Help! I earn 50k net but I am always broke because of loans, tithes, and harambees

Help! I earn 50k net but I am always broke because of loans, tithes, and harambees. Photo | Photosearch

What you need to know:

Once I get my salary, I repay this money and start borrowing again for the new month. This has been the cycle for the last seven months after I moved to Nairobi. 

My name is Kevin. I am single. I am extremely generous. I earn a net of Sh50,000. My expenses are as follows:

  • Tithe: Sh5,000
  • Transport: Sh2,500
  • Food: Sh5,000
  • Rent: Sh7,000
  • Electricity: Sh400
  • Wifi: Sh1,000
  • Loans repayment: Sh10,100 (I am in default because I am broke).
  • Harambees contributions: (Sh5,000-10,000) per month.


Currently, I am at a deficit of Sh50,000 having borrowed from work. Once I get my salary, I repay this money and start borrowing again for the new month. This has been the cycle for the last seven months after I moved to Nairobi. I want to clear a bank loan of Sh90,000 which I have not paid for five months now.  I am in the CRB. I would like to save and buy a vehicle to rent out as a taxi. I used the bank loan I am struggling with to buy a plot in Nakuru town. I have the title. How do I get out of my financial mess?


George Mangs, investment expert and the founder of investment firm MarketCap

George Mangs, investment expert and the founder of investment firm MarketCap. Photo | Pool

Start with the basics: food, transport, rent, power, and wifi. They total around Sh16,000, leaving you a balance of Sh34,000. It's from this balance that your tithe of Sh3,400 should come from and leave you with a balance of Sh30,600. You shouldn’t be obliged to pay tithe before taking care of your basics first. With your cycle of debt, it can be tempting to go for mobile loans. These are costly and attract interests of nearly 20 percent. Avoid these because most of your basic needs are already taken care of in the initial budget of Sh16,000. You need to trim your harambees allocation down to Sh1,000. By doing this, you will have a balance of Sh29,600. You need to resume your loan repayments. If you dedicate Sh10,100 to the bank loan repayment, you will have a balance of Sh19,500.

Instead of paying your employer’s loan as an advance, find out if you can have it restructured so that you pay it off in installments. You can repay at a rate of Sh10,000 per month. This will leave you with a balance of Sh9,500. Out of this, Sh4,500 should go to an emergency or miscellaneous fund. The remaining Sh5,000 should go to an investment account that will earn interest or dividends at a rate higher than the inflation rate. By the time you complete your work loan repayment in five months and free the extra Sh10,000, you will have built up an extra Sh25,000. 

Your emergency kitty will have Sh22,500 if your basic budget stays constant. You should be able to clear the bank loan plus default interest charged in the next 9 to 12 months if you resume your payments as cited above. This will free an extra Sh10,100 and leave you debt free. Out of your net salary of Sh50,000, you will have Sh24,600 at your disposal for saving in an investment account and an already saved Sh47,500 (Sh25,000 + Sh22,500). Bank loans are usually cheaper compared to other credit lines in terms of interest charged. As such, a CRB listing from a bank loan default may not be as bad as a similar listing from a digital lender. You can still be eligible for asset financing after completing your current loan.

Before you get a car for renting, you will need to understand the basics such as capex, maintenance costs, insurance, and driver expenses. This is what will give you a realistic payback period plan based on projected cash flows and let you know if it is a worthy investment or not.

 Being extremely generous is not a great accolade unless you are a tycoon, because it beats logic to be so good at giving away something you so desperately need. 

It’s good that you have acquired an asset. However, unless the plot is generating cash flow/income, it's a dead asset; good for sentimental value, but not good for the pocket. The same funds put in a treasury bond could be generating in excess of 10 percent net annually in returns. In future, avoid investing in land just to achieve sentimental value and fit in with other land owners.


Rhina Namsia, the founder and chief executive officer of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory

Rhina Namsia, the founder and chief executive officer of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory. Photo | Pool

Your net income is Sh50,000 and from your budget your total monthly expenses come to Sh41,000. You ought to be having a balance of Sh9,000. The revolving loan you have from your employer seems to have created the biggest problem. First, talk to your employer about the loan and let them allow you to pay the loan in installments instead of paying it as an advance. Ask to pay at least Sh5,000 per month until you finish paying it off.

If you abide by the 50/30/20 rule where 50 percent of your net income goes to basic needs, 30 percent to pay the bank loan and other needs, and then 20 percent to savings, then you are right on the correct path as per your budget. Your total basic needs come to Sh20,900. 50 percent of your net pay is Sh25,000 meaning you could be having an extra Sh 4,100. Let this Sh4,100 be paying your employer’s loan advance. 30 percent of your net pay is Sh15,000. Out of this you remain with Sh4,900 after you pay off your bank loan with Sh10,100. Save this balance in an interest-earning account such as the money market account. Lastly, 20 percent of your net pay is Sh10,000. Save this money in another interest-earning account towards your goal of buying a business car. The first money market account can be savings for a rainy day.

A second-hand Toyota Axio or Axis will cost Sh500,000 to Sh700,000. With your current savings, it may take too long to achieve this dream. You may need to focus on increasing your current income by getting a better job first or starting a side hustle. 

On your land in Nakuru town; find a way of making it productive instead of letting it lie idle. Lease it out to a commercial vendor, or if in the right area grow some cash crops and make an extra income out of it. Land is a fixed asset meaning it may be hard to sell off, but you can make it productive as it continues to gain value with time. Your generosity is costing you about Sh10,000 every month. It’s not bad to be generous or assist but you need to start being firm. Best way to curb this is by having clear goals written down and strictly following them. Be generous to yourself too and channel the Sh10,000 you donate every month to interest-earning accounts until such a time when you'll have secured your finances and financial independence.


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



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