8. 8 Key elements of a business plan

A simple business plan is a vital tool for any entrepreneur or aspiring business owner. It serves as a roadmap, providing direction and clarity for the development and growth of your venture. In this article, we will delve into the essential components of a simple business plan, equipping you with the knowledge and structure needed to create a compelling and effective plan. Please remember that a plan is no more than just that, a plan. Its success or failure is dependent on implementation and it should thus be viewed as simply a first step to a long journey.

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a) Executive Summary

The executive summary is the first section of your business plan, but it should be written last. It serves as an overview of your entire plan and should capture the reader's attention, compelling them to delve deeper into your business concept. Key elements to include in the executive summary are:

Business Description: Provide a brief description of your business, its name, location, and the industry it operates in.

Mission and Vision: Clearly state the mission of your company, outlining its purpose and values. Additionally, share your vision for the future, showcasing your long-term goals.

Target Market: Identify your target audience and explain why there is a demand for your products or services within that market.

Competitive Advantage: Highlight what sets your business apart from competitors and how it addresses customers' pain points uniquely.

Financial Projections: Present a concise summary of your financial projections, including revenue, expenses, and projected profitability. None of us can see the future as it will pan out, however having some sort of idea of what you anticipate makes it easier to understand why the plan is either working or failing in comparison to the overall plan. You essentially create something to compare against once you begin the business rollout.

2. Company Description

In this section, provide a detailed overview of your business, exploring its history (industry), structure, and legal considerations:

Business Structure: Clearly define the legal structure of your business, such as a sole proprietorship, partnership or limited liability company (LLC). Explain the reasons behind your choice of structure.

Business History: Share the background story of the industry and thus your venture, including its founding, major milestones, and any significant achievements; the latter obviously doesn't matter if you are just starting out, however, you are likely to be part of a larger industry.

Products or Services: Detail the products or services your business offers, emphasizing their features, benefits, and unique selling points.

Legal and Regulatory Considerations: Highlight any licenses, permits, certifications, or intellectual property rights necessary to operate legally within your industry.

3. Market Analysis

Conducting a comprehensive market analysis is crucial to understanding your industry, target market, and competition. This is the Raison d'être (reason for existence) and it's key that you get this very right from the beginning. Focus on the following aspects:

Industry Overview: Present an in-depth analysis of the industry in which your business operates, including its current state, future trends, and potential growth opportunities.

Target Market Identification: Clearly define your target market, considering factors such as demographics, geographic location, psychographics, and buying behaviour. What latent need are you satisfying vis a vis the competition?

Competitor Analysis: Research and analyze your competitors, identifying their strengths, weaknesses, market share, and strategies. It's important to understand your potential competitor's behaviour, for example, while you may be addressing an unfulfilled niche, will it be simple for your competitor to copy what you are doing, and thus scuttle all your market assumptions? How long will it take for the competition to adapt to your new model?

Market Research: Gather and present data from primary (raw data directly from the field) and secondary sources (what is already in recorded format) to support your understanding of the market's dynamics.

SWOT Analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) for your business to gain insights into your internal capabilities and external challenges. Strengths and Weaknesses come from within or if you prefer intrinsic to your enterprise e.g. people and thus talents, capital, source of raw materials and ideas etc Opportunities and threats come from outside, where you have little control e.g. competitors, legislative environment, essentially the market at large. For more on SWOT analysis read here 

4. Product or Service Offering

In this section, provide a detailed description of your products or services, explaining how they address customers' needs and stand out from the competition. PLEASE NOTE THAT WHATEVER YOU ARE OFFERING NEEDS TO BE DIFFERENT FROM WHAT HAS PREVIOUSLY EXISTED. THE HARDER THAT UNIQUE SELLING POINT IS, THE MORE LIKELY THAT YOU WILL SUCCEED. REGARDLESS OF THE FORMER, PLEASE ENSURE THAT YOU ARE OFFERING SOMETHING WITH A DIFFERENCE! 

Product/Service Description: Thoroughly explain your offerings, highlighting their unique features, functionalities, and how they solve problems for your target market.

Value Proposition: Clearly articulate the value your products or services bring to customers, explaining why they should choose your offerings over competitors.

Development and Production: If applicable, provide insights into the development and production processes of your products or services.

5. Marketing and Sales Strategies

Outline your strategies for marketing and selling your products or services effectively:

Marketing Plan: Detail your marketing strategies, including online and offline channels such as social media, content marketing, email campaigns, and advertising. Marketing is about creating awareness of what you are offering.

Sales Strategy: Elaborate on your sales approach, describing how you will reach and convert potential customers into paying clients. Sales is about converting, those who are aware into paying clients.

Pricing Strategy: Explain your pricing model, taking into consideration factors like production costs, market demand, and competitors' pricing. 

We all want to make money, and it's tempting to price with this in mind, however, remember that customers have choices, so it's important to price in line with customer expectations. The starting point is your break-even price, which is the price that takes care of all your costs; once you determine that, every extra coin is profit. The more unique your product is, the higher the margin you can keep above your break-even price.  The reason why brands are created is largely to do with this point. If a consumer feels positive about a specific brand, the more likely that they will pay more. A shoe or a burger is just a burger or shoe, however, a consumer is likely to pay more for say, Gucci as opposed to a similar quality product/service simply because they position the brand in their minds as being of the highest quality. This is the end game for any product and thus business plan.

Distribution Channels: If relevant, outline your distribution strategy, discussing how you will get your products or services to the end-users.

Customer Relationship Management: Describe how you will build and maintain strong relationships with customers to foster loyalty and retention.

