What to do in December to avoid crying in January

Financial expert Steve Biko explains to Jael Musumba why everyone is broke, what to invest in next year and how to avoid going nuts after Christmas.

Are Kenyans stupidly extravagant?

We are not stupid in our spending, unless love is involved. But yes, we tend to spend beyond our means on drinking, beauty and fashion.

How should Kenyans plan their finances for the December holidays?

Simple. We should create a budget of what is important and basic and focus on that. This will help us plan with the little money we have and at least be ready for a rainy January.

Is there a way we can enjoy Christmas without spending stupidly?

It’s difficult not to spend so much during Christmas because it’s the only time a majority of us get to spend and be with our extended families.

Are there things we can do right now to avoid dry pockets in January?

Come up with a budget and stick to it. List the priority areas for December. Look at the critical ones for January and see how best to resolve them. Whatever remains can be spent on fun and entertainment. Budgeting sounds basic and boring, but it is the best way to handle this.

But everyone seems to be broke. What is happening?

This is a perception that needs to be debunked. It’s always you who is broke whilst everyone else has cash to spend and play! However, the economy is in a technical recession that has made capital circulation tighter than it has been in ages, hence people have money just for basic spending and survival. And with job redundancies, small and medium enterprises closing at the rate of 400,000 per year, we as a country are in survival mode.

Then how come some people are building ‘gorofas’ and buying big cars?

The truth of the matter is that most of the people who are living lavishly and spending heavily are either tenderpreneurs, who are busy stealing from taxpayers, or are involved in illicit money deals and ‘wash wash’. Genuine businesses and even high-end salaried people are in survival mode.

If you make money in quails, most Kenyans flock there, diluting the market. How can we break away from this herd mentality?

Unfortunately this is a mentality that won’t be broken anytime soon. Every Kenyan is looking for deals and opportunities to survive and make a buck. What we need to do is expand the base of the economy in key areas such as production, agro-processing and manufacturing to ensure that these three can support other economic sectors.

Why do most rich people seem stingy and unhappy?

This is not true. Most rich people I know are happy. But what I know is that the more money you have, the more problems you get. More worry comes when one tries to ensure how they remain rich and all. Yes, when you have money, you become cautious with your spending so that you don’t revert back to poverty. But this is an individual habit and not a general assumption about rich people.

Why don’t Kenyans have a money saving culture?

In an economy like ours, saving the little you have is a luxury. We are constantly in a survival mode. We live from hand to mouth, one salary away from abject poverty.

It doesn’t make financial sense to go to ‘shags’ when fares are high and things are expensive. But Kenyans don’t learn. Why?

Unfortunately, that is how the economy is set. We have greedy businesspeople who take advantage of Kenyans when they need to do something. This is made worse by the fact that we do not have a consumer body that looks at the rights of the people and defends them when such things happen. We go home and we travel upcountry when we get some time off work and when we do, we do so in droves and fares are raised, because of lack of transport. This is a greed issue that is engrained in our business culture.

What should Kenyans invest in next year?

2019 is going to be an exciting year. Since the economy is technically in a recession, and with mounting debt, those with a high risk tolerance will invest and make a lot of money in return. Areas such as the Nairobi Securities Exchange, logistics sector, manufacturing, agro-processing, retail, healthcare and education will give good returns. As devolution takes root in its second term of administration, opportunities are in plenty if we can be able to traverse the country.

Which investments should Kenyans ignore?

It’s not fair to simply dismiss an investment opportunity unless one has audited it. However, there are certain things that happened this year that give us a benchmark on how to keep off certain investments, especially when everyone floods there. My advice is simple, audit an investment opportunity. Look at your risk tolerance. Also, avoid investments that everyone is going for. It creates a saturation point that simply kills any possible returns.

The average Kenyan saves five per cent for retirement but pays government 30 per cent or more in taxes. Does this make sense?

Our tax regime is repugnant to say the least. I have constantly said on traditional and social media that the biggest scam that is silently unfolding in Kenya is the pension. In fact, we pay 49 per cent of our earnings to government in form of diverse taxes and we are left with 51 per cent, which is not enough to pay for basic needs, leave alone saving for retirement. Seems logic and sense went out of the window on this one.

Why do Kenyans take bank loans for lavish December weddings?

Honestly, this is something that I have never understood. Why take a loan to do a wedding in the first place? This is a serious liability. Loans should be taken for investments and emergencies only. However, this is a peculiar aspect about Kenyans and if you audit the weddings done this way, the first couple of months are strained due to financial constraints.

As a financial expert, apart from love, what attributes should we look for in a spouse?

Love is subjective. What I always say is: find someone whom you resonate with. Someone whom you can laugh, cry and fight with without threats of leaving. A praying partner is an added advantage. A kind and selfless partner is critical to the relationship. A forgiving partner ensures that the relationship grows and heals with time. A hardworking partner is essential to the marriage because this is how you will both be able to create genuine wealth and be able to grow it.