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Financial planning myths you should never believe

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Some money myths are so pervasive that most people believe them, yet you may be losing money by holding onto them. We debunk five of them.

1. Renting is for idiots

Owning a home is great. It is security. But should it be your ultimate financial goal? Some financial experts, like Grant Cardone, actually advocate for renting rather than buying a house. “A home is not an investment because it doesn’t pay you every month.

In fact, you have to pay for your home every month…. An investment is not a good deal if you are paying in and no cash flow is coming out. Your equity is tied up and you don’t have access to it,” he says. He advocates for investing in yourself, developing your skill sets and focusing on growing your income first.When you rent, you have a set amount that you pay every month that you can easily budget for. The advantage of renting is that it also allows you to live without that particular debt, as most people acquire property on debt. You may think that you are only paying rent, but you are also buying something else: time.Time to think through exactly what you want for the long-term in terms of owning a house, time to save and time to shop around for a house and location that will be worth your while and not end up costing more than you had anticipated for it. It also allows you to move when necessary, something to consider if you want to cast your net wider in terms of finances. While renting, you also don’t have to worry about costs like security. Those are the landlord’s problem.

2. Real estate will always appreciate

Most of the time, investing in real estate is a good idea but buying into the myth that it will always appreciate will leave you disappointed. A little investigation into the state of real estate in several markets both here in Kenya and abroad will show you that this is not true. Just last year, 2019, Kenyan real estate investors experienced losses as values in the property market fell by more than six per cent.

“The price of the prime residential property fell by 1.8 per cent in the first half of this year, increasing the annualised decline to 6.7 per cent in the year to June,” said property consultancy firm Knight Frank, in its market report last year.The growth rate is now at a five-year low, with some developers having dropped prices by as much as 30 percent. Experts have been warning of an impending collapse of the property market in Kenya for a while, so it would be wise to do a lot of homework before you invest your hard-earned money in it.

 3. Owning a car while you rent is stupid

We have all heard the running joke of the man who owns a Prado but parks it outside a rented home. Is he a fool not to have a mortgage while he can seemingly afford it? What this mythical belief fails to acknowledge is opportunity cost, which is the cost of a missed opportunity.Being stuck in a matatu that cannot leave before it is full, and that also has to use specific routes may cost you time. And time is a crucial resource. The few coins you save using the matatu may end up being a drop in the ocean in comparison to what you could have gained during the time you lost, which can really accumulate over a month.

Not to mention the car itself can be used as an extra source of income if you can use it to ferry people to work or even put it to work via ride-hailing apps like Uber during the hours when it is idle. It may also come in handy during emergencies and may make more financial sense if you have a family.  

4.  Always pay more for quality

Usually, quality costs more, but not always. Sometimes you are really just paying more for the brand name rather than for the quality of the item.A good example is with medicine. Most generic drugs have the exact same formula as the original and therefore work the exact same way, yet sometimes the original drug will cost a lot more. This approach can also help you if you decide to invest in stocks.Some stocks are traded for less than they are really worth because the market underestimates them but will net you more in the long run when they begin trading at their true worth. This approach is known as value investing, and is what has made Warren Buffet a billionaire.

 5. You have to have enough money to invest

The internet has been a game-changer when it comes to investing, but some people are yet to wake up to its potential. For instance, in Kenya, you can buy government bonds, M-Akiba, via your phone and start investing with as low as Sh3,000.Bonds are a low risk investment whose returns are guaranteed, at an interest rate of 10 per cent per annum which are paid out after every six months.Most people usually use M-Shwari for loans only but you can also open a lock savings account on the app and earn interest of about six percent per annum on your savings. Start with what you have.

6. Pay off multiple debts at once to cut down on interest

You’re so eager to be out of debt that you want to clear all of them all at the same time. Although your determination is admirable, this strategy might not work. Paying out small amounts to different sources of debt will wear you out pretty fast. It won’t seem to make much of a difference in reducing your debts- which will also reduce your motivation to pay them off.Solution: Try the snowball method of paying off debt. This is where you start by addressing the smallest debts (maybe from family and friends) first. While you can make minimum payments on bigger debts, you should aim to pay off as much of the smallest debts as you can.Paying off your smallest debts faster will help you gain momentum and motivate you to keep going till all debt is paid. Additionally, the amount of money you have available to pay debt will increase once the smaller debts are paid off. Think of it like a snowball rolling down a hill, getting bigger and bigger as it goes. You start with small actions, and over time, they make a huge difference.

By Standard


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Business

KQ resumes direct flights to New York

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The national carrier Kenya Airways (KQ) resumed its direct flights between Nairobi and New York on Sunday.

