I want to move out of my parents' house. Help me plan my Sh18,000 salary

My name is Alvin. I am 24 years old. I have a new 9 to 5 job in Nairobi. I will be earning Sh18,000 net salary. I live with my parents and would like to move out and start my life now that I have a job. I also have a girlfriend and would like to spoil her once in a while. How do I plan / budget this salary? Which neighbourhoods should I look to move to? At what age should I consider saving money? What should I prioritise at my current stage?

Benjamin Cheruiyot – the Engagement Lead at Abojani Investments, a personal finance and investments advisory firm

At 24, you need to gain more skills to improve your earning capacity, especially if your current job is scalable. Use your free time to upgrade your current qualifications by learning professional skills online or by apprenticeship. Being single, you need to make use of your low expenses or less responsibility to save and invest at least 30 percent of your income. Make the most out of living at home with your parents. Do not be in a hurry to move out of your parents in the short term as you will incur expenses that will eat into your income. Your salary may not allow you to live in an average, well-serviced neighbourhood. Bed-sitters in safe neighbourhoods will cost half your salary, besides commuting expenses, food, and other basics. These may not allow you room for personal development or attainment of short-term goals.

Saving should start immediately when your first salary comes in. It is recommended that you save at least 10 percent of your income when you are starting work. As your income increases or your budget normalises, you should increase savings to between 15 to 20 percent of your income. In your case, you will need to have sufficient emergency funds to cover at least six months of your living expenses (Sh72,000).

With very minimal expenses, it can be possible for you to aggressively save Sh12,000 monthly and use Sh3,000 for transport and Sh3,000 for your personal wants. This would translate to savings of Sh144,000 in a year. 

What would you do this month? The answer to this question will form your money habits. Nonetheless, without overstretching yourself, your budget should be allocated as follows: Sh3,000 to a SACCO limited access account, Sh3,000 to a money market fund, Sh5,000 to personal use (clothing, entertainment), Sh3,000 to miscellaneous (airtime, bundles, entertainment), Sh2,000 to transport and Sh2,000 to an ordinary savings account for quick access. Do not be tempted to dabble in investments you know little about. Do not fall into get-rich-quick schemes or peer pressure to allocate your limited resources to ‘investments’ that promise too much within short periods.

Consider life insurance too, especially if you expect to have a family. Life insurance covers are cheap while you are young. Benefits can be used to educate your children, pay off a mortgage or leave an inheritance. At your age, the number one priority should be increasing income to over Sh35,000 through learning skills that you can monetize.

If it's your current girlfriend that you intend to marry, encourage her to develop herself to avoid dependency on you. There are certain monetary lengths you shouldn’t go to in the name of ‘spoiling’ or ‘caring’ after her. These include going into debt or breaching your budgets and diverting monetary allocations. If it doesn’t fit into your budgetary plan, you can’t afford it. At 24, your financial focus should be a 10-year project that will make you financially self-sustaining by age 35. Be keen to delay gratification and reinvest your interests or dividends in your chosen investments.

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