6. Organizational Structure and Management Team

In this section, outline the organizational structure of your business and introduce key members of your management team:

Organizational Chart: Display the hierarchy and roles of various positions within your company, showing how responsibilities are distributed. Obviously, when you begin, it's likely that you will be thinly staffed. Staffing increases in direct relation to the growth of the business; don't pay for what you don't need!

Management Team: Provide detailed profiles of key team members, highlighting their qualifications, expertise, and relevant experience.

Staffing Requirements: Identify your current and future staffing needs, and explain how you plan to attract, recruit, and retain talent.

Employee Development: Discuss your plans for training and developing your workforce to enhance their skills and contribute to the growth of the company.

7. Financial Projections

Financial projections demonstrate the financial viability and sustainability of your business over a specific period. Include the following:

Income Statement: Project your revenue, expenses, and profit margins for at least three years. This should include an estimation of sales, cost of goods sold, operating expenses, and taxes.

Cash Flow Statement: Outline your expected cash inflows and outflows, highlighting any potential cash flow gaps. This is best done on a month-on-month basis.

Balance Sheet: Present the projected financial position of your business, including assets, liabilities, and equity.

Break-Even Analysis: Calculate the point at which your total revenue equals your total expenses, helping you determine when your business becomes profitable and over what duration.

Funding Requirements: Clearly state the amount of funding required to start or grow your business, where you expect the funds to come from, along with how you plan to use the funds.

Funding Request

If you need external funding to launch or expand your business, provide a compelling funding request:

Financing Needs: Clearly state the amount of funding you require and the purpose of the funds.

Funding Sources: Identify potential sources of funding, such as bank loans, investors, crowdfunding, grants, friends, family etc

Repayment Plan: Explain how you plan to repay the borrowed funds and the terms of repayment. This is obviously related to your expected profitability and the time it will take to attain the same.

Financial Projections: Provide supporting financial data and projections to demonstrate the feasibility of your funding request.

8. Risk Analysis and Mitigation

Assess the potential risks and challenges your business may face and outline strategies to mitigate them:

Risk Identification: Identify internal and external risks that could impact your business's success, such as financial risks, market volatility, or changes in regulations.

Risk Assessment: Evaluate the probability and potential impact of each risk on your business.

Risk Mitigation Strategies: Propose action plans and contingency measures to minimize the effects of identified risks.

Conclusion

Crafting a comprehensive business plan is essential for any entrepreneur looking to turn their vision into a thriving reality. A well-structured business plan not only serves as a guide for business growth but also serves as a critical tool when seeking funding or partnerships. By incorporating the key components outlined above, you can create a robust and effective business plan, setting the foundation for the success of your entrepreneurial journey. Remember that flexibility is essential, and the plan will require constant adjustments as your business evolves and adapts to market dynamics and customer needs.

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Enjoy!

7. What is a Ponzi Scheme for dummies?

Ponzi schemes are fraudulent investment scams that promise high returns to early investors using funds from new investors (essentially borrowing from Peter to pay Paul). Named after Charles Ponzi, who orchestrated a notorious scheme in the 1920s, these schemes continue to exploit unsuspecting individuals today. Recognizing the warning signs and understanding the mechanics behind Ponzi schemes is crucial for safeguarding your finances. In this article, we will delve into the intricacies of Ponzi schemes and equip you with the knowledge needed to identify and avoid them.

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Understand the Promised Returns

 Ponzi schemes lure investors with promises of unusually high and consistent returns. Be wary of investment opportunities that guarantee abnormally high profits without corresponding risks. Legitimate investments typically involve a trade-off between risk and return, so any offer that seems too good to be true likely falls into the Ponzi scheme category.

There are a number of general classes of investment that it would be useful to check against in determining if the returns being offered are abnormal. They are as follows:

Fixed deposits and savings: Compare the interest rates Commercial and savings banks are offering 

Stocks: Ask investment professionals, and dare I say Google as well, what the annual return for the exchange was as a whole for a particular year. For example in the UK, the FTSE 100 index only returned 1% in the year 2022

Bonds: There are two classes here, private and public (government). What comes from the government is normally considered risk-free, since a government can literally print money to repay its obligations. As a result, government securities return much less than bonds from private companies.

It's very important to find out what a similar fund would offer in the market, before investing in any scheme. In regards to the above, if a scheme suggests a fixed return of say 15% per annum when banks are at 3% and say the stock market index performance for your country is say 5%; you would have good cause to question further.

Lack of Transparency

 One of the key characteristics of a Ponzi scheme is a lack of transparency regarding the investment strategy or underlying assets. Genuine investment opportunities provide clear information about how the funds will be used, the associated risks, and the expected returns. In contrast, Ponzi schemes often provide vague or convoluted explanations, making it difficult to understand how the promised returns are generated.

The second you encounter vague and unclear explanations, simply walk away. FOMO, the fear of missing out always lingers, but trust your instincts and walk away.

Consistent Returns, Regardless of Market Conditions

 Ponzi schemes offer steady returns, often monthly or quarterly, regardless of market conditions. They claim to possess a secret formula or exclusive access to investments that allow them to generate consistent profits. In reality, legitimate investments fluctuate in response to market dynamics, and consistent returns are never guaranteed.

Remember that PONZI schemes generally work on the principle that new investors will pay off older investors and for as long as there are new investors coming on board, there will always be fresh cash. Bernie Madoff managed to maintain his PONZI scheme for many years by making entry exclusive. This way, investors rarely asked questions and in many cases considered it a privilege to be part of his fund. It all unravelled due to being unable to keep up with those wanting their funds redeemed. The fund literally became too big to maintain the status quo. He run the fund for almost 20 years; starting in 1991 and closing in 2009.