In a tweet, KQ announced the move and topped it up with an offer to passengers who book their flights before December 10 that they will enjoy discounted prices.

Welcome back to the Big Apple! Today we resume our service between Nairobi and New York, and we can’t wait to welcome you on board. Book your ticket via https://t.co/hitS3Whxtp before December 10th to enjoy discounted rates ✈️🌎 *Disclaimer – video from our pre-COVID archives pic.twitter.com/1kET4h0kRK

— Kenya Airways (@KenyaAirways) November 29, 2020

“Welcome back to the Big Apple! Today we resume our service between Nairobi and New York, and we can’t wait to welcome you on board,” the airline said.

The national carrier last operated the passenger flights using the Nairobi-New York route in April after disruptions caused by the Covid-19 pandemic.

KQ resumed international flights in August after suspending all its operations in March following the government’s directives after the firsts case of Covid-19 was confirmed in Kenya.

On Saturday, October 31, KQ announced that it had postponed New York flights’ resumption.

Through a notice, the airline said the decision to postpone the flights was informed by the increased cancellation of flight bookings to New York.

“We regret to announce that due to increased cancellations of flight bookings to New York City, we have pushed back the resumption of our service to this destination to November 29. We sincerely apologise for the inconvenience caused,” read the statement then.

Kenya Airways inaugurated direct flights to the US in October 2018, cutting the journey to the US by 15 hours and by October 2019 KQ had flown at least 105,084 passengers after completing 594 flights to and from New York.

by NN


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Bodaboda chama grows into a multi-million shilling housing cooperative

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A journey of a thousand many miles starts with a single step. A Nakuru-based bodaboda operator’s self-help group proved this in its growth. Driven by the ambition to have something to take home once they couldn’t ride any more, ten bodaboda operators from Barut, Nakuru West in 2015 formed Kianjahi Group, pooling a minimum savings of Sh100 per week per person.

“Being a bodaboda operator is a risky job and has serious effect on one’s health especially if you don’t dress properly for the cold. After attending a seminar in Machakos we decided to start making savings,” said Benson Sigei, the group chairperson.

The group grew as more members joined in 2016. After evaluating their progress, the members increased their weekly savings to Sh200 and eventually to Sh1,000.

“Before the year ended we were nearly 100 members. Our savings were growing and we had to come up with plans which some members considered as too ambitious and pulled out,” says Sigei. With savings of nearly Sh2 million, they bought a 1.6-acre piece of land which was previously a sand quarry.

“It cost us Sh2.1 million in buying the land and rehabilitating it to usable standards. We embarked on making savings for constructing houses which would be of similar design,” he said.

To make this possible they converted the group into Kianjahi Housing Cooperative Society Limited and introduced Sh15,100 registration fee and minimum share capital of Sh60,000 payable in Sh500 weekly instalments.

AmpThe group started the construction of two-bedroom houses in a gated community model.

“Every member now contributes a minimum of Sh1,500 for savings every week. Those yet to clear their share capital make an additional payment of Sh500. This amount does not exert great pressure on the riders since the majority make nearly KShs1,000 per day.

The group then started the construction of two-bedroom houses in a gated community model where four houses sit on every 50 by 100 feet plot. The cooperative completed the construction of the first 50 units majority of which have already been occupied.

“We took a Sh15 million loan and in addition to our savings we bought an additional acre of land at Sh2.1 million. In the first phase, we have constructed 52 housing units. 35 members have already moved in,” said the vice-chairman.

The cooperative has bought a third parcel of land on which they intend to set up houses for all members. Members who moved in during the first phase like pay Sh2,000 per month. Sh200 goes to savings and Sh1,800 going towards offsetting the cost of construction. The payment for the houses is spread over seven years.

by Standardmedia.co.ke


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Enough is Enough: Kenyan man in US relocates to motherland to become a farmer

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In a bold move and which took great courage, a former Kenyan Diaspora man Kunga Kihokia who was born and raised in Miami Florida has moved back to Kenya, bought a 20 acres piece of land and established an organic farm in Murang’a.

Initially, Kunga had planned to be in Kenya for three weeks 5 years ago but after what he says was the realization of the problems affecting Kenyans because of western lifestyle which he himself was struggling with, he felt strongly to start an organic farm to address those problems.

Kunga has built a water tower to use gravity that allows the water to get pumped and distributed  through  irrigation into the field. Everything in the farm is powered by solar energy and he has dug a borehole that supplies enough water for the farm. Watch the video, be inspired  and enjoy.

Source: Diasporamessenger.com


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