I’ve been earning 35k but my new job is paying 25k. How do I readjust my life and spending?

My name is James, married with a daughter. I have recently changed jobs and this has affected my income. Previously I had an average income of Sh35,000 per month (basic; 26,500 +bonus incentive on sales). My monthly expenditure was as follows; rent Sh10,500, transport Sh2,600, shopping Sh4,000, electricity Sh500, school fees Sh7,000, chama Sh2,000, food and miscellaneous Sh5,000. The salary used to be paid twice a month (30% of basic by mid-month) which also gave me some instability when managing my finances as I would always end up broke. As of now, my income has taken a shift and I am to earn Sh25,000 net as an intern with the PSC. I needed a career shift and thus opted for this internship. Kindly help me plan for this small salary.

Emmanuel Mbogholi is a financial advisor and trainer, and business coach

You will need to review your spending plan. Your current expenses amount to Sh31,600 against an expected income of Sh25,000, leaving you with a Sh6,600 deficit. 

Start with creating a safety net that will protect your family against unforeseen emergencies. Allocate 10 percent of your income to savings; 5 percent or Sh1,250 of which should go into an emergency fund. The other 5 percent should go into a medium-term savings vehicle such as unit trusts or a regulated money market fund. 

Allocate a further 15 percent for food and groceries and 10 percent or Sh2,500 for household shopping. Try to purchase items from fresh food markets and wholesalers where you can get a good bargain. Tap into big retailers’ discount sales on items such as cooking oil.  

Housing should ideally not take up more than 35 percent of your income which in your case is Sh8,750. This might call for you to downgrade your housing for now until your income stabilises.

As you have a family, allocate a further 10 percent to recreation and entertainment. This will call for finding alternatives to regularly have fun together without having to spend beyond your limit. A good option would be to visit public parks which charge minimal entry fees if any. Avoid eating out. Spend another 10 percent on transportation and personal expenses and lastly allocate the remaining 10 percent or Sh2,500 to school fees.

This will call for a lot of sacrifices from everyone in the family. However, because you have mentioned you needed this career change, I encourage you to stay focused on the long-term benefit of readjusting yourselves.

The other possible alternative would be for you to explore the option of increasing your available income as a family. This can be through a family business or even side hustles. The other benefit of this type of work is it doesn’t require a heavy financial investment. If you opt for this, begin by carrying out an assessment of your skills to know which type of opportunities best align with your strengths so as to ensure you maximise on what you already know. 

Also, ensure you do these jobs during your extra time. You mentioned you used to work in sales. Perhaps a good starting point for you would be online marketing jobs. Another option would be commission-based jobs where you sell products or services for an established company for a cut. Approach starting a fully-fledged business with caution due to the risks involved. If you choose this option, ensure you build your capacity as a business owner so as to increase your chances of success. 

You can do this by taking a short course on entrepreneurship. Also, explore how economically active your spouse can become. With extra income from her, your medium-term readjustments will be easier on your whole family.

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.