Personal Finance Kenya [10+ free lessons and templates]

Personal Finance Kenya: Lesson 3 – Introduction

Welcome back! Hope you got valuable insights from the previous lessons. In this one, we will learn how to make money while remaining liquid in Kenya.

When creating cash flowing liquidity, there is no tool as versatile as the money market fund (MMF) in Kenya. Whoever made education insurance policies should learn how to create products that make sense. MMFs can be your financial Swiss army knife. You can use them to:

  • meet goals
  • earn interest
  • remain liquid

Here are some of the ways I leverage MMFs in my personal finance management.

Personal Finance Kenya: Lesson 3 – Emergency Fund (Expenses)

An emergency fund is a key part of personal finance management in Kenya and is the OG way to use MMFs. Here are the key benefits of an emergency fund in Kenya:

  • Rainy day fund: Money set aside in your MMF to deal with unexpected small expenses. Life happens and when it rains this fund can be your umbrella.
  • Antifragility: The more money in your emergency fund, the more antifragile you are. Being antifragile is having options. For example, if you have 1 year’s worth of expenses, you can easily leave a job you hate. You can fund your lifestyle for an year as you look for a good job.
  • Peace of mind: The Zen of mind knowing you can deal with emergencies if they arise is priceless. You also create mental bandwidth to grow your wealth.
  • Avoid debt: No need to go into debt to deal with emergencies. Your emergency fund saves the day or at worst resets you to zero to fight another day.
  • Buffer: Business owners can use an emergency fund to smoothen irregular income. Whenever, you make more than your “normal” monthly income, set aside the “extra” income into your emergency fund. Whenever, you make lower than your “normal” monthly income, dip into your emergency fund to cover the deficit.

Most personal finance coaches in Kenya will advise 3 to 6 months worth of expenses for your emergency fund. Unfortunately, this is goal based thinking. Goals need discipline and motivation. A better way is to setup systems. Systems are sustainable and don’t rely on you being disciplined or motivated to attain something. This is true for your money but also other areas of your life. Read this book on how to setup systems in your life.

The Jaza Shilingi system uses monthly standing orders to deposit specific amounts into the MMF Emergency Fund (Expenses) account. Over time you get the goal via automation. It will feel good when you get to 3 months’ worth of expenses then 6 and before you know it an year! You get more antifragility and optionality in your life as these multiples of your expenses grow.

Further, the system ensures there is always an emergency fund balance. Even when you withdraw from it, the system will build it up again! That’s the power of automation and system thinking! There are no hard targets. However, lowering your monthly expenses or increasing the standing order will lead to faster success! CIC MMF and Sanlam MMF are best for those using the Jaza Shilingi system of growing wealth in Kenya.

3 things I can point to and say this helped me achieve financial freedom in Kenya. Number 1 is in the next lesson!

  • Onwards to Lesson 3 – Emergency Fund (Investments)

Personal Finance Kenya: Lesson 3 – Emergency Fund (Investments)

Another idea in my Jaza Shilingi system that I wish someone had figured out and taught young me. The idea is to set up an emergency fund for your investments. The money market fund and your investment need to have the same bank for it to work.

I leverage the concept in all the investments I recommend for the Jaza Shilingi system. So, I don’t want to spoil that lesson on where to invest your money in Kenya. However, for the sake of this section, let’s look at one example involving Kenya NSE stocks.

A comprehensive guide on buying shares in Kenya and the practical lessons learnt will be shared later in this personal finance course. I use an NSE CDS account with AIB capital (AIB AXYS). You can open an account with them online. No paper work needed!

I use Sanlam Money Market Fund for the Emergency Fund (Investments) account. The bank is Stanbic as both Sanlam and AIB bank with it. This is important as transactions with any of the 3 entities is fast and free! You can however use other entities as long as you identify the common bank between them. This is a key part of this section of the Jaza Shilingi system. It allows you to quickly move in and out of invested positions. So how does this apply to the Kenya stock market?

It is rare for me to sell my stocks as I hold them for the long term. However, sometimes the market offers some great opportunities. So if I own a well performing stock but based on my analysis I think it’s overvalued. I will sell it and then hold the money in the MMF – Emergency Fund (Investments) account. That way the money can be earning interest as I wait for another opportunity in the market.

Another way I use this MMF sub account is to hold the dividends I am paid. My experience especially in the Kenya stock market has been that after the book closure date most dividend stocks normally fall because many people were only chasing the dividend.

My trick has been and it has been working for me. I will wait for the dividend to be paid and then move the money to the MMF sub account for investments. I never panic so I won’t sell the underlying stock as it falls post book closure. The dividend can be earning interest in the MMF as I wait for a chance to reinvest it in the stock.

This is especially important for me when I believe in the long-term value of the company. If short term moves e.g. after book closure give rise to prices that are below my long term valuation, then I will reinvest my dividends into the stock. By the way reinvesting your dividends is the way to ensure compound growth from the stocks bought from NSE in Kenya. But that’s a lesson for another day.

The one thing I can tell you is don’t get into the buying of shares in Kenya if you don’t know what you are doing. It’s a sure recipe to lose money. Wait for the lesson on how to buy shares in Kenya for a bit of wisdom. As I said in the disclaimers section, it is called Personal Finance for a reason.

Educate yourself. That way when it comes to buying shares in Kenya or any other investment, the decision is your own. It should be that you know the basics of what you are investing in. That way you can decide what to invest in and or can ask the right questions when relying on a professional.

The worst mistake you can make is listen to a guru with a hot tip! Another recipe to losing your hard earned coin. Trust me I made that mistake in my rookie years of investing. And no I will not be your guru!