Pressure to Recruit New Investors

 Ponzi schemes heavily rely on recruiting new investors to sustain the illusion of profitability. Early investors may be encouraged or incentivized to bring in friends, family, or acquaintances. The scheme's survival is contingent upon a continuous influx of fresh capital. If an investment opportunity places excessive emphasis on recruiting new participants rather than the underlying investment itself, it is a major red flag. Bear in mind that they literally have you bring into the fold, friends and family supposing good intentions, only for you to later become their source of anguish when the fund collapses.

Absence of Proper Regulation

 Legitimate investment opportunities are subject to regulatory oversight and must comply with specific legal requirements. Ponzi schemes, on the other hand, often operate in an unregulated or lightly regulated environment. Conduct thorough research to ensure the investment opportunity adheres to the necessary regulations, licenses, and permits.

Lack of Audited Financial Statements

 Transparency is vital when evaluating any investment opportunity. Ponzi schemes generally avoid independent audits or employ fraudulent accounting practices. The absence of audited financial statements should raise suspicions about the scheme's legitimacy. Reputable investments provide audited statements as proof of their financial health and compliance.

It's highly likely that the PONZI scheme will have audited statements, however, the question to ask is who is the accountant cum auditor? A sincere fund will want to establish confidence with potential investors and thus choose well-known audit and accounting firms. It's assumed that such firms will be careful of who they give a clean bill of health.

Difficulty Withdrawing Funds

Withdrawal restrictions and delays are common characteristics of Ponzi schemes. Investors may encounter excuses, bureaucratic hurdles, or arbitrary rules that prevent them from accessing their funds. These tactics buy time for the scheme operators, enabling them to recruit more investors or prepare their exit strategy. Beware of any investment that makes it unduly difficult to withdraw your money.

If you find yourself at this stage, then know that you are in trouble. You will need to keep knocking loudly and vociferously until you get your funds out. I encourage you to shout loudly; no fund manager wants a belligerent customer for a client :) 

Ponzi Scheme Operators with Questionable Backgrounds

 Conduct thorough due diligence on the individuals promoting the investment opportunity. Ponzi scheme operators often have a history of involvement in fraudulent activities. Check their credentials, reputation, and track record. Be cautious if there is limited information available or if they have a history of legal issues or disciplinary actions.

Recognizing the warning signs and understanding the mechanics behind Ponzi schemes is vital to protecting your hard-earned money. Be sceptical of investment opportunities that promise high returns without commensurate risks or lack transparency. Conduct thorough research, verify the legitimacy of the investment, and seek advice from reputable financial professionals. By staying informed and vigilant, you can safeguard yourself from falling victim to these fraudulent schemes. Remember, if something seems too good to be true, it probably is.

Enjoy

6. Real estate investment for beginners

Below is a list of why one should invest in real estate over other forms of investments and why I would favour that you get into it early and begin the process of wealth creation.

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Tangible Asset with Control

 Real estate is a tangible asset that you can physically see and touch. Unlike stocks or bonds, you have direct ownership and control over the property. This ownership provides a sense of security and control, as you can make decisions related to the property's management, improvements, and rental terms. 

Leverage

 Real estate investments can be leveraged by using financing. With relatively low-interest rates, you can borrow a significant portion of the property's value, requiring only a portion of the total purchase price as a down payment (normally about 10%; this is currently changing to 0% for as long as one has a clear income source e.g salary or a business). This allows you to control a larger asset with a smaller upfront investment. 

If the property appreciates in value, the return on your investment is magnified due to the leverage used. However, it's important to be mindful of the associated risks and ensure that the property generates sufficient cash flow to cover the debt service.

Capital Appreciation

Over time, real estate and land tend to appreciate in value. This means that your investment could potentially grow in value, even if the value of other assets, such as stocks, declines. For example, the average home price in the United States has increased by more than 50% since 2000. This means that if you bought a home in 2000 and sold it today, you would likely make a sizeable profit.

While there can be short-term fluctuations, well-selected properties in desirable locations tend to appreciate over time. As property values increase, your wealth grows. Appreciation can be influenced by factors such as location, economic development, population growth, and supply and demand dynamics.

The housing crisis that occurred in 2008 paints a very different picture in regard to the stability of housing prices and the growth of equity. I will not delve into the reasons why it occurred, however, I will suggest ways to protect yourself.

Many of the homes affected by the crisis were new and aimed a the growing middle class that found it difficult to find a home that suited their needs closer to the Central business district and failed to afford the trappings of suburban living. Living in an apartment in an upmarket part of the city is very different from a lavish plot a few miles away in suburbia. The problem is that thousands of these suburban homes were built, but the criterion that had been used for years as to who qualified for the mortgages was diluted in favour of corporate profits. As a consequence, you had many approved buyers without the ability to repay, leading to many suburban neighbourhoods going into default, inoccupation and eventually decay.

How do you protect yourself against this happening to you in future? Well, as a rule of thumb, look for good neighbourhoods closer to the central business district. If you have ever used an Airbnb or a hotel, the trend tends to be a better occupation rate in good neighbourhoods closer to the city. If a stranger seeking to come into town chooses this or that hotel, it's likely that if you are close to them, you will also attract both Airbnb and local residents choosing to live in such an area. The natural demand for the location will ensure that while there is upheaval elsewhere, it will minimally affect you.

In towns where land is a scarce resource e.g. an island, real estate can be very expensive. In cities where there is more land, what is close to the CBD and in a good neighbourhood is also scarce, as generally the way a city grows is from the Centre. The closer you are to it, the more value it generally has. Of course, there are also low-income areas, which tend to be close to the CBD, but concurrently there are also good areas. Focus on the good areas.

