I make Sh29,000 as a house girl in Saudi. Please help me budget and invest

My name is Stacey. I am a house girl in Saudi Arabia earning a salary of between Sh27,000 to Sh29,000. I have been having problems with how to save my money and invest at the same time. I don’t want to return to Kenya and have nothing to show for all my hard work and perseverance. I also don’t want to stay here forever. How do I start saving when I am so far away? How do I balance between personal expenditures and issues such as black tax? What asset goals are realistic for me to target? I see some girls saying they have built rentals from their Saudi jobs. I dream of the same. Please help.

Dominic Karanja, Financial planning and investment consultant

To achieve your financial goals, you will need to develop a personal financial plan. This will include your income, day-to-day expenses, debt repayments, protection, savings, and investment. 

On average you will ordinarily spend 50 percent of your income on food, transport and housing. But since you are working as a house girl, I assume you are currently not spending on these expenses and this can be used for investment. You will have 70 percent of your income which translates to about Sh20,000 available for savings and investment. Savings is the amount of money you keep aside while investment is the process of converting the accumulated savings into productive use. 

I would recommend that you set up an emergency fund that can take care of at least six months of your expenses. Now that you are working in a foreign country your family members and the local community would expect that you support them financially, but you need to avoid having the 'Saviour Complex’ since you can’t save everyone. I would recommend that you dedicate not more than 10 percent of your income towards that tax. This leaves 20 percent of your income to personal expenses.

For savings and investment, consider your risk profile and the timeframe of your investment. I would encourage you to start saving with the SACCO and always remember to capitalise your SACCO dividends.  Currently, there are several SACCOs offering products that are targeting people in the diaspora, however, you need to consider joining a SACCO where you can get friends who can guarantee a loan.  

If you consistently save Sh14,000 which is half of your monthly income with a SACCO you will have saved almost Sh370,000 by the end of the second year, assuming that you will be ploughing back your dividend earnings to the savings.

SACCOs are a good source of development loans. It is recommended that you commit at least a third of your net income towards loan repayments which means that though your SACCO savings by the end of year two can allow you to borrow a loan of about Sh1 million, at your current pay you can afford to access a development loan of Sh420,000 in future at an annual interest rate of 12 percent on a reducing balance payable in 60 months. You will pay a monthly instalment of Sh9,343. Keep on increasing your SACCO savings as your income increases so that you can borrow to finance the rental houses.

You need to consider investing the extra funds in a Money Market Fund (MMF). The MMF will guarantee you some returns, your capital will be preserved, and you can grow your portfolio through regular savings. I would encourage you to invest at least 70 percent of your emergency fund in an MMF. If you save Sh6,000 per month with MMF at the rate of 8 per cent per annum you will have a total of about Sh155,000 by the end of the second year.

You need to consider the most affordable and efficient provider to transfer your funds to the MMF account. You can use the money you will have saved in MMF account to buy land and then utilise the SACCO loan to develop the land. Rental income will augment your income that you can use in repaying the loan.

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