How High Earners Remain Poor
I’ve observed several paradoxes this year that left me thinking unchecked ambition is better than no ambition at all. There is nothing to celebrate in taking uncalculated risks. That many leave their successful lives and blindly invest in ventures that leave them more hurt while no lesson can be learnt or salvaged from the unwise decisions. That many of the things we aspire to have remain just a mirage if we don’t apply wisdom and experiences of others. I’ll do it with examples.
Here is a Head teacher, a Civil servant and a bank employee who earns a net of Ksh 100,000 – Quite a high pay. The good Kenyans join their respective friends in different parties and they casually discuss business ideas; one of them gets an opinion that Matatu business is quite profitable. Another finds out that starting a Hardware is the “best” thing at the moment since there’s a “Construction boom”.. Without further reference to research and getting raw info from the players in those particular industries, the Head teacher takes a Loan of Ksh 3Million and buys an UmmoInner Mat or 2 Matatus which they take to a Sacco.
The Civil Servant takes the same Ksh 3 Million and invests in a Hardware shop. Loan repayment is in 10 years meaning 25k is deducted from the salary Ceteris Paribus (Holding all other factors constant). The Bank employee takes a loan and buys a plot (Piece of land) since his branch manager tells them real Estate is low risk and high gain. After 2 years, the following happens – The Head teacher realizes Matatu business is not as easy and not even profitable in the long run. His Matatu has stalled. The Civil Servant realizes the Location of his Hardware shop is not strategic – The shop can’t sustain itself and is closing. The Bank employee realizes there’s a court case involving his piece of land – it was a fraud. In a nut shell, all of them lose money.
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Unfortunately, they all have to continue servicing the loans for the remaining 8 years with nothing to show for it. To “Recover”, they all top up the loans to invest in other “Ideas” but don’t work either – The vicious cycle continues.
Many Kenyans are servicing loans for investments that no longer exist. Point is here – Many of us jump into ideas with no reference to due diligence. We join any band wagon that is casually discussed within our circle of friends without going into any depth. We invest with our hearts and not our heads. A serious investment should only be done after thorough analysis.
The other point is that you don’t need to do “everything” to be rich. Take just one main line of business. Learn the ropes in and out. Understand the dynamics well and you will surely make all the monies you need with that one line. Diversify only after the main line of business can stand on its own.
Article by Ndindi Nyoro