 Cash Flow Generation

 Real estate investments can generate ongoing cash flow through rental income. When you purchase a property and rent it out, you receive regular rental payments that can provide a steady stream of income. Positive cash flow (where rental income exceeds expenses) can be used to cover property-related costs, such as mortgage payments, maintenance, property management fees, and taxes. It can also be reinvested in additional properties, accelerating wealth growth.

This is one of the greatest advantages of real estate and many wealthy people today have become wealthy because of property. As a rule of thumb, the earlier you start to invest in real estate, the better. You need not have the funds to buy a property, you will however need the cash flow to be able to get the loan required for the same. Age is important, as the tenor (or length of time required to repay) tends to get shorter, the older one is. This is based on common sense; the younger you are, the more likely you will live longer. So for instance, in a market like the United States, mortgages can last up to 30 years; this assumes for instance that if you take a mortgage at 20 years old, you will have comfortably paid it off by the time you get to 50 years. 

It's not wise to take the full 30 years to pay down the mortgage. I'll demonstrate with a few basic numbers. Mortgage rates with Freddie Mac, are currently at about 7% per annum.

Imagine you want to buy an apartment worth $100,000

The capital is simply split over the full 30 years as $100,000/30 years/12 months = $ 278 per month

Interest is yearly, so $100,000* 7%= $7,000 per annum / 12 months = $583 per month

The combined capital and interest repayment per month is thus $ 861

That's the first part of the calculation. The second more unsavoury part is the interest payments. You will pay $7,000 dollars every year worth of interest. This means that after 14 or so years, you will have paid approximately USD 100,000 in interest alone; this is the value of the property at purchase. It is thus in your interest to repay the loan as fast as you can.

The beauty of mortgages is that you don't have to suffer the pain alone. If you approach the mortgage as an investment, you are best renting it out and using the rentals to pay down the mortgage. The mortgage and rental repayments rarely match, and it's likely that you will need to top up. To accelerate repayments, top up more than is needed and consider this a form of forced saving to eventually be free of any payments. Your goal is to own the property and enjoy its benefits in future. Look for cheaper accommodation to live in, and let it out to those willing to pay more today; you can live in it tomorrow.

If you start early, say at 25 years of age, assuming that you have a job right through your professional life, you can end up with 5 or 6 properties fully paid for by the time you get to 60 years of age. The modus operandi is always the same. Buy, lease and top up to repay faster. Income from three or four well-chosen properties in good neighbourhoods will always attract rent. This will make for very good retirement income which you can easily pass on to your loved ones.

 Tax Advantages

 Real estate investing offers several tax advantages that can help increase your after-tax returns. Deductions can be claimed for expenses related to property management, repairs, and maintenance. Mortgage interest payments can be tax-deductible in some jurisdictions. Real estate investors may also benefit from depreciation deductions, which can reduce taxable rental income. 

 Diversification

 Investing in real estate offers diversification benefits for your investment portfolio. Real estate behaves differently from traditional financial assets like stocks and bonds. It tends to have a lower correlation to these asset classes, meaning its performance isn't strictly tied to the stock market. Diversification helps reduce overall portfolio risk by spreading your investments across different asset classes that may perform differently under varying market conditions.

Inflation Hedge

 Real estate has the potential to act as a hedge against inflation. Inflation refers to the gradual increase in the prices of goods and services over time, eroding the purchasing power of money. As the cost of living rises, rental income and property values can also increase. Real estate is often considered a tangible asset that has historically shown resilience during inflationary periods.

Building equity

 Over time, you can build equity in your real estate investment. For example, if you buy a property for $100,000 and it appreciates in value by 20%, you will have built up $20,000 in equity. This means that if you sell the property, you will receive $120,000.

Control and Value-Add Opportunities

 Real estate investments provide you with control over the property, allowing you to make improvements and add value. By actively managing and enhancing the property, you can potentially increase its value and rental income. Value-add strategies can involve renovating, expanding, repositioning, or redeveloping the property to make it more attractive to tenants or buyers. Implementing such strategies can result in higher rental income and appreciation potential, contributing to wealth growth.

Remember that investing in real estate also entails risks and challenges. These can include market fluctuations, economic downturns, property vacancies, unexpected expenses, property management responsibilities, financing risks, and limited liquidity. It's crucial to conduct thorough research, assess your risk tolerance, and seek professional advice from real estate experts, financial advisors, or attorneys before making any investment decisions. All this notwithstanding, I would still consider real estate to be a safe bet in the long run against many other forms of investment.

Enjoy

5. 10 ways to build wealth

Financial freedom and how to build wealth can seem like a daunting task, but it doesn't have to be. With a few simple steps, you can start and reach your goal. The first step is to track your spending by the use of a budgeting app or simply keeping a written record of your expenses. I suggest:

 UTONGA Monthly Budget Planner

  

It's free and cheap at just $1.99 per annum for premium functions. It has numerous reports to cater to most needs.

Now on to the steps on how to build wealth:

Step 1: Understand your net worth

The first step is to understand your net worth. Your net worth is the difference between your assets (what you own) and your liabilities (what you owe). Once you know your net worth, you can start to track your progress and make changes to your financial habits.

Please don't allow the exercise to discourage you. This is not an exercise in comparison. There will always be somebody with more and another with less. Simply concern yourself with yourself and yours. No great human story towards anything meaningful started at the top. Take your daily single step and in time, you'll get there. As the social scientist Malcolm Gladwell suggests, practice practice practice makes perfect

Step 2: Set financial goals

Once you understand your net worth, you need to set goals. What do you want to achieve with your money? Do you want to retire early? Buy a house? Pay for your children's education? Once you know your goals, you can start to make a plan to achieve them.

