My name is Steven, and I am 26 years old. I work in a government agency in Nairobi, earning a net salary of Sh55,000. My monthly expenses include:
-HELB loan repayment: Sh3,300
-Rent, water, and electricity: Sh12,500
-Transport: Sh4,000
-Food: Sh5,000
I had started saving in a Sacco, accumulating Sh350,000 (Sh11,000 per month in savings). I took a loan of Sh600,000 against the deposit to purchase a piece of land. Unfortunately, the land purchase didn’t go as planned, and I ended up using Sh100,000 on miscellaneous expenses. I deposited the remaining Sh500,000 into a money market account out of fear of spending it unwisely. Currently, I am repaying the loan at Sh18,500 per month.
I also have a girlfriend who I like to spend on for entertainment purposes, and I send Sh4,000 to my family every two months. My goal is to retire at 48 years old. I also want to purchase a home, buy a good car, and be able to take care of my family comfortably, including going on holidays by the time I turn 35. How can I achieve these goals?
--------
Advice from Benjamin Cheruiyot – Engagement Lead, Abojani Investments
Out of your Sh55,000 income, your total monthly spending amounts to about Sh54,300, leaving you with a surplus of Sh700. Your expenses are modest, considering the loan repayment takes up about 30 percent of your income. Your SACCO savings record is commendable, as you’ve been saving about 20 percent of your monthly income, which is an excellent habit.
However, taking a loan without a solid plan can be detrimental, as the interest costs often lead to missed opportunities for asset acquisition and growth. Let this experience be a lesson to improve your financial decisions in the future.
Your profile reflects a young person eager to build wealth quickly and achieve financial freedom within 22 years. To realise your medium-term goals of owning a home, buying a car, and supporting a family by age 35, you must focus on increasing your active income by upskilling or seeking promotions.
Sacco savings and Money Market Fund
You’ve made a good start with low-risk Sacco deposits, which will earn you about Sh30,000 in interest, to be paid in a few months. If you don’t have immediate plans for this money, consider reinvesting it in the money market fund (MMF).
Your Sh500,000 in an MMF is already earning approximately Sh175 daily, with an annual post-tax return of 11 percent. Compounding this amount could generate capital growth of about Sh50,000 in the first year. To accelerate growth, aim to make regular monthly contributions to the MMF when your budget allows.
Life insurance and retirement planning
Consider taking out life insurance, especially if you plan to start a family. Policies are more affordable when you are young, and the benefits can help with education, mortgage repayment, or leaving an inheritance. Retirement planning should also be a priority. Your top goal should be increasing your income through skills that can be monetised, either at your current job or through a side hustle.
If you intend to marry your current girlfriend, consider reducing entertainment expenses and encourage her to develop her career. This will help ensure financial independence and shared responsibility for future goals. Combining incomes in the future will enable you to achieve joint goals, such as homeownership and long-term financial stability.
Aggressive investment approach
As a young person, you can afford to take more aggressive investment risks, as you have time to recover from potential setbacks. Once you’ve repaid your loan, develop a solid investment plan aligned with your financial objectives.
Some investment options to consider:
Stocks: Invest in companies with a track record of strong earnings and consistent dividends.
Fixed income instruments: Treasury bills and bonds offer guaranteed returns and safeguard your principal.
Key takeaways
The path to financial security lies in risk and debt management, disciplined budgeting, and consistent saving. Redefine your objectives to create a SMART budget (Specific, Measurable, Achievable, Realistic, and Time-bound) that aligns with your medium- and long-term goals. Remember, it is not the plan that fails but failing to plan.
-------
I am in my mid-40s earning Sh103,000 but always struggling month to month
My name is Samuel, and I live in a rental in Nairobi. I also have a family home upcountry. I have three children: two are in primary school, and the eldest recently sat for their KCSE exams. I earn a net salary of Sh103,000. My monthly expenses include:
-Rent: Sh11,000
-Water and electricity: Sh2,000
-Shopping (Nairobi): Sh6,000
-Shopping (upcountry): Sh10,000
-Power (upcountry): Sh1,500
-Wife’s allowance: Sh10,000
-Transport: Sh6,000
-Farm laborer (upcountry): Sh10,000\=
-Bank loan repayment: Sh33,000 (Loan balance: Sh235,000; ending July 2025)
I took a Sh1 million loan to dig a borehole for irrigation farming, but it didn’t yield enough water for commercial use. Despite earning over Sh100,000, I struggle financially and lack significant investments. I want to secure my children’s future, start commercial dairy and poultry farming for my wife, and begin saving for retirement. How can I achieve this?
