My name is Raymond and I am struggling to sustain my family. I have a family consisting of wife and three children. I earn Sh. 73,000 net but I am always struggling with finances.

My expenses are 10% tithe at Sh. 7,300, AMREF Sacco Sh. 8,000, Harambee Sacco Sh. 3,000, Sacco Sh. 1,000, transport Sh5,000, daughters school fees monthly Sh. 5,000 (fees is Sh. 19,000 per term in PP2) son’s university fees at a monthly of Sh. 10,000 (Sh. 32,000 per semester) I pay for my wife’s business rent of Sh. 12,000 as it has not picked up so far.

KPLC token Sh. 2,000, gas Sh. 2,500, Wi-Fi Sh. 2,500, GOTV Sh. 1,500. I don’t pay rent at the moment as I am living in the house my parents had built. Son’s transport to university Sh. 6,000 inclusive of lunch, shopping Sh. 10,000. Kindly help me out. I am not able to save enough to sustain my family or invest in a house.

The Expert’s take:

The key to financial success lies in increasing income. Disciplined spending, especially on lower income, can help you attain short term goals like savings for business and acquisition of skills and sustain your family.

Your total spending amounts to Sh. 75,800 which is above your Sh. 73,000 earnings. However, you are able to save Sh. 12,000 in three SACCOs. This is 16 percent of your net pay. Much of your income goes to education – Sh. 21,000. Your son’s transport and lunch costs aren’t much if you compare with living near campus where rent and other expenses will exceed Sh. 6,000. The rest of your expenses are in line with everyday expenses for a small family. It is also important to take care of other basics that form part of personal finance eg. Education planning and medical insurance.

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However, you could cut down on some, for example; switch to a lower GoTv package as you have Wi-Fi for other entertainment. Shopping at Sh. 10,000 for a family of five can’t be any lower unless you cut out food expenses by buying grain in bulk or leasing a plot to grow vegetables for own consumption and sell extra produce.

You need to look at your wife’s business rent expense. Can her business meet this cost, or half of it? Since you are shouldering the entire family budget, she should be able to pay at least half her business rent. This will help you redirect Sh. 6,000 towards building an emergency fund (or sinking fund) in a money market fund. These savings will add up to Sh. 80,000 in a fund earning 12 % per annum. You could accumulate Sh. 500,000 in five years and even more if you aggressively leverage on sources of extra income.

Your SACCO deposits amount to Sh. 144,000 a year. You probably got (or expect) some interests and dividends from these savings. How do you plan to use the money? Having medium to long term goals like school fees needs, home ownership, or entrepreneurship will make you intentional with your side income.

Your SACCO deposits can also be used for a loan multiplier. Most SACCOs give 4X your deposits. If you have Sh. 250,000 in your SACCO BOSA account, you have access to Sh. 1 million loan subject to your monthly repayment ability. In 4 years, your son will have completed university and this will free Sh. 16,000 from your monthly budget. This amount can service a Sh. 1 million SACCO loan depending on the loan term. Together with the money market fund savings, you can embark on home ownership plans by building (if you already have a plot).

Using time as an advantage, you do not have to rush to completion of milestone goals like home ownership. You aren’t paying rent now, after all. From your savings, you can build at your own pace, in stages. When you already have the framework in place, it won’t be long before the finishing is done.

Meanwhile, channel any extra earnings from work (eg. Bonuses or overtime pay) into a money market fund. Discover any skills you can harness (at low set up costs) for extra income.

This question was answered by Benjamin Cheruiyot who is the Engagement Lead at Abojani Investments, a personal finance and investments advisory firm. A version of this financial question and answer was also published in the Daily Nation newspaper.