital wallet that enables users to send and receive bitcoins. Under the hood, bitcoin is a digital currency and hence exists only in a cyberspace network, made up of users and miners. Users can make various transactions online while miners verify and protect the integrity of the system.  The bitcoin network is essentially the sharing of public ledgers called “Block Chain”. These ledgers contain all the transactions ever made, allowing all miners to verify the validity of the transactions made by the users. The authenticity of these transactions is protected by a digital signature made from a cryptographic function in your wallet.

Once the transaction orders are sent out, they are places in a blockchain in chronological order to be confirmed/verified. This process of verification of the authenticity of the transactions entails checking whether the transaction order fits the strict conformity of the cryptographic rules of the bitcoin system. The verification is basically distributed to all miners and a consensus must be made to confirm awaiting transaction orders/instructions in within the blockchain. Therefore, the integrity of the entire blockchain is protected enforced by cryptography.

Source: Quora

Bitcoins are created by Miners, who use computers to solve mathematical functions (bitcoin transaction orders). Using computer power of specialized hardware miners are able to process transactions and secure the network in exchange for new bitcoins.

 These new bitcoins are created at a fixed rate making, the bitcoin mining business very competitive.

Bitcoin is owned by bitcoin users and hence the entire bitcoin network has no specific owner.

Is Bitcoin a Good Investment?

Before we delve into whether bitcoin is a good investment or not, first let’s understand what constitutes a good investment and see how bitcoin measures up against these standards:

Long-term viability. An invest has to appreciate and remain valuable over time to be considered viable in the present day. Most investors do not buy assets that do not have a long-term viability as most of the money made in investments comes from value appreciation. Bitcoin is no different. However, the jury is still out to determine the future of bitcoin; even so, bitcoin has made it 9 years strong amidst speculation of its collapse. The future still seems bright but be wary.

Market Capitalization is just a complex way to say the total dollar value of the coin in the market. It is used to compare the true value of one asset against another within a large market. Bitcoin has a very high market capitalization, without any comparison, we can only conclude that there is a lot of invested interest in bitcoin –  over 100 billion worth.

Good Statistics. Do price trends and other statistics of the bitcoin look promising? Just like the way we can invest in companies with great branding and vision but, if they are not profitable, the price isn’t right or management isn’t at its best – then, you would literally be throwing your money into a sink-hole. Market transparency is important to ensure good statistics are available to traders. The one thing that bitcoin prides in, is transparency.

Easy to understand the business model. Businesses and investment products run simple. This means that they are stable and have a good growth curve behind them as they do not require a lot of learning to grow. In investments, complex models are a sign of fraud, to obscure the investor from the false foundation on which they are built. Bitcoin model is different from traditional investments but it’s simple to understand….you get the idea.

How to Acquire Bitcoins

There are only three ways to acquire bitcoins: mining, buying on an exchange or having someone transfer them to you.

Mining

Miners acquire new bitcoin in exchange for their services of processing transactions and securing the bitcoin network. Mining entails the use of the computing power of specialized hardware which can be quite expensive. As more miners enter the business, the mining business becomes more competitive as miners need to reduce their operating costs to make a profit.

Unfortunately, the expected number of bitcoins to exist is limited to 21 million. This number hasn’t been achieved yet but the creation of bitcoins has been decreasing at a predictable rate – each year the number produced has been halved. In the future, since miners cannot acquire new bitcoins for their service, miners will then exclusively be supported by small transaction fees for their services.

Buy on an Exchange

You can buy bitcoin from an exchange, in the same manner, you can buy any other currency. To pick an exchange, here are some of the factors you will need to consider:

  • Trustworthiness of the exchange. You will need an exchange that does what it says and provides transparent data of coins in cold storage.
  • Compatibility in exchange. What do you have to exchange for bitcoins i.e. KSH, USD, Euro or any other fiat currencies will determine what exchange you choose to use.
  • Security of exchange. Although the bitcoin network has remained secure, many peripheral bitcoin businesses have been hacked. Therefore you need to find a secure exchange to deal with. A good role of thumb is never to leave more coin online than you are prepared to lose because anything can happen.

Below are the top best exchanges of 2017 where you can buy bitcoin and other cryptocurrencies:

  • Coinbase (Since 2012) – This US-based firm offers mobile wallet, offline storage and insurance protection for currency stores on its servers. They have bitcoin, Ethereum, and Litecoin for trade. Coinbase has 1% flat fee for each purchase while all deposits and withdrawals are done without a fee.
  • LocalBitcoins – This is an amazing site that allows people from different countries to trade in local currency. Yes, even in Kenyan shillings. 
  • Coinmama (Since 2013)- Allows money deposits through MoneyGram and the Western Union. This exchange sadly has very high exchange rates.
  • CEX.IO (Since 2013) – Another amazing platform that accepts various forms of payment such as card payments, bank transfers, and crypto capital.
  • Changelly (Since 2016) – Changelly has a wide variety of cryptocurrencies including Monero, Dash, ByteCoin and many more. It also has a mining platform MinerGate, that provides merged mining pools for Windows, Mac, Android and Linus operating systems.  Exchange fees are at 0.5% on transactions.
  • Cryptopia (Since 2014) – Cryptopia has a very low transaction fee of 0.2% per transaction.
  • Bittrex – If you are looking for very fast execution of orders, great security, and stable wallets – this is the website for you.

A few more mentions:

Transfers

You can have someone transfer bitcoins to you as a gift or a payment for service or product.