A simple idea that I have come to find to be effective is real estate. I say this maybe because I am an old-fashioned bloke, who prefers to see and touch what I have invested in. Real estate shares the same traits as other investments, such as intrinsic value (it's valuable in and of itself), it can be traded and provides financial security; however, there is one thing it does, that no other class of investment can offer, namely that you can live in it. This might sound simplistic for the more sophisticated investor, but I consider it part and parcel of human DNA to have physical ownership of a part of the earth. I honestly believe that it's the single best investment one can pass on to one's nearest and dearest, but that's just me.

I live in a country where the longest loan I can get is not more than 12 years. In more financially sophisticated environments, the mortgage tenure is over 30 years. If you are young, this is something to take full advantage of by taking up a mortgage early.

As a general rule, don't invest in a property you are unwilling to live in. This is a sure way of ensuring that you invest in a standard that you are personally comfortable with (in terms of location, style of house, neighbourhood etc). By being comfortable with the property, should you lack a tenant, you would be happy to take up the property yourself and pay the rent to the financier, in the way of mortgage repayments.

There is always the fear of the amount of time it will take you to pay, and the fact that you will pay the cost price of the mortgage many times over if you keep paying to the end of the tenor e.g. 50 years. This is a poor way of thinking. The reality is that:

a) Without the long tenor and thus spreading the principle over many years, you would not have been able to buy the property in the first place

b) The principle, i.e cost of the mortgage is spread over 50 years, e.g a $100,000 dollar apartment in a good part of say New York, means the principle is $2,000 annually ($100k/50 years/12 months), and thus $166 per month. The interest on the mortgage, say 7% per annum is 7%/annum on the $100,000 spread over 12 months $7,000/12 to say $583 monthly. 

The monthly number, both interest and principle for a $100,000 apartment is thus 583 plus 166, which is just under USD 750 per month.

The calculations tend to change because of nuances like reducing balance, insurance, processing fees, your credit rating etc, but what I have explained takes up 99% of what one can expect.

Once you acquire the apartment, the idea is to get a tenant to pay off the mortgage on your behalf.

Always remember that most banks have no early repayment penalty. You can thus repay the principle as quickly as you are able to. Throw everything you have at the mortgage until there is none left. As your life circumstances improve financially, reduce the mortgage as quickly as you can. Once you finish, there is no reason not to start again, take up another mortgage and run two or three concurrently.

My final advice is that housing crashes, market crashes etc will always come and go; all the same, people still need good properties and good neighbourhoods to live in. This is why it's very important that you are comfortable with living in your properties. I assure you if you are, those with a similar taste will too; good neighbourhoods always hold value.

Step 3: Earn more income

One of the best ways to grow financially is to earn more income. This doesn't necessarily mean getting a raise at your current job. You could also start a side hustle, freelance etc. Any way you can increase your income will help you reach your financial goals faster.

We live in an age of interconnectedness through the internet. The internet abounds with both simple jobs (e.g. Data entry and answering surveys) to more complicated goals depending on one's knowledge. There is no harm in spending your leisure time racking in a few dollars with online jobs that are available to anyone with a modicum of education and a willingness to forgo free time. You can consider it both an addition to your full-time work and a way to earn a few bucks when at leisure. Frankly, anything that reduces your spending during leisure, both keeps you grounded and brings in some money that you can use for the same.

Some sites that come to mind for this are Upwork, Metroopinion (for surveys) etc and so on. If you are reading this, am certain you can look up online sites offering the same. For as long as you know how to use a computer and the internet, you really have no excuse not to be able to bring in some income to shore up your daily job. I personally aim to learn touch typing as a way of getting more blog posts out and maybe offering my services online. 

Step 4: Save money automatically

The best way to save money is to do it automatically. Set up a direct deposit from your paycheck into a savings account. This way, you'll never even see the money and you won't be tempted to spend it.

This is really a matter of discipline. Determine what you can spend monthly, and any extra should be kept aside. Again I reiterate, this is not about keeping up with the Joneses, but rather a way to keep you focused on the eventual goal.

They say that the destination while important is not as important as the journey. By having financial discipline with little, it will be much easier when you inevitably have more. Don't get sucked in by advertising, that tells you you always need more. One home is enough; one phone is enough; a suit or two are enough; branded goods are no different from any other similar good. Choose function over brand every time. If this makes you unfashionable, then so be it. I am told Warren Buffet wears the same suits he bought years ago; lives in the same house; drives the same car, yet he's amongst the richest men in the world. Choose function over fashion; who says an unbranded item is not as beautiful as one that's not?

Step 5: Spend money consciously

Once you've started saving, you need to start spending money consciously. This means tracking your spending and making sure you're not overspending in any one area. 

Step 6: Pay off high-interest debt

If you have any high-interest debt, such as credit card debt or payday loans, you should focus on paying it off as quickly as possible. This is because the interest you're paying on this debt is eating away at your wealth. 

If you are paying interest at 30% per month, it means that every 3 months, your interest equals the debt amount. Stay away from these and seek help from family and friends, hopefully at zero interest.

On another note, while credit card debt does tend to come with high-interest rates, they also give very good incentives to pay on time. The incentives e.g discounts at supermarkets and many such like retail outlets. Don't elevate yourself to being too important to take advantage. Every little helps.

Step 7: Build an emergency fund

Once you've paid off your high-interest debt, you should start building an emergency fund. This is a savings account that you can use to cover unexpected expenses, such as a car repair or a medical bill. An emergency fund should be equal to at least three to six months of your living expenses.

As a general rule, try to put aside at least 10% of your free income monthly, this is over and above any forced saving like paying off mortgage loans. Liquid cash is important to handle emergencies.

