Help! I earn Sh145,000 but I'm always broke due to mismanagement

I earn Sh145,000 but can’t account for some of it due to mismanagement

What you need to know:

  • I don't know how to manage my decent salary. I can’t even account for some of the money I earn.

My name is James. I earn a net of Sh145,000. I have a big issue with managing my money. I don't know how to manage it. I can’t even account for some of the money I earn.

Please help as I am one step away from going broke despite earning a decent salary. This is my budget:

Sh30,000: Rent (I pay three rents) 

Sh3,000: Internet

Sh2,000: Credit

Sh15,000: Shopping

Sh35,000: Car loan

Sh30,000: Chamas

Sh10,000: Fuel.

Sh20,000: Unaccounted for

Paul Muhami, the managing director of financial advisory firm, Empower Financial Advisors Ltd

Your known expenses take up 86 percent of your net income. This is Sh125,000 out of Sh145,000 net income. 

The first red flag is that you have not mentioned saving anything. You must open a savings account and start putting in 10 percent of your earnings.

This should be an account that will earn you interest at a rate higher than the rate of inflation so that the interest earned holds value for your cash. This means that your options will be either a money market fund or a reputable Sacco dividend account.

Given your net income, your gross is around Sh207,000.00. You need to save at least Sh21,000.00 every month. Saving should come first before expenses (paying yourself first). This is almost the amount you have classified as ‘unaccounted for’.

Get into a check-off system through your employer so that this money is automatically deducted and sent away to your savings account or money market account. This will give you annual savings of Sh252,000 minus interest.

Why are you paying three rents? Assuming none is for a self-sustaining business, you must take urgent steps to consolidate these rents or at least, reduce them to a maximum of Sh20,000 to Sh25,000.

This will save you Sh5,000 extra which can be saved or kept in an emergency fund. Sh15,000 shopping is also on the higher side for the average Kenyan household. Note, that higher salaries can give you the urge to spend more under the illusion of affordability.

Separate needs from wants, and avoid impulse buying. Aim to spend between Sh10,000 to a maximum of Sh12,000 per month. This will save you between Sh3,000 and Sh5,000 per month, translating to between Sh36,000 and Sh60,000 per year to take your total annual savings to nearly Sh300,000.

You spend Sh30,000 on Chamas. Are these merry-go-rounds or table-banking investments? As the name suggests, merry-go-round is just that—going round in circles—without earning anything.

If they are merry-go-rounds, discontinue them and put the Sh30,000 into interest-earning accounts like Money Market Unit Trusts.

That is already Sh360,000 per year, which you may use to retire the car loan, or better still, earn you above Sh30,000 annually in compounded interest from unit trusts and Saccos for long-term projects.

If the Chamas are table banking, what are the pros and cons of being in them? For example, if you have access to loans, what interest are you charged? What are the objectives of these Chamas? Reduce fuel expense by occasionally using public transport. Since this car has a bad loan on it, find out how you can commercialise it.

Can you start doing car-boot sales over the weekends? Any income from these should go into the loan repayment so that the car starts working for itself.


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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