How to Buy Bitcoin in Kenya

Here is a short summary of the process you will go through to buy and store your bitcoins:

  1. Load your MasterCard/Visa Card/M-Pesa (depending on the platform you are using) with the amount that you want to invest.
  2. Open an account with an exchange of your choice – select the most reliable and secure exchange.
  3. Verify – using ID or any other document requirement the exchange might ask for.
  4. Deposit money into the account you have created with your exchange.
  5. Buy the bitcoin units corresponding to the amount you have in your account.
  6. Get a digital wallet to store your bitcoins.
  7. Transfer your bitcoins from your exchange account to your wallet for storage.

Owing Bitcoin

Bitcoins need to be stored in a “digital wallet” which exists in a cloud or on your computer. It works like a bank account that allows you to send or receive bitcoins, pay for goods or save your coins. It comes with a mathematic key which allows you to create a signature like the one you use on your bankers’ cheques. Each time you make a transaction, the transaction message is fed into a cryptographic function (mathematical key) that creates a unique signature. This signature cannot be copied or reversed because it’s a product of a mathematical function i.e. f(12345)= ?, cannot be reversed to f(?) = 48951.  The receiver of the funds will check the authenticity of the signature to verify the sender.  This system is built on numbers hence the anonymity.

Is Bitcoin Investment Guaranteed?

Just like life, there are no guaranteed investments unless you have serious backing for your investments. There is no such thing as quick money either. Everything is a true test of patience and therefore if you want to start, better start now.

The factors of demand and supply dictate the price of bitcoin and as such, market violability will affect it. Bitcoin has the potential to reach $100,000 in a few years.

Bitcoin (USD) Price

Source: Coindesk

As you can see, bitcoin currently trades a little under $8,000, from about $800, a year ago.

So the real question is, can bitcoin become worthless?

The answer is a big YES! Looking back into history, there have been instances where currencies have failed and no longer been used. For instance, we now have the Zimbabwean dollar and previously there was the German Mark. As you know, these currencies failed because of hyperinflation, which is an impossible problem for bitcoin since the amount of bitcoin in the digital world cannot surpass 21 million bitcoins. However, there is a risk of technical failure, competing currencies, political issues, economic failure and much more.

A Word of Advice

  1. Get data first. Understand bitcoin or any other cryptocurrency before investing and know how it works.
  2. Avoid participating in Initial Coin Offerings (ICOs), particularly the much-publicized ones. They are follies.
  3. Open your account at an exchange and buy your coin of choice such as bitcoin, Ethereum, Neo, Ripple, Litecoin, EOS – whatever tickles your fancy.
  4. Don’t join scam outfits like BitClub Network, BitClub Advantage, Yota etc. These groups advocate that you go through a sponsor or referral. Don’t buy into their bullshit – they capitalize on your ignorance.
  5. Never give money to anyone to buy bitcoin for you through any so-called affiliate.
  6. Beware of collapsing cryptocurrencies such as Ethererum. “Collapse” here means, plunging 50% within a short time and Ethereum has collapsed 52% in four weeks, in the recent past.

Cryptocurrency Tsunami Sirens

The enormous swings in the cryptocurrency world by all indication is a bad sign but not all too different from the other over-hyped investments. The only difference here is that many of us are ignoring the tsunami-sized danger sirens that should make us rethink investing in some of these coins, if at all any of them.

The cryptocurrency market is different from other markets as there are no market makers and liquidity evaporates when selling starts. Therefore, this translates to large amounts of wealth being created every day and disappearing the next. All this happening in the shortest time frame at much higher percentages than other much-hyped traditional investments.

The hope that drives this market as investors seek to recover previous losses puts into question, what will the future of cryptocurrency be like!

Final Words

The price of bitcoin is rising rapidly every day, making it a great investment option for young investors. The average investor usually holds their bitcoin until the value is 30x its initial before selling. Therefore, it is important to buy bitcoin with great understanding and purpose to get the most out it just like you do with any other investment.

Most bitcoin owners are waiting for the day that bitcoin will become mainstream but the older generation remain skeptical of it and believe it will collapse. There is no currency in the world backed or not, that is 100% safe from failure or the effects of hard times. Therefore, it is hard to predict the future of bitcoin but there is always the possibility of the crush of the technology that created bitcoin, provided that big banks and big governments do not crush first.

As for now, bitcoin remains and continues to grow every day attracting millions of investors. Enthusiasts continue to champion it as the future of money, while seasoned investors continue to maintain a healthy dose of skepticism. The bottom line here is the decision lies with you – whether or not it’s worth the wager.

How badly do you want in on a piece of this action?

Further Reading:

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How to Build Wealth Rapidly

By
Irene Makanga
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0

To build wealth fast, we need to spend less and earn more. 

Many of us are seeking ways to amass wealth fast and hence always trying to find ways to take shortcuts to success. Disobeying the law of things’ development, only ends up in disaster as told in the Chinese idiom helping the shoots grow by pulling them upward.

It comes from a story of a farmer who was sick and tired of waiting for his rice shoots to grow. At the height of his anxiety and impatience, he devised a brilliant quick method to help his rice shoots sprout. The next day the farmer worked hard from morning to dusk, pulling each rice shoot from the ground. Needless to say, all his crops died in his haste to help them along and wasted a potentially good harvest.

Building wealth is the same. Once the seeds are planted, it takes time to watch them grow to a substantial size. Our lack of patience is one of the reasons we never achieve our financial goals as it makes us easier prey for fraudsters, investment bubbles and all types of schemes. In the end, we lose everything.

Nonetheless, we can still build wealth fast but it requires work. You will need many seeds and a lot of fertile ground to watch your seeds grow fast.

So how can you build wealth real quick? Not microwave quick, but fast. Let’s take a look.

