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I would like to have a better grasp on my finances and buy land, buy my own car, and start investing.
I am a broker without a regular salary; how do I buy land and build a home in Syokimau in the next 5 years?
My name is Sheryl. I am 33. I am a broker. My salary is never consistent. I can make up to Sh250,000 one month, then make nothing for the next two to three months. There are months where I make Sh10,000 and others where I make Sh20,000, depending on what brokering hustles I get. This type of earning has left me struggling financially. My expenses total Sh48,000 and they include fueling my car (Sh10,000), rent (Sh15,000), food (Sh12,000), with the rest going to entertainment and miscellaneous spending. Sometimes I feel so ashamed that I have nothing to even send my mum in the village, yet I sometimes make very good money. My goal in the next three to five years is to secure my mom’s livelihood in the village now that age is catching up with her, to buy a plot and build my own house around the Syokimau area. How do I plan to achieve this?
Alex Kibebe , the founder of Rubiani Wealth Management, who is an investment consultant and a business development coach, says:
To effectively manage your finances and achieve your goals, your first step should be to write a budget and adhere to it. Given your uncertain income, it is crucial to minimise expenses to ensure you remain afloat even in those months when you make little or no income. Keeping your expenses low will also help you save up towards fulfilling your goals.
I recommend reducing your fuel costs to Sh8,000 and your food expenses to Sh10,000 by avoiding luxury travel, unnecessary food items, and eating out. Additionally, work at limiting your entertainment and miscellaneous spending to Sh7,000. This will bring your total monthly expenses to Sh40,000.
Next, open a Money Market Fund (MMF) account for your savings. An MMF account allows you to invest any amount of money at any time and earns interest of about 15 percent per year (at current market rates). With MMF, you also have access to your funds whenever needed. You can review the various MMF providers in the market and identify an ideal one to invest with, bearing in mind the rate of inflation and the withholding tax on earnings.
Now, during months when your income exceeds your monthly expenses, transfer the surplus to your MMF account. And in those months when you make less than your expenses, you can draw funds from your MMF account to cover the shortfall. Maintaining this discipline will keep you financially covered and potentially grow a surplus fund.
Once you have established this financial stability, focus on building passive income. Passive income is the consistent income that you earn with little to no effort. In other words, it is when your money is working for you. By investing in products that generate passive income, you can convert your large one-off earnings into continuous cash inflows, thus providing you with more financial stability and security.
For your passive income, I would advise you to consider investing in Treasury bonds. Treasury bonds offer hassle-free passive income, and with a minimum investment of Sh50,000, you can earn about 18 percent per year at the current rates. If you accumulate Sh1 million from your surplus fund and substantial deals in the next year and invest the same in Treasury bonds, you will earn approximately Sh180,000 per year, or Sh15,000 monthly. This amount can cover your rent. By continuing to invest in Treasury bonds for an additional two years, your passive income could grow to Sh40,000 per month, thus covering all your expenses. Once you achieve this, you can then focus on fulfilling your other goals.
For your mother’s livelihood, discuss available options with her based on her location, expertise, and interests. There are many projects that you can consider, such as building simple semi-permanent rentals, keeping grade cows for milk sales, or setting up a shop. Once you have settled on a project, you can allocate much of your broker income towards this goal since your expenses will be covered.
After setting up an income project for your mother, you can then focus on buying land and building your home. I would advise you to continue investing your savings in the MMF account until you have enough funds to purchase your desired land around Syokimau. Some reputable land-buying companies offer instalment payment plans that don’t have a huge spread from paying cash. Explore these. Given your choice of location, you might also want to ensure that the land you acquire is in an accessible area and is not prone to flooding, as you recently witnessed. This might cost you an extra premium, but you will have peace of mind in the long run.
Once you have purchased the land, consider switching your savings from the MMF account to a Sacco account. This will give you access to a loan to accelerate your home construction. Once you get your certified plan and a realistic bill of quantities, you can build in phases to avoid stretching yourself thin. For example, in the first phase, you can build the foundation and the slab, then take a breather. In the second phase, you can build the walls up to lintels. If the home is a bungalow, the next step will naturally be roofing. If it is a maisonette, the next step will be the first-floor slab. This method will ensure that you can specify a targeted building goal, then realise it within a given time frame.
By diligently following this plan, you will be well on your way to achieving your goals within your three- to five-year timeline.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered on this column.
