I earn 70k but I am always broke and in debt

I earn 70k but I am always broke and in debt. Photo | Photosearch


What you need to know:

  • I am only lucky I don't pay rent and utility fees because I live on company premises. I would wish to vacate one day. What can I do to have my own home?

My name is Bob. I earn a net salary of Sh70,987 after statutory deductions. My deduction and expenses include; Sacco deduction of Sh. 8,000 (5,000 back office and 3,000 front office). Education policy of Sh6,000, car loan of Sh23,000 (Sh16,000 principal and Sh7,000 interest. Loan balance stands at Sh600,000) parents and siblings minimum monthly Sh10,000, TV subscription Sh2,800, household shopping Sh15, 000, group contribution Sh2,000, car fuel Sh4,000.

Sometimes I feel pushed and end up using the Sh3,000 front office. In fact, right now, I have nothing in the front office account.  

I am only lucky I don't pay rent and utility fees because I live on company premises. I would wish to vacate one day. What can I do to have my own home? I have always loved to invest in the money market, how can I identify a profitable one?


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

Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money. Photo | Pool

A close examination of your financial breakdown reveals that your total expenses are Sh70,800. This implies that once you subtract total expenses from your net salary, you remain with a measly figure of Sh187.

The greatest liability is the car which takes Sh23,000 (32.4 percent of your net salary) leaving you with an unsubstantial amount for saving and investing. To get a handle on the situation, you need to do the following:

1). Calculate your net worth and budget/track your money: Calculating your net worth means determining how much you are worth financially and how long you can survive in case you lose your job or exit.

From your breakdown, you do not seem to have any tangible asset except the car which is more of a liability because it only takes money from you. The fact that you are financially pressed to withdraw money saved in the FOSA account means you are living beyond your means.

The Sh187 balance from your total expenditure is an indicator that you have serious challenges in budgeting, tracking and saving money.

Use the 80/20 rule, which can be further broken down to suit your precarious financial situation. The budgeting guideline requires that you have to pay yourself first by saving at least 20 percent of your total income.

Considering that you do not pay for rent and utilities, you need to review your expenditure significantly as follows:

i) Parents and siblings: Reduce this expense from Sh10,000 (14%) to Sh7,000 and remain with a disposable sum of Sh3,000.

ii) TV subscriptions: Do away with this expense for the time being by using the free-to-air option and save Sh2,800.

iii) Household shopping: By buying essential foodstuffs and other basic items in bulk and monitoring the rate of consumption to reduce any wastage, you may save at least Sh4,000.

iii). Car fuel: You should not use your car all the time. You can save at least Sh1,000.

After this expenditure review, you will gain an extra Sh10,800. Use Sh7,800 to increase your car loan repayment. Once you do that, you will pay Sh30,800 for the car loan.

It will, therefore, take 20 months to clear the loan instead of 26 months. You will also have disposable income of Sh3,000 which you can use as an emergency fund put in a money market fund. It is important to clear this loan as fast as possible to release the money held up.

Since your car is a liability, you might also want to evaluate how you can convert it into an income-generating asset.

For example, can you enroll for online taxi in your free time? Can you do car-boot sales over the weekend? You mentioned Sh2,000 group saving. This shouldn’t be a merry-go-round. If it is, you need to redirect this money to an interest-earning investment vehicle once the group cycle is complete.

As regards your savings, 20 percent of your net income translates to Sh14,197. This is the money you save in your Sacco (Sh8,000) and education policy (Sh6,000).

Once you clear the loan, you will have a surplus of Sh30,800 which you may use to increase you Sacco BOSA savings to Sh20,000 and FOSA (withdrawal saving fund) to Sh5,000 and the other remaining Sh10,800 can be saved in a separate interest-earning money market fund account.

Considering the unstated cumulative amount you have already saved in a Sacco and additional top up, in three years, you will have at least Sh720,000. Using the 3X multiplier factor, you will obtain a loan of around Sh2.1 million.

