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Yesterday, the popular sport betting company Sportpesa announced that they had a winner for their Kshs 221 million jackpot. With great pomp and color, Samuel Abisai, the winner was unveiled this morning.

Winner of Sportpesa Jackpot

As expected, social media has been abuzz with the things one would do if they won that much money. This was my favorite; the state of our economy.

While I do not participate in any kind of betting and highly discourage people from doing so, my imagination was as active as everyone else’s. What would I do if I came upon KShs 221 million? This was not a strange/new question, as financial freedom is never far from my mind. I in fact have a figure in mind, which is my goal figure and keeps me motivated to both grow my income, and save as much as I can.

I came up with an imaginary portfolio for my imaginary jackpot. And just to say that this portfolio is largely driven by my world view, and opinion about money – I do not believe in accumulating wealth for power/future generations etc, for me, money is solely to buy me freedom and life options. I want to have just enough to not work. ūüėÄ

1. I would buy a house (Kshs 20 million)

Annual income: Zero, only emotional comfort.

My current house is not perfect, but I find that it is the right amount of house that I need to live comfortably for now. It is a 3 bedroom house in a middle class neighborhood, and a 10 minute walk to each of my sisters’ houses. It is in a block of apartments, which I like for security purposes and play mates for my only child. Unless I needed to move because of her school, I would simply buy the house I live in, then upgrade the finishes I do not like.

Why not move to a nicer neighborhood?

Because for me, a house is utilitarian. It is a living space, and my need for a living space is finite. A house that is too big, in a fancy neighborhood just means I now have other costs to take care of Рhigher service charge, domestic staff,  fancy parties by the poolside and my simple car may not even fit in. My neighborhood is not perfect, but which one is? All these are things just come with baggage I do not need. Plus the social benefit of living close to my siblings is priceless.

2. Sort out living income by investing Kshs 36 million in government instruments (average returns 10% p.a)

Annual income: 3,600,000

Monthly income: 300,000

This investment would not give me much in terms of long term growth, but it would guarantee me a comfortable monthly income. This income would be sufficient to live on quite comfortably, plus afford my daughter a school I love but can currently not afford because I am too busy saving for that magic figure.

3. Invest Kshs 55 million in real estate, because I am Kenyan (6% rental return)

Annual income – 3,315,000

Monthly income¬†–¬†276,250

I would build a few rental houses in a lower middle class estate such as Utawala or in Ruiru, or invest in a student housing block near a university. Real estate has low rental return, but it has two major benefits:

  • Capital appreciation. The value of your investment, if well chosen will keep growing over time. Long term, real estate appreciates by 6-9% per year, which combined with the rental income makes for a decent return.
  • Bank collateral.¬†Should you need funding from a bank, having income generating real estate goes a long way in enabling you access money – both as security, but also ability to negotiate cheaper loans

The income from real estate would go into two things – charitable giving and re-investment.

4. Kshs 55 million in blue chip stocks (5% dividend return)

Annual income РKshs 2,762,500

Monthly income – Kshs 230,208

A blue-chip stock is the stock of a large, well-established and financially sound company that has operated profitably for many years and has a track record of paying dividends. In Kenya, I would include a few of the larger banks here, a utility company, and one mobile operator. However, since I am not an expert at this, I would consult a stocks expert to help me pick the right stocks for a portfolio that is well balanced.

The most important thing when picking a stocks adviser is to make sure that they do not have an ulterior motive in recommending certain stocks. If the adviser is earning stock broking commissions or other similar commissions, then they are not working for you. Get an independent stocks financial adviser.

The second thing is to go in with a bit of knowledge yourself. It does not take much reading to know how to interpret financial statements, how to tell whether a stock is under/overpriced etc.  You should be the ultimate decision maker on what you buy.

5. Kshs 33 million on speculative investments

Annual returns: ?

Conventional wisdom has it that only 15% of your investment portfolio should be speculative, i.e returns you cannot predict. I would split these funds into two:

  • Speculative real estate – I have a bias for land but would go for land in promising counties or for agriculture, as opposed to buying in the city
  • Speculative stocks – Companies that are going through hard times now but with hope of pulling through, and whose stocks are cheap.

6. Others: Kshs 31 million

This would be my splurging money. I would give some to my immediate family, book a 1 month long holiday, new clothes, shoes, etc etc etc It would probably run out pretty fast, but it is a good amount to have fun with.

