The Question: I am 22 years old. I have a diploma and I earn Sh. 21,000 net salary every month. I am employed in Eldoret town. The money I earn is never enough.
The only amount I am able to account for is Sh. 12,000 which I spend on rent, and Sh. 2,000 which I spend on transport. I have considered moving back to my parents who live in the town outskirts but I am afraid I will be receding financially.
I also don’t want to be mocked by my friends who all live on their own. Have fallen into debts and I am unable to save any money. All my money problems can be solved if I could lay my hands on something like Sh. 500,000 or Sh. 1 million.
I can be able to pay off my current debts, save, tithe and live a nice lifestyle in an upmarket residential area. In future, I would also like to transition into entrepreneurship. I would also love to own a small ‘kadudu’ car and relocate to Nairobi. What can I do to generate such an amount?
The Answer: It is commendable that you have managed to secure a job in a job market that is increasingly hostile to young job seekers.
However, your ambitions are off the rail track. At your current age, your priority should be building up of your skills and competitiveness to have a longer-lasting marketability.
For example, you might want to consider upscaling your diploma to a degree. In between, you might want to consider uplifting your soft skills by taking periodical Masterclasses on career and money (especially on investments, Saccos, money market funds). Remember, these skills will come in handy should you lose your current job or find yourself jobless down the line.
The list of items you want to achieve from Sh. 1 million betray your intent to fit in with a certain social grouping.
Whereas it is not wrong to have financial goals, your goals ought to be realistic, aligned to your earning abilities and designed to grow your net worth.
The goals don’t have to be aimed at fitting into a certain social group or aimed at impressing the society.
Now that you are earning, start with the basics which involve planning a budget for your net income of Sh. 21,000. Track and list what amount goes to what expense.
For example, come up with a table with two columns, one for your expenses and the other for the amounts allocated. These will include amounts such as for rent, water and power, food and groceries, transport, entertainment, clothing and airtime.
Each allocation must be trimmed realistically. For example, the amount you spend on housing is over half of your net earning and you should consider moving to a more affordable place.
Since you live upcountry, you can easily get a good affordable bedsitter for Sh. 6,000 to Sh. 7,000. Better still, if your parents are comfortable to accommodate you, you may consider dropping your ego and taking a step back to your parents place for reboot.
This will save you a whole Sh. 12,000 which will translate to Sh. 144,000. Save this money in a reputable Sacco earning annual dividends of at least between 11 and 13 per cent.
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At your age, these funds can help finance your degree studies, which you can pursue in the evenings and weekends whilst you continue working. You might fins that your parents are willing to support your degree studies, which will save you some money.
At the same time, you will also save on food and groceries, an amount you can save in an MMF as your emergency kitty. However, to build up a sense of responsibility, it will still be nice to chip in at home.
Shelve your aim of relocating to Nairobi unless there is a compelling reason behind the relocation. Even in the event you get a job offer, you must contrast the net earnings and the cost of living which is on the higher side in Nairobi.
For example, the amount you currently pay in rent might be higher in Nairobi; the salary you earn in Eldoret has more value than an equivalent earn in Nairobi.
Don’t rush to start a business such as a side hustle with the money you save. Stick to employment first and learn the ropes as you improve your knowledge and skill-set.
The experiences you get will give you the best feedback on whether you’re cut out for employment or entrepreneurship. Remember, you don’t always have to quit a job and start a business to grow wealth. Good luck.
The solution to this financial question was provided by Josephine Murage, an investment banker and personal finance consultant. A version of this question and answer was previously published in the Saturday Magazine. The Saturday Magazine is a publication of the Nation Media Group.
