Here’s what I’ve learnt about building wealth

We found out from top money managers their tried and tested principles of growing money.

Kenya Bankers Association CEO Habil Olaka.

1. Don’t waste it

Having money is the same as having water in a pot. If your pot (read wallet) has holes, you will never fill that pot. So the critical thing with your money is to seal the loopholes so that as you put effort in building it, it is getting stored rather than flowing out, cancelling out your efforts to build more.

People usually waste money through unnecessary and unplanned for expenditure, which does not add to your revenue generation.

There are expenses that are critical for revenue generation but there are others that are not and can be done away with. This same principle applies to all entities, from your home to the government.

What you manage to build up should then be channelled to investment for future returns.

  Kenya Bankers Association CEO Habil Olaka

Institute of Economic Affairs CEO Kwame Owino.

2. Grow your skills

As much as possible, build on your skills. That way, you will be earning yourself some time to earn better in future. Build your professional capabilities by taking a new course or learning a new skill.

If you do that, the likelihood that you will be earning more in the following year than this year grows. That will translate into you being able to save a larger percentage of your money than you currently are.

  Institute of Economic Affairs CEO Kwame Owino

ICEA LION Asset Management CEO Einstein Kihanda.

3. Consistent investing wins every time

If you are investing, do it consistently over time. Be very disciplined. Don’t do it as a one-off. This way you will be able to grow your investment portfolio. 

Planning is relatively easy for most people. Execution is where people fail. A lot of people start and then stall. If you have identified what it is that you need to do, be very disciplined in following up on actually doing it.

 ICEA LION Asset Management CEO Einstein Kihanda.

KCB Bank Group Chief Financial Officer Lawrence Kimathi.

4. Assess your risk appetite first

Growing money is relative. One person can invest, get a 5 per cent return and be very happy to have grown their cash. Another one will want a much higher return. Growing money is usually a balance between risk and reward.

You need to decide your risk appetite. If you are going to take a low risk, expect a low return. Invest in government securities, which are risk free. If you are going to take more risk, then you add a risk premium and can expect to earn slightly more.

The risk reward is also dictated by time, so you also have to look at the amount of time you have. If you are investing in shares, for instance, which is a higher risk, then you must look at it on a longer-term basis so that if the shares go down, you are willing to leave the money in there until it recovers.

If you put it in land, you can give it like three years, and then it will appreciate and you will get your return.

 KCB Bank Group Chief Financial Officer Lawrence Kimathi.

Live Your Dream Enterprises Co-director Edna Otieno.

5. Pay yourself before paying your bills

When you earn your money, regardless of how you earn it, there are various people you will pay. It could be rent or even taxes. If you are only paying other people, then you will be working for other people for the rest of your life.

The first person you should pay is yourself. You do that by allocating some money to achieve your aspirations, dreams and goals. You can also put it in an investment vehicle and invest somewhere or save it.

Your risk appetite and the amount of money you have will determine where you put that money.

Live Your Dream Enterprises Co-director Edna Otieno.

Diamond Trust Bank Group CFO Alkarim Jiwa.

6. It isn’t rocket science 

Just save and make it a habit. Having a consistent savings culture is a great way of getting your money to work for you.

Diamond Trust Bank Group CFO Alkarim Jiwa

Co-founder and Portfolio Manager at Season Investments David Houle.

7. When investing, use logic not emotion

One of the biggest mistakes I see people making is investing based on emotion rather than a disciplined, systematic process.

In particular, I think people need a disciplined plan for risk management as mitigating large draw-downs in your investment portfolio has the potential to add more value over time than maximising every ounce of upside in the bull markets.

Co-founder and Portfolio Manager at Season Investments David Houle