Step 8: Invest your savings

Once you have an emergency fund, you can start investing your savings. There are a number of different ways to invest, such as stocks, bonds, and mutual funds. You should do some research to find the right investment strategy for you.

As a general rule of thumb, well, my rule of thumb, is to invest in what you are familiar with. Professionals use numbers to determine where value might exist; the fact that they've never personally interacted with the companies they have in mind is irrelevant. I generally believe, that while the numbers do indeed matter greatly, if you interact with their products regularly, then it's likely that many others see the same value you do. Professional advice, freely available from friends family and the internet, will guide you as to whether they are reasonably valued for you to invest. 

Investing today, in the age of the internet and mobile connectivity is fairly straightforward today. I do however caution that a low price is no determinant of value; value is simply a factor based on the companies existing overall value (Assets less liabilities plus current profits) and the expectation of growth for the future; the latter is the hardest thing to value and it's where research pays off. Apple, Microsoft, Tesla etc while in their early days may have been cheap, what may have made them attractive is to project where they would go and take a chance that they would succeed. One must apply 70% common sense and 30% research and make a decision. 

In finance, they say the risk equates to the potential reward. The profile in general looks like this:

Asset class       Associated risk/return

Stocks                High

Bonds                 Medium

Fixed Deposits    Low

and savings

Government       Low to risk-free

securities

When young, one can be riskier. As you get older, you generally invest in lower-risk products. 

Step 9: Stay disciplined

Attaining wealth takes time and discipline. There will be times when you want to give up, but if you stay disciplined, you will eventually reach your goals.

Step 10: Reevaluate your goals regularly

Your financial goals may change over time. As you get older, you may want to retire early or start a business. Make sure you reevaluate your goals regularly so that you're always on track. See step 

Following these simple steps can help you to reach your goals. It won't happen overnight, but with time and discipline, you can achieve your dreams.

Here are some additional tips for building wealth:

• Live below your means.
• Avoid lifestyle inflation.
• Invest in yourself.
• Get educated about money.
• Be patient.

Financial independence is a journey, not a destination. Enjoy the process and don't be afraid to ask for help along the way.

Enjoy

4. Realistic ways to save money

Saving money is an important financial habit that can help you achieve your financial goals, such as building an emergency fund, buying a home, or investing for retirement. Here are some ways to save money:

1. Create a budget

The first step is to understand your income and expenses. Create a budget to track them and identify areas where you can cut back on spending. There are several budgeting apps and tools available that can help you create and manage a budget. One such tool is :

 UTONGA app

  

We encourage you to check it out. It's affordable and great value for money!

2. Set goals

Setting savings goals can motivate you. Start by setting short-term goals, such as saving for a vacation, and long-term goals, such as saving for retirement. Calculate and determine how much you need to keep and the frequency and related amount you need to reach your goals.

3. Automate your savings

Set up automatic transfers from your checking account to a savings account each month. This can help you be consistent without having to think about it. Alternatively, be disciplined about manually transferring a certain amount to your savings account every time you receive an inflow.

4. Reduce expenses 

Look for ways to reduce your expenses. For example, you can save by cooking at home instead of eating out, using coupons and discounts, or negotiating your bills. Don't take anything for granted; negotiate.

5. Shop around

Before making a purchase, shop around to compare prices and find the best deals. This can help with big-ticket items, such as appliances or electronics. There is no shame in comparison, it is precisely why there is competition. You've worked hard for your money, use the same effort in how you spend it.

6. Avoid debt 

High-interest debt can eat into your funds. Try to avoid taking on debt or pay off any outstanding debt as soon as possible. Practical examples are as follows:

To the extent possible be self-reliant rather than spending outside of the home

Let's say you spend $5 a day on coffee from a coffee shop. By making your coffee at home instead, you can save $1,825 a year ($5 x 365 days). That's a significant amount of money that you can put towards your savings goals.

If you have a gym membership that costs $50 a month, but you only go once a week, you can save $40 a month ($50 - $10) by cancelling the membership and working out at home or outside.

Extreme care with debt

If you have a credit card balance of $5,000 with an interest rate of 20%, you'll end up paying $1,000 in interest charges over a year if you only make the minimum payments. By paying off the balance as soon as possible, you can save $1,000 in interest charges and avoid accumulating more debt.

 Refinance your debt

If you have high-interest debt, such as credit card debt or a personal loan, consider refinancing it to a lower interest rate thus paying off your interest charges and paying off your debt faster.

7) Use public transportation

If you regularly commute to work or school, consider using public transportation instead of driving. This can save on gas, car maintenance, and parking fees etc. You can also use this time to read, listen to music or podcasts, or catch up on work.

8) Buy generic or store-brand products

Generic or store-brand products are often just as good as name-brand products, but they're usually much cheaper. Why pay for advertising when the product is the same; milk or bread is just that whether it is branded or not!

9) Pack your lunch

Eating out can be expensive, especially if you do it regularly. By packing your lunch instead, you can save and eat healthier. You can also prepare your meals in advance to save time during the week.

When I was younger, I was concerned about how it would look. The reality is that saving is a personal journey and its benefits far outweigh any social concerns in the present. Imagine saving enough for that mortgage deposit, when your colleagues have eaten away (literally) at their opportunity. 

10) Shop for clothes during sales

Clothes can be expensive, but you can save by shopping during sales. Look for discounts and coupons online or in-store, and try to buy clothes out of season when they're on clearance. What's the point of having the latest fashion and being perpetually broke? Prioritize the future over the present!

11) Cancel subscription services

Subscription services, such as streaming or gym memberships, can add up quickly. If you're not using a subscription service regularly, consider cancelling it . I have Netflix, Prime and Showmax; all streaming services. I hardly spend an hour a day in front of the telly. It's ridiculous; they'll be going very soon.

