I earn Sh22,127 net from a County accounting job but I’m always broke. Help me budget to acquire an asset

My name is Geoffrey. I am employed by the county government in the Western Kenya region as an accountant. I am almost two years into this job. I earn a gross of Sh42,370. Out of this, Sh4,400 goes to pension, Sh4,150 goes to Helb loan repayment, and Sh3,793 goes to a three-year bank loan that I took to take my sister to college. Also, Sh500 goes to the workers’ union, Sh2,500 to my insurance savings with CIC, Sh200 to NSSF, Sh3,700 is eaten by taxes, and Sh1,000 goes to the NHIF. At the end of the month, I am left with a net pay of Sh22,127. My rent money is Sh2,000, and out of the remainder, I have to support my sister who is in college, and my other family members who are not well off. I have completely been unable to save. Buying new clothes is a nightmare. I don’t even have an asset to show for the work I do. How do I turn this situation around? Please help.

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

You are only two years into employment. Make short, medium-term, and long-term plans. It is commendable that you have both an insurance savings policy and a pension plan (apart from the statutory NSSF). The policy will result in a lump sum payment that can take care of your children's education needs or finance a major acquisition in the future. The pension plan will guarantee you a decent life upon retirement, and contributions can be accelerated in the future as your income grows. 

You are left with Sh20,127 after paying Sh2,000 rent. College hostels typically charge Sh6,000 monthly for food and accommodation. Out of this, you will be left with Sh14,127. You can allocate Sh7,000 to food. Buy dry foodstuffs in bulk, especially when in season. Clothes aren't necessarily bought every month, so an average allocation of Sh3,000 every three months should suffice. You will be left with Sh4,127. Join a SACCO and save Sh3,000 in a BOSA account. These savings will earn interest and allow you up to a 3X loan multiplier. Save Sh1,127 in an ordinary bank account for short-term savings. Any allowances received at work should boost this account. You may use these savings to lease land for cereals and vegetable farming. 

This will greatly reduce your food costs. Meanwhile, the HELB loan repayment will gradually reduce. Take advantage of waivers where possible. In four years, your HELB and bank loan will mostly be paid off. By then, your SACCO deposits will amount to Sh160,000, inclusive of interests. This will allow you an Sh480,000 five-year loan that you can use to purchase a plot and build at your own pace, ultimately eliminating rent from your budget. The loan will be financed from the Sh7,943 available from the paid-off HELB and bank loans. You will continue earning interests from the SACCO deposits as you service the five-year loan.

Stella Chepng’eno is a financial consultant at Eagle Tact Consultants Limited

Although your family is not well off, it is important to find out how relatives can contribute to paying for your sister’s upkeep after you have paid the fees. This will lessen your burden. When income is not sufficient, you either increase it or reduce your expenses. At this point, reducing your expenses will only improve your financial position by a small proportion. The better trick is to find ways to boost your income. Start by doing an audit of your time. What do you do during your free time? As an accountant, there are so many consultancies you can start doing in your free time. For example, have you considered offering accounting services to small and medium businesses in your area at a small fee? Typically, office work goes from nine to five, with weekends off. 

This is adequate time to generate side income from these types of services. The rule of the thumb is to always pay yourself after your statutory deductions. Whereas it is commendable that you have a pension plan, it is also advisable that you join a Sacco. Start by contributing Sh1,000 and boost up your savings from the side accounting jobs you will create. This will set you on the path to acquiring an asset as your savings will not only be eligible for dividends but will also qualify you for a 3X loan. There are also Saccos that assist their members with property acquisition. 

These Saccos buy large tracts of land and subdivide it to willing members then make deductions in form of loans. Joining such a Sacco will come in handy for you. Saving alone will not make you wealthy in the long run. It is multiple income streams that will. Your long-term goal needs to be to create at least three income streams. However, from your Sacco savings, it will be important that you reinvest any dividends or interest that you earn. The cost of living is rising at a high rate. This means that you must put your money in a Sacco that earns interest above the inflation rate. 

There are licensed and reputable Saccos that pay dividends as high as 12 and 15 percent. Join them. You also need to audit your personal needs and wants and work with a budget. Start by looking at your budget and what percentages you have allocated to each section. For example, are the other categories in your net budget hurting because of the amount you spend on entertainment? Out of the Sh20,127 you are left with after paying Sh2,000 rent, how much do you spend on black tax, entertainment, and transport? Evaluate how you can make adjustments. For example, though the entertainment budget should be in the range of 10 to 20 percent, it would be best if you can allocate just five percent of your net income to it.

If you have any money problem, send us an email via: [email protected]. Your questions shall be answered on this page.