I am 25. I earn about Sh45,000 net salary and get Sh15,000 from online side hustles.
My expenses are: tithe Sh6,000, offering Sh500 every Sunday, rent Sh13,000, groceries Sh12,000, water and power Sh1,500, mama fua Sh500 every Saturday, girlfriend allowance Sh10,000, mum Sh2,000, baby sister Sh1,000, saving Sh2,000, personal accessories Sh2,000, transport Sh4,000.
I am planning to get married in August this year and my wedding budget is Sh300,000 for dowry and Sh250,000 for the wedding.
My current total savings are Sh105,000. I don't have a debt and since I have a paycheck, I am considering taking a loan of Sh700,000.
I want to use Sh550,000 for dowry and wedding, and Sh150,000 to set up a business for my girlfriend who is currently unemployed. Is this a loan I can afford?
Dominic Karanja, a financial planning and investments consultant
You have a steady income and no debt, along with Sh105,000 in savings, which gives you a solid financial base. However, your monthly expenses nearly match your earnings. Each month, you bring in a combined income of Sh60,000.
Your expenses add up to about Sh57,500 per month. After covering all these costs, you are left with just Sh2,500 each month, if not less after accounting for any unforeseen expenses. This means your budget is stretched thin, with little room for extra cash flow beyond basic savings.
Obtaining a Sh700,000 loan against a combined monthly income of Sh60,000 constitutes a high-risk financial undertaking.
Estimated monthly repayments ranging from Sh16,600 to Sh17,800 (calculated at an interest rate of 15 –18 percent over five years) would account for approximately 30 percent of your total earnings.
Financial institutions typically approve personal or salary loans based on a maximum repayment threshold of one-third of net salary, as a safeguard against excessive indebtedness. With a net salary of Sh45,000, the maximum monthly instalment permitted is Sh15,000 per month.
For this loan to become sustainable, you would need to implement a radical budget overhaul to avoid falling into a cycle of perpetual debt.
Making a few simple tweaks to your monthly budget can lead to a substantial boost in your savings. For instance, reducing the girlfriend allowance from Sh10,000 to Sh6,000 saves Sh4,000; lowering grocery expenses from Sh12,000 to Sh10,000 adds another Sh2,000; and cutting personal accessories costs from Sh2,000 to Sh1,000 frees up Sh1,000.
These adjustments would give you an extra Sh7,000 each month. If combined with the existing monthly savings of Sh2,000, your new total savings would rise to Sh9,000, helping you accumulate funds faster for upcoming wedding plans.
To obtain the most advantageous interest rates, it is advisable to prioritise SACCO loans or employer-backed check-off schemes, as these generally feature lower rates than conventional commercial bank personal loans.
While servicing the loan is theoretically achievable within a disciplined budget, careful planning and diligent management are essential to ensure that both your core expenses and marriage objectives are met without jeopardising your long-term financial security.
To achieve your target of Sh700,000 by August without over-reliance on high-interest borrowing, consider bridging the Sh595,000 shortfall through a combination of disciplined savings, community engagement, and strategic negotiations.
Temporarily reducing non-essential expenditures and initiating a wedding committee or M-PESA drive could collectively generate approximately Sh350,000. Furthermore, revising the wedding budget to Sh150,000 and arranging with your in-laws to pay the dowry in instalments would considerably reduce your immediate financial obligations.
When considering a loan, it is prudent to ensure that the amount remains within manageable limits. Financial best practices recommend that loan repayments should not surpass 20 percent of monthly income. For instance, with a total monthly income of Sh60,000, the recommended maximum repayment would be approximately Sh12,000. Accordingly, an appropriate loan amount would range between Sh300,000 and Sh350,000, which is considerably more sustainable than the Sh700,000 you are currently thinking about.
A more prudent strategy for initiating a business for your girlfriend would be to begin with a modest and manageable investment instead of allocating Sh150,000 upfront. Consider opportunities that require lower initial capital, such as purchasing a mitumba bale (approximately Sh40,000), engaging in perfume resale (around Sh20,000), establishing a small cereals shop (close to Sh60,000), or opening a food kiosk (roughly Sh50,000). An initial investment in the range of Sh50,000–Sh70,000 can help minimise financial risk while enabling the enterprise to scale gradually.
This strategy not only supports financial stability at the outset of your marriage but also helps avoid unnecessary debt associated with an extravagant wedding. Remember too, for instance, that there is the option of a wedding at the Attorney General’s where costs of registration and a small celebration can be as less as Sh20,000, thereby keeping you away from a Sh550,000 wedding debt altogether.