Personal Finance Kenya - We Dont Do That Here Meme

My mission is to educate. Your mission should you choose to accept it, is to learn, share the knowledge and then apply it. Apply only what you understand and own your decisions. Here is a hot tip from not-your-guru guru…

For stock markets in Kenya or anywhere in the world, only invest what you can afford to lose. Leave your ego out of trading stocks. The stock market humbles egos. Ego will make you go all in on a trade and the market will show you who’s daddy. So be humble. Test out your “theories” and “analysis” with small positions. Better to fail fast and fail small. No one wants to go all in and fail big.

Sometimes, you lose your biases when you lose your money. You lose some cents and gain some sense. All of a sudden your eyes open up to a risk or flaw in your perfect analysis. So fail small. Learn from the loss and adjust. Be humble in your gains. Moderate your emotions so greed does not lead to mistakes of confidence.

Most importantly, be patient.

Value will always be unlocked in the long term. All you need is time and capital so as to profit when it finally does. For me patience and the emergency fund for my investments take care of that!

Time out. Reading the last bit and I can’t believe it came from my raised-in-Kigari, primary-in-Njukiini, Kagumo-High-schooling, Taita-Bush-campus-going brain!

Let me quote the hell out of it as I myself need to read and think about those words when I invest!

Value will always be unlocked in the long term. All you need is time and capital so as to profit when it finally does.

Nash Thuo

When you think about it.

An emergency fund for your investments gives you options and the liquidity (cash) to instantly benefit from opportunities in the market. It may be buying land at below market value due to a distressed sale or buying a stock dirt cheap in the NSE.

No matter the asset. You will always be ready to grab it and profit. That is priceless. It’s why excess cash or windfalls are to be swept into an MMF Emergency fund (investments) account. You remain liquid while earning cash flows and will always be ready to grab opportunities. Even Warren Buffet know this.

At worst, with this system, you will never be asset rich and cash poor.

We all want to be rich. Fine with me. A better goal is to also live a rich life. The next lesson helps with that!

  • Onwards to Lesson 3 – Vacation + Goals account

Personal Finance Kenya: Lesson 3 – Vacation + Goals account

The reason I initially highlighted the vacation fund on its own is because I like to explicitly bring in the aspect of living a rich life as you can learn from this book. The vacation and goal funds can be merged. You’d use this money market fund sub account to save up for things or experiences you’d like to buy.

Between the two aim to spend more on experiences rather than buying stuff. Research shows spending on experiences leads to happiness. The problem with buying stuff is that your happiness is short-lived due to hedonic adaptation. It’s a term for the joy we get when we buy new stuff which wears off within a few days. The problem is when you start chasing this “joy” by buying new stuff again. Then it becomes a vicious cycle of never ending consumption. Contrast that to spending on experiences. Experiences live in our memory. We can reminisce about the experience and relive the happiness.

Whether that means riding a cable car or marveling at Gaudi’s buildings in Barcelona.

Or paragliding in the coast of Cape Town

Or chasing the sunset in the Maasai Mara

Experiences will pay dividends forever!

You also have experiences to reminisce. Relive them in the comments section. Name the place and the thing you loved best. If there is nothing, tell me what you plan to experience. Who knows it may be the same for both of us! #LetsTakeaTrip

Use this MMF sub account to save for fees, furniture or a vacation. Whatever the goal. Set it. Deposit money via standing order. Earn interest as you plan the trip or purchase. When the goal is reached, withdraw and spend on the experience or thing.

Money market funds in Kenya are versatile. There are other creative ways to use them. For now, have these in your money system:

  • MMF Emergency Fund (expenses)
  • MMF Emergency Fund (investments)
  • MMF Goal Fund

Of the 3, the most important is the emergency fund for your investments. It is key for growing your wealth in Kenya and finally achieving financial freedom.

MMF accounts opened this year!

If you one of the Kenyans above, under my financial advisor code, reach out if you want help in opening the MMF sub accounts.

If you want help to open an MMF account, send me a WhatsApp message via this link.

The good thing with MMFs like CIC Money Market Fund, is you don’t need a deposit to open the MMF account! You can make the minimum deposit when you get it!

Free Net worth tracker

The tracker’s design is intentionally simple. Simple leads to action. Complexity impedes action. Fill the template to make it your own.

Process to get it via WhatsApp or Telegram:

  1. Chat with me via this WhatsApp link or this Telegram link.
  2. Save my contact as Nash Thuo for it to work.
  3. Send a message with the word “secret” to activate the bot.
  4. Follow the bot commands to get the template and other services.

The above also works with Instagram. Just DM me the word “secret” to activate the bot!

The template will evolve with the lessons. The final one has the pretty dashboards but we don’t need that at this stage of the free Personal Finance Kenya lessons.

Next steps

Use the template above to make your own net worth tracker and thus be ready for the next lesson! We will build your tracker with each lesson. This is the first section. Four more sections to come!

It great to have attained financial freedom in my early 30s. To do it in Kenya is an even greater feat! I don’t think me and you have the same opportunities as someone born in the first world. But men are we hardworking! As a people, if we get our values right, we are destined for greater heights!

Everything on JUMIA

Hope sharing this section of the Jaza Shilingi system helps in your path to financial freedom. It’s my small way to give back and improve financial literacy in Kenya. Pay it forward. Also, share this blog with family, friends or colleagues.

Here are bonus lessons to add to what has been shared so far!

10 Personal Finance Basics
  • Onwards to Extra Bonus lessons (Coming soon!)

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11 Comments

  1. Informative read….i like it. I came from Reddit

    1. Awesome to hear! Happy to know Reddit peeps are learning as well 🙂