No. 1 Strategy to Build Wealth

Great wealth builders have always focused on saving more money and earning more money. Earning more money ensures that they increased their income-expense gap and thus accumulated more wealth. Saving more money entailed reducing expenses to the bare minimum i.e. not buying crap or taking out loans for things that don’t produce wealth. Ultimately, higher earnings and lower expenses meant more money saved and invested each time.

Since building wealth is synonymous to investing. You cannot escape learning about personal finance and investing. Don’t be intimidated by it or afraid; despite the wild market rides it isn’t complicated. Just start small, use the conventional options and work your way up.

Here’s what you need to do in a snapshot:

 

“A man is rich whose income is larger than his expenses, and he is poor if his expenses are greater than his income.” – Jean de La Bruyère, Les Caractères

Saving More Money

Great savers save 20% – 50% of their income – the more you make, the more you can save. 50% may seem extreme for many of us, but it’s doable. According to Ramit Sethi (personal finance guru) in his New York bestseller “I Will Teach You To Be Rich”, he states that:

“On average, millionaires invest 20% of their household income each year. Their wealth isn’t measured by the amount they make each year, but by how they’ve saved and invested over time.”

Essentially, what how much you make is inconsequential, what matters is how much you put aside. The more you save the more seeds you have to make your various investments. Remember, you cannot invest money unless you have the money to invest.

 

So, where can you invest to achieve high growth rate on your savings?

  • 0-7.5% – savings account
  • 5 – 12% – treasuries, preferred stock, bonds, peer-to-peer lending
  • 12% – 30% – direct real estate and private equity funds
  • 30%+ – Start a small business or invest globally (top-tier private equity and hedge funds)

As much as there are all these investment vehicles, investing in paper assets that earn you a mere 12% alone will not help you build wealth FAST. The power of compounding is miraculous but it requires time. Building wealth fast requires putting more and more money into your savings/investments on a consistent basis and making the right investments in the assets that meet your goals.

Earning More Money

This is the question everyone is asking – how do I earn more money?

A common misconception about making more money is that you need to have money to mint more of it. This isn’t true. When you say such things, you mentally cripple yourself and set yourself up for failure even before you start. Building wealth requires a changed mindset too – a firm conviction that you can do anything that you set out to do.

When am stuck in a rat and cannot seem to find a way out, I try to find ways to better myself. I believe that my lack of foresight is as a result of missing information or knowledge. This way, I find myself stumbling upon new ways to build more wealth faster than ever.

Fortunately, there are four avenues of making money:

  • High paying job – If you are a career person, focus on your expertise and ensure you earn your worth. This means you will have to invest more in your education i.e. get an MBA or specialized designation.
  • Side hustle – Make money on the side while you work on your average paying job.
  • Venture into entrepreneurship (highly recommended) – work on your business full time and ensure it succeeds. These days, business owners are investing a lot more on themselves by getting strategic coaches and/or marketing themselves. Today’s business environment requires much more out of entrepreneurs than ever before.
  • Invest – become a part/full-time investor by always being on the prowl for lucrative investments.

Here’s a brief look at building wealth rapidly:

Final Thoughts

If you are young, start by saving for retirement and investing in paper assets (money markets, bonds, and stocks). Ensure that you have enough money in your emergency fund. Starting these things earlier on will ensure good financial habits that will guarantee success in building wealth in your later years.

As for the rest of us, we have to work hard at the right things or we will be merely spinning wheels and getting nothing. Learn early what works for you and what does not. The only way you can go is up. I have tried numerous businesses, which have helped me discover my strengths and weaknesses. My current businesses are as a result of several businesses that did not work. In each one, I learned and because I learned, I won.

I hope this resource helps you. Please let us know what you think in the comments section below. If this article has been of great help to you please share it.

Meanwhile, You can click on the following links to read more on building wealth: 

 

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9 Easy Tips for Traveling on a Budget

By
Irene Makanga
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0

An investment in travel is an investment in yourself ~ Matthew Karsten

Budget travel vacations and amazing travel destinations are what most people looking for. One of the best times to travel is while you’re in college because you haven’t been tethered to one place or have grounding commitments yet. When I was in college, I embarked on a grueling journey down south to Cape Town by Bus. It wasn’t a trip for the light-hearted but to me; it was one the best ways to truly experience Mother Africa in her naked glory. From remote wilderness trails to the bustling city views. Even though travel can be quite expensive, it is completely possible to experience the world on a half-empty wallet, so start counting those shillings.

Here are some tips and tricks I have gathered over the years on how to travel on a budget:

#1 Consider The Mode of Travel

A Mile for miles, the route between home and the most scenic destinations in the world. Be it backpacking or traveling in comfort, the different modes of travel could make or break your budget. I have picked up a few tips and tricks along the way to seriously reduce my travel expenses:

  • Travelling at night. Save on hotels by traveling overnight where you can.
  • Take a bus or train. Opt for a bus or train to reduce your travel fare. This is mainly for local travel or travel within a continent. This entails you to study the public transport system before you leave and know how it works.
  • Book airline tickets well in advance and use various online sites to get the best rates.

#2 Squeeze Many Cities

Budget travel sometimes demands that you try to squeeze many cities or countries into one trip. When traveling on a budget, this will save you quite a lot of airfare and time. For instance, if you choose to travel to Europe, bundle up the trip and visit many countries and cities within the European Union. You can also do the same for Sub-Saharan African countries or the Americas.

#3 Consider Travel Seasons

Usually, for budget travel, it is cheaper to travel during the low season. Asia is summertime, Europe is winter time. Plan your trips around those times and you can score awesome flights and very low prices on hotels.

