How to create the best chama with friends

New Year, new goals. If financial independence sits at the top of your resolutions list this year, a chama may be the bridge to that dream.

These popular informal investment groups in Kenya have turned many into millionaires. By using a simple model, members of the group agree on how much to contribute every day, week or month then distribute a certain amount to each member from the larger pool. Members also have the advantage of borrowing without interest among other benefits.

Usually, these groups are made up of friends or family members who have a common destiny which is to make money, invest or save.

Starting an informal investment group with friends can be a fun and rewarding way to get involved in the world of investing. Here are a few steps to consider when starting your own group:

Find like-minded friends

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Start by finding a group of friends who are interested in investing and who are at a similar financial stage in life. It can be helpful to have a diverse group with different levels of experience and knowledge.

As you create the group ensure everyone is on the same page when it comes to risk tolerance and financial goals. It's important, to be honest about your own financial situation and to make sure that you are comfortable with the level of risk involved.

Establish clear guidelines

What are the expectations of the group? Before starting a chama you must be able to answer that question. This may include things like how often you will meet, how much will the contributions be, fines for late contributions, how you will make investment decisions and what the goals of the group are.

While setting this foundation it is crucial that everyone is present so that all is agreed upon and set on paper.

You should also agree on other important policies like terms for leaving the chama, penalties etc. Coming together as friends have its own limitations. Avoid doing things causally just because you are friends and find a way to establish a system for tracking the group's progress and performance.

Determine financial goals

As aforementioned, you must know and make sure that everyone in the group is on the same page when it comes to the vision and mission of the chama.

This will prevent unnecessary problems that usually arise in many investment groups. Decisions pertaining to investments should be clear.

Do your research

It is up to you to do your own due diligence and determine whether this is a good and viable idea or not. Remember, money is a very sensitive subject.

Identify friends who are serious, those who have the money to contribute and those who have the discipline to follow rules.

If the purpose of the chama is for investment opportunities make sure you are all familiar with financial terms and the running of an investment group.

Use a professional

While an informal investment group can be a great way to learn about investing and make decisions as a group, it's also a good idea to seek the advice of a financial professional. A financial advisor or wealth manager can provide valuable insights and guidance to help you make informed investment decisions.

It would even be better if he or she was a friend and they would be willing to join the chama. This will help with accountability and bring in a more formal aspect that may be lacking.