It pays to honour your loan obligations.
I am a Nairobi resident with a monthly salary of Sh70,000. I am currently servicing a bank and a Sacco loan, which both deduct a total of Sh38,000 every month, leaving me with Sh32,000. I have about two and half more years to pay off these loans. I had taken the loans to fund a business that collapsed and left me in losses. I took the Sacco loan against my shares. The money I am left with is not enough to get me and family by. I have a wife and three children, two who are in secondary school and one who is a newborn. My wife was a mama mboga in our estate but she closed down. I am always struggling to keep up with school fees, rent, food and basic clothing. Some of my friends who earn way less than me are doing way better than me. The birth of my thirdborn has made things even tougher. I am now thinking of moving to the slums and relocating my wife and children to the village. That way, I may be able to manage rent and hide from neighbours and friends from whom I have borrowed soft loans amounting to about Sh100,000 and defaulted. I have no savings or investments. Please help me plan so I can pay off the loans as soon as possible, avoid the slums, and start living a more stress-free lifestyle in Nairobi.
Andrew
Inziani Khasiani, financial consultant and the executive director at Klientele Kenya
The real issue here is a mismatch between your lifestyle expectations and your income, along with a lack of systems to prevent unhealthy financial decisions. First, understand what led you here.
Common triggers include lifestyle pressures, medical bills, school fees, unexpected expenses without savings, an easy money mentality, poor financial decisions, and family pressures.
You need to identify and eliminate these triggers. Some recommended steps include postponing financial decisions to give yourself time to think, creating and strictly following a financial plan based on your income, maintaining a long-term perspective on your finances, and having honest conversations with yourself about your borrowing habits.
Consider paying off your Sacco loan using your shares. Since you took the loan against your shares, you may have accumulated shares that can offset some or all of this debt. If your shares can cover the full amount, do so immediately. Use any freed income to accelerate repayment of your bank loan.
After the bank loan, move to pay off the other soft loans. As you reduce and pay off the loans, commit to not taking any new loans, regardless of temptation or pressure. View borrowing as a threat to your family’s long-term stability. Remember, temporary relief from debt often leads to bigger problems down the line.
Going forward, your spending must be disciplined. The best way to start is by tracking every shilling spent—write it down immediately. Maintain strict spending discipline, especially with only Sh32,000 for a family of five. Every shilling counts.
Consider what savings you might achieve by moving to a lower-rent area—be mindful that this could increase transport costs, so find a balance. Look into options like wholesale food purchases to save money. Can you negotiate a fee payment plan with your children’s schools that aligns with your inflow?
Take a firm stance and eliminate discretionary spending on entertainment and unnecessary items. Contribute to the national health insurance fund to safeguard your family against unexpected medical costs that could derail your plan.
Look for ways to boost your income. Consider part-time evening or weekend jobs like tutoring if you have relevant skills, or small buying-and-selling businesses using your professional contacts. Your wife could contribute additional household income through home-based work such as catering, door-to-door sales, or offering services in the neighbourhood.
Prioritise ventures that require little or no upfront investment. Your circumstances demand both cost-cutting and income-building efforts, even though both are difficult in this economy. Just accept that progress will be gradual and uncomfortable.
Establish accountability for any new financial commitments. Work with a trusted third party who can keep you accountable. Involve your spouse if she demonstrates financial discipline and commitment to your recovery. Make her your financial partner—no major spending decisions should be made without mutual agreement.
Regarding relocating your family to the village, weigh the pros and cons carefully. If adequate resources are available there, it could offer a comfortable life and even supplement your income. However, if resources are limited, it might create new problems and strain family unity. After your wife’s postpartum recovery, she may start a part-time hustle that will ease your burden.
For the next 90 days, eliminate borrowing, track expenses, and cut non-essentials. This will yield progress and motivation. Remember, this journey is not just about surviving the current crisis; it is about laying a foundation for lasting family prosperity and financial freedom. I wish you all the best.
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
