Monday, September 25, 2023

I learned the hard way matatu business is not for the fainthearted

Michael David is the CEO of MoneySense Ltd, an investment firm, and the lead coach at Team MoneySense, a personal finance and investment WhatsApp group.

Financial management system: I have a financial management system that addresses the way I obtain and allocate money. All of my income, including monetary gifts and bonuses are subjected to a system. In my financial management system, I have allocated percentages to savings for investments, emergency fund, tithe, personal expenses, and investment capital. Wealth creation is all about systems. For example, your car doesn’t have moods. It works according to the reliability of the system built into it.

Saving money in banks: Saving is a great habit but I personally think that saving money in a bank is doing oneself a major disservice. If the bank is not paying interest on your savings or if it does, a rate that doesn’t match the inflation rate, your savings may increase but the purchasing power of your savings will reduce over time. Your savings won’t be able to do in the future as much as they can do today.

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The purchasing power of money reduces over time due to inflation. A year from today, a hundred shillings won’t be able to buy the same amount of goods and services because of inflation. It is because money loses value over time that we invest. We don’t invest to make money but to protect the purchasing power of our savings. Sure, we may make money in the process but that’s not why we invest. When you save in a bank, it will invest your money, make hundreds of millions or billions of shillings in the process and pay you nothing or very little.

My biggest money mistake: Investing in the matatu business is my biggest mistake so far. Even though I did my research, I did not anticipate how corrupt the system is. I had to get out. The loss wasn’t much though, but I could have lost much more if I didn’t have safeguards. Every venture comes with some level of risk. Understanding risk management is therefore very important. Risk is the possibility of loss and the best way to deal with it is by having safeguards.

If I could start all over again: I would do what I am currently doing earlier; I would build a finance management system early on. I would save more and start investing from onset. I would be more patient and more focused on the process of wealth creation.

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To stay employed or go into business: I advocate for people to do what they love and are best equipped for. For example, should a pilot who loves flying and travelling the world quit in the name of entrepreneurship? How about a teacher who enjoys teaching but doesn’t have the skills or the stomach to run a school? Employment and entrepreneurship are just tools. Financial freedom can be achieved either way, but you should ideally enjoy the journey. We thrive by doing what we love, what we are passionate about and what we are equipped to do. A power saw can cut a tree very well because it is well suited for the job, but it is ill suited to cut hair. You can’t use a power saw in a barber shop.

My success recipe: Making it in life is a transformational process of becoming. Those who have big muscles got them and maintain them by transforming into individuals who live and do things in a certain way. If you magically gifted me with a ‘six pack’ today, it would only be a matter of time before the six pack was replaced by my ‘one pack’.  Because in terms of personal development, my lifestyle and habits cannot allow me to sustain a ‘six pack’. This is where most of us fail. We focus on results instead of process. We imagine we can possess what we are not equipped to acquire and maintain. It is for the same reason that many of those who win big amounts in lotteries don’t have much to show for it. You can have more if you can become more.

This feature was first published in the Saturday Magazine. The Saturday Magazine is a publication of the Nation Media Group.

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