An expert guide to finances in a cash crunch economy

James Karundu, PassionBiz Academy CEO, works with startups, service providers and entrepreneurs as a business mentor and motivational coach. In five years PassionBiz has mentored hundreds of people. As we inch closer to 2021, the money guru shares tips on how to put your personal and business finances right for a smoother financial year.

This is the time for entrepreneurship. When we talk about personal finances, one must make up for any shortfall through entrepreneurship. You have to start thinking in terms of two or three side hustles – three income streams; that is how people survive in the West. We are at that stage. And there is nothing shameful about it. Organise your time well. If you’re employed, then you need two other income streams. Give your employer eight to five, and then you have five to eight; that is yours. A lot of people are not leveraging on technology; on their gifts and talents. Thereby, they lose opportunities for generating a second and a third income. I was a lecturer for years and I started with side hustles, including my Koumon business using the gifts and talents I have, which is to teach people mathematics. I knew mathematics is a pain point. So I used to give tuition in people’s homes until I found a smarter way, which was buying a franchise of Koumon. I would leave home in the morning and after classes at the Polytechnic, I’d drive to the YMCA Centre in South C where I’d teach twice a week. Twenty years later, I still do it.

You have to be brave and calculated. I don’t come from a family of entrepreneurs. In fact, it was so scary for me to even leave my job that was permanent and pensionable. One of my goals was to increase the amount of money I used to earn in a month. I told myself that I was going to make what I earn in a week, in a day. And I did. So you must decide, set a target for yourself for the amount of money you want to earn, and the time it will take. Also, I engaged in coaching programmes. If it was not for the coaching, I would not even have left my job. I had a coach who held my hand until I handed in my resignation letter after carrying it in the briefcase for two years.

Quitting a white collar job for self-employment needs you to have a plan. Build a buffer, which is really your insurance. If you want to exit, change your company – slowly, start associating with people who have stepped out. The more you talk with them, the more you get the courage. Bottom line? Get a coach; get a mentor. Put money aside and systems in your venture. That’s exactly what I did. Before I exited my job, I had 10 employees – and I realised that I only needed three or four. There’s always going to come a tipping point and when it does, look for a good coach to walk with you. Don’t hesitate. Don’t stay for too long. Face your fear and you’ll do alright.

The financial challenges we are facing aren’t all a result of the pandemic. The pandemic accelerated an already challenging scenario, even with business owners. It’s not like business was flourishing before March. But the bottom line is that this is a time of forced evolution. That evolution was going to happen, maybe in several years. A lot of people were sitting pretty in supposedly good jobs, and suddenly their security stopped being bankable. It is a time of great change; time of great turbulence. In 10 months, we have had a 10-year evolution. Let me give you an example. When the country transitioned to digital from analog television, the Permanent Secretary signed on a paper that on a particular date all those ubiquitous little red TV boxes that dotted the countryside were going to become obsolete. We had to shift from one technology to another. What used to work then no longer works here. Now, a lot of what used to work in pre-Covid has become obsolete.

Opportunities are for the fast, and first learners. We will continue being in a state of learning – fast and furious learning. The zoom meetings are not going anywhere soon. The landscape is going to be looking a little bit more like this (2020). Underneath this scenario there is great opportunity for those who think differently; for the people who pick the pieces and decide to pivot. One has to think differently. A lot, in terms of thought process, is now obsolete.

Kenyans have not stopped spending and investing. People are buying, they are spending and investing; it is a myth that they are not. The thing is that they are buying and investing in different things. There is no market for post-Covid solutions. No one is going to buy what you’re selling today to help them post-Covid because we don’t know what the situation looks like after the pandemic. So the market is looking for ‘now solutions’.

An entrepreneur would do well to zero in on the pain points of the pandemic. Target specific pain points, because that’s what the market is looking for. Also, gig economy is in play. People are not looking for long-term engagements. It’s a freelancer’s world now.

For 2021, set clear financial targets. A lot of things have changed, but there are some others, such as targets, priorities and goals, that have not changed and are going to be applicable in 2021. You must have intentions; be clear in your mind. Begin with written down goals. What do you want to achieve? Without goals you can’t move anywhere… the simplest goal setting is, what do you want to achieve and by when. Go to a quiet place and have a meeting with yourself. Tune in and ask yourself, ‘What do I really want to achieve?’ And don’t set goals just for the sake of it; make goals that have meaning. Let them be big and scary, let them be meaningful to you.

Be as frugal as possible…Without a doubt, we are in a place of constricted cash flow for a lot of people. We need to practice being frugal. Conserve what you have. That, however, is not to say that you don’t spend, because if you don’t, then you are creating some sort of traffic jam in the economy. The economy requires money to circulate. I recommend for families to have a kamukunji and agree on priorities. Say ‘This is what is available, this is what we have to spend on’. Frugality is a mindset because you cannot grow financially if you’re spending everything that is coming in faster than a speeding bullet.

For one income households, the spending plan on what is available is key. You have to take the bull by the horns and matters must be spoken openly. You can’t hide… you can’t tell your children that you are on work leave when you lost your job. Have candid conversations with family members and plan. Say ‘this is what we have and this is what we are spending on’. Your first priority is livelihood: food, shelter and clothing. Teach the children and the family members to stop looking at the Joneses. People are in different life circumstances. Families are now spending more and more time together so they can have these conversations. Brainstorm ways of meeting any shortage. Additionally, allocate funds for tomorrow. I have taken on a personal mission to get people on a 52-week savings plan. I really love it; I have gotten all my employees on that. Put money aside each week even if it is Sh100. For minimalist living, one also has to be disciplined.

Maybe you still have a job and your business isn’t doing too badly. So your cash flow isn’t that constricted. You have a little cushion. But what you need to realise is that you don’t know about tomorrow. You cannot continue living large as you previously did, because 2021 is coming and as you have seen, it can get too unpredictable too fast.