#4 Bring a Friend or Two

Traveling in a group or in twos makes everything a lot cheaper in the long run because you can split the cost of accommodation and food. This way, you can really get more value for your money.

#5 Get Travel Insurance

Insurance is a necessary expense for budget travel. Think about what may unexpectedly happen on your trip like losing your luggage or falling ill in a foreign country. All these things can quickly turn a perfectly inexpensive trip into a very expensive one. So, look into the different travel health, baggage, cancellation and medical evacuation insurance products and chose the best one for you. These days, they don’t cost much and it would save you much more in times of crisis.

#6 Consider Where You’ll Stay

Depending on your budget you can choose from hotels, apartments or hostels. If you are moving around a lot, (as is expected for backpackers) hostels would be more ideal. They may not offer a lot of privacy but if you are looking for a place to lay your head for a few hours, they are the best. For every city I went to, I found trip advisor quite resourceful in finding cheap places to stay, particularly in Gaborone, Johannesburg, and Capetown. These days, there are many more sites that you can use to compare prices and get the best rates when traveling on a budget.

#7 Plan to Do the Free Stuff

It shouldn’t cost much to experience different cultures. Many places in the world have free museums and historical sites.  You can also sit on the beach, walk around public parks and be acquainted with your environment. There are also many cities in Europe that offer free tours – take advantage! If you run out of things to do, ask the locals about great places to go – usually, people living within a locality are unlikely to spend a lot of money on entertainment.

#8 Book Activities in Advance

Make a list of all the places you would like to go and see if you need to book in advance. Advance bookings cost less particularly when getting airline tickets. Additionally, ensure you take advantage of discounts and coupons.  These days, you can access discounts and coupons on your fingertips by making use of the numerous travel sights.

#9 Make Your Own Food

Eating out can be quite expensive in a foreign city. If you are drawn to a city for its food and culture, consider having two special meals a day. However, go to the supermarkets and stock up on food; make yourself simple breakfasts/lunches to carry around while you roam. All these tips and tricks can save you significant amounts when traveling on a budget.

Overall, treat your travel budget in the same manner as you would treat your home budget. This way, you can afford much more than you can imagine. Even if you are living the high life, the kind of experience gained through travel has no price tag. Save up and explore the world as much as you possibly can.

I hope this resource helps you. Please let us know what you think in the comments section below. If this article has been of great help to you please share it.

Meanwhile, You can click on the following links to read more on budget travel: 

Happy Travels!

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How to Get Out Of Debt Successfully

By
Irene Makanga
-
0

Get out of debt before it’s too late.

Realize that debt stems from complacency and carelessness. It is driven by an individual’s personal problems that yield to habits or even attitudes that result to overspending.  As such, there are numerous ways to get into debt but, there are only three steps to get out. The key thing here is to adopt the right attitude and habits.

This is a 3 step process to get out of debt permanently:

Step 1: Get out Debt by Understand Why You Are In Debt

In order to get out of debt successfully, you have to look at your debt as your responsibility. Do not blame any lending institution for your problems. This means that you need to have a strong financial awareness and plan. A big part of this is delaying your gratification and associating wealth with intrinsic values.

Debt is caused by habits, and these habits keep you in a vicious cycle of debt. These are the habits that get people into debt:

  • Emotional Spending & Addition – Are your spending habits connected to how you feel? Emotional spending stems from boredom, need for entertainment, anxiety and much more. Identifying the root cause of your unnecessary spending habits is the first step to change. Addiction is similar to emotional spending as it may be a consequence of a deeper personal problem. Just like any other addiction, debt can be very destructive.
  • Entitlement & Instant Gratification – This is basically the belief that you deserve all good things in life regardless of the financial cost. I mean, why shouldn’t you have that designer bag, shoe, new car, expensive pedicure – when all your friends have it. Instant Gratification is closely related to entitlement as people with an entitlement problem often want instant gratification in the form of either enjoyment, pleasure, satisfaction or even some form of self-worth.
  • Self-Worth Linked to Material Things – The advertisements today manipulate people into believing that a certain product will make you seem wealthier, attractive, happier, and smarter or even have the best figure in town. Don’t fall for the marketing gimmicks. Only you can define your own self-worth.
  • Having No Plan & Complacency – No Plan? Make one. That is the difference between a true wealth creator and a debt accumulator. Debtors tend to detach spending, saving and earning. As a result, they have no budget, no plan for retirement, no tracking of numbers and no strategy for increasing earnings. Therefore, debtors tend to live from month to month because they have no long-term plans. Complacency and attitude towards debt will surely keep you in debt. Small debt here and there to fuel your desires will add up to serious debt and complacency will lead you to bankruptcy and foreclosure.

Step 2: Get out of Debt by Changing Your Debt-Forming Habits

In order to get out and never look back, one has to change their debt-forming habits. Break the habit, and adopt new wealth-creating habits. So what are the debt-forming habits that you need to change to get out of debt:

  • Break Your Spending Habits – To break free from emotional spending, you can adopt the 30 days no spend challenge. If that is too much for you, try holding off buying something for three days, if you still want the item after three days then it may actually be worth buying.
  • Break Your Addiction – Simply avoid all forms of addictive behavior and live a well-balanced life. Eat healthy, exercise and feed your mind with productive things. I know this is easier said than done, but if you feel that you need help, don’t hesitate to contact a professional for help.
  • End Your Entitlement – seek to only purchase what you can afford or immediately pay for with the money you have. Save money on anything you need. This way you are only entitled to what you can afford.
  • Delay Gratification – Delaying gratification is one of the best ways to tackle this. Hence, purchase items every 3 to 5 years of even more extended time horizons. This gives you more time to save up and really think twice about the things you think you need. This way, you can pay cash for all your purchases to lower costs.
  • Disconnect Self –Worth From Material Things – A good habit is to separate your spending from your feelings of worth. You are and cannot be defined by your possessions. Therefore, dig deep and unearth your purchasing motives. Figure out if they are genuine or based out wants relating to self-worth.
  • Have a Plan – set up a plan to secure you financially. Develop reserves for inevitable rainy days and take out insurance for those risks you cannot afford to lose. Save monthly from earnings for retirement.
  • Be Proactive – respond proactively and take it upon yourself to be responsible for any impending financial problems. Living on your salary from month to month is no way to live.

