My wife and I are new primary teachers. Help us manage our 56K net pay

My name is Gilbert. My wife and I are primary school teachers upcountry. We both earn a net of Sh28,000 each. We have two children. One is in nursery PP1 and the other one is a toddler. These are our first jobs. We are excited and anxious not to mess up our money. We have big dreams. We would like to go back to school and scale ourselves career-wise. We would also like to buy a piece of land and build our own home in the foreseeable future. We haven't done much with our first salaries because we don't know how to budget. Please help us draw up a budget. We don't have loans yet. Should we also pay tithe and give to relatives at this stage?

Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money

Your total income as a couple is Sh56,000. It is important that you hold a candid conversation with your wife on how to share your financial obligations as a couple and leverage your dual salary for increased savings and investments. This will help you to overcome any nagging feelings of financial infidelity, especially at these early stages of your careers.

Use the 50/30/20 rule to help you budget. Pay yourself first before you start spending on other needs and wants. You can automate and diversify your savings as illustrated below:

a). Channel 30 percent towards savings. This translates to Sh8,400x2 (Sh16,800) diversified as follows: 

i. Sacco: Sh3,500x2 = 7,000 

ii. Education Policy Insurance: Sh3,000x2 = Sh6,000 (2 children)

iii. Emergency fund: 1,900x2 = Sh3,800

b). Channel 50 percent (Sh14,000x2 = 28,000) towards necessary expenses. These expenses should be shared proportionately with your wife (you can pay house rent, child's school fees and house-help) as follows:

i. Rent: Sh4,000 (for the houses popularly known as doubles). If you get one near your places of work, you can eliminate transport and top up your rent for a better and more spacious house.)

ii. School fees: Sh4,000 (per month)

iii. House-help: Sh4,000

iv. Shopping: Sh7,000

v. Transport: Sh2,000×2 = Sh4,000

vi. Utilities: Sh1,500

vii. Others: Sh3,500 (This should help cover deficits arising from the cost of living).

c.) Other expenses 20 percent (Sh5,600x2 = Sh11,200). This may be allocated to your emergency fund, black tax, entertainment, and gifting.

When budgeting, consider the following:

1). Monitor your expenses on a daily, weekly, and monthly basis to determine where every shilling goes to avoid wastage. Leverage the pocket-friendly rural lifestyle to grow your financial muscle for investments.

2). Diversify your savings and investments. As a couple, channel part of your savings to a teacher's Sacco, take education policies for your children, and save for emergencies. Use the Sacco savings for investment or development projects that can generate more income instead of just getting a loan and buying land and building a home in the medium-term. Invest in yourself and acquire financial literacy skills by enrolling in a financial management programme to teach you how to manage your money wisely, and invest appropriately.

3). Review your financial situation. Calculate your net worth after every six months to determine your actual financial position. If your net worth is positive or improving, it means you are doing well (assets outweigh liabilities). The rule of thumb is: For every two assets there is one liability (ratio of 2:1). Paying tithe is not cast in stone, especially when you’re new at work and salary. Out of the Sh11,200 use Sh5,000 to pump up your Sacco savings to Sh12,000. Then allocate Sh2,000 to your personal needs, Sh2,000 to your black tax, and the rest of Sh2,200 to your religious gifting.

4). Join a reputable Sacco. Teachers Saccos have friendlier solutions for teachers. By diversifying and saving through the Sacco, your annual savings will amount to Sh144,000 with a dividend of Sh14,400 at the rate of 10 percent. In five years, your savings will total Sh720,000 without factoring in the dividends. Your emergency kitty will stand at Sh228,000 if they aren’t utilised within that period. This total of around Sh950,000 can get you a quick development secured loan of up to Sh2.8 million.

5). Take a sound life cover with a reputable insurance company or have an individual pension plan besides the plan provided under the TSC.

6). Scan your immediate environment and find out what skills, services or goods are in high demand. Devise a plan on how to solve an existing or emerging problem. A side hustle will supplement your income and help you raise money for further education and fill any budgetary gap.

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