A sweet high

In the morning prior to my last post, I had a cup of tea accompanied by a full-fledged teaspoon of sugar. Today morning, my cup was accompanied by a teaspoon of hope...and a chapati. Such is the situation in most Kenyan households. The price of sugar escalated to historical values overnight. I passed by a supermarket yesterday to buy some and was shocked to hear them say that they didn't have any (obviously holding stock). Some places are selling it for Kshs 235!! At such a price, you're better off having plain bread -with salt from our tears- for breakfast. As if that were not bad enough, food prices are shooting up like its a race. Flour, butter and rice are but a few examples.
Speaking of inflation, Kenya's moved up to 16.7% this month, up from 15.5% in July. ANOTHER historical high for my beloved country. Here's what it means: High rates of inflation lead to inefficiency in a market economy and, in the medium to longer term, to a lower rate of economic growth. Movements in the general price level are influenced by the amount of money in circulation, and productivity of the various economic sectors. If I'm not mistaken, the Central bank called back some money a few months back....or was it a plea to citizens to let go of the coins they were holding?? Basically, the money in circulation had/has gone down. Couple this with a depreciating currency and you have a nation of desperation. What one could buy with a money 'X' is much less. That $1000 note book that used to cost Kshs. 80000 now costs Kshs.94000. That's what inflation means.
There's other ways to survive though. As of tomorrow I'm replacing sugar with honey, butter with jam and faith with dreams (they can still come true). Some alternatives are much cheaper and even healthier. After-all, I'm still investing in my physical health and financial future.

Accomplished one of my 2011 goals :)

Straight to the point....I finally opened a bank account. One that I'll actually use. I had one before but I figure it's been closed due to inactivity (2 years of no transactions). If any of you jacked me within that period, you would have found a few notes in my socks and other areas. Lakini sasa....tough luck!

"He's only opening a bank account now?" Yes, yes I am. I've always been against the notion of keeping my money in another institution's hands only to be charged for either withdrawing my own money or simply keeping it there. Alas, it's necessary. As much as there are 5 layers of security to get through before you reach the 600 bob under my pillow, a bank somehow feels safer.

Bank accounts differ from bank to bank. Here are some common types:

1. Checking account: Commonly known as current account and used for daily transactions at a fee. Withdrawal can be done at any time and there's no limit (unless you intentionally put one or are withdrawing more than what you have). No interest on deposits. Use it preferably if you're in business.
2. Certificate of deposit account: Commonly known as fixed account. Earns a relatively high interest on deposit (which is made once and for a fixed period of time). You cannot withdraw until its maturity. In Kenya, most banks require a minimum deposit of Kshs 500,000. The longer the period, the higher the interest earned.
3. Savings account: These are meant to encourage a saving culture. Fair interest is earned on deposits and one can only withdraw a given maximum and a given number of times in a month. The trick is to find a bank that offers a rate that will help you beat our 16+ % inflation.

With the introduction of M-banking (transactions via one's mobile phone...at a fee) and E-banking (Remote banking transactions via internet...at a fee), banking has become more efficient if not quite enjoyable. Having an ZAP, YUcash, Orange, MobiKash or M-PESA account really helps with this. Research on the various student accounts available in your area. Sit through those tasteless bank account advertisements. God knows some are better than their actual service. Till next time...

Armed for the future

There's many ways to arm your future. One can literally make a futures contract to have ammunition delivered at a future date a a given current price (the beauty of futures market). This isn't the kind of arming I'm talking about though. I'm referring to increasing the probability of a secure and more stable future. Investing to be more specific. Many of us are investing subconsciously e.g. eating right, networking, purchasing shares,etcetera. I'll briefly focus on the financial investment bit in hopes of alerting or reminding you how important it is to think in the long-term.

 

I've been setting aside Kshs. 600 every week for the past month. It sounds petty right about now, but I'm sure this "petty" stamp will decrease exponentially to the function of time. I plan on owning/acquiring at least 1000 shares in a number of companies listed in the NSE by the time I graduate next year. Economics101 teaches us that the opportunity cost of having money set aside is the interest one would have alternatively earned. Last i checked, the interest rate offered by most banks floats around the 4% mark while that of inflation around the 20% zone. Without getting too statistical about the figures, one can safely say that my recent more sounds good. As an OPM member, I need to grow my income...somehow! So i picked one of the safer ways of doing it, buying shares. Anyone who kept their eyes on BAT around 7-10 years ago would have noticed their Kshs. 139 stock price. As with most, people kept away from it claiming it was too expensive a share. As far as I recall, the company has been paying dividends in the range of Kshs.14 - Kshs. 17.50 @ share....among the highest paid in this country. The stock is currently listed at Kshs. 255 per share, a decrease from the Kshs. 300 it hit some time last year. There are other examples in the opposite end of this spectrum. I'm certainly not advising you on what to do with your money. My plan is to keep setting aside this "extra"amount every week. What I'm asking you to do is to consider saving Kshs. 601, and pray I don't catch up to your wealth.