The Question: My name is Jimmy. I am not married and don’t have kids. I am currently doing mahindi choma every evening in Kijabe along the highway. I sell a piece at between Sh. 20 and Sh. 30 depending on the amount I buy from the farmers.
I can sell to about 50 people per day and make a gross of Sh. 1,500. There are good days when I exceed this figure. On slow days though, I make a gross of between Sh. 450 and Sh. 600. If I buy a piece at Sh. 15 and buy charcoal at Sh. 50 per container, my net comes to around Sh. 650 on days when I sell 50 pieces.
My tactic is to sell along the highway for a number of hours then retreat and sell at our trading centres in the evenings. I would like to grow and open a car wash then acquire a motorbike for boda boda work.
However, I am not good at money management. I save the money on my Mpesa and most times I find myself spending nearly all of my profit on personal expenses. I don’t have rent expenses because I live within our family’s compound. Please help me plan myself and start securing my future.
The Answer:
From your list of earnings, you make an average net income of Sh. 650 a day. Since your expenses are currently low, I would advise you to save as much as possible so as to realize your goals within the shortest time.
You can work at saving Sh. 300 per day and spend the remaining Sh. 350 on your personal needs. Open a “Lock Savings Account” with Mshwari or a “Fixed Savings Account” with KCB M-Pesa. These accounts are available to M-Pesa users and they enable you to save up money for a period of time without the option of withdrawing.
You can start with a lock period of 3 months and save Sh. 300 every day (25 days a month). If you do so, you will have a total of Sh. 22,500 at the end of the 3 months.
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Within this time, you can seek for a part-time job in a local car wash. This will help increase your income while giving you an opportunity to learn more about the car wash business.
I would suggest that you first pursue the goal of owning a motorbike. There a several Boda Boda financing firms available in the market that can advance you a loan with a deposit of Sh. 7,000 to Sh. 20,000.
You then make mandatory daily loan repayments of between Sh. 200 – Sh. 300 for a period of 1 to 2 years. Compare the different financing options that are available to you so as to get the best value.
For example, if you take a loan of Sh. 130,000 with a repayment of 18 months at an interest rate of 24 per cent per year, your daily repayment will be Sh. 289. The catch though is on whether you can manage to raise Sh. 300 daily without fail, and in addition to this amount, fuel and service the motorbike, and have a net income from it to pay yourself.
If you are able to make Sh. 1,000 per day from your Boda Boda and possibly Sh. 300 per day from other opportunities, I would suggest that you top up your daily loan repayment from the minimum to Sh. 500. This way, you will be able to pay off your motorbike loan in much less time.
If you consider the example provided above, increasing your repayment from Sh. 289 to Sh. 500 will enable you repay the loan in 10 months as opposed to 18 months.
You also need to continue saving up so as to fulfill the other goal of starting a car wash business. From the approximate Sh. 700 that remains after paying your loan, I suggest you save Sh. 300. You can save up this money in a Sacco so as to earn a dividend and have access a loan to start your car wash business.
Research the various SACCOs available and choose the most fundamentally sound. If you consistently save Sh. 300 every day in a Sacco, you will have saved up Sh. 75,000 in 10 months. By this time, you will have paid off your motorbike loan. Use this period to research more on the car wash business.
Depending on the amount of capital you need for the car wash, you can take a loan from the SACCO of up to 3 times your savings – in your case up to Sh. 225,000 and start the business. If you do so, you will have achieved your goal of owning a Boda Boda and car wash business in about a year.
The other option is to lock your daily savings for a period of six months to come up with a total of Sh. 45,000. This can be topped up to around Sh. 55,000 from extra cash savings from higher sales in your good business days within this period.
With Sh. 50,000, you can find yourself a second hand motorbike with a clean engine and remain with an extra Sh. 5,000 for insurance and county registration.
There are multiple Kenyan online Facebook groups that specialize in second hand boda boda motorbikes but do your due diligence. Once you get this bike, evaluate whether to use it as boda boda during your mahindi choma offpeak business hours or hire a rider to deliver you Sh. 300 every day.
The latter will push your savings to Sh. 600 per day or Sh. 15,000 per month. Save this money in a Sacco account with the goal of raising funds for the car wash business after the end of the following year.
The expert’s take on this personal finance question was provided by Alex Kibebe, the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach. A version of this query was also published in the Saturday Magazine, a publication of the Nation Media Group.