Being proactive means:

  • Making realistic budgets and setting spending limits.
  • Tracking your daily spending.
  • Ensuring financial accountability.
  • Paying down your existing debt and seeking to live debt free.
  • Learning how to curb emotional spending or completely divorcing emotions from shopping.
  • Setting a shopping schedule.
  • Forcing waits times to delay gratification or give you some time to rethink your purchase decisions.
  • Avoiding situations that may cause excessive spending.
  • Increasing your income.
  • Take out insurance for the risks you cannot afford.

Step 3: Get Out of Debt & Become Debt Free

When you take debt on and become responsible for it, it opens doors to a debt free life. This way you can easily get your life back on track and maintain a positive cash flow. The first thing you need to do is pay off all your existing debt and don’t take on any more.

Here are some things that you may do:

  • Organize existing debt ensure no more hemorrhage to your finances. You may consider consolidating all your debt and refinance to lower interest rates.
  • Sell unnecessary things in your possession and quickly pay down your debt.
  • Structure remaining debt and pay it off using the snowball (pay off the small debts first building up to the bigger ones) or avalanche (pay off debt with the highest interest rates first to the lowest) method.

In order to keep debt at bay, manage the risks in your life in order to secure your dreams and live a fulfilled life. Finically successful people know and are aware that bad things happen and these things can get you knee deep in debt. You may manage the unexpected and get out of debt permanently, by taking on insurance for the losses you cannot afford.

These potential areas are:

  • Life insurance to replace income, if the primary breadwinner passes on.
  • Disability insurance to protect you against major injury that may cause loss of income.
  • Fire Insurance to protect against destruction of property.
  • Liability insurance to protect against debt obligations that can potentially wipe out all your savings.
  • Health insurance to protect you against the high costs of healthcare.
  • Set up and emergency fund to help you pay unexpected expenses i.e. sudden job loss, contributions to family emergencies or merely car problems.

When you plan for the unpredictable events in your life, these things will not forever set you back and result in serious financial ruins. So if you plan to get out of debt, ensure you get out permanently.

I hope this helps you. Please let us know what you think in the comments section below. If this article has been of great help to you please share it.

Meanwhile, You can click on the following links to read more on how to get out of debt:

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Parents: 10 Money Tricks for New Parents

By
Irene Makanga
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0
10 Money Tricks for New Parents

A close friend of mine is expecting and, with joys of having a newborn baby comes lots and lots of expenses. We are both finance nerds and finance dominates a lot of our conversations. We both acknowledged that it is tough to think about saving, investing and parenthood when facing a whole new category of costs from health care to baby formula. It is overwhelming, especially for a new bride, moving to a new city and expecting – but here are 10 money tricks that can help as a new parent:

#1 Breastfeeding

Whenever you can, breastfeed. It is not only healthy but you can save you a lot in your first year with your child. You can also save by waiting to buy breastfeeding clothes for nursing in public. Wait as long as you can until you are committed to breastfeeding since you’ll be indoors in the first three months anyway.

#2 Baby Food

Make some baby food. Instead of relying on baby formula, when your baby is of age, mash some zucchini, pumpkins or ripe bananas. Make one more serving and save another.

#3 Think Big

Buy goods in bulk. There is a high probability that if you are a new mum you are taking advantage of stocking up on all the food and supplied that cost far less when you bought large quantities.

#4 Swap Goods

Exchange clothes and toys. You can pass on or seek out hand-me-down clothes, toys, and books from friends and relatives. While you are at it, have a heartfelt conversation about being a parent.

#5 Unisex Clothes

Mix up and buy unisex shades & styles. When you are having your first baby, mix up the pinks/blues with unisex shades because you next child might be boy/girl. Those hand-me-down clothes would be useless unless if you buy only pink/blue clothes.

#6 Baby Wipes

DIY homemade wipes. These could save you a lot in the long run. Purchase nice soft paper towels that won’t fall apart when wet.  Place them in a plastic container – soak the towels in some baby wash, olive oil/baby oil/essential oil of your choice, and some water.

#7 Life Insurance

Get some life insurance. It is never too early to seek out a great life insurance product to save money for your child’s education fund. This will enable you to take advantage of the huge tax benefits that come along with life insurance products.

#8  Gifts

Create a gift list. For birthday gifts and other holiday gifts, ask family to give presents for things that not only help your child but as well as actually help your budget in the long run i.e. clothes, sports gear or music instruments/lessons. Do away with the useless plastic toys that they can outgrow.

#9 Saving

Automate savings. As a new part, it is wise to stash away some money every month from the day the baby comes along. You can start off with KES 1000 a month is a great start and years later you may have a significant reserve fund that can be used to fuel your college or help with emergencies.

#10 Educate Your Children

Teach your child to be mindful of money. As your child grows up they too start can start adding as well. These are the kind of lessons that will last a lifetime and reduce the risk of having an entitled child. A financial conscious child knows that money isn’t plucked from trees and therefore, will not ask for outrageous things over the years.

