I'm thinking of starting a long-distance heavy goods transportation business. I would like to purchase a truck and trailer for between Sh4 million and Sh4.5 million. This means that the price of a Mercedes-Benz Actros MP4 is about 3 million yen, and the price of a trailer is about 1 million yen. I would like to purchase this cash. There are no loans. Actually, I don't have any debt at the moment. I am qualified and licensed in the heavy trucking industry, so I plan to do this trucking business as a side job alongside other informal jobs. However, I intend to hire a part-time driver and have already identified someone reliable for this purpose.
Currently, my net income is around Sh120,000, but my total household expenditure totals Sh30,000 inland. I live in my own house and don't pay rent. My spouse is employed by county government and also runs his own clothing and cosmetics business. The expected net profit per month from this new business is approximately Sh100,000. Even if I settled on this business, I also considered whether to invest in bonds or rental housing instead. However, I am worried that the profits will not match the investment and I will end up with a cash shortage (low liquidity cash capacity). If I were to advance my trucking business and manage a net income of Sh100,000, how should I invest this money to reach break-even as soon as possible? Please advise me on the best way forward? .
Financial planning and investment consultant Dominic Karanja said:
The monthly disposable income is Sh90,000 which can be used for investments. Investments involve a certain amount of risk, so please consider diversifying your investments. Diversification reduces risk by spreading your money across different investment options.
It is important to consider your risk profile and investment horizon. You need to have clear financial goals and a financial plan. Start by creating an emergency fund that covers at least six months of expenses. You should create an emergency fund of at least Sh180,000 based on your current expenses. We recommend investing your emergency fund in a money market fund (MMF).
You mention that you have a heavy-duty freight transportation certification and license, which suggests that you already have an idea about the opportunities, challenges, and risks of investing in the trucking business. Besides purchasing a truck and trailer and hiring a driver, there are several other factors you should consider before starting your business, as some factors such as insurance and regulatory compliance will require more costs. Keeping all factors constant, an investment of Sh4.5 million is expected to yield a net profit of Sh100,000 per month. This equates to a return on investment of approximately 2.22 percent per month or 26.67 percent per year. That means it will take 3 hours. You can recover your initial investment in 9 months a year. We hope you take taxes into account when calculating your net income. Your investment plan should also consider how you plan to expand your business in the future and your exit plan if it fails.
There are many different sources of passive income that you can invest. Passive income refers to income earned with little or no effort on the part of the investor. Passive income is a way to diversify your income sources and reduce your dependence on a single job or business. You need to invest time in learning and researching different passive income opportunities. Passive income can come from rental income, dividend income, interest income, capital gains, etc., among others. It is advisable to start saving with Sacco and always remember to take advantage of Sacco dividends.
Sakos is a great source of development loans to expand your business, as they will advance your loan amount by 3 times your savings. However, you must have a sufficient source of income to pay the monthly installment loan. You should consider investing your surplus funds in his MMF. We recommend that you consult your financial advisor regarding the best MMF in which you can invest your funds.
Investing in Treasury bills and government bonds requires a minimum of Sh100,000 and Sh50,000 respectively, while infrastructure bonds require a minimum of Sh100,000. Yields on government bonds are on the rise, with the average interest rate on the latest Treasury bills above 14%, and the latest 2-year and 5-year government bond coupon rates at 16.9% and 17.9%, respectively.
Real estate requires large amounts of capital and long-term investment, with returns on properties developed for sale ranging from 20 to 30%, while rental properties average returns of 6 to 8% per year. If you are comfortable taking risks and keeping your money in long-term investments, you can consider investing in stocks. For a transportation project to be viable as a business, the expected return must be higher than the expected passive income from the various investment options available.
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