Young People - Budget (Part 4)

What is a budget?

Budget is a document (written down) that contains all the expected income, the projected expenditures and investments/savings of an individual, organization, or even government.

Here is a budget of typical youth earning a salary of sh. 30,000/- p.m.

ITEM	AMOUNT
Rent	7,500/-
Bills (water, Elec, etc)	2,500/-
Shopping	3,500/-
Transport	4,500/-
Pocket Money	6,000/-
Total expenditure	24,000/-(80%)
Total Income	30,000/-
“Surplus”(Savings)	6,000/-(20%)

Is this budget good enough?

Why do we need a budget?

There are a lot of reasons an individual or an organization would need a budget:

1. Planning for the current and future economic goals.
   Budget can help an individual make realistic goals for the future. Budget will give an individual an accurate idea of how much one can actually afford at the moment and in the future.
2. To avoid hitting bankruptcy(Overspending)
   Budget protects an individual from “economic-devil” of overspending and hence avoiding one from incurring heavy debts that might lead to bankruptcy.
3. To have control over the money.
   With the budget in place one will always have to counter-check the details in the budget before making any spending. The best thing can happen to an individual when it comes to economic matters is to have control over money.
4. Better emergency response
   With a working budget one will be in a position to respond well when it comes to emergencies such as sickness, accidents, loss of jobs among others.
5. Debts and Credits Tracker.
   With a budget one is in a position to know the status of debts and credits.

Parts of a budget

A good budget should contain at least six major sections;

1. Income section.
   This gives an account of all the income that is received or expected(one is sure) within that period of budget.
2. Debt section
   This gives the account of debt you are willing to settle within that period of the budget.
3. Credit Section
   Amount expected to be paid back to you from the debtors within that period of the budget.
4. Expenditure section
   This covers the day-to-day expenditure, monthly bills, shopping expenses among others. This section should be well elaborated on each item name and cost. This is a crucial section that most individuals mess.
5. Savings/Investments section
   This is a section where the amount/percentage to be saved/invested is mention. This section take into consideration all the above sections.
6. Emergency section
   This section covers the insurances and other forms of emergencies savings that should enable an individual respond well when need arises.

How to budget

Total Income(100%) = Income + Credit

Total Expenditure(<70%) = Expenditure(65%) + Debt (5%)

Total Savings (>30%) = Savings/investments(>15%) + Emergency savings(at-least 15%)

Conclusion

One must not use more than 70% of the income to sustain the current lifestyle because it will have a big impact in the future.

Total Income(100%) =Total Expenditure(<70%) + Total Savings (>30%)

Young People - A.I (Part3)

What kind of investment should one do?

Do you just buy yourself a dream car?

Should you just invest everything you have? 

Part 3 of Young people articles tackles the allocation of investments(A.I).

ALLOCATION OF INVESTMENTS (A.I)

This is the far most important activity that investors must undertake before committing their monies.

When one is into investment, be it shares or running business, the main purpose is to get returns that is suppose to uplift that individual economically. In A.I one has to strike a balance between risks and rewards. '' Don't put all your eggs in one basket.'' As an investor one should take a moment and ponder on priorities in his/her life. This is simply achieved by counter-checking with a working budget (complete and functional one).

There are three categories of Investment Allocation :

1. Fixed Income Investments

2. Varying Income Investments

3. No Income Investments

   

• Fixed Income Investments

These are types of A.I that deliver predictable returns, no matter the economic situation. This type of investment has the highest security and can be used to facilitate the basic needs of an investor comfortably.

An investor makes allocation for this kind of investment so as to get constant returns(to cater for house, education, food, cloths etc). With such A.I one is safe and sure of the basics needs are always covered. A 'trouble-free' investor will be able to develop more, economically.

Minimum of 60% of the total investment.

Examples : Bonds and debentures, insurance, even a home.

• Varying Income Investments

These are types of A.I that can give you good returns, no returns and even a loss. This type of investment has little if not no security at all and thus cannot be depended upon to cater for crucial needs. Investors use this kind of investment to try their luck, experiment or even just to achieve a certain goal that isn't economically.