I understand that it is hard to shift your thinking overnight to align with your new life as a parent. It isn’t easy. However, keep rocking and don’t be afraid of failure.

You can click on the following links to read more about kids and money:

 

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Save Money in 10 Practical Ways

By
Irene Makanga
-
0
Save Money in 10 Practical Ways

How hard do you work for your money? I believe that you would rather work hard for a financially stress-free life than living from paycheck to pay to check buying things on a whim. Over the years I have gathered a few tricks and tips on how to practically save money. Some I have used and some have worked for people I know.

Here are some of the practical ways to save money:

  1. Buy things in bulk. It is cheaper to buy things in bulk, as the savings will add up after a while. Therefore, you can buy things that you know you use a lot of such as toilet paper, shower gels, soap etc.
  2. Stay healthy. Being sick costs money. Even with health insurance in Kenya, at some point, you will spend some money here and there. So exercise every day and eat right (less junk food) to keep the doctor away.
  3. Stop paying attention to others opinion of you. You can never make people happy, so there is no need to always upgrade things just to impress them. Focus on you, and save money and improve your life.
  4. Eat at home. Eat at home more and save money on food. If you are working, carry some packed lunch. Also, buy and cook in bulk to save money and time in the long run.
  5. Indulge in low-cost activities. We all have hobbies and things we would like to indulge in to relieve stress. Don’t just stay at home, indulge in on low-cost activities/hobbies such as hiking, reading or visiting local parks. to save money.
  6. Do not go shopping when you are bored or on an empty stomach. You will end up spending less and purchase much healthier food. Always have a list of things you need and stick to it.
  7. Seek out discounts. You can buy in large quantities when things are on sale or take advantage of coupons/discounts. If you particularly like buying particular costly brands. Every few months some products go on sale. Stock up then, until the next sale to save money.
  8. Take a hard look at your bank statement. Take time to study your bank statement at the end of the month. It will help you gain insight into where your money is really going.
  9. Engage in money saving challenges. Challenge yourself to go many days without spending any money. This excludes absolute necessities like food, fuel or transport.
  10. Think twice before every purchase. Every time before you go out to buy something that isn’t necessarily necessary, think twice. Ask yourself if you would rather have the money or whatever you want to buy. This way you can save money on unnecessary spending.

For all the extra money you have saved, you can open a savings account and stack it up for retirement, holidays or major life events. Life can be so much more beautiful but it requires a lot of hard work and sacrifice. If you can’t change how much you earn; you can stretch every shilling you earn and save money.

If you are an audiobook junkie like I am, I would recommend you listen to Rich Dad’s Cashflow Quadrant by Robert Kiyosaki. This book will guide you as you seek to make more, spend and save more. It highlights some basic truths that you need to know as you take on this journey to financial freedom.

You can click on the following links to read more about how to save money and invest:

 

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Financial Abuse: 10 Signs and Ways to Protect Yourself

By
Irene Makanga
-
0
Financial Abuse 10 Signs and Ways to Protect Yourself

Men believe that it is their ‘God-given right’ to control women and their money.  

We live in a society where women are ruled by men so any change we attempt to make is a blood-soaked battle. This misconstrued belief by men continues to lag our society behind as they hang on to their ‘God-given rights’ in control women and what is worse use their money to contribute to their abuse. This is what we refer to as financial abuse.

Financial abuse is one of the invisible weapons used due to its insidious nature and the fact that it can easily be masked in what may appear to be a normal relationship. Financial abuse is where a victim is prevented from acquiring, using and maintaining any financial resources.

Financial abuse has been characterized as the paramount reason that women stay in abusive relationships and why many chose to go back. Additionally, research has revealed that in 99% of abusive relationships, financial abuse is a factor as it completely leaves the victim completely dependent on their partner as a form of control.

What Are the Indicators of Financial Abuse?

Financial abuse is a usually under-recognized as a form of family violence due to its subtle nature. However, it is not difficult to discern whether or not you are a victim of financial abuse. Knowledge is power. And knowing that you are falling into a trap that will leave you completely dependent on your spouse until one day you realize you have no money, maybe in debt and with no understanding of finances – will help you put in place the necessary measures that can save you later on.

Here are a few indicators of financial abuse:

  • Handing over any money you make and being denied any access to it.
  • Having no access to money and bank accounts
  • Having no access to bank statements or financial documents – simply hiding assets.
  • Being forced to leave your job or directing your career choices i.e. making you stay at home or work for his family business.
  • Being coerced into signing bank loans and other financial documents – using your money and credit by being threatened into giving permission.
  • Withholding money and controlling your spending – he would ask for receipts or give an allowance.
  • Threatening to leave or deny you any financial support.
  • Not making any financial contributions, working or paying bills, yet and still controlling all the finances.
  • Spending money on himself (probably with his friends or mistresses) but not letting you do the same
  • Belittling you about your knowledge of money, ability to earn or financial contribution to the family.

What Do You Do Next if You Are a Victim?

Society generally views women as less mathematically capable, so don’t let that be your narrative. This will make it even more difficult for you to leave an abusive relationship. Teach yourself where you can as it is most often dangerous when you know nothing. Hence, as you try to leave ensure that you can do so permanently.

Here are some of the things you can do once you make that decision to leave:

  • Reach out to your family, friends, church or any support group you have.
  • Open a bank account in your name and keep it a secret.
  • Put away some money. Take any wages you earn, grocery money or allowance and put away every shilling you can so that you may have some money to get started once you leave. If you cannot open a bank account, save the money in a place he would never look.
  • Have a plan – there is much at risk, therefore always plan. Plan where you will stay and how much you will need.
  • And finally, leave him. If he has not already physically abused you, there is a very good chance it will lead to physical abuse.

