I earn Sh70,000 but I’m always broke and feel I’m working without reward

My name is Ignatius. I have a family, three children and a wife. My wife is a stay-at-home mom. I earn a net salary of about Sh70,000. Here is a summary of my monthly budget: Rent: 11,500, tokens 2,000, transport 5,000, monthly shopping 12,000, Gas refill 2,800, daily expenses 9,000, Grade Two fees 13,000 per term, PP1 fees 10,000 per term. My last born is one and stays at home with my wife. Wife’s allowance 8,000, Mother 5,000, My mother-in-law 5,000. After paying all these, I am always too broke to even buy myself anything. I feel like a donkey that works without a reward. I have no financial purpose or achievements to be proud of. What do I do?

Emmanuel Mbogholi is a Partner at SFAI Kenya – a strategy, accounting and tax practice

Financial prudence begins with living within your means. Your monthly expenses amount to Sh68,000, which is more or less your entire income. This explains why you don’t have much left for personal spend. To turn around your financial situation, begin by creating a budget which will help you track your income and expenses in detail so as to identify and cut unnecessary spending.

The simplest method you can use is the 50:30:20 budgeting system where you will apply 50 per cent of your income, in your case being Sh35,000, to essential living expenses such as rent, transport, school fees, other recurring bills and groceries. 30 per cent or Sh21,000 to lifestyle costs which in your case should cater for your wife’s and parent’s allowances as well as other personal expenses such as dining out, and buying clothes.

The remaining Sh14,000 should go towards savings and investment. Once you have a budget, it is critical for you to maintain your spending within the budget allocations. This might mean cutting down on some areas, looking for more affordable alternatives or eliminating non-essential spending altogether.

The next step is to start building an emergency fund to cover unexpected spending. This is especially critical for you being the sole income earner for your family. Target to save at least six months of living expenses in your case being Sh336,000. Use the Sh14,000 for savings to reach this goal which should take you 24 months or thereabout to achieve. This money can be saved in a money market fund where you will be able to make a decent return on investment while still being able to easily access the funds if need be.

To achieve these, you will be required to readjust your budget allocations and cut off unnecessary expenditure that might be drawing you back. This includes the Sh10,000 allocation to your mum and mum-in-law. Your daily and monthly expenditure amounts to Sh21,000. This can be slashed down to around Sh15,000 to save you an extra Sh6,000.

Besides your financial situation, I commend you for not being in debt. Maintain this discipline to ensure you are able to begin investing once you have set up the emergency fund. Be patient as you work towards this.

The next goal should be to explore the possibility of increasing your income so as to accelerate your journey to financial freedom. The options for doing this include seeking a better-paying job, taking on a part-time job, or starting a side business.

Weigh the gains against the risks of each considering time available, resources required and your skills especially where doing business is concerned. You should also discuss your financial situation as a family and collaborate with your wife to find solutions.

Currently, you have an allocation of Sh8,000 allowance for her. This amounts to Sh96,000 per year and over Sh100,000 if this money were to be invested in an interest-earning channel such as a Sacco or Money Market Fund. Find out with your spouse how much of this can be redirected into an investment and how much can be left for her person use. For example, can she save Sh5,000 out of Sh8,000 in an MMF and use the remaining Sh3,000 for her personal use?

Also, your talk could include her seeking a job or engaging in some sort of income generating activity such as a small business depending on what her skills and interests are. This can be on a part-time basis to ensure she’s able to still raise your child. Increasing your earnings while staying within your budget as a family will help you achieve your financial goals faster.

Ultimately, for you to achieve success and build wealth over time, invest in financial education to learn more about the different investments available to you from government securities such as T-Bills and Bonds to real estate and even entrepreneurship.

Make these small, manageable changes and then begin to gradually work towards bigger financial goals such as living in your own home or even becoming a property investor. This journey is one you will definitely be proud of!

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I will retire in June; how do I invest my wealth for a comfortable retirement life?

I am a widow aged 59, set to retire in June. My monthly expenses amount to between Sh90,000 and Sh110,000. This includes a monthly medical cover of about Sh12,500. My financial status is as follows: Equity, KCB, and Safaricom shares Sh745,000, four acres of land in Molo and two acres of land in Kajiado. This land is for farming. I have a farmhouse of three bedrooms in the Molo farm. I also have a three-bedroom bungalow in Ndeiya, Kiambu, where I currently live. Provident fund Sh10 million (minus tax), Sacco shares of Sh4 million, fixed deposit savings of Sh650,000, NSSF Sh450,000. I would like help on how to manage my money to live a comfortable life in my retirement. All my children are grown and working, although my last born is just recently employed and is living with me.

