I am 44 and I earn Sh100,000 net. How do I plan my money for savings and investments?

My name is Naomi. I am 44. I take home Sh100,000 after deductions. My budget is as follows:

Wi-Fi: Sh3,000

Netflix: Sh1,100

Post-paid line: Sh1,000

Fuel: Sh12,000

Food: Sh15,000

Domestic cleaner: Sh4,000 per month (she comes once a week)

Car loan: Sh45,000 (exactly a year to clear)

Sacco savings: Sh5,000 monthly

Sacco savings: Sh750,000

Personal savings bank Account: Sh120,000

Spouse support: Sh25,000 monthly plus family home, school fees and service charge catered for

Side hustle account: Sh60,000. Income monthly differs from Sh5,000 to Sh25,000

Miscellaneous: Sh10,000

In case I left employment today, I’d have about Sh450,000 at my disposal. What investment plan can I make at this time in my life? Can I buy land to put up a holiday home that I can rent out?

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

At age 44, you have 16 years before you reach the mandatory retirement age of 60 years if you are a civil servant. This means that you have reached a critical age bracket (40-50 years) which is usually known as the stage of stabilisation after transiting from the take-off stage. At this crucial age, you need to develop a robust investment plan which will propel you towards financial independence.

1). Review your finances/income and expenditure to know where every shilling goes per day, week and month. From the breakdown given, your total income is Sh140,000 (including spouse support, and average monthly income from side hustle of Sh15,000). Your total expenditure is Sh131,100 (including spouse support and attendant expenses, miscellaneous). This gives you a surplus of Sh8,900 which can be used to boost the Sacco and personal savings.

You need to reduce your expenditure on:

a) Entertainment: (Wi-Fi, Netflix and miscellaneous) from a total of Sh13,000 to around Sh10,000 and remain with Sh3,000 disposable income.

b) Fuel expenses: This should be readjusted from Sh12,000 to Sh10,000 to save you Sh2,000.

c) Food expenses: Readjust from Sh15,000 to Sh10,000 and save Sh5,000. Buy foodstuffs in bulk and stop eating out often.

In total, you will accumulate a disposable income of Sh23,900, which includes Sh15,000 plus the remaining balance of Sh8,900. Increase repayment for car loan repayment by Sh20,000 so that you clear it in eight months (by the end of March 2023). This will leave you with a total disposable income of Sh68,900 in April 2023 to boost Sacco deposits and personal savings.

2) Increase your savings on investment and emergencies. Your Sacco deposits of Sh5,000 per month should be increased to Sh10,000 and, by July 2023, you will have Sh870,000. After clearing the car loan, increase this amount to Sh20,000 per month and in two years (July 2025), you’ll have accumulated Sh1,350,000. This lump sum is a gold mine that will earn you good dividends and act as collateral to acquire a three-multiplier investment loan. Your personal savings should be channelled to a safe, secure and easily accessible money market fund which will earn you a compound interest of at least nine percent. In a year (by August 2023), you will realise Sh540,785. After clearing the car loan, increase personal savings from Sh10,0000 to Sh20,000 (remain with Sh36,900 disposable income) and by July 2025, you will have accumulated Sh1,153,600. After clearing the car loan, direct about Sh15,000 towards buying stocks every month at the Nairobi Securities Exchange (this leaves you with Sh11,900).

3) Invest in your children’s education. Procure a modest insurance policy once you have carried out due diligence of the available providers. First, use the current disposable income of Sh8,900 to acquire an affordable policy for one or two of your children. But once you have cleared the car loan, you can renegotiate and increase the premium payment by Sh11,900. Instead of relying on spouse support, the education insurance covers will cushion you against unforeseen circumstances like ill-health, incapacitation and even death.

4) Reduce debt on consumption and increase debt on investment. Remember that an asset is an investment that generates income. A good debt can repay itself unlike a bad debt which is a liability because it doesn’t generate anything. Use the Sacco deposits to acquire a three-multiplier loan to buy a holiday home in cash instead of going for a mortgage. You can use part of your savings to supplement the Sacco loan.

5) Write a will and make retirement plans. It is advisable to plan on how your estate will be managed and shared among your children and/or next of kin. Don’t procrastinate on this because you may never know what will happen tomorrow. Also, decide on when you want to exit employment instead of waiting for the mandatory retirement age. You need to invest more skills, time and money in your side hustle and make it more profitable so that it can earn you a reliable cash flow to sustain your lifestyle and supplement your passive income from your investments.