------
Advice from Inziani Khasiani – Executive Director, Klientele Kenya
Retirement readiness is influenced by three main factors: financial readiness, career, and health. Financial planning is an ongoing process that requires regular reviews to stay aligned with changing circumstances.
Based on your numbers, your income exceeds your expenses by Sh14,000. However, 32 percent of your income goes to loan repayments, and 30 percent is spent on upcountry expenses. You haven’t indicated savings or whether school fees are included in the upcountry costs.
Loan repayment and budgeting
To start your investment journey, prioritise accelerated loan repayment. Commit the Sh14,000 surplus toward your loan, allowing you to clear it by May 2025. Simultaneously, track your expenses for the next five months and set limits for categories like rent, school fees, and transport. Aim to allocate at least 32 percent of your income to retirement savings, increasing to 40 percent once the loan is repaid.
How much do you wish or should you invest? Can I reasonably work out a figure in my recommendations? What are the factors to take into account before picking a figure? When considering a retirement objective that involves commercial poultry and dairy farming, it is essential to define what “commercial” means in this context. The term “commercial” can encompass a wide range of investment levels, from small-scale operations requiring only a few thousand shillings to large-scale enterprises necessitating millions in capital.
I note the investment in a borehole that did not result in water as anticipated. The availability of water will not only open avenues for other investments, the proposed poultry and dairy farming require reliable flow of water. You need to review the reasons for the borehole not providing adequate water and arrive at rehabilitation costs so that you include adequate water in your investment plans. Possible reasons include borehole design and construction issues, depth of borehole and geological factors amongst others.
The importance of effective management in farming cannot be overstated, as it plays a crucial role in ensuring the success and sustainability of the enterprise. Effective management encompasses various aspects from financial planning to operational efficiency and regulatory compliance. Do you have the skills required to run an agricultural enterprise? By investing time and resources into relevant training programmes focused on poultry and dairy farming, you will enhance your decision-making capabilities and better prepare yourself for the challenges ahead.
Starting your poultry and dairy farming projects while you are still employed offers significant advantages. First, your current employment provides a stable income stream to fund the initial setup costs of infrastructure, equipment, livestock, and feed. This financial stability also acts as a safety net in case of unforeseen challenges like disease outbreaks or low yields. Additionally, being employed improves your creditworthiness, making it easier to secure loans for farm expansion if needed.
Starting early and small allows you to gradually learn the skills necessary for successful farming.
Poultry and dairy farming require expertise in areas such as animal health, feeding practices, disease management, and market dynamics. By beginning on a small scale now, you can gain hands-on experience and go through a trial-and-error phase without the pressure of relying solely on the farm income. You will also have time to build connections with other farmers and agricultural experts who can provide valuable guidance.
Establishing your farm early enables you to create a sustainable business model before retirement. You will have time to research markets and develop efficient workflows. Early revenue generation from small-scale operations can be reinvested into expanding the farm gradually. Furthermore, starting now ensures that by the time you retire, your business is already well-established with systems in place.
To ensure a successful start, I recommend you conduct a business plan to fill in the gaps identified above. Begin by analysing the required investment for each area: infrastructure, livestock, number of birds, feeds, basic equipment, and borehole rehabilitation. This will help you determine your total capital needs and allow you to create a structured budget. Consider reaching out to local agricultural extension services or experienced farmers for guidance on current costs and best practices. Look out for potential grants or low-interest loans specifically designed for agricultural ventures.
Beyond farming, I recommend diversifying your portfolio with safer and predictable investments such as money market funds and government bonds. These will provide stable returns and act as a safety net in case your farming venture encounters challenges.
To secure your children’s future, consider opening an education policy for the two younger children and a savings plan for the eldest to support their next education phase. You can also consider an emergency fund equivalent to three to six months of household expenses to cushion against unforeseen emergencies.
Lastly, revisit your long-term financial plan periodically. Your goals may evolve as you progress. A financial advisor can help you adjust your plan to reflect changes in income, expenses, and financial priorities.
Key recommendations:
Commit to saving a higher percentage of your income after completing the loan repayment.
Develop a comprehensive business plan for your farming ventures, including an analysis of costs and projected returns.
Start your poultry and dairy farming on a small scale to gain expertise before expanding. Diversify into safer investments like money market funds and government bonds. Set up an emergency fund and education savings plans for your children.
Periodically revisit and update your financial plan.
With discipline, consistent savings, and thoughtful planning, you can achieve financial security and a comfortable retirement while supporting your family.
Best of luck on this exciting journey!
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.
