'I work hard, but I seem to be living paycheck to paycheck.'
I am 32, single and don’t have children yet. I earn Sh52,000 net per month from my formal civil service job. I also have a small side hustle, a beauty and clothing shop that I co-own with a friend. I get Sh10,000 per month after expenses from it. I have a bank loan of Sh800,000 that I took one year ago. I pay about Sh24,000 in instalments at an interest rate of about 17.5 per cent. The loan is for a period of four years.
I had taken this loan to contribute to start-up capital for the clothing business. I also used part of the money to pay college fees for my younger brother, and clear medical bills for my father. My monthly budget is: Loan Sh24,000, rent Sh12,000, food and groceries Sh15,000, personal care Sh6,000, miscellaneous Sh2,000, parents Sh2,000, brother Sh1,000. I have no savings.
My partner is considering selling her share of the business. I don’t want a new partner, and I am wondering if I should take a fresh loan of Sh2 million, pay off the outstanding loan, and use the balance to buy off and stabilise my life financially. Please advise me because I have been working hard, but I seem to be living paycheck to paycheck.
Muthoni Njakwe is an accountant and the author of the personal finance book Her Shilling, Her Power: A Woman’s Guide to Financial Freedom.
Managing a full-time day job while running a side business and supporting your family is not easy, and it reflects a high level of responsibility and commitment.
At the moment, your challenge is not a lack of income, but a cash flow compression problem. This means your total monthly income is exactly equal to your total monthly expenses, which leaves you with no financial surplus.
Financial position
Your total monthly income is Sh52,000 from your salary and Sh10,000 from your side business, bringing your total income to about Sh62,000 per month.
Your monthly expenditure totals approximately Sh62,000 per month.
This means your entire income is fully absorbed by your monthly obligations. Your immediate financial priority should be to create some level of monthly cash surplus, however small, in order to restore financial flexibility.
Debt position
Under standard lending guidelines, especially for check-off loans, financial institutions apply the 1/3 rule, where total loan repayments should not exceed one-third of your income. Based on your salary, this would come to about Sh17,000 per month.
At the moment, however, you are servicing a loan at Sh24,000 per month, which is already above this recommended level. This shows that your current debt obligations are already high compared to your income.
If you were to take an additional loan of Sh2,000,000, even at a lower interest rate of around 10.5 per cent and over a repayment period of five years, the estimated monthly instalment would be approximately Sh43,000. Even after offsetting your existing loan, this repayment would still be high compared to your total income.
When you combine this instalment with your essential monthly expenses, it would leave you with a financial deficit, which would make it even more difficult to meet your obligations comfortably.
Steps to take:
1). Restructure your current loan first
When you have a cash flow problem, the first step is to try to create breathing space. Right now, your biggest pressure is your monthly loan repayment.
Since you have already serviced the loan for one year, the outstanding balance has reduced. You can talk to your bank about restructuring the loan, either by extending the repayment period or reviewing the terms. This can help lower your monthly instalment.
Even a reduction from Sh24,000 to around Sh15,000–Sh18,000 would make a big difference. It would give you some room to manage your expenses more comfortably and start creating a small surplus. Also look at the non-essential expenses you can reduce. For instance, can an item like personal care be reduced from Sh6,000 to Sh4,000?
2). Handle the business partner exit carefully
Since your partner is considering selling her share of the business, this decision should be handled carefully and not rushed.
You should not commit to a buyout that will put you under debt or financial strain. The focus should be on allowing the exit to happen in a simple and practical way that does not damage the business or your financial stability.
3). Put the right structures in place so earnings and costs become predictable
Before your partner exits, it is important to put the right structures in place so that your business income and expenses become more predictable and clearer.
This means having a proper understanding of sales, costs, and profits so that you are not running the business based on assumptions. You should clearly know what the business is actually making, what it is spending, and what is left as profit.
4). Focus on increasing and stabilising your income
At the moment, Sh10,000 from the business is a good start, but there is still room for growth and expansion.
Look at practical ways to increase sales, reduce unnecessary costs, and improve profit margins, whether it is through marketing, better customer service, or pricing. Even an extra Sh5,000-Sh10,000 per month would make a big difference to your overall financial situation.
5). Avoid new debt
At this stage, it is important to avoid taking on new debt. While a new loan may look like a solution, especially if it has a lower interest rate, it will still increase your monthly obligations and put more pressure on your cash flow.
Your current challenge is not access to credit, but lack of financial breathing space. Until you are able to create a consistent monthly surplus, adding new debt will only make your situation more difficult. The focus now should be stability first, not expansion or more borrowing.
Focus on reducing pressure, staying disciplined with your expenses, and strengthening what you already have. With time and consistency, you will regain control and be in a stronger position to grow without financial stress.
