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I earn Sh38,000, should I take Sh1m loan to upgrade my wife’s business?

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You need to save at least 20 per cent of your income – according to the 80/20 rule.

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My name is Felix. I live in Nakuru town and I am married with two children. I am employed as a contract employee with a net salary of Sh38,000.

My expenses are as follows: Rent Sh10,000, food Sh12,000, special shopping for my last born infant baby Sh5,000, airtime Sh2,000, transport Sh1,600, water and power bills Sh1,200. The remaining amount has been going to savings, miscellaneous expenditures and black tax. Together with my wife, we have saved Sh250,000 in a bank account.

My wife runs a printing, cyber and MPesa shop in town. This shop has been making Sh10,000 monthly after paying rent. However, similar shops have mushroomed around her and she wants me to take a loan of between Sh800,000 and Sh1 million and convert it into an electronics and phones business.

I am not sure if this is a good idea for us. Should we go for it?

Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money, says:

Before addressing your dilemma on whether to start an electronics business or not, let us first examine your actual financial position. Your total expenditure is Sh22,200 against your net salary of Sh38,000.

This leaves you with a balance of Sh15,800 which is roughly spent on savings, miscellaneous expenses and black tax. From your breakdown, it is not clear how much goes into these expense items. This implies that you neither operate with a spending plan nor track your money after spending.

You need a comprehensive audit of your financial lifestyle to determine your net worth (sum total of your assets minus liabilities), find out whether you are living within your means or not, and identify what you can do to earn more money from both your job and business.

You need to work with a clear spending plan or budget that contains details of your expenditure items and be able to track where your money goes on a daily, weekly and monthly basis. By doing so, you will determine areas where you need to cut down on unnecessary expenditure.

For instance, your expenditure on rent of Sh10,000 (26 per cent) supersedes the recommended average of 15 per cent (Sh5,700).

This would necessitate moving to a cheaper house of about Sh6,000 or Sh7,000 and save about Sh3,000, and or boosting up your income to make up for the shortfall if your circumstances really cannot allow you to move to a cheaper house.

Food expenses of Sh12,000 (32 per cent) surpass the recommended average of 20 per cent (Sh7,600).

This might be plausible given the increase in prices of commodities. But you can still get discounts by buying foodstuffs in bulk especially when in season for cereals, and storing them well. You can save around Sh4,000.

You can equally reduce spending on airtime by Sh500 to Sh1,000 once you buy a monthly package.

If you can institute these cuts on your expenditures, you will save about Sh8,000 which can be channeled to savings for emergencies or investment.

Second, you need to save at least 20 per cent of your income – according to the 80/20 rule. This translates to a round figure of Sh8,000.

This leaves you with Sh7,800 from the remaining amount of Sh15,800 as per your financial breakdown.

This amount can be saved in a Sacco or Money Market Fund. You need to diversify your savings into various vehicles to meet your financial obligations and investment goals.

Therefore, saving in a Sacco and MMF comes in handy. Consider channeling your bank savings of Sh250,000 to a compound interest-earning money market fund manager offering at least 13 per cent as per the prevailing market rates.

Ensure, you channel monthly deposits of around Sh8,000 so that in three years you will have realised a gross sum of Sh710,817.

You can also go for a reputable Sacco with dividends above 10 per cent to benefit from interest as well as possibility of financing using the 3X multiplier effect.

Third, audit your wife’s cyber and MPesa business. Review the business’ monthly income versus expenditure. Ensure proper accounting and bookkeeping are done.

It is not clear how much is paid on rent and other operational expenses like your wife’s salary. It is important to determine how much the business should pay your wife as salary depending on the business performance or profitability.

How is the profit utilised? Is there a separate bank account for the business? Is the profit ploughed back or used for your wife’s personal upkeep?

Competition from similar mushrooming business ventures may not be a big challenge once you have cultivated a reliable business niche and built a loyal clientele. Meanwhile, consider reviewing and rebranding your current business as you assess the possibility of expanding it.

Fourth, before you take a loan to start the new electronics business, consider a number of factors.

One, identify the big WHY propelling you to launch the new business. Ask yourself: Why are we starting an electronics’ business? What problem do we intend to solve considering the existing market trends? Do we have the required passion and skill set to manage the business?

Conduct an intensive market survey to establish the existing gap, needs and demands of customers.

