I earn Sh420,000 monthly but I am left with zero at end of the month. How do I build my family home?
What you need to know:
I would like to build our house in the next three years. The challenge is that at the moment, I have got no disposable income.
My name is Meshack. I need help in reorganising my finances. I am a medic and have a take-home pay of Sh420,000. I am the breadwinner. I have three Sacco loans that I am servicing that I had borrowed to build some rental stalls and to begin a car wash business. I use 180,000 to service these loans. I am still unable to realise much from the carwash business since the operating costs are much higher than the income. I have three education policies for my children totalling around 35,000. I save 20,000 for their education monthly. My monthly expenditure - Rent, shopping, domestic manager, etc totals Sh135,000. The rest is our pocket money. I would like to build our house in the next three years. The challenge is that at the moment, I have got no disposable income. Please help.
Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
From what you have shared, you have a net income of Sh420,000 and your monthly expenses totals Sh370,000 leaving you with pocket money of Sh50,000.
In order to achieve your goal of building your home in three years, you will first need to come up with the approximate cost of building it by getting yourself an estimated bill of quantities. You then need to divide this amount by 36 months in order to see the amount of money you need to save up every month. For example, if the cost of building your house is Sh4million, then you will need to invest at least Sh100,000 per month totaling Sh3.6million in three years. If you save these funds in an interest-bearing account, then your savings should get to about Sh4 million.
Consider a Money Market Fund. At the prevailing rates, your savings should grow at a net interest rate of a minimal of 7.5 per cent per year and this will help towards raising the needed funds. In the event of bulk cash, you could’ve looked out for medium-term bonds such as the three-year bond recently released with a 14.228 per cent coupon and 12.1 per cent after tax.
If these amounts were to be saved in a Sacco of good standing, you would be guaranteed dividends of upwards of 10 per cent which you can compound over the 36 month-period to hit your target as well as open yourself up for new funding.
Given that you do not have any funds left at the end of the month, you will need to make adjustments both in your income and expenses;
Rentals: You have not given details on the current status of your rental stalls. If this project is still outstanding, I would advise you to focus on completing this as a priority.
Review: Another way you can increase your monthly savings is by reviewing your home expenses. Consider reducing your pocket money to Sh20,000 and transfer the balance of Sh30,000 to the monthly savings.
Settle loans: You have not stated the timelines for settling your outstanding loans. If these loans will be paid off within three years, then you can channel the freed funds towards saving for your home project.
Locum jobs: Seek locum jobs if your schedule allows or jobs such as lecturing or consulting in your field. This income can be used to accelerate payment of your loans, starting with the most expensive ones.
Review car wash: You need to have an honest review of this business to see if it has real prospects of breaking even and giving you significant profits. If the business has been in operation for some time and you are struggling to manage its performance, then you may want to consider other options such as selling.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered in this column.