My name is Daniel. I am 24. I have been living in Limuru with my parents. I have just received and accepted a job offer with a net salary of Sh25,500. The job is in Westlands area in Nairobi. I plan to live in Kangemi or Ngara areas which I understand are quite affordable. I have a one-year contract on this job starting February with the possibility of extension next year. Kindly assist me to budget and attain financial independence despite my small resources. I would like to have some savings and probably start a side hustle such as a car wash in case my contract is not renewed. I also don’t want to return to my parents’ house. Instead, I want to be independent. How do I survive in Nairobi on this salary
Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
There are various strategies you can use to meet your financial obligations and also save towards your investment goals. A simple one that I recommend is the 50:30:20 rule. In this strategy, work towards keeping the costs of your basic needs at 50 per cent of your income, your wants at 30 per cent and your savings at 20 per cent. Some people choose to interchange the needs and wants so that 20 per cent goes to wants and 30 per cent savings and this is a good idea worth considering.
In your case, I expect your basic needs to be rent, utilities including electricity and water, basic home shopping, transport costs and food. Given that 50 per cent of your net income is Sh12,750, I would advise you to get a single room for about Sh6,000 in the areas that you mentioned. The basic utilities of the house should come to about Sh8,000. You can budget Sh2,500 for your monthly shopping that includes food, personal items and communication expenses. Transport to Westlands from the areas you mentioned is about Sh100 return and this comes to Sh2,500 per month. This will leave you with Sh700 extra cash for your basics every month.
Budget 20 per cent or Sh5,100 for your wants. This includes your entertainment costs, charity venture such as parents’ support and purchase of clothes and other personal non-basic items. Finally, save up 30 per cent which is Sh7,650.
I would advise you to invest this Sh7,650 in a Money Market Fund or a Bond fund. These investment accounts earn an interest of around 12 per cent (net of 10.2 per cent) per year at the current rates. You can research on an ideal fund manager to invest your funds with. If you take this option, you should have about Sh96,000 at the end of 2024.
As for business, I would advise you to consider no or low capital businesses for a start as your savings are still growing. There are many low capital businesses that you can consider as you get started. These include selling of items such as shoes, clothes, perfume, tech items and the like. Get a good supplier who gives you good rates and quality photos for the items you choose to sell. You can then share the items’ photos and prices (including your profit) to your colleagues at work and your other networks. Once someone orders and pays for an item, you can have it delivered to them by your supplier as you settle the payments.
Other ideas you can consider are selling services for a commission such as insurance, holiday packages and entertainment tickets. Consider trading in the items or services that are needed by your workmates and circle of friends and also something that you are good at and enjoy trading in. However, you need to do your trade after working hours and avoid interfering with your job as you do your side business. Doing such low capital businesses will help you hone your business skills while keeping your risks low. Since you would want to venture into car business in future, you can take up part time car wash jobs over the weekends or after work. This will give you some money as well as insights on how this business actually works before you even invest your hard earned money into it. As you make money from your side hustle, invest as much of your profits as you can to keep building your fund.
If the contract is not renewed after one year, then hopefully you will have gained some traction with your side business and this will sustain you as you look for another job opportunity. In such a case, you will have more time to grow your business and possibly not even need another job. If on the other hand your contract is renewed, continue investing consistently as per plan and this way, you can build your fund to finance more capital intensive businesses such as a car wash and also pursue other goal such as owning a home.
How do I pay for university education with Sh28,000
I earn Sh28,000 and have been working for just six months, how do I plan for a degree and passive income?
My name is Nancy. I am 27. I am a primary school teacher Kitui County. I earn a net salary of Sh28,000. I have one child who will be joining grade one in 2025. I have been working for about six months and haven’t been able to save any money. Most of my income has gone into paying PP1 fees, furnishing my rental house, and paying bills. I have a dream of returning to school for my degree so that I can get better opportunities or careers. How can I earn some passive income? Should I take loans to fund my degree?
Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money
To plan your money well, you need to adopt the financial strategies below.
First, audit your financial lifestyle. This involves determining your current financial position, operating with a budget and tracking your money daily.
To determine your exact financial position, you need to calculate your net worth by taking a summation of the total assets (fixed and current assets) minus the total liabilities (loans and money lent to you by other people). The amount you get will help you know your current financial standing and how many months you can survive without your current job as a TSC teacher. Also, you need to operate with a clearly drawn budget or spending plan outlining how much you need to spend on your needs and wants. Use the 50/30/20 rule as a guide. Pay yourself first by channeling 30 per cent (Sh8,400) to various saving vehicles, 50 per cent (Sh14,000) to necessary expenses (such as food, rent, utility bills) and 20 per cent (Sh5,600) to wants or unnecessary expenses like black tax, beauty and fashion trends. This budgeting guide is not cast in stone, you can vary it to suit your specific needs.
For example, you can reduce the money you spend on necessary expenses (from 50 per cent to 40 per cent) in case you don't spend on rent. You can also reduce the amount you spend on wants. Additionally, track your money on a daily basis and know where every shilling goes. Once you do this for at least three months, you will be able to determine how much you spend on average every month.
Take your child to an affordable school where you pay school fees of not more than Sh20,000 a year which translates to around Sh7,000 per term. You are in a rural county, which means you can keep your living costs down.
Secondly, get a saving and investment programme. You need to have a distinct saving scheme to cater for your emergency, school fees and investment. Channel 30 per cent (Sh8,400) to various saving and investment vehicles such as Sacco (Sh5,000), money market fund (Sh6,000) for emergency purposes and take education policy of about Sh3,400. The Sacco savings will help you secure a loan to use in building additional rental houses. You can use the money saved in MMF to pay school fees and replenish the account as time goes by. The additional money you get from the furnished rental units will supplement your income, help you save more and offset some pending bills. Join a teacher-friendly Sacco. There are numerous Saccos founded by teachers that have larger benefits and financial support for teachers than ordinary savers. These benefits include project financing (such as home ownership) at favourable rates and financing for career progression (such as the funds you want for your degree).
Third, set SMARTER financial goals. To have a clear spending plan and save and invest prudently, you need to set short term, medium term and long term financial goals. Short term goals range from three months to 12 months and this may include the monthly savings in Sacco and MMF. Medium term goals take two to five years which may include building additional rental units. Long term goals take five years or more. One of the long-term goals should be taking a 10-year education policy for your child.
Since you just started your career, it would be advisable to avoid taking loans at this moment until your financial position stabilises. Remember, any loan you might take in future should be dependent on your ability to repay without financial strain, and be tied to a clear purpose.
You also need to discover your passion activity and monetise it in the long run. Identify your natural inclinations and start a side hustle to supplement your income. Aim to take your income to a net of about Sh50,000 in the medium term.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered on this column