Benjamin Cheruiyot – the Engagement Lead at Abojani Investments, a personal finance and investments advisory firm

Ideally, one ought to identify an interest to pursue years before retirement. Using one’s networks in employment can help set up a thriving business while still on payroll. Thus, planning how to spend your time in retirement depends on your knowledge, skills and experience. Many cases of retirees losing their retirement savings to “quick fortune” schemes abound. Others get into the lure of rentals, expending all lump-sum payouts to projects without detailed building cost plans. The result is unfinished structures.

Bills hardly change when salary stops, yet monthly pension does not match your last salary. You need to scale down your lifestyle since inflation will always reduce your purchasing power. The first thing is to maintain comprehensive medical insurance. Old age attracts reduced body immunity, especially with underlying conditions. Do not carry your job title into retirement. You may no longer afford frequent travel as fuel costs are always going up. Expensive eat-outs will also drain your finances. If possible, limit outsourcing services you can do yourself.

Agribusiness requires proper market research lest you be stuck with produce. If done well, there are endless opportunities for wealth creation. Unlimited value addition to farm produce will also give you a ready market to satisfy. Your skills and passion, even at low season, will determine the extent of success. You can maximise output on your six acres in Molo and Kajiado. You could do maize or potato farming in Molo and explore a favourable crop in Kajiado. Should you want to focus on Molo, selling the Kajiado parcel to increase acreage in Molo is also advisable. This will reduce unnecessary expenses involving travel and management.

Read: Help! I earn Sh85,000 but have zero savings

As you already have a house in Molo, you could relocate and enjoy country living where you will grow your own food and drastically lower living costs, besides healthy eating. You may consider renting out the Kiambu home for income as you settle in Molo. It is however important to bear in mind the social challenges that might come with this, especially if you have never resided upcountry.

With a cash and stock portfolio of Sh15.8 million, excluding land and property holdings, you are looking at another 30 years or more in old age retirement. Will this amount last you that long? Assuming you do not have cash-flowing investments, this amount, when liquidated, only equals 12 years of your monthly expenses. With inflation, this can reduce even further.

You need to invest this amount to earn you more interests that will keep you going longer. Investing in a safe but meaningful returns vehicle like government bonds will earn you regular income. You will receive about Sh9 million from your provident fund.

To meet regular expenses or short term projects, you need to put part of it in an easily accessible account, like a money market fund. Sh2 million in an MMF earning 11 per cent annually will earn you Sh19,000 monthly, net of 15 per cent withholding tax.

The balance of Sh7 million can be invested in a Treasury or Infrastructure Bond returning 18 per cent per annum, you will earn Sh630,000 every six months. This averages Sh105,000 a month. These two investments return Sh124,000 monthly, which exceeds your current monthly expenses.

Read: I earn Sh420,000 monthly but I am left with zero at end of the month. How do I build my family home?

Other cash flowing assets include the Sacco deposits. At an average of 10 per cent annual interest, you will earn Sh380,000 net of withholding tax from your Sh4 million holding. This is more than Sh20,000 monthly.

You may opt to liquidate the bank fixed deposit and NSSF dues, both totaling Sh1.1 million and top up on your money market fund account. This will generate an additional Sh11,000 adding up to Sh30,000 monthly interests from your MMF investment of Sh3.1 million.

Read: Why do many men get rich in their 30s, and go broke in their 40s?

The stocks you hold are largely growth oriented. These stocks have dividend yields of about 10 to 12 per cent based on current share prices and the 2022 dividend payments. At your age, income is essential. Switching to mature dividend stocks like BAT, Standard Chartered, or Williamson Tea is advisable, although such a shift ought to be well calculated and backed by proper investment guidance from a qualified securities investment professional.

Managing cash flow in retirement is highly recommended. You shouldn’t hesitate to work with a planner to adjust your portfolio allocation subject to market dynamics and future economic outlook.

If you have any money problems, send us an email at [email protected] and leave your number. Money questions will be answered here.