This kind of A.I is 50-50 one can gain a great deal of even lose a great deal hence the allocation should be moderate.

Maximum of 30% of the total investment. 

 Examples: Starting a business, trading in shares, currency trading etc

• No Income Investments

This category of A.I that delivers nothing in returns and neither does it improve the economic situation of the investor. They are usually carried out to improve the social status of the investor or to fulfill a dream.

Maximum of 10% of the total investment.

Examples: Buying a second car/home, changing T.v. Set, remodeling the house etc.

Conclusion

''There are only two words that will always lead you to success. Those words are YES and NO. Undoubtedly, you’ve mastered saying YES. So start practicing saying NO. Your goals depend on it!''

Jack Canfield

Young People - Equity Investment (Part2)

If full economic stability is to be achieved and the world is to liberate itself from poverty, then people should start thinking and acting like businessmen. Just assume that you have lost your job now, what would happen to the lifestyle you are living?

Young Men and Women also say that they have time to invest, before they realize it is too late and have mouths to feed, hence become salary dependant. By 24^th day of the month the person lives on loans to be paid when salary comes.

Start saving and investing NOW!! 

 

How to start an equity Investment

One needs to visit any commercial bank that is involved in the trading of shares. Open a CDS (Central Depository and Settlement account), deposit some money and instruct the stock brokers to buy you shares. Monitor the capital market to see how the shares you have are doing and trading them to your advantage.

Reason to choose Equity Investment over other forms of investments

I have prepared six or so reasons as to why one should actually do equity investment.

1. Easy like ABC.

It is pretty easy to start an equity investment as explained above the activity should not even take more than 60mins to complete. Unlike other forms of investment like say, running a shop, it doesn’t require a constant supervision. Very suitable for a ‘side business.’ With the technological advances one can also trade shares online in real time.

2. Money working for you.

At the end of a financial year the corporation you bought your shares from will release its performance of the previous year and give dividends to the share holders. The money you invested in that company will work for you (probably when you are sleeping) and give you some profit that you don’t even know how it came about.

You can buy shares of a small company and after 10yrs of running the company has grown to a multi-billion company and the market value of the shares will definitely rise. You sell the shares and ripe off the profit.

3. It’s a form of saving.

The equity investment is a better way to invest unlike in banks where you are given all forms of accessing your money (OTC, ATM, Cheque, and wire transfer) and the money is subjected to several charges to operate the account. The investment made in the shares can be ‘forgotten’ and also gain value in terms of bonus shares, capital appreciation, and dividends.

4. Playing Part in Economic development.

By investing in a corporation that is running in a particular country, then you are definitely an asset to the economic growth and development of that country. The small investments made by several individuals can end up creating employment to the jobless individual on the streets therefore reforming the streets and boosting the economic situation of the country.

5. A perfect economic back-up plan.

Future is never certain in terms of economic position. A lot of misfortunes can come your way and not be in a position to salvage yourself. Fatal accident, loss of job, and sickness but to mention a few can really bring you down. With an equity investment in a week, you can sell the shares and get the cheque.

6. Collateral for business financing.

A good track record of shares portfolio is acceptable collateral for financiers. Suppose you want to start a business and you have little of no capital at all to start, your share portfolio can assist you gain financial assistance, usually 60% or less of your portfolio.

Conclusion

“When you consume your whole salary, you are just another net consumer and a burden to the economy; when you save a good percentage of it, you are a potential entrepreneur and wealth is bound your way.”

Lets us make this coming financial year (12-13) an investing one and we improve our living standards.

Young People & Investments

An equity investment simply means the purchasing and holding of shares of stock, (on a stock market) by individuals or firms. They anticipate income from capital gains and dividends, as the value of the stock rises and the companies make profits respectively.