13) Buy in bulk

Buying in bulk can be a great way to save on items you use regularly, such as toilet paper or paper towels. However, make sure you have enough storage space and that you'll actually use the items before they expire.

15) Use Supermarket loyalty points systems

It's a simple way to attract discounts. Take advantage of Supermarkets competing with each other.

16) Rent instead of buying

If you need a tool or equipment for a one-time project, consider renting it instead. Renting can be much cheaper and it can also save you storage space.

17) Take advantage of free entertainment

Instead of spending money on entertainment, look for free options in your community. For example, you can go to a park, attend a free concert, or visit a museum on a free day. Additionally, along with your friends, entertain at home. This cuts the cost of going to entertainment establishments.

18) Negotiate your bills

You may be able to negotiate your bills, such as your cable or internet. Call your provider and ask if they can offer you a better deal or if they have any promotions or discounts.

19) Use a programmable thermostat for your home

A programmable thermostat can help you save on your heating and cooling bills by adjusting the temperature when you're not home. You can set the thermostat off or reduce the temperature during the day or at night, and then turn it back on when you're home.

20) Buy used items

This is a favourite of mine. Buying used items, such as furniture or electronics, can be much cheaper than buying new ones. Look for deals on websites such as Craigslist or Facebook Marketplace, or shop at thrift stores or garage sales.

By using these tips and examples, you can save and improve your financial situation. Remember that saving is a habit that requires discipline and commitment, but it can pay off in the long run.

Enjoy

3. UTONGA Personal finance app free

We continue from the previous post and expound further on our UTONGA Personal finance app and the management of the same. Let me first start by stating that the old adage, no pain no gain, remains very true for all human beings and more so for the younger that are just starting off in their various careers, and thus the importance of an app like ours. There is quite frankly, no free lunch however the opportunities offered by the world today are much more different from the times when I grew from adolescence into adulthood, namely the 1980s; yes, am an old fossil, willing to impart a few words of wisdom.

Kindly download our UTONGA Personal finance app free

 

  

A quick summary, that's expounded on below will be useful. I make the following suggestions:

- Work hard in your day job

- Save as much as you can and reduce consumption expenditure while increasing investment income

- Use the internet to generate revenue over time. There are loads of free tools to take advantage of.

- As much as possible use forced saving. It's worked for me and is sure it will for you.

The problem we all face in finance is that we all have a myriad of expenses, but very few income sources. The typical path to wealth is to reduce expenditure, using a personal finance app like ours and thus growing income. This is obviously much easier said than done, and none of us wants to be frugal to the point of living a “tasteless and uncharitable life”; the trick is to find some sort of overall balance.

We live in an age where opportunities abound for those with capital, both intellectual and physical. Another way to describe the physical, is simply those with resources and intellectual, as the clever.

In my schooling days, the factors of production were Land, Labour, and Capital. It's 2022 now, and we have a couple more Technology and Intellect. The latter has always been there, but the combination of technology and intellect makes it a factor that can thrive without having resources (land and money).

In yesterday’s world, those who had resources were the nobility, political elite, the business world, etc where resources could be used as collateral, and all the members of this club were educated well enough to know how to organize labour to achieve their ends. 

If you had no access to land and capital, you would join the ranks of labour (assuming a reasonable education) and hope that over time your labour would provide you with the capital to allow you to join the ranks of the owners of capital and land - resources.

Today’s world is very different from that of say 100 years previous. Just looking at the list of super-wealthy, technology clearly plays a very dominant role. Technology as a factor of production has shown that those that start with smart minds combined with technology, need not have had any outward signs of wealth at the beginning, only a great idea, which when once understood by investors, made these new thinkers fabulously wealthy. An excellent example is that of Bill Gates, if we can disregard that his family was not poor, still managed to exceed the wealth of many generations of the Gates family at the tender age of 21, by which time he had amassed a USD 2 billion fortune.

Enough of the history lesson, the point to take home is that one should always look for ways to diversify sources of income, given the difficulty of reducing expenditure. I am suggesting that in the absence of land or capital, you have your mind and you have access to technology, for example, the internet, to help you determine the easiest way to diversify your income.

 I am convinced that the internet, and many free services offered on it, is one of the ways that intellect and technology meet to allow those with the ability to use this platform, to break into the ranks of owners of capital. It will take time, and the competition is very stiff (there are millions more that lack rather than have the capital), but there are also few genuinely smart people out there, so hopefully the end is not as far off as you think; I make the assumption that everyone reading this, how to grow in wealth, is smart :).

There are many ways that one can approach the internet and technology generally, but whatever you decide, always choose a path that best suits you; the one that you consider least complicated, allowing you to devote time and effort, effortlessly, in developing it. Remember, whatever it is, for as long as it is providing the world with a solution to a problem, latent or otherwise, then it will succeed. The extent of that success will depend on how widespread the problem is, which determines the extent of usage, which eventually translates into dollars and cents. I came across a wise saying, apt I think for this post " The best time to plant a tree is 20 years ago, the next best time is right now". Just start.

The whole aim of our personal finance App is to modify behavior, by making you more cognizant of your spending and the consequences of it. The vast majority of working adults subsist on a fixed salary, which is why it is crucial to plan for it. It's natural not to be too enthusiastic about planning, who wants to be reminded of how little we earn, but it is essential to be successful in cutting down expenses and growing savings.

If you are the happy-go-lucky kind, fully aware of what you need to do, but not having the discipline to do it, then maybe forced saving is the next best option. Forced saving is using debt to purchase a financial asset, and using whatever sources of income you have to repay the debt. There are obviously many kinds of assets you can buy e.g stocks, real estate, land namely anything that retains value into the future and certainly not what would fall under consumption e.g a car, shoes, clothes, etc. 