Leaving an Abuse Relationship:

The most dangerous time is when a victim decides to leave an abusive relationship and hence safety key. No one else but you knows his capabilities and to what extent he would go to further enforce his control over you.  It is important to note that financial abuse often leaves victims homeless and in poverty. Therefore, it is important to ask for help. There are many people and organizations that are more than willing to help you leave your current predicament.

For the rest of us who have not experienced financial abuse, what can we do to put an end to financial abuse?

The most powerful tool we have is our voice. We have to raise our voices and raise awareness of financial abuse by telling our daughters, relatives, and friends. Additionally, take the time learn from those who have undergone financial abuse. And if you are one of the millions of women who have been in an abusive relationship, please do not be ashamed to speak up about it. Be proud that you had the strength to survive and the courage to leave; use your voice and your story to inspire and save others.

You can right-click on the following links to read more on financial planning:

 

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How to Develop A Simple Retirement Plan

By
Irene Makanga
-
0
How to Develop A Simple Retirement Plan

A great retirement plan should “begin with the end in mind” – Steve Covey.

A great plan begins with the end in view, that is – set the goal and then create the plan that gets you there. It is very simple and straightforward, yet and still very uncommon. Most of us will save x amount per unit of time and then determine if and when they can retire.  Meaning that if upon retirement the amount is not enough, they will continue working until it is.

So, how quickly do you want to retire? Are you comfortable leaving things to chance?

The following is a simple steps process you would need to figure out when developing a retirement plan.

#1 Determine the Vision for Your Retirement Plan

You will need to have at least a rough idea of what your dream life after retirement looks like in order to complete the retirement plan. This way, you can easily approximate your retirement costs and come up with a budget more easily.

Many common retirement plans include: traveling the world, staying at home, moving back to the country or even reading novels.

#2 Determine Your Retirement Date

Once you have figured out the vision for your retirement, you will need to pick the date upon which you intend to retire. The reason for this is to calculate and the number of years you have to build your retirement plan to meet your goals, and because your pensions and savings depend highly on this date.

#3 Determine Your Cost of Retirement

The costs you will incur every year after retirement is the cost of your retirement. In order to adequately create a great financial plan, you need to guesstimate how much you will need a year when you retire. Since you are not consulting a professional retirement planning expert, we can round off figures and generously estimate the amounts. This way we can adequately take care of inflation uncertainty and return on investment factors. My rule of thumb of making great estimates is to use your current expenses and spending as a starting point.

#4 Determine the Amount You Need to Save

So, how much do you need to save? Taking the amount you will require every year after retirement, now you can easily approximate how much you need to save now. To do this, you will need to match your projected income to your estimated expenses by using the following steps:

  1. Sum up all the pensions and savings income you are to expect upon retirement. If you are unaware of how much you are expected to receive every month, contact your service provider.
  2. Subtract this amount from your total estimated expenses per year/month depending on how often the income will come in. The difference between your expected income and your expected estimated expenses will yield either a shortfall or excess surplus per year/month.
  3. If you have a shortfall, you will need to make up for it by estimating the amount to support that shortfall. This is the amount you need to save to meet your retirement plan obligations.

To do this, you will need to take the total estimated expenses amount per year, multiply by the number of years after retirement. This will give you the total shortfall you need to make up for.

That is if your shortfall is KES. 25,000 per month x 12 (annualized) x 30 (years after retirement) = KES. 9,000,000

#5 Build A Savings Plan to Meet Your Retirement Goal

With this amount, you can now build a savings plan.

Take the amount in the previous step and divide it by the number of years you have until retirement. i.e. KES. 9,000,000 / 20 (years to retirement) = KES 450,000 per year. This translates to KES 37,500 per month. This will give you the amount you need to save per year.

With this figure, you can set up your account to automatically save this amount every month to meet this goal.

However, if this amount is too daunting, you can revisit your retirement dream or reduce your expenses every month. Whatever rocks your boat!

 #6 Determine Where to Invest Your Savings

This probably the most difficult step to determine on your own without sufficient information on the market. Investing for the long-term is a very difficult task even for investment professionals given the investors’ expectations. However, not to complicate things here – you can consider shopping around and talking to various investment advisors. Share your plan with them and they will give you the various investment options matched to your needs.

However, some common types investment options you may have:

Related: 3 Paths Of Wealth Accumulation

#7 Maximize Your Saving Using Tax Exemptions

Saving for long periods of time to meet shortfalls in your retirement plan can be boosted by tax deferral investment options. These investment options are either government-sponsored retirement plans or tax exemptions within some investment vehicles such as life insurance products or housing bonds.

Related: How to Legally Pay Less Taxes 

Finally, it is imperative that you start planning and saving for retirement now. The sooner you start the better life you might have upon retirement with more than enough to sustain you. Do not put off this decision and fail to meet your retirement plan. Delaying this may leave you highly dependent on others upon retirement.

Happy Investing!

You can right-click on the following links to read more on financial planning:

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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5 Ways to Use Your Life Insurance Benefits

By
Irene Makanga
-
0
5 Ways to Use the Your Life Insurance Benefits

There are many uses of life insurance benefits that many insurance consumers are clueless about, that offer protection to a variety of things that are directly uninsured. 