Forms of investments

• Shares of stock
  
  Shares are portions(fraction) that a company/organization divide its assets into and offer them to private or public. Thus shares of stock is the amount invested in the company by an individual/company. Total sum invested in a corporation mostly by an individual or a group of persons.
  Shareholder is a individual with shares of stock, and is entitled to dividends. Dividends is a share of the distributable profits of the company. The more shares you own the much dividends one receives.
  A shareholder can also make capital gains by selling the shares when the value of the stock rises.
  
• Bonds/Debentures
  
  Bonds are basically debts. Companies/ corporation sales bonds to individual to increase the capital base of the of the company. When an individual or a group of persons purchase a bond it simply means that you have given credit to the company/corporation (even government) at an agreed return rate. The investor in this case is referred to as a creditor to the company.
  Here there creditor is not affected by the outcome of the company's activities weather losses or profits. Bond is a form of loan that has a maturity period after which the creditor is paid back the amount invested and the accrued interest agreed upon investing.
  The creditors have a higher claim of the company's asset than the shareholders in case the company is declared bankrupt.
  The interest are usually paid in an agreed rate(usually semiannually) within the maturity period and after the period, you receive the principle amount.
  The term “Bonds” is used when the government is the receiver of the investment while “Debentures” refers when a private institution is the receiver.

Conclusion
You want to start a business and the you cannot raise the capital, you approach a relative for a loan of Sh.100k and agreement is written done to “pay back after one year with 5% interest”. (This a debenture and the principal amount is Sh.100k while the interest rate is 5%). You run the business for a while and later sale half the shares of the business to your friend at sh.50k. You put it in writing that the business issues 1000 shares and friend takes 500 at sh.50k . (Now the friend is a shareholder with 50% of stock). By end year business has a turnover of sh.500k, you pay the relative sh.100k plus sh.50k interest. The cost of establishing the business was 100k and the cost of paying the personnel including you is sh.200k. The profit (500-150-100-200)k = sh.50k. Then you pay sh.25k to the friend (shareholder) and yourself (owner). Now the sh.25k paid to the shareholder is called dividends.
Try the questions below.

Question 1.  

Company A offers 11% stock at Sh. 143 while company B  offers 9.5% stock at Sh. 117. Of the two which is the best investment?

Question 2.
How much must one invest in 10% stock at Sh. 96 in order to obtain an income of Sh. 650?

                                                                   Any comments are highly appreciated.

MICROWAVE INTERNET

Introduction

Microwaves are extremely high frequency radio waves. Finding most use in the mobile phones industry, in the kitchen (microwave ovens), Radars (meteorological, airplanes, ships and military), and latest, used as a medium to 'fast' Internet connection.

Optical fibers use tiny glass tubes to propagate information (through light) and it is the current mode of Internet connection that is considered the fastest. Cables interconnect Europe, Asia, America, and Africa.

Shares and currency trading has become the modern day ''land''. One can lose or gain massive 'wealth' through shares and currency trading. The trick about shares and currency trading is buying 'them' when the price is least and sell when the price is higher. That is it, you gain/lose the difference. Here speed is of greatest essence.

Comparison between Optical fiber and Microwave technologies

It is well known that both light and Microwaves are forms of electromagnetic waves. That simply means that they have similarities in their characteristics if not same properties. All Electromagnetic waves travel at a maximum Cosmic speed ( C = 3.0 * 10⁸ m/sec) also known as the speed of light in a vacuum. The only difference between light and microwave is the wavelength whereby light has shorter wavelength compared to Microwaves.

But when it comes to the medium which the two travel, then the speed may have a little difference

which may matter a lot.

• Optical fiber.
  This consists of small glass 'tubings' inside which the light travels. The speed of light in a glass tube is estimated to be 2.0 * 10⁸ m/sec.
• Microwaves.
  Here the medium is air and considering the fact that air can offer more or less no resistance to the microwaves hence the speed is estimated to be higher than 2.0 * 10⁸ m/sec.

Conclusion

Microwave Internet connection can provide a faster connectivity and less response time when it really matters. The preference of using microwaves over optical fibers is justified in high stakes (shares and currency) flash trading, small difference in response time amounts to big earning/losing.