You are forced to attend to your financial obligations for assets, which grows your savings, and thus automatically reduces your consumption. The idea to keep in mind is that after all your efforts, at some point in the future you will enjoy the fruits of your labour.

When I was young, I was indeed happy-go-lucky; my dad, being a strict disciplinarian and frugal character, suggested at the age of about 30 that I should consider a mortgage. It seemed like a win-win situation at the time. I had a good job supporting a bank mortgage and the plan was for the tenant to pay the mortgage. This was probably one of the best things I ever did. The tenants did indeed pay off the mortgage and I had paid it off within 5 years. I did this by throwing all the money that came with gifts, promotions, and bonuses at it. I've continued taking up mortgages, at a slower rate than when younger, but the same principle holds. Tighten your belt and pray for the day you own outright.

So, the moral of the story is that it's never too late to start and a good way to start is to use an app like ours to give you a perspective of where you are currently, and where you need to curb back. We encourage you to set off on this journey and to be disciplined about it; nothing good in life comes without hard work.

In my general worldview, we are just sojourners in this world and I consider time to be relative to the lessons we are meant to learn when we are here. One man's life against another is apples and oranges, completely incomparable. My thinking is that the overarching goal for all is service to our fellow creatures; this however takes different forms, the hard work is choosing that which works best with your personal makeup, and while you are at it, why not make a couple of pennies for yourself and those you love.

I hope these few words of advice have been useful to you..in the interim, don't give up your day job yet, but start to engage in the internet and all that it offers. Build up your portfolio regularly and in time, you will create a business; remember, once it's out there and is unique, it will forever remain yours. Start by using our app.

Kindly download UTONGA Personal finance app

 

  

Enjoy

2 UTONGA Monthly Budget Planner App

We continue from where we left off and expound on more features of our UTONGA Monthly Budget Planner app

 UTONGA Monthly Budget Planner app

  

a) Itemized income and costs

This covers any period showing dates, amounts, descriptions, and a running balance. You will be able to print out the statements to pdf and thereafter to a physical statement should you so desire  

b) Reports that show your net worth.

This simply adds up all your sources of income and any debts to give a total figure of your overall wealth.

c) Multiple entry feature

If you are drawing on one source of funds e.g a credit or debit card, you can post each individual expense and have the tallied figure go directly to the source of funds.

d) Pin and biometric support

This is largely a function of the phone's ability. If it supports biometric entry, the app will do the same.

e) Daily posting reminder

This is again a feature that is reliant on the phone's ability. You can set up a daily reminder to post entries. The app is manual, so a reminder of this nature is useful. It's very human to be lazy about posting, however, once you get accustomed to it as I have, you will rarely need the prompt. 

f) Data reset and backup

As with any application, you can reset the app to its original status and additionally, you can store data in your phone's internal memory and recall the same as and when needed.

g) Inter-account movement. 

You will be able to shift funds easily mimicking the real world. For example moving money from your checking to your credit card, or from your salary account to your savings. On the app, it's a fairly simple and straightforward process.

More detailed UTONGA Budget Planner app explanations with screenshots:

1.     Movements between sources of funds

Just like in the real world, if you move funds between your various sources of funds, you can also replicate the same in our app. See the arrows at the bottom of the screenshot above? that's what you press. The idea is to simply mimic the real-world movements. It can be tedious, however, since there is no actual link to your real-world accounts there is no security risk; it just requires a little extra effort.

Income 

Expenses 

You can generate both income and cost reports over any period. They have the following columns:  the dates, type, images or photos, accounts affected, the amount, and the running balance for the expenses or income over that period. This is very similar to the real world, except that in this case, they are shown separately rather than on one page. Each has a running balance, again similar to a normal bank statement.

A pie chart for the period showing them in diagrammatic form is also readily available (see the top of the screenshots). This makes it easy to know, over any desired period, what the main sources of income or outgoing expenses are; this is obviously very useful for planning purposes.

These reports can be exported to excel or CSV files on your device and from there exported to your computer/laptop. The statements can be viewed in a vertical or horizontal orientation.

3.   Net worth Report and Pie charts

This is similar to the one found under the Accounts section. It's just a tabulation of all your account balances whether overdrawn or in credit. This is again simply a diagrammatic representation of one's portfolio of financial assets.

The pie charts, again show diagrammatically which financial assets dominate your portfolio and thus where to make necessary changes.

4.     Multiple entries mode

This is a unique feature where many costs are accumulated and tallied and the total goes to one of your sources of finance, in the case above it's the Cash wallet. This feature is very useful when using a single source of finance (e.g a credit or debit card) when shopping e.g when in a supermarket and other such places where there are many expenditure categories you are spending on, at a single go. 

For example:

Toilet paper    x

Soap               x

Cooking oil    x

Other              x

TOTAL         XX

CREDIT CARD                    XX

So instead of passing each expense individually, the app tallies and records all expenses and passes one entry to the financial account or source of funds.

5.     Back up

Information can be backed up at any time into your device's internal storage files. From there you can export to any place you want. If you need to reset your data, you can then restore using the backup at any time.

6.     PIN and Biometric Locks

At the very least, all devices can enjoy the PIN lock. Facial print and fingerprint recognition largely depends on your device's ability. 

7.    Weekly notification

Our app is manual and requires some discipline to post and keep updated with your day-to-day transactions. The reminder, obviously, reminds you of the need to post and thus keep you up to date.

9.    Data reset

If you are changing phones or simply want to remove all data from your device, you can first back up and export the info to someplace and thereafter reset it. You can always upload to a new device. 

We continue in the next post 

Enjoy