I live in Naivasha. I am 28 years old with a net salary of about Sh. 36,000. I am newly married on a come-we-stay customary basis and I am contemplating relocating to a more spacious one bedroom self contained with a kitchen at Sh. 12,000 monthly rent.
Currently, I live in a Sh. 6,000 single. Besides this, I spare Sh. 20,000 monthly on my household budget and use almost all of this amount. I have a Sh. 650,000 Sacco loan that I have been servicing at Sh. 14,000 per month. I used this loan to buy a plot. My current balance is around Sh. 500,000. I am required to pay Sh. 14,000 in installments.
However, I have fallen into arrears in the three months I have been married as my budget has shifted to accommodate my new wife’s needs. I have allocated her Sh. 5,000 allowance out of this amount which means that I have been paying Sh. 9,000 out of the Sh. 14,000. I have arrears of Sh. 15,000.
My plan was to complete payments or when close to completing payments, I take a top up and build a standard three bedroom house. I don’t know how possible this is now going to be. My wife is a secondary teacher but has not managed to get a permanent job with the TSC. She graduated and got her TSC number in 2023. She is currently jobless and depends on me. Please advise me.
The Expert’s Take:
From your financial report, your total expenditure is Sh. 54,000 (including the split payment for plot and wife’s needs) against a net salary of Sh. 36,000. This leaves you with a deficit of Sh. 18,000 whose source is not clearly known as to whether it is from any side hustle, savings or other debt instruments. Perhaps, the net salary excludes the Sacco loan amount which is serviced via check off.
This now leaves you with a deficit of Sh. 4,000. You do not have any emergency saving of any kind save for an unknown Sacco deposits and/or shares that may have helped you secure a SACCO loan of Sh. 650,000. The total cost of the loan, that is, principal plus interest is not indicated. Perhaps, you have taken a SACCO loan at an interest of 14 percent on a reducing balance payable in a period of about five years which amounts to around Sh. 850,000 making it possible for you to pay Sh. 14,000 per month. To meet your financial needs, consider the following suggestions.
One, audit your spending habits. Your breakdown indicates that you do not exactly know how much you spend on various household items. You have just stated a general figure of Sh. 20,000 as a household budget which may include foodstuffs, utilities, TV subscription, and general upkeep expenses.
To be financially disciplined, operate with a clear-cut spending plan or budget that spells out specific amounts for each household expense items or vote-heads. Using the 50/30/20 budgeting guide, you should spend Sh. 18,000 (50 percent) on necessary or household expenses, Sh. 10,800 (30 percent) savings and Sh. 7,200 (20 percent) on wants.
This guide will help you prioritize savings for emergencies, a very important component of prudent personal financial planning. In addition, track your money to determine your daily, weekly and monthly spending habits. Once you do this for at least three months, you will get an actual estimate of every expense item per month making your spending plan much easier.
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Two, optimize or leverage on the plot you bought. You indicate that you used the Sacco loan of Sh. 650,000 to buy a plot whose actual cost is unknown. However, you have indicated that you have a current balance of Sh. 500,000 out of which you are supposed to pay Sh. 14,000 per month but which is in arrears of three months.
 Consider constructing mabati rental houses for low income earners if the plot is near a town or a residential urban dwelling. If you construct, for example, 10 simple single room houses at rent of Sh. 1,500 per month you will collect Sh. 15,000 per month. This amount can make the loan repayment much easier but you have to save first for some time in order to accumulate at least Sh. 100,000 for the start of the project. This option is more economically viable than going for a top up loan to construct a three bedroomed residential house which will require around Sh. 3 million to construct and do some finishing.
Alternatively, you can build a simple house and save yourself the Sh. 12,000 rent you want to pay for a self-contained house. This option comes with other additional benefits of starting up a garden grow crops for subsistence thereby saving you some money spent on groceries. Nonetheless, the amount you spend for transport might significantly increase.
Three, encourage your wife to get a job as a teacher in one of the nearby secondary schools if she does not have any business she is doing currently. Being a teacher on Board of Management (BoM) terms can earn her about Sh. 20,000 which will go a long way in supplementing your household income and defray some expenses especially the money you spend for her upkeep. In a few years, she will Ultimately be employed by TSC and the dual income will increase significantly.
In sum, consider starting a side hustle to supplement your loop income. Scan your immediate environment and identify a socio-economic problem that needs a solution. Consider your skill set and passion activity. This will enable you to start a business in line with your competency skills, area of specialization and passion.
This financial question was answered by Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money. A version of this question and answer was also published in the Saturday Magazine, a publication of the Nation Media Group.