To make headway in managing your money, you need to know where every coin is going.
My name is Lewis, and I am 45. I’m divorced and live alone, and I have children. I feel I’m not aligned in my financial journey. I would want to own a home in three to four years, and have a passive income of Sh120,000 per month. The target for the house is Sh6 million. It can be either an apartment of Sh6 million or a plot of Sh3 million and construction of Sh3 million. My net income is Sh110,000. My budget is as follows: Rent: Sh17,000, Electricity: Sh2,000, Water: Sh1,000, Wifi Sh3,000 (This I need since I use it for side hustles), School fees Sh20,000, children’s food/upkeep Sh10,000, Parents Sh5,000. My shopping and groceries are Sh5,000 (these are mostly taken care of by side hustles). Transport is taken care of by the company. Miscellaneous and entertainment I cover from side gigs. I faithfully save and invest 50,000 per month. I have an emergency fund of around Sh1 million in MMF. I have Sacco savings of around Sh300,000 but I don’t save regularly since I don’t have guarantors there. I’m there for the dividends and maybe will use the Sacco to buy me that land or home. I have Sh2 million invested in government bonds which generate passive income of an average of Sh60,000 for four months, the other eight months are not covered. I have plots of land which can fetch Sh3 million if liquidated and I’m not planning to build on either of them since they are not in ideal locations. So how do I achieve these goals that will also be in line with my retirement?
Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
Your current budget is quite prudent and your disciplined approach of consistently saving Sh50,000 per month—about 45 per cent of your net income—is a solid step toward achieving your financial goals. To reach your objectives of owning a home In four years and generating Sh120,000 in monthly passive income, I propose a strategy that will focus on growing your passive income through the purchase of more Treasury Bonds and then selling off your plots to fund either buying a piece of land for your home construction or making a down payment for purchasing your home – depending on your choice of whether to buy or build a home. You can then take a SACCO loan to fund your home construction or pay the balance to purchase your home.
To implement this strategy effectively, consider setting up a separate Money Market Fund (MMF) account specifically for accumulating funds for purchasing additional Treasury Bonds. By channelling your monthly savings of Sh50,000 into this account, you can accumulate approximately Sh600,000 by the end of 2025. Add the expected interest of Sh240,000 from your existing government bond investment, approximate interest of Sh100,000 from your emergency MMF account and roughly Sh60,000 interest earned from your new MMF account in the year. This will bring the total funds in your new MMF to about Sh1 million to invest in Treasury Bonds.
I recommend investing in Infrastructure Bonds as they are Zero percent tax rated (as of now) thus maximising your returns. Currently, Infrastructure Bonds issued in 2023 and 2024 are trading at a net yield of around 15 per cent in the secondary market (Nairobi Securities Exchange). Investing Sh1 million at this rate would yield approximately Sh75,000 every six months.
If you continue reinvesting your monthly savings and all interest earned from Treasury bonds and MMF accounts in 2026 and 2027, your Treasury bond portfolio could grow to approximately Sh5,450,000. This would generate an estimated annual return of around Sh810,000. To ensure a steady monthly cash flow, you can structure your bond investments so that interest payments are spread across different months.
In the meantime, you could sell your plots hopefully at the estimated market value of Sh3 million and use these funds to either purchase land in your preferred home ownership location or make a down payment to buy a house, depending on whether you decide to buy or build. You can then take a Sacco loan of Sh3,000,000 to finance either the construction of your home or to pay the balance to purchase a home. Many Saccos are now offering competitive home development loans without requiring guarantors, so it would be worthwhile to check if your Sacco provides such options. If you take a loan of Sh3 million at 12 per cent interest for five years, your monthly repayment would be around Sh67,000, which could be covered by the income generated from your Treasury bond investments.
Once you have repaid the home loan, you can continue building your passive income by reinvesting in Treasury bonds. In addition to this, consider diversifying your portfolio into other passive income options such as an Individual Pension Plan (IPP), insurance annuity or even rental real estate. This diversification will strengthen your retirement funding.
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I am a family man; with Sh43,000 net salary, will I ever afford to own a home and a car?
My name is Derrick. I earn a gross of Sh60,000. After statutory deductions, I take home around Sh43,000 but end up borrowing. My family's household expenses are as follows: Rent - Sh11,000, School fees for my two children per month - Sh10,000, Transport - Sh5,000, Shopping - Sh5,000
Can you please advise me; I want to buy a piece of land, build a house upcountry, and finally buy a car without taking out a loan.
Josephine Murage is an investment banker and personal finance consultant
From the financial breakdown that you have provided, your total expenditures per month amount to Sh31,000. This leaves out Sh12,000 that you have not accounted for. You need to list all your loans down, and the places where you borrow them. I assume that you are stuck in a mobile-borrowing loan cycle whose interests are very expensive. Re-examine your budget, trim excesses and use the realised funds to pay off monthly debts.
To make headway in managing your money, you need to know where every coin is going. This means listing down your recurrent monthly expenses, allocating finances to them, having a manageable and realistic miscellaneous budget allocation, and setting aside investment-oriented savings.
To do all this, start with tracking your expenses. You may need to get assistance from your spouse on this if you are not sure about your household’s spending habits. You can list all the expenses you spent money on in October, and then list the same for the current month of November. A spending pattern will start to emerge, and this is what will inform you of areas you need to trim to further accelerate your financial growth. Adopt the 50:30:20 budgeting method, in which you will allocate 50 per cent to needs, 20 per cent to wants and 30 per cent to savings and investments. Note that these percentages can be altered as your financial situation changes.
You might want to evaluate how your spouse can contribute financially to offload some of your household expenses. This will relieve more funds which you can allocate to your savings. For example, what are her qualifications and employability? If she can find work that will bring in at least a net of Sh15,000 to Sh20,000, your household could be between Sh10,000 to Sh15,000 closer to realising some of your saving goals.
As you set out your savings, you need to be clear about what is realistic and in which durations. You have mentioned land, a house and a vehicle. These are not short-term goals, given that you have not indicated having any savings and your apathy towards asset financing. Set short-term, medium-term and long-term goals. Each of these goals should take you closer to your long-term goals. They should be realistic, time-bound, and attainable. In your current financial situation, I would not encourage you to prioritise acquiring a vehicle, unless you can create a secondary income stream out of it – such as through weekend car-boot sales or the running of evening and weekend taxi business.
Over and above proper financial management, you need to devise ways of improving your current net earnings. To do this, you might need to acquire additional qualifications and skills by way of returning to school, attending relevant seminars and masterclasses, and boosting your work output. This may require a bit of financial input which means it can be one of your medium-term goals that will then propel you to your long-term goal of owning a home.
You intend to acquire land and build upcountry. What informs this resolution? Why upcountry? You need to be clear on whether your aim is related to costs or the need for a retirement home, and how moving upcountry could impact your work. Set a budget too for this. There are places you can get land for as low as Sh100,000 or even less, but there is no value, especially should a need to liquidate come up years down the line. Set your sights on a specific location, work with the current rates and create an allowance for appreciation. Loans are not always as bad as they are made out to be. In fact, by committing your savings to a Sacco, you will not only access dividends at a rate that is much higher than what is offered in a fixed deposit bank account but could also access financial support at three times your savings and a more affordable repayment rate. If you have land at a strategic place, some Saccos offer affordable building support through the Kenya Mortgage Refinance Company home loans.
However, before you take a loan, your capacity to meet repayments will need to be accommodated by your net earnings.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered in this column.
