My name is Jake. I am 23 and a degree holder. I am not married and don’t have children. I earn Sh56,000 monthly. I also get a commuter allowance of Sh5,000, uniform allowance of Sh5,000 paid annually, and house allowance of Sh8,000.
I have a bank loan that I pay Sh22,000 and a microfinance loan that I pay Sh12,000. I took these loans to help my mum start a chicken farming and hatchery project and to upgrade my living room (sofa set, smart TV, gaming, and music system).
Most of my other expenses are on rent, girlfriend and soft life. I would like to own a car before June 2026 and my budget is between Sh700,000 and Sh1.2 million. If I cannot take another loan, how do I raise this amount?
Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money
At 23, you are in a tender youthful stage that creates the base for sound financial take off in your 30s. You are lucky to be a degree holder and fortunate to have secured a modest job paying you Sh56,000 with some additional benefits.
Your total income is Sh69,000 excluding uniform allowance paid annually. Your total debt is Sh34,000 which consumes 49 per cent of your income leaving you with an insufficient balance of Sh35,000 for the recurrent and discretionary expenses.
Being single and without children is a plus because you have a golden opportunity to leverage your youthful energy, time and salary to create a solid financial base. To manage your finances better and achieve your financial goals, track your money, spend with a budget, increase your income, manage your debts wisely, review your desire for a car and acquire financial literacy.
From your general breakdown you do not know exactly how much you spend on rent, girlfriend and lifestyle. You equally do not know the difference between needs and wants. Record every expense in a notebook, Excel sheet or downloadable online application for easy monitoring of where every shilling goes.
Do a weekly summation of the recorded expenses as per the vote heads. Then, draw a monthly financial statement with particular details of the income or cash inflows and expenditure or outflows— the amount versus whatever expense (big or small) you spent on it. This will help you create a realistic budget.
A budget will help you to live within your means by guiding you on how to allocate money to your needs and wants. Your budget is constrained by the huge loan payments which leaves you with a disposable income of Sh35,000. This amount is insufficient to cater for all your necessary and discretionary expenses. Use a variation of the 50/30/20 framework to create an alternative crisis budget anchored on the 60/30/10 guideline.
Allocate 60 per cent (Sh21,000) to necessary expenses such as rent (Sh10,000), transport (Sh3,500), utilities (Sh1,500), household shopping and foodstuffs (Sh6,000). Channel 30 per cent (Sh10,500) to savings towards your dream car or investment purposes and 10 per cent (Sh3,500) to wants; such as girlfriend and lifestyle trends.
You need to cut down on unnecessary expenses like girlfriend treats, entertainment, gaming, eating out and subscriptions. Once you have repaid your loans, you can readjust you budget and revert to the 50/30/20 and allocate your money accordingly. You can decide to increase the savings to accelerate the desire to buy a car in good time.
Financial management skills
Earn some money from the chicken and hatchery business you started for your mother. Because you took loans for the project, you cannot afford to rest in your laurels without making frequent follow ups. Be actively involved in the management of the project, get frequent updates and ensure the business is a profitable investment. Target a monthly income of Sh5,000 to Sh10,000 to supplement your salary.
Monetise what you already have because you have bought smart TV, gaming, music system and sofa set. You have the option of using the gadgets to start an income generating business in your house or neighbourhood. The other option is leasing gadgets to an events organiser at a fee or selling them altogether and raising money for a profitable passion business.
You can venture into online writing, photography, video-editing, data transcriptions, sales and marketing, tutoring, part-time job or do any hustle related to your degree. Identify your unique TRAP (Talents, Resources, Abilities and Passions) and monetise it. Target Sh5,000 to Sh10,000 per month.
Do an introspection of what is pushing you towards buying a car. Is it your peers, your neighbours and the society in general so that you fit in a certain class? Is it for convenience purposes or do you want to do business with it? These questions will help you assess the triggers and help you realise that life is not a race or a competition.
Let us dive into the financial requirements. To buy a car ranging from Sh700,000 to Sh1.2 million by June 2026, you need to save Sh100,000 in seven months and Sh58,000 in 12 months. This sounds impractical and unrealistic on account of your current financial position. You will be compelled to readjust and delay this goal. Remember, a car is only a valuable asset when it generates income. Otherwise, it is a liability that requires more money to fuel and maintain.
You need to consistently save, for instance, Sh7,000 to Sh10,000 for three years to qualify for an affordable loan from Sacco. Identify a well-managed Sacco for your saving deposits on account of the multiple benefits. That is entrenching a saving culture, annual dividends at around 10 per cent, and affordable credit facilities guaranteed by fellow Sacco members. By the end of three years, you will have become wiser, cleared your current loans and learnt of other better ways of investing your hard-earned income to generate more money to afford the car and the lifestyle you desire.
Leverage on your youthful energy, time and intellect to equip yourself with personal financial management skills. Learn about debt management, setting financial goals, prudent saving and investment mechanisms, and ring-fencing your assets. This knowledge will help you manage your money much better and earn more from other sources. By the time you are in your 30s, you will experience an exponential take off.
At the same time, consider upgrading your degree to a Master’s as well as acquiring additional professional skills through masterclasses and online courses, many of which are sponsored and certifiable. This will improve your employability and give your resume an extra touch of marketability in what has become a highly competitive world. Couple with financial literacy and financial independence, not even the sky shall be a limit for you! All the best.
