Help! I earn Sh150,000 but have no savings or investments because of my spending habits

My name is Teresia. I earn Sh150,000 net per month. I work in the medical field in the private sector. I have two children aged nine and six. I am separated.

My monthly budget is as follows: Tithe Sh10,000, fees per term Sh50,000 for the two kids (PP2 and Grade 4), rent Sh20,000, food Sh18,000, fuel Sh5,000 to Sh10,000, parents and siblings Sh12,000, power & water Sh4,000, DStv Sh3,000, Weekends Tours and Travel Chama Sh4,000 (I travel for tours a lot), Merry go round Chama ya Wamama Sh6,000 per month, Saving Sh7,500.

Although I have been working for nearly two years, I have nothing to show for it. No significant investments or savings. This is depressing because I earn what looks like a good salary. I don’t know what to do.

Sometimes I think I am not making enough and want to take my baby daddy to court for child support. But I then cave in fear. I live a lovely life and the last thing I want is stress from children’s court battles.

What do I do to get my finances in order? How do I secure my kids’ future? I have a car but would want to live in my own house someday. How do I get there? 

Stephanie Nguku, Financial Advisor, Founder & Managing Partner – Upscale Consulting

Your monthly allocation for fees is around Sh16,700. Your total monthly expenses come to around Sh108,700. This leaves you with Sh41,300 unaccounted for.

This is money that could be going to unbudgeted spending such as your multiple tours and travels. You need to track where this money is going by listing each cost per every item you spend money on. Meanwhile, some adjustments can be made to your budget to unlock more savings which can grow into investments.

Some examples are as follows:

You have an annual black tax allocation of Sh144,000. This may rise with the rising cost of living. To mitigate and trim it downwards, sit down with your family and evaluate what income-generating ventures they can start.

These don’t have to be high-capital ventures. They could be as simple as improvised farming (eg. Dairy farming for milk sale to your nearest local dairy cooperative plant, hotel, or even neighbouring residents. Or layers and broilers chicken farming for eggs production and meat sales). The idea is to teach them to fish and not give the fish for sustainability. 

You also have an allocation of Sh3,000 for DStv. Get yourself a GoTv instead and bring this expense to Sh1,750. This amount will afford the most premium GOTv package. Bring your fuel budget to a maximum mean of Sh7,500 for saving you an additional Sh2,500.

Consider saving the Sh4000 tours and travel spend in a Money Market Fund for a full year, and have an annual holiday budget from it. Apart from earning compounded interests from these savings, you will build a culture of saving, trim the number of tours you are currently doing, and also have better structured annual holidays. Remember every travel attracts other secondary expenses. 

Your merry-go-round chama is not earning you any interest. Apart from social capital, your money is losing value and is vulnerable to inflationary forces.

Add this Sh6,000 to your monthly saving of Sh7,500 to raise Sh13,500 in savings per month. You also have an allocation of Sh10,000 for tithe even though you are operating paycheck to paycheck. Whereas the issue of tithe is a sensitive faith-based decision, it is not cast in stone.

It is up to you though to determine whether to cut this allocation and top it up on your savings for future investments or to leave it as is. A top-up would take your monthly savings to Sh23,500 equal to Sh310,000 annual savings in a Sacco account with 10 percent dividends. 

Your school fees of Sh50,000 may not be sustainable in the long term. The fees will increase as your children advance. Do a survey for more affordable, quality schools that you can transfer your children to. If you can save at least Sh10,000 from this expenditure, redirect it to an education policy to lessen the burden down the line. Do due diligence when taking any policy.

For example, there are policies that will terminate without any refunds or benefits if you fail to remit your monthly obligations in time. Have standing orders that push the money allocated for all your savings directly to the respective accounts every month.

By tracking and saving the unaccounted Sh41,300, your savings have the potential to become a total of about Sh65,000 (Sh23,500+Sh41,300) which is equivalent to Sh858,000 annual savings in a Sacco account giving minimum 10 percent annual dividends.

On child support, evaluate the emotional and financial toll such a case will have on you. Talk to a family lawyer to get realistic prospects. Indeed, if you can get reasonable financial assistance from your co-parent, you will get more breathing space to salvage more savings and improve your living standards.

Another important resource is the time and skill you have. Do you have a skill that you can put to practice after work hours or a consultancy service you can venture into? This can be an extra source of income that can go on to help you own a house.

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