This is a modest sum that may be used as a down payment to acquire a house through an affordable mortgage scheme or buy a plot to start building, once you supplement it with savings from MMF, FOSA or withdrawal saving account and your side hustle or passion business. 

2). Invest in your financial education: Invest in learning financial skills about financial planning, budgeting, debt management, saving and investing, protecting assets and monetising your skills. Hire services of a financial coach, attend financial seminars and workshops. 


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I earn Sh215,000 net but I am broke and facing repossession

My name is Paul. I earn a net of Sh 215,000. I live in a house of Sh30,000 and have a car loan of Sh700,000 (in default that needs to be cleared or the car will get repossessed by end of August).  

My bank is willing to give me a non-guaranteed loan of Sh1.2 million but I can't access it as I am on CRB with several small loans (mobile and one other bank loan) defaulted, amounting to Sh200,000.

How can I get out of this trap? I also need to buy a plot and complete building by end of next year.

Here’s my monthly budget in Kshs:

  • Monthly income: 216,000 (300,000 gross)
  • Rent: 30,000
  • Power: 4,000
  • Water: 5,000 (paying 40,000 arrears then revert to 1,000 usage monthly)
  • Shopping: 10,000
  • Nanny: 6,000
  • Entertainment: 20,000
  • Parents: 5,000
  • Wife: 10,000
  • WiFi: 3,000
  • Netflix: 1,000

Loans in default: Sh740,000 due and Sh200,000 due. All default led from 2019 during start of Covid  when I’d lost my job.

Loans access: Sh1.1 million non-guarantee limit available.


Benjamin Cheruiyot - the Engagement Lead at Abojani Investments, a personal finance and investments advisory firm

Your expenses amount to Sh94,000 monthly. That is 43 percent of your net salary. This is enviable by any standards and can be improved by cutting down on the entertainment allocation.

Reducing Sh7,000 will add up your surplus to Sh130,000. This amount will help you pay off the huge loans and make savings and investments, which should be your biggest focus now.

Since you can only access a Sh1.1million non-guaranteed loan from your bank upon clearance by CRB, you may not be able to meet your intended goals of purchasing a plot and building a house by December 2023.

You need to clear the Sh200,000 debts to restore your credit worthiness. This should take you two months to pay off the loans plus any interests and also pay the standard fees to get you out of a negative listing.

You will have to negotiate a 3-month reprieve on the vehicle repossession to enable you to pay off the Sh740,000 car loan plus interests incurred. A Sh800,000 loan will cost you about Sh20,000 monthly, for 48 months. The balance of Sh110,000 can be allocated as follows:

i) Sh55,000 to a SACCO BOSA account to help you build deposits that can get you a 3X multiplier loan to finance the acquisition of a plot.

ii) Sh35,000 to a money market fund to establish a fund for personal short-term goals. The advantage of this account is high liquidity.

iii) Sh20,000 to a ready-access ordinary bank account to sort emergencies that may arise.

By December 2023, savings in the money market fund will amount to Sh560,000 inclusive of interests.

SACCO deposits will have accumulated to Sh825,000. Pending any emergencies, your bank account will hold Sh300,000. The total in these accounts will be Sh1.6 million which is only enough to buy a plot.

The other viable option is to take a 3X multiplier loan on your Sh825,000 saved in the SACCO. With this, you will access a Sh2.4 million loan repayable at Sh55,000 monthly for 60 months on a reducing balance formula.

This will afford you a Sh1.5 million plot and the balance can be used to assemble building materials and start work on the foundation. To pay the SACCO loan, you will have to reduce contribution to the money market fund account to Sh15,000 and the ordinary bank account savings to Sh10,000. This will free Sh30,000.

When you reduce SACCO monthly savings to Sh30,000, you will have Sh55,000 to service the loan. Finally, you can build your house at your own pace using funds saved in the money market fund and SACCO interests.


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.