Chachanomics Money Conversations During the Start of Covid-19 in 2020
Q1. Who is Chacha Nyaigoti Bichang'a?
I am a lecturer at a local public university, passionate about
teaching people about personal financial matters like financial planning and management
anchored in budgeting, saving, managing debts and investments. I am the Founder
and Lead-Coach of Chachanomics 101 Mentorship and Coaching Program.
Q2.
Why did you decide to teach people about personal finance?
My passion is informed by the realisation that money matters
cause more intolerable stress and suffering to many people than they can dare
admit openly because money is a tabooed subject just like sex education.
Research indicates that 80% of the domestic conflicts, separation and divorce are
due to money-related problems. In fact, money is the number one cause of
depression in Kenya and Africa in general.
Q3.
Who are your major clients or target audience?
I adress personal financial matters that touch all cadres
ranging from students, graduates, professionals working in various
institutions, business persons and corporate institutions. For youngsters, I
focus on mentoring them to utilise their time well in discovering their passion
and exploiting it, learning to budget, save and invest their time, energy and
money in profitable endeavours. I mainly teach professionals about how to
develop a financial plan based on their unique and special needs; for example,
establishing a six months' capital reserve, saving for retirement and
investment in various asset classes.
Q4.
What is the reality of money at this time of Covid-19?
The unfortunate truth is that Covid-19 has caused unbearable
loss and suffering not only to millions of Kenyans but also the entire world
populace. Major global economies have tumbled under the pandemic as well as
developing nations. Scores of businesses (both formal and informal) have either
collapsed or lost a huge percentage of the profit margin. Many employees have
lost jobs, some have been put on unpaid leave while others have experienced
salary cuts. Generally, there is little money in circulation and the standard
of living has gone a notch higher.
Q5.
What are some of the critical challenges people are facing with money?
As already pointed, money is in short supply and the cost of
living has hit the roof making people to take risks of getting out of their
quarantine comfort zones to try and eke a living. The hunger virus is more
lethal than the dreaded Coronavirus. In fact, many middle income earners have
exhausted their savings and food reserves making them more vulnerable to hunger
and starvation just as the low income earners. The future looks bleak unless
something is done (at individual and government levels) to save the situation.
Q6.
How can the financial challenges be overcome?
The devastating financial problems can be addressed by embracing
a multipronged approach. This includes: one, creating a crisis budget that
makes adjustment to your new reality. Two, cut down on unnecessary expenditure.
Three, allocate more money on the most essential needs at the moment, that is,
food, rent and social amenities like cable TV subscription, water and
electricity. Money usually spent on non-essential expenses like entertainment,
travelling, clothing, jewellery,
electronic gadgets like good smart phone etc should be saved. Four, do not
exhaust your savings or overwithdraw thinking that the pandemic is ending soon.
Five, use the available food and other resources well. Six, ongoing or new
projects can be suspended for the meantime or completed of the situation allows
among other austerity measures (akin to what the Kenyan government has
partially done).
Q7.
How much percentage do you allocate to the needs and wants?
Supposing you're following the 50/20/30 budgetary plan, 50% of
your net income normally goes to needs, 20% to savings and 30% to wants. You
can now cut down the whole of 30% meant for wants/non-essential expenses e.g.
travelling, eating out, drinking with friends, gym subscription, electronic
gadgets, airtime, shopping for designer clothes and holidays. You can now work
from home and eat with your family members or carry packed food to work, buy
foodstuffs in bulk, buy second hand but decent items, and save the rest. The
remaining percentages can remain intact but may be adjusted in case of job loss
or salary cut. You can renegotiate on debt payments but pay rent, utility
bills, reduce food consumption and withdraw sparingly from the emergency
reserves, if any.
Q8.
You said that one can stay for 6 months eating what he has saved. That is only
possible when you've a job but what about those without jobs?
Yes indeed I have said that you should aim at saving at least a
six months of your normal total expenditure in a month to cushion yourself from
any emergency/unexpected eventuality like the Covid-19 global pandemic, loss of
job, illness or any form of incapacitation. For instance, if your normal
monthly expenses totals to Kshs. 50,000 then you should aim at putting aside
Kshs. 300,000 as your capital reserve. This sounds a tall order to many people
whether you're employed or not. You should save what you can as so long as it
is not less than 10% of your total income. Please note that saving performs
various functions besides being an emergency buffer, that is, for retirement, funding
recurrent expenditure like school fees and more importantly saving for
investment. This means that you need to save at least 30% of your total income
to be on a safer side.
Q9.
Can you advise somebody to start a business at this time?
Not necessarily. The writing is on the wall. The economic
indicators are clear. If you weren't in business before the pandemic, you need
to spend your money wisely, and do more market research on the business you
want to establish. If you were already in business, you can pick up from where
you left and reinvent your business for better returns. You can explore other
avenues like online platforms to market and sell your products.
Q10.
What can you say about somebody who wants to buy land or stocks at this time?
What a good question! If you have already acquired a loan, it is
advisable not rush into buying property without carrying due diligence. Look
for motivated sellers so that you can leverage by buying a bigger piece of land
for less. Meanwhile, tie the money in 3-6 months treasury bills to earn some
interest instead of it lying idle in a bank account as you do the groundwork.
More cheaper deals are coming your way sooner than you expect. Watch out!
It is my sincere hope that you have been enlightened. For more
queries, please feel free to inbox me, send feedback on my Facebook and twitter
accounts.
Stay Safe, Mask and Sanitize!
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