I have recently become aware that age is catching up with me. I need to budget to achieve my goal of owning a home.
My name is Henry. I am 38 and a new father of twin girls who are now 11 months old. I earn Sh156,000 net. I also have a street-brokering and consultancy side-hustle that gives me about Sh30,000 in a fair month. My budget is as follows: Rent Sh25,000, stay-at-home wife’s allowance Sh20,000, shopping and groceries Sh20,000, power, home internet and entertainment Sh7,000, water Sh2,000, black-tax Sh15,000, day-time nanny Sh10,000, fuel around Sh10,000 (Prado Diesel), and the rest goes to miscellaneous expenses. A while back, I was constructing a four-bedroom maisonette that stalled after roofing and installing window grills and the main entrance metallic doors. I estimate that I need at least Sh2 million to complete plastering and other interior and exterior finishings. However, I have an outstanding two-year loan of Sh1 million of which I pay Sh47,700 per month. I have paid off eight months so far. I had used this loan to set up the first-floor slab for my house, walling and roofing. I also have a Sh50,000 bank
mobile loan that I keep paying off and borrowing. I have become “addicted” to this facility and can’t seem to shake it off. I currently do not have any savings to speak of. How do I rearrange my finances to pay my debts as fast as possible and complete my home in time for my 40th birthday?
Inziani Khasiani, financial consultant and the executive director at Klientele Kenya
Given your current situation—balancing family expenses, debt repayment, and the desire to complete your home project before turning 40—here is a proposed roadmap to help you achieve financial stability and realise your goals.
Your summarised financial position shows a total monthly income of Sh186,000 against disclosed expenses of Sh156,700, leaving a net positive cash of Sh29,300. The Sh1 million loan at a monthly repayment of Sh47,700 per month is a major commitment, with 16 months left if you maintain current payments. The Sh50,000 bank mobile loan, though smaller, creates a cycle of dependency that needs to be broken.
Commit to not borrowing from the mobile app again. Allocate income from the revised budget to clear this loan. Calvin, there are many possible reasons why you might be hooked on soft loans. It would be important that you stop and analyse your drivers. For each reason, there will be at least two or three possible solutions. Pick what works for you. Develop the discipline to resist small, distracting habits of mobile loans. Although it may appear a minor adjustment, this is a crucial and strategic move that plays a significant role in shaping your overall financial journey going forward.
Create a budget, reduce some of your expenses and cut non-essentials. The following are some of the recommended reductions.
Reduce wife’s allowance by 50 per cent from Sh20,000 to Sh10,000 temporarily. It is important to involve your wife in the rationalisation conversation. Including her in these discussions is essential to maintain trust, prevent resentment and promote shared problem-solving. Her involvement ensures that her perspective is considered on key family commitments, helping to avoid misunderstandings or unintended consequences that could arise from unilateral decisions.
Aim to reduce shopping and groceries by 50 per cent from Sh20,000 to Sh15,000 by using strategies that define and prioritise essential items, shopping against shopping list, avoid impulse purchases and buying in bulk (weekly or monthly). Reduce Power, internet and entertainment by 50 per cent from Sh7,000 to Sh3,500 by cutting non-essential subscriptions or reducing usage. Consider reducing fuel by 30 per cent from Sh10,000 to Sh7,000 by optimising trips and where necessary, use public transport.
Consider reducing black tax expenses by 30 per cent from Sh15,000 to Sh10,500 by structured financial planning (commit only Sh10,500 per month) and proactive communication (when contributing less, advise the beneficiary why you cannot afford more).
The revised expenses position has total inflows at Sh186,000 against expenses of Sh156,700, leaving a net positive cash of Sh60,300. If you use these numbers, try and track your expenses daily or weekly. Make all payments on time and review your budget regularly to stay on course.
Once the bank mobile loan is cleared, which should be within month one, you will remain with two commitments. There is no urgency on the two-year loan. I recommend you maintain repayments at current levels. You have an urgency and strict timelines on finishing the house. The amount required of Sh2 million to finish construction can be saved gradually from the revised budget. I recommend you push the surplus of Sh60,000 towards that project. Assuming no change in income level, it will take you 34 months to raise Sh2 million. That will be April 2028. Regular investment in income generating avenues like the money market will earn you additional interest.
The property is a long-term investment and its value can be expected to increase over time and contribute to your financial independence. Consider and where possible, at this early construction stage, to incorporate any income generation amendments on the building. Upon completion of the house project, the savings and surplus income should be redirected toward building an emergency fund, investing for future growth, and further expanding your business ventures.
The most significant part of my recommendation is a challenge to you to leverage street-broking and consultancy and mould it into an entrepreneurial enterprise. The potential for growth is significant, given the low start-up costs and scalability. To improve your current income stream, you should focus on expanding your network, diversifying services, enhancing marketing efforts, and forming strategic partnerships for steady referrals. A thorough analysis of your business model, market demand, operational efficiencies, and financial projections will help identify opportunities to boost revenue, reduce costs, and improve overall profitability, ensuring sustainable growth and long-term success.