In Kenya, there is a low uptake of life insurance products due to certain common beliefs about life insurance. However, given the lack of knowledge about life insurance, it is my understanding that many consumers believe that life insurance is used for funding living expenses, replacing the income of a breadwinner or simply covering funeral expenses.  However, there are many other uses of life insurance that you might consider when planning for your finances and they are:

One: Debt & Mortgage

With a sizable amount of cash value on your life insurance, you can take out a loan against your policy or pay a debt. Insurance companies can offer cash-value loans at an interest rate that is much lower than banks. However, please note that the value borrowed and interest will be deducted from the death benefits when you die before paying out the entire loan amount.

Additionally, it can also be used to pay off a mortgage balloon payment or pay off a mortgage upon the death of the mortgage taker. In this way, life insurance can be used to protect family when a key member of the family unexpectedly dies.

Two: Covering Education Costs

In life, you will probably have times when large expenses are unavoidable. Commonly, expenses arising from paying for college or high-school fees for your children. There are some products that product makers have created products specifically. These products are specifically designed to meet these needs which go a long way to reduce or eliminate the burden of such expenses when the time comes.

Three: Income Replacement

Aside from the traditional means of replacing the income of a breadwinner. Life insurance is also used accumulate cash a value which can be used to provide extra income upon retirement.

Four: Monies Gifted

Traditionally, life insurance has also been known to store wealth for loved ones and the causes people care about. The lump sum of money is transferred to loved ones or causes upon the death of the insured. This amount is tax-free making it a great vehicle to take care of the people and things you care about.

Five: Payless Tax

Unfortunately, we adults cannot avoid parting with some of our income to the government every year. However, knowing the ways to pay less tax could save you a lot in the long run. Life insurance is one tool you can use to effectively store wealth, reduce your tax bill and meet your financial goals all at the same time.

So many Kenyans are still grappling with how to achieve long-term financial security yet overlooking one of the most critical tools to meet that goal – Life insurance. This is as a result of lack of full understanding of all the ways life insurance can be used to provide financial security. There are many types of life insurance – make sure you educate yourself before taking on a policy to ensure you get the best for you. It is unfortunate that life insurance is viewed as merely single utility product when it has a varied number of uses to cater to a very wide range of needs. With some creativity and planning, it can be extremely useful in achieving long-term financial security.

You can click on the following links to read more on financial planning:

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How to Legally Pay Less Taxes

By
Irene Makanga
-
0
how to legally pay less taxes

You can improve your financial health by taking advantage of the various tax-filing maneuvers to reduce your tax bill.  

At the beginning of every year my partner and I, spend hours keeping abreast with tax laws. For us, we seek to take every tax deduction to which we are entitled to, in order to save on tax bill. While paying taxes is a civic duty and a non-enjoyable experience at that , our taxman has outdone himself in making the process as easy as possible.

As the cost living keeps rising, it would not hurt to seek out ways to leave more money in your pocket without evading the taxman. Here is how to legally pay less taxes:

Go Long on Investments

Capital gains tax is tax on securities, land and buildings is at 5% rate on net gains. Capital gains tax is less selling costs such as advertising, agent commissions, valuation fees and others. Selling an asset after a having it for a long time or short time can have some effect on your overall gain. Active trading particularly on securities can yield to very high tax liabilities on capital gains. However, it is imperative that you do not base your trading decisions solely on tax concerns. Rather, think whether selling a wining investment after holding it for a day or year for tax reasons makes any sense to you.

Let’s Talk About Life

Getting life insurance is great way to reduce your tax bill and meet your financial obligations all at the same time. Life insurance has always been a great way to deliver your money into the future at  a tax reduced discount. In Kenya, the tax relief for taxpayers on premiums is realized on amounts not exceeding KES 60,000 per year at a 15% rate. For those very keen on their financial planning, this is a great way to get more out of your life insurance policy and taxes.

Buy a House

If you are still debating on whether to buy or rent a home, remember that mortgage interest is tax-deductible. Having a mortgage is a serious commitment just like paying rent but you have to be strategic about these things. Mortgage interest tax rebates can significantly go a long way to reduce your overall tax liability. This however, should not be your main reason to take on a mortgage but you should factor it into your calculations. Under the Income Tax Act, you can get a rebate of an amount no more than KES 480,000 a year. This can go a long in the initial years when a significant portion of the mortgage payment interest.

Housing Bonds

Make most of the exemptions through by investing in investment vehicles that enjoy tax exemption benefits. Mortgage-backed securities i.e. housing bonds offered by Housing Finance or the National Housing Cooperation, would be a great start. Investors in housing bonds have an opportunity to enjoy tax exemptions of up to KES 300,000 on their investments. This way, you can accumulate some wealth at a lower cost to you.

Retirement Savings

One of the best ways to reduce your income tax payable is to contribute as much as you can into a retirement savings account. This way, you can take advantage of tax exemptions that will significantly reduce your tax bill. The money contributed is not included in your taxable income hence, not taxable. Therefore, you can accumulate a sizable amount in your pensions account tax-free by making contributions to registered pension and provident funds to take advantage of these tax exemptions.

On Being Your Own Boss

Finally, those of us who are self-employed know that we pay twice what salaried pay in many income tax deductions. Therefore, as a business woman/man, ensure you cost everything i.e. if your work from home, cost expenses such as your own salary, utilities, repairs, depreciation, mortgage interest as a business expense. Self-employed people have many deductions that they can take on but they have to be very strategic about it – if it adds some form of value to your business, include it.

These are just some of the tax breaks that you can strategically take advantage of that can yield high aggregate savings for you. Therefore, spend a little more time investigating tax breaks, you may learn how to legally pay less taxes and many more ways to shrink your tax bill.

You can right-click on the following links to read more on financial planning:

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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