I am 28, and earn Sh41,000 net per month. My budget is as follows: Rent Sh10,000, Food and groceries Sh12,000, cooking gas Sh1,200, power and water Sh1,000, salon and nails Sh4,000, transport 5,000, new clothes Sh3,000, tithe Sh4,000, savings Sh500.
I also have mobile loans of Sh6,000 that I alternate between two apps on my phone. I had saved Sh50,000 but this has reduced to Sh20,000 as I have been making withdrawals to fill gaps in my budget, pay mobile debts and meet miscellaneous expenditures.
When I started saving, my goal was to buy a piece of land before age 30 at a budget of Sh500,000.
Now this goal is seeming like a dream yet a colleague who earns the same amount and has one child has raised Sh300,000 in savings and is already scouting for plots.
Josephine Murage, an investment banker and personal finance consultant
Your monthly expenses come to a total of Sh40,700, leaving you with a measly surplus of Sh300. This is not enough to cover your miscellaneous expenses and mobile loan repayments. It explains why your savings have been dwindling down. As it is, your withdrawals are getting more than your deposits. However, your financial situation is not irredeemable.
Granted, much of your expenses hold water given the current living standards and the cost of living. However, there are two items that you can pluck temporarily: new clothes and tithe. The allocation for these two items come to a total of Sh7,000 per month. Since you have been buying new clothes at the end of the month, it is reasonable to assume that you have racked up a decent wardrobe that can allow you to halt this expense.
The total of Sh7,000 that you spare from your salary for the month of April shall be enough to pay off your Sh6,000 mobile loan and leave you with a surplus of Sh1,000.
You have indicated that you have been alternating between two mobile lenders – borrowing Sh6,000 from one lender to repay the other and vice versa. It is important you understand that while this cycle may have seemed to work, you have been losing money in expensive borrowing rates. Once you clear the debt of Sh6,000, do not be tempted to borrow from either.
Use the surplus of Sh1,000 to settle any miscellaneous expenses that may pop up in the middle of the month (light bills such as airtime). You will notice that you have basically stuck with your current budget, and only made two minor adjustments, to avoid radically disrupting your lifestyle.
The next step is to start working towards your goal of owning a plot. This should kick off from the May salary, with deliberate actions starting before you receive that salary. You will now have an extra Sh6,000 that you can inject into your savings. You have to know the type of vehicle that you are using to save your money. A savings account offers very minute rates while your money is exposed to inflationary pressures in a current account.
I recommend that out of the total of Sh6,500 available for saving (Sh6,000 from the total of Sh7,000 derived from budgetary cuts and Sh500 that you have been saving), take Sh2,500 and start saving it in a money market fund. Overtime, this will be established as an emergency fund kitty that you can use to settle small budgetary emergencies without going into debts or without making withdrawals from your primary savings vehicle.
Scout around for a reputable, licensed and professionally run Sacco and start saving Sh2,000 out of the remaining Sh4,000. Then have the balance of Sh2,000 in your bank’s savings account. For this to work, you may need to place a standing order that sends your money into these accounts once your salary is remitted and before you spend on any expense. By the end of April next year, your savings will have grown from the current balance of Sh20,000 to over Sh100,000.
You will, however, notice that the allocations to these three saving vehicles is limited. The only way to grow them is by sourcing for extra income. Look into your professional qualifications and the skills you have as an individual. How can you privately commercialize them to eke out an extra income stream – for example through consultancy services?!
If you cannot commercialise, what other skills can you tap into to make a few coins? For example, can you make and sell chapatis or traditional porridge to colleagues and neighbours? Look at things you can do without compromising your finances. If you can make a profit of between Sh200 and Sh300 from such an effort, you will have an average of Sh5,000 extra that you can redistribute among your savings vehicles to accelerate your funds growth.
You can still realize your dream in under five years (before age 33) without going into debt by way of expanding your income sources.
I will also encourage you to tap into opportunities that grow your resume. For now, you can start by researching and applying for sponsored online professional course trainings that offer certifications. This will not cost you anything and the returns for you will be an improved resume that retains and boosts your employability and career marketability.
You mentioned being downcast over your colleague’s progress at your expense yet you earn in the same cadre. The quickest way to lose hope is by copying the Joneses. You may never know if your colleague has other sources of income or what they are involved in that gives them an edge over you. That is not your business. Your primary objective is to run your own race.
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.