Two, come up with a workable business plan that spells the framework of your business in terms of exact business location, products to sell (such as smartphones, laptops, TVs, radios), legal structure, unique selling points, risk analysis, market analysis, personnel, marketing strategies, pricing, financing options, operations, managing business finances and the like.

Your biggest dilemma Is how to finance the business. If you were to opt for a bank loan of about Sh800,000 to Sh1 million, you have to bear in mind your repayment ability, total cost of the loan (principal plus interest) and duration of loan repayment.

Your salary alone may not be enough to finance the bank loan.

Your current business too will strain on account of its low profitability. Consider using the joint bank account savings to improve the existing business for a higher profit which you can save for one year or so before securing a loan to expand the business after conducting due diligence.


I earn Sh25,000,and have no savings despite working for two years; should I quit and go for a house-help job in Saudi Arabia?

My name is Joyce. I am turning 26 and I earn Sh30,000 and after deductions it gets to around Sh25,000 (I also get small monthly commissions that range from Sh1,000 to Sh4,000 but they are not guaranteed). I live with my mum (I am thinking of moving out) so I handle most of the monthly expenses. My transport to and from work is between Sh3,200 and Sh4,000 a month and I also tithe. I don’t have any savings despite working for two years. By the end of every month, I find myself in small debts of up to Sh10,000 that I can’t explain. Most are mobile phone app debts. My dream is to build my mum a house and get a side hustle, but with my current earnings I don’t think I will ever achieve this. I am now considering paying an agent to get work in Saudi Arabia as a house help. I have seen women who have built rentals back home from such jobs despite the risk. Is this a good move? Should I quit my job and go for it? If not, how do I manage my small money to achieve my dream?

Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach

Building wealth and achieving goals such as constructing a home for your mother take time. With proper planning, financial discipline and patience, you can reach these and many other aspirations. Since you are young, you have ample time to learn, fulfil your dreams and succeed financially.

The first step you need to take to achieve your goals is to establish the right financial discipline, starting with a budget. One effective method of establishing a budget is the 50:30:20 rule. This approach allocates 50 per cent of your disposable income to basic expenses such as transportation, food and other necessities. Another 30 per cent goes towards your wants (discretionary spending) and the remaining 20 per cent is saved or invested.

Given that your transport expense is Sh4,000, you can allocate Sh6,000 for monthly shopping and home support. Additionally, set aside Sh2,500 for unforeseen expenses, bringing your total needs budget to Sh12,500 or 50 per cent of your income. Next, budget Sh7,500 for discretionary spending on items like apparel and entertainment. The remaining Sh5,000 or 20 per cent of your income should be saved.

Once you’ve established a budget, you then need to develop the discipline to stick to it. One effective strategy for establishing budget discipline is to allocate funds immediately upon receiving your income. For example, you can do your monthly shopping, tithe, contribute to your savings fund and make other necessary payments right away. Then use a mobile app to allocate and manage your daily expenditure.

Another method is the envelope system. Label envelopes for each expense category such as transport, home shopping and personal care. At the beginning of the month, withdraw your income and place the designated amounts in each envelope to help manage your spending.

If sticking to your budget is a challenge, consider getting accountability from a trusted friend or relative.

As you establish this discipline, grow your savings to achieve your goals. Your first goal should be to get out of debt. Use your savings from the first two months to pay off all mobile loans so that you do not need to take on new debt to get through the month. Once you are free from mobile debt, keep off these loans to avoid being in a debt cycle as this will keep you from progressing financially.

Once out of debt, work on investing to raise capital for your side hustle. I would advise you to consider investing your savings in a Money Market Fund or Bond Fund account. These investment products offer an annual interest rate of between 12 per cent and 15 per cent while providing easy access to your funds. Research on the various fund managers available to find your best option. To build your saving discipline, I would advise you to invest for at least one to two years as you raise capital for your side business.

Once you have achieved this goal, you can now start saving towards building your mother a house. You can consider saving with a Sacco so that you can access a loan and accelerate this goal. Do your research on available Saccos to find the ideal one for your savings.

Developing strong financial discipline is more critical to your financial success than simply increasing your income. I would therefore advise you to focus on building the discipline rather than quitting your job to relocate to work as a house-help in Saudi. Note, if you don’t get a grip on your money here, moving to Saudi will not improve your saving and spending habits. Also bear in mind the implications of making such a move, including costs, emotional readiness, and the career you’re establishing in Kenya and its future progression.

If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered on this column.