I am in my 20s and want to save and invest Sh1 million and start earning Sh100,000 daily

Your attitude towards money, your spending mindset and how you manage your finances are critical to achieving your goals.

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My name is Stephanie. I am in my 20s and currently have no stable job or income. I am in debt and cannot save any money. I need Sh1,000,000 to save, invest, pay off debts, donate and meet my other expenses. What do I need to do to start earning Sh100,000 daily? I have a business idea to recycle plastic waste and if I can get a sponsor, I would like to start it within a month. Please help me.

Stella Chepng'eno, a personal finance consultant and coach, says:

Your attitude towards money, your spending mindset and how you manage your finances are critical to achieving your goals. Either you manage your money or your money manages you. You need to start by understanding how to manage money. Don't expect money to suddenly fall from the sky and solve all your financial problems.

It is important to understand the financial journey, which is divided into the following stages 20s to 30s - accumulation phase. 40s to 50s - Consolidation phase. 60's and above - De-accumulation phase. This will help you plan and ensure that you achieve your financial goals. The other aspect that affects how you handle money is your money personality. Are you a spender, investor, saver or debtor? Money personalities affect financial outcomes and understanding your personality will help you to manage your finances better.

It is important to note that achieving a daily income target of Sh100,000 is not realistic in your circumstances. In any case, such a daily cash flow would require multiple income streams, high business turnover or high cash transaction rates, none of which you have. The income stream could be either active or passive.

What you have is an idea that you want to pitch to angel investors or venture capitalists for funding. Note that there are several ways to finance a business, including personal savings, debt financing, equity financing, financing from family and friends, business incubators, venture capitalists and angel investors. In most cases, venture capitalists and angel investors fund budding start-ups in exchange for equity. This gives them partial ownership of the company.

The decision to fund a start-up is usually based on the number of sales, cost of production, profit margins and the upside potential of the business. It is not based on emotion. Most investors do not fund ideas. They fund startups that are already up and running and can provide the above elements for evaluation. This means that you need to turn your idea into a working start-up before you can approach financiers.

Be honest with yourself about why you want to get into recycling. Is it a passion or a hobby, or is there a real gap in the market? How many other businesses are involved in recycling plastic waste? What are the actual funding requirements for this start-up? How will this business generate a daily cash flow of Sh100,000? Is this realistic? If this analysis is negative, then you need to drop the idea, burst out of this unrealistic cocoon and face your financial realities head on.

For example, you state that you need Sh1 million to save, pay debts, invest and donate. This betrays your current financial situation and suggests that you are in debt and not saving. Instead of imagining that Sh1 million will magically appear and solve all your financial problems, it is better to create a personal financial plan and budget based on your current net income.

Keep track of your income, expenses and debts (small and large, including mobile phone loans). Create a strategy around this, for example, how to get out of your current debts, how to start saving and how to start working towards your long-term business goal. This strategy should have a timeline around it based on the age categories listed above. Use your current skills to optimise all potential income streams before you can dream of earning Sh100,000 a day. This means having a regular job and supplementing it with side hustles (services such as consulting or weekend shifts).

Plan to start repaying your most expensive debts (mobile phone loans) and consolidate your formal debts for a smoother repayment period. Pay yourself out of your salary and put it into savings. Preferably, start saving in a sacco. As your understanding of personal finance improves and your financial situation improves, you can consider allocating some funds to savings instruments such as money market funds and bonds, which are now available to buy through a mobile app.

Since you have a budding entrepreneurial dream, I would encourage you to start attending entrepreneurship workshops for startups. They will help you learn more about startups, how to access funding and what the local pool of angel investors and venture capitalists are looking for. There are also various opportunities for free short courses on micro, small and medium entrepreneurship.

If you have any money problems, email us at [email protected] and leave your contact. Money questions will be answered in this column.