Things I would avoid

  • Purchases that change my economic status. Going up a wealth class often comes to an increase in expenses and pressures / demands on you. You have to change where you hang out, the car you drive etc. I am lazy. Any extra cash I get goes to life experiences, not flossets.
  • Purchases that make my life expensive. I would probably buy a newer version of my car, but I would not upgrade it for a bigger, more expensive car immediately after hitting the jackpot. The only time I would do this is if the income from my investments grew to a level that would handle the higher maintenance costs. It would need to be a sober, unemotional decision.
  • I would avoid listening to people’s opinion about how I should live ūüėÄ

My plan looks conservative and simple because I do not thrive on highs (which are often followed by lows). I prefer a lazy life filled with cruises.

What would you do with Kshs 221 million??

  1. Njeri May 2, 2017 at 5:44 pm Reply

    I actually like your conservative plan. Why splurge and then later on, try adjusting to what your previously lived by? Makes no sense.

    The only thing I would change here is instead of buying clothes, shoes, etc etc with the 31million, I would travel a whole lot. It would end in like two months. *chuckle*

  2. David May 3, 2017 at 3:08 pm Reply

    I have been crucified in the office when I told them I would keep my current job for at least a year and invest the entire amount on Government Securities (was looking at a 9% return PA (19m per year/1.6m per month) and live and invest off the interest. the 1.6 I can live comfortably and perhaps look at giving family 250k each per month and 100k as tithe and contribution to charity. The 1m per month remaining would be used for living expenses, fun and the balance reinvested ūüôā

    • kellie June 1, 2017 at 9:10 am Reply

      I think your idea is brilliant. It is sober to keep your job. However, investing in government instruments while spending the interest could lead to capital erosion as the instruments do not have capital gains.

  3. JJ May 12, 2017 at 11:28 am Reply

    would continue working and perhaps up my investment as i sober up with time,

  4. Lawrence May 22, 2017 at 7:28 pm Reply

    Too much money being invested into real estate and the returns are not as high as you seem to imagine. I would invest heavily in govt instruments, if you put in say,78 million into those you would be assured of at least 1mill per month in return. Govt instruments are not speculative and your money is safe. Shares, on the other hand,are not. In this era of always changing trends your net worth can be wiped out in a day when it comes to shares. My thoughts

    • kellie June 1, 2017 at 9:09 am Reply

      The returns on government instruments are lower overall than real estate. Short term yeild may seem lower (comparing revenue on year 1 on either), but long term that is not the case. Remember, government instruments do not appreciate with time, neither do they give you any form of inflation protection, which you can get in real estate if you position right.

  5. Lawrence May 22, 2017 at 7:37 pm Reply

    Lets do quick math here. An average house in Nairobi(2br) will set you back 12mill. The average rent for that house in a “middle class” neighbourhood is 60-70k meaning in a year you make max 840k, that is assuming the house is occupied all year. You will therefore need 14 yrs to recoup your investment. Factor in that better houses will come up in that neighbourhood hence you will have to bring down rent. That plus all the running costs and repairs you will have to do.
    Personally I wouldnt go anywhere near real estate. I’d rather invest in the line of work I am in, you understand that business better and all the dynamics that come with it

    • kellie June 1, 2017 at 9:06 am Reply

      Lawrence, the value of real estate is much higher than rental income:
      1. The annual capital appreciation especially if you own the land the house stands on
      2. A bankable asset you can borrow against to invest in other businesses – this has been the greatest value for most Kenyans who own real estate
      3. Passive cashflow – money that comes in without requiring your input and can even be a benefit to future generations

      I hear you, many people choose to invest in other things but real estate, but in terms of long term capital preservation, real estate trumps a business any day. This is why even business moguls with opportunities to start all kinds of business will have some real estate.

      On your financial calculation above, if one had 12 million, there are better places to buy houses than the upper middle class, which any analyst will tell you is overpriced. The lower middle income estates are an example, where demand for good housing far outstrips supply, student housing, and in some county centres that have high growth potential. Like all investments, a high level of expertise works in your favor

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About the Author

When I’m not here writing, I run Lattice Training, where we offer customized training solutions for businesses of all sizes, from startup entrepreneurs all the way to large corporations.
The aim of this blog is to simplify personal finance. I write about budgeting, personal finance, management and doing business in Kenya, in a way that everyone will understand.

If you have questions or would like to get in touch with me, leave your details on the form below, and I will get in touch. Thanks for reading.

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