By maintaining the right mindset, unwavering commitment, and consistent action at every stage, Calvin, you can break free from debt, build savings, complete your home as planned, and maximise the potential of your street-brokering and consultancy business. Stay disciplined and track your progress. Involve your family in your plans. I wish you all the best.
***********
I’m 24 earning Sh30,000. How do I save and invest safely in high-yield investments?
My name is John. I’m a 24-year-old who recently started a remote job as a junior web developer, earning Sh30,000 per month. Since I live with my parents in Limuru, my expenses are very minimal. I have so far saved Sh120,000 in a money market account and I plan to invest at least half of my net salary (Sh13,500 per month) after taxes, although I’m open to saving or investing all available funds to maximise growth. I’m seeking your expert advice on how and where to invest this money correctly in order to build long-term wealth as I mature more into adulthood and take on more adult responsibilities. I would also like to know what type of returns to expect. My goals are to grow my savings safely while exploring higher-return options as I gain experience. I’m considering Saccos, treasury bills, or unit trust funds but I’m unsure which are best for my situation, how they work, and what returns to expect. What strategies and specific investment options would you recommend for someone with my income and risk tolerance?
Robert Ochieng’, the founder and investment advisor at Abojani Investments
The secret to financial security and wealth accumulation is risk and debt management, which entails being adequately medically insured, paying off short term loans and living within your means by establishing a budget and adhering to it.
John, you are at the right age to acquire more skills in web development and niche computer skills, then expand your expertise for more lucrative contracts. You also need to make short, medium-term and long-term plans. I commend you for setting the short-term goals of making a budget and building savings.
With estimated monthly net earnings of Sh27,000 you can do better with savings if you budget appropriately. Savings should start the very moment you earn an income. It is recommended that you save at least 10 per cent of your income when you are starting work. As your income increases, you should increase savings to between 15-20 per cent of your income. In your case, to truly meet short-term needs that may include having sufficient emergency funds covering at least six months of your living expenses, you need to be aggressive. Assuming total personal expenses amount to half your salary income, you still have about Sh13,000, which is a good amount to grow savings and investments monthly. Joining a Sacco is recommended. Find one that accommodates freelancers and the wider informal sector, especially where your colleagues at work are, so that you can get guarantors for loans in future. Saving via Sacco inculcates a healthy habit and enhances discipline.
Sacco monthly savings of Sh5,000 will earn interests of Sh6,000 at 10 per cent annual interest in the first year. Doing this consistently for three years will add up to Sh200,000 if interests earned are reinvested. This will allow you up to 3X loan multiplier, thus a Sh600,000 loan for a purchase of an asset, say a plot, or scaling up your business. Repayments will average Sh12,500 for 72 months due to the reducing balance formula. You will continue earning interest from the Sacco deposits as you service the six-year loan. You may reduce the monthly savings to Sh3,000 to accommodate the loan repayments should circumstances get tough.
You already have exposure to money market funds. You need an emergency fund that equals at least a year's expenses. In your case, this could be at least Sh200,000. This can be built via a money market fund. An MMF is a collective investment scheme that pools funds from institutional and individual investors who all get an equal rate of return. Interests earned depend on the sums invested. MMFs typically invest in short-term instruments like fixed deposit accounts, treasury bills, commercial papers and short-term maturity bonds. The advantage of MMFs is liquidity of the funds, thus easy access at any time. Withdrawal orders are executed within two to three days. These are funds for short to medium-term goals and also 'parking' funds with no immediate purposes. Bond funds also provide stable income rates at between 12-13 per cent per annum.
Monthly savings of Sh8,000 in an MMF can accumulate over Sh300,000 in three years at about 10 per cent annual interest. Alternative investments that are safe but have meaningful returns include treasury and infrastructure bonds. With a Sh100,000 investment in an infrastructure bond paying 13 per cent annual interest, you will receive Sh6,500 every six months for the duration of the bond. You could also invest in high-yield NSE-listed dividend stocks. Some, like BAT and Standard Chartered Bank, have dividend yields of 15 per cent and above, subject to share price fluctuations. You can also cash in on capital gains.
Learn about stocks, treasury bills, treasury and infrastructure bonds, high-yield savings accounts and mutual funds with lower entry barriers. These allow you to focus on your career, seeking higher income prospects as you create passive income streams to boost your liquidity. The two – a salaried job and passive income sources – are not mutually exclusive. Medium-term goals like education planning, medical insurance, and long-term goals like home ownership and retirement planning are realities you will have to deal with. You are in the technological field that is evolving daily. Even as you save, prioritise the acquisition and upgrading of your skillset to remain competitive. You can start with online courses and accreditations even as you aim for formal academic pursuits.
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.
