Breaking free from debt requires honesty, making difficult sacrifices and remaining disciplined.
I am in my thirties. I am married with one child who is five months old. I have a fluid income as my work is brokerage and consultancy in Nairobi. I have been averaging around Sh140,000. My wife is currently a stay-at-home wife. I am drowning in debt, and I need help.
Three months ago, my household items were auctioned, and my family and I were kicked out of our rental apartment. My rent was Sh70,000 per month, but I had fallen behind by six months. My monthly budget for groceries, shopping, baby food, house-help, power, water, fuel and entertainment was Sh62,000. I have a defaulted bank loan of Sh2 million that I have not serviced for four months. The interest for this loan is Sh59,980 per month. I serviced the loan for 10 months before I defaulted.
Out of Sh2 million, I received Sh1.9 million due to processing costs and fees. I used this money to upgrade my car and pay for my younger sister’s fees who is studying clinical medicine in college. After getting auctioned, I took a loan of Sh450,000 from two shylocks to pay rent and furnish my new rental apartment. This loan has a duration of 18 months. I have been paying a total of Sh40,000 for this loan and the costs, fees, and interest is chocking me. I am paying Sh60,000 rent in the new place.
I don’t want to sell my car or lower my lifestyle as I feel my social status, bargaining power and edge will suffer, which means my earning power will reduce. Please help me get out of the chock-hold of debt that I am in. —Alvin
Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
Your financial distress stems from a clear mismatch between your income and your expenses. Your current monthly debt repayments amount to approximately Sh100,000 — about Sh60,000 to a defaulted bank loan of Sh2 million, and another Sh40,000 to shylocks for a combined loan of Sh450,000.
In addition, you are paying Sh60,000 in rent and spending roughly Sh62,000 on household needs including groceries, utilities, baby supplies, transport and help. This brings your total monthly expenses to around Sh222,000 yet your average monthly income stands at Sh140,000. That leaves you with a shortfall of Sh82,000 every month which you are attempting to bridge through debt. This is not a sustainable financial path and will only keep you in a distressful cycle of debt.
The pressure you’re facing is not due to insufficient income but of trying to maintain a lifestyle that your income cannot sustain at the moment. Continuing on this path risks deeper debt, more distress and potential auction of remaining assets. No meaningful financial recovery will occur unless you take urgent and difficult corrective steps to regain control, protect your young family and begin rebuilding your finances. Here are two possible approaches you can consider;
Option 1: Keep your assets but radically reduce your lifestyle
The first option is to retain your car and other assets but make immediate and substantive adjustments to your lifestyle. With Sh100,000 going towards debt repayment, only Sh40,000 remains for your living expenses — and your current monthly costs are three times that. You will need to scale down drastically, starting with a more affordable house with rent of about Sh20,000. This may involve relocating to a location you may find less appealing but at this stage, affordability must take priority over convenience or prestige.
Next, you need to trim your household budget to essentials only — food, baby care, utilities and basic transport. Since your wife is currently a stay-at-home mother, consider managing without a house-help. Work to aggressively bring down your household budget to Sh20,000 – within your remaining income. This is a temporary adjustment, but a critical one if you want to maintain ownership of your car and stay on track with loan repayments. Stick to this reduced budget for the next 12 to 24 months to give yourself a realistic window to recover.
Additionally, engage your bank and renegotiate your loan. Financial institutions often allow borrowers in distress to renegotiate repayment plans — you may be able to reduce your monthly repayment to around Sh50,000. The key is to approach the bank before they escalate the debt collection efforts. As for the shylock loans, consider replacing them with a lower-interest facility — such as a SACCO loan — if you have access. This can significantly reduce your monthly repayment burden.
You can also consider discussing with your spouse whether she can take up income-generating activities from home — for example, online work, tutoring or start a day-care from home. Any amount earned will ease pressure and speed up your financial recovery.
Option 2: Sell the car to immediately reduce debt pressure
The second option — which you have expressed reluctance to consider — is selling your car. Although emotionally difficult, it remains one of the most practical and fastest ways to ease your financial burden. For instance, if you can sell the car for around Sh1.5 million, you could use part of the proceeds to clear the shylock loans, bring the bank loan up to date, and still afford a more modest car of approximately Sh850,000. This move would reduce your total monthly loan repayment to about Sh60,000, making your financial situation far more manageable.
Even with this relief, you would still need to reduce your overall expenses to fit your income. For example, consider moving to a rental house costing around Sh30,000 and limiting other household spending to within Sh40,000. This would bring your total monthly outflow to below Sh80,000 — a level that matches your income
While it is understandable that you feel reluctant to sell your car due to the perceived impact on your image or earning power, it is important to recognise that financial stability and peace of mind are worth far more than appearances. A simpler car and a debt-free lifestyle will give you far greater confidence, flexibility and bargaining power than holding on to a high-cost asset that is undermining your financial security.
Whichever path you choose, ensure that you remain disciplined to follow through. If necessary, seek accountability and help from your spouse, trusted friend or financial counsellor. If you get extra income, channel it to reduce your debts as opposed to upgrading your lifestyle. If you remain focused and consistent, you can realistically be out of debt within two years.
Once out of debt, ensure that your lifestyle always falls within your income to avoid getting into a debt trap again. A few tips that can help you keep expenses in check include keeping your rent at 25 per cent to 30 per cent of your monthly income, avoiding loans for consumption or status-related expenses such as upgrading your home and building a buffer/emergency fund to cushion income fluctuations. Additionally, aim at saving and investing at least 10 per cent of your income towards long-term goals such as your child’s education and home ownership.
Breaking free from debt will require you to be honest, make difficult sacrifices and remain disciplined. But the result — financial freedom, family stability and restored peace — will be worth it.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered here
