What Can 20 Bob Do? Danson’s Retirement Story

Danson is 71 years old, and since his retirement from a City Council job in 2004, he’s been living well. He is actually living better than he ever did while employed. His monthly income is higher than his salary at retirement, he first drove a car post-retirement; he has two vehicles actually.

When we think of life after retirement, we don’t imagine it as an upgrade to our current lives. These are the best days we have, as we age it goes downhill. Speaking to Danson left me with lessons that if applied, it could be the reverse. Today Danson earns over Kshs 100,000 bob a month from his ventures, he looks 5 years younger, and he spends his time educating young people on the importance of saving early. Why is this impressive? A good number of people die within 10 years of retiring, and most people see a lifestyle downgrade when they retire from their jobs. Rarely do they get upgraded like Danson. If I live to be 70, I want my 70s to also be my best years yet 😀

Danson and yours truly

Danson’s starting salary was 129 bob in the 60s. Even then, he told me it was not much. It only just covered monthly budget; rent (39 bob), food (30 bob because he bought food daily on account of being unmarried), transport (60 cents a day). He however had a bit of surplus, which he, like most young people then and now spent on drinking and having fun.

In his own words, he “drunk” his money away, until 1974 when he “Woke up”. His net salary then was 358 bob a month, and considering he now had a couple of responsibilities was still not much. He however resolved to be saving at least 100 bob a month, across a number of savings schemes:

• 20 bob went to his riika (age group), an investment club he had with 6 of his age-mates
• 20 bob went to a second investment club
• 20 bob to the City Council pension scheme
• 40 bob to a SACCO

When Danson retired, he invested a lump sum into a matatu (mini bus for public transport), a decision that cost him dearly, as he lost Kshs 700,000 in the venture. He then decided to expand on his farming which he had been doing small-scale while employed.

What did 20 bob do for Danson?

1. His riika has built a rental house which earns them a tidy sum every month.
2. His monthly pension payment is also his security for loans, against which he borrows for his business

Danson taught me a couple of ageless finance lessons:

1. Do not wait until you have a lot to start planning for retirement

He started with 20 bob. The reason we do not save for retirement is not lack of cash, but the commitment and follow-through to keep away small amounts of money consistently over time. With the 52 week challenge, I believe we are training ourselves in the discipline of saving consistently.

The next step should be to open an account with a pension scheme, where you deposit a small amount every month. Conventional wisdom says 10% of your gross pay, but you know what? Start with 2,000 bob, with a promise to increase it by 1,000 bob every year.

Next week on this blog, I’ll have an analysis of a number pension funds, be sure to read and sign up. On that post, I will tell you why a pension fund should be your first action point as you plan for retirement.

2. Do not wait for retirement to experiment with businesses

Danson says his biggest financial mistake was investing in a business he knew nothing about. He admits that people make millions out of matatus, but people who understand how the industry works. He regrets that he did not take time to understand the business before venturing into it, but he recovered fast, opting to go with the less glamorous but just as lucrative venture that he understood; farming.

I have made some and lost a lot of money in similar experiments, and my one advantage is that most of these experiments are happening while I’m still young and have years ahead to earn some more money, though even those years are not many. I’d hate to be figuring out what to do after retirement in my 50s.

The greatest lesson from my experiments has been that my brain is my highest paying resource, and it will pay more than any other venture that involves me doing manual work. This is what educated my winding up my farming venture, and going into training and consultancy. This discovery also means I need to be continuously investing in my brain 😀

This weekend do two things for me:

1. Transfer 2,000 bob to your Mshwari account and lock it in. This will be the holding account as you wait to open a pension account.
2. Think about your economic engine. What is your greatest money making asset, and how can you make it earn you more money than you’re making now?

This month, the Retirement Benefits Authority (RBA_Care on Twitter) has a campaign running to inform us on the benefits of saving for retirement. I am working with them on this, so follow the blog posts, and the campaign hashtag #kulegalega . No products are being pushed by this campaign, all there is, is information that will help you make good financial decisions 😀

Next week, we see what a pension fund offers you.