My name is Philip Odhiambo. I am 25 years old. I am not married. I work as a freelance transcription and academic writer. On average, I make Sh. 55,000 from my work every month. So far, I have managed to save a total of Sh. 98,000. I live in the Pipeline area in Nairobi County. Every month, my total budget amounts to about Sh. 41,000. This budget includes the following items:

Food – Sh. 9,000

Rent – Sh. 7,600

WiFi – Sh. 1,500

Entertainment – Sh. 5,000

Family – Sh. 5,000

Friends – Sh. 5,000

Tithe – Sh. 500

Airtime – Sh. 1,500

Emergency / Pocket money – Sh. 5,000

How do I save so that I am able to buy a plot of land at Sh. 600,000 within one year in Kisii?

I am a security guard in Nairobi. This is how I survive on Sh. 18,000 salary

Chacha Nyaigoti Bichang’a, personal finance coach at financial consultancy firm, Chachanomics Limited

To realize Sh. 600,000 within one year, you would need to save Sh. 41,833 per month. This is more than the amount you use for your monthly budget of Sh. 41,000.

If you had saved Sh.98,000 within a year, it would mean that you saved about Sh. 8,167 per month. However, since there is no budgeted savings in your expenditure, you currently do not have a savings plan.

This means that your average savings are below the required margin of between 10 to 30 per cent. The first step you need is to match your savings with your goal. Start by cutting down on your rent.

Look for, and move, to a cheaper house of about Sh. 5,000. This will save you Sh. 2,600. Cut down on family expenses by half to save another Sh.2,500. In the meantime, do away with expenses on entertainment and friends to save an additional Sh. 10,000.

These cuts will give you Sh. 15,100 every month and Sh. 181,200 in 12 months. Find a reputable Sacco that pays at least 10 per cent on dividends and pool your savings there.

At the end of the year, you will have a total of Sh. 279,200 which will include savings of Sh. 181,200 from your expenses cuts and Sh. 98,000 which you have already saved.

If you earn dividends at a rate of 10 per cent, you will get an additional Sh. 27,920 to make total savings of Sh. 307,120. This amount will be sufficient for you to access a Sacco loan of up to Sh. 921,360, which will be more than your budget of Sh.600,000.

Alternatively, you can add the balance between your income and expenses of Sh. 14,000. If you can sustain an income of Sh. 55,000, this balance will give you savings of Sh. 168,000 to make a total of Sh. 447,200 without dividends and Sh. 491,920 with dividends at 10 per cent.

This will give you access to a loan of up to Sh. 1.475,000, which is enough to buy the plot and build a simple home. However, instead of taking the loan route, you can extend your timeline to buy land in 12 months by 6 to 12 months.

Within 18 months of diligent saving from the above budget cuts, you will manage to have Sh. Sh. 737,880 and Sh. 983,840 within two years.

It is also commendable that you have a budget for emergencies. This fund should be saved in a Money Market Fund where interest will be compounded.

You may consider hiving off Sh. 500 and enlist for health insurance under the NHIF to caution you in the event of a medical emergency.

This financial question and answer was first published in the Saturday Magazine. The Saturday Magazine is a publication of the Nation Media Group.