My name is Gerald. I live in Ngara, Nairobi with a net salary of Sh. 29,449. My expenses are; Rent 6,500, Food 3,000, Transport to Westlands 3,000, Savings in a Sacco 4,000 (Haven’t saved for last 2 months), Airtime 1,000, Leadership training 2,000, Spouse 3,000, Miscellaneous 3,000.
I have a credit card loan with a balance of 29,000. I used to pay 5,000 monthly then defaulted. I have an online business that I am still funding from my income. It isn’t stable yet.
I have a one year contract that was extended from this month. Kindly assist me to attain financial independence and be frugal in management of my small resources.
Robert Ochieng’, Investment and Financial Advisor at Abojani Investments
Your total expenses should amount to Sh. 30,500 against Sh. 29,449 income if you hadn’t defaulted on your credit card repayment and Sacco savings.
With the two defaults, total expenses amount to Sh. 21,500 against Sh. 29,449 income.
You have not serviced the credit card loan repayments nor contributed to the SACCO for the last two months, possibly due to commitments to building your online business with about Sh. 8,000 hived from these two expenses.
It is important that you settle the credit card loan to avoid accumulating unnecessary interest and hurting your credit score.
It’s also important that you reinstate the Sacco savings as you don’t have any other savings or investments. Your rent is only 22% of your net salary.
You’ve made efforts to keep expenses lower. Keep at this over the duration of your contract. Before you resume savings, focus on eliminating current debt first.
Squeeze Sh. 1,000 from miscellaneous expenses and Sh. 9,000 due to SACCO savings and credit card repayments, and channel the entire total of Sh. 10,000 towards the credit card loan every month.
This loan should be settled in 3 months. Once this is done, increase your Sacco savings to Sh. 7,000 and commit Sh. 3,000 towards your side hustle until it turns profitable.
Online businesses have lower overhead costs since you do not lease business space or engage more than 1 or 2 assistants at the initial stages. Saving Sh. 7,000 monthly will amount to Sh. 84,000 in the first year.
If you are fortunate to get your current contract extended by a few more years, a consistent savings habit over three years will accumulate to Sh. 290,000 inclusive of annual 10% interests.
This will allow you to borrow up to 3 to 4 times your deposits, subject to repayment ability. For financial stability, you need to invest in both fixed and liquid assets.
A Sacco loan of Sh. 800,000 can fund the acquisition of a plot, with repayments of Sh. 18,000 for 72 months. With future improvement on your net income and steady earnings on your side hustle, you should be able to afford these repayments.
Use leadership training as an opportunity to scale up the corporate ladder and bargain for higher pay. Once this training is complete, an additional Sh. 2,000 disposable income will be released.
Together with your miscellaneous allocation, your disposable amount should rise to Sh. 4,000. If your online side hustle becomes self-sustaining and profitable, the monthly disposable income should rise to Sh. 7,000.
This money will earn you an extra Sh. 290,000 if saved in another Sacco for a period of three years at a minimum of 10 per cent interest.
I am a security guard in Nairobi. This is how I survive on Sh. 18,000 salary
You need to have a realistic metrics and timeline for this side hustle in order to measure its growth rate and probability for income generation.
You have an allocation of Sh. 3,000 for your wife. What does she do for a living? The goal for the both of you should be for her to create an extra source of income.
Multiple sources of income will safeguard your family’s financial position if your contract isn’t renewed after the one year extension period.
If your spouse is earning, and with your disposable income going into savings, you may both agree to reallocate the Sh. 3,000 to personal entertainment.
If she’s working too, she should have a budget and money goals. Her earnings can be diversified into liquid assets like stocks, money market funds, treasury bills and bonds over time to enhance your family’s liquidity through payments of interests and dividends.
You may however both need to enroll for training master-classes on proper investment in liquid assets.
A version of this feature was also published in the Saturday Magazine. The Saturday Magazine is a publication of the Nation Media Group.