I’m a mason earning Sh1,200 daily. How do I save for own home?

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My name is Jackson. I am 25, unmarried and live in the outskirts of Nyahururu town. I am a mason earning Sh1,200 daily. This goes up to Sh1,500 on special days when we do special tasks such as plastering. I am normally paid every Saturday a total of 7,200. I don’t work on Sundays.

My goal is to save some money, buy a plot, and build my own house. I don’t want to be the builder who built other people's homes but ended up renting throughout his life. However, I don’t know how to do this as I end up spending most of my money and am left with nothing to save. I have to admit that I don’t have a budget and live day by day. I would like to get married after I have owned a plot and started depositing building materials at my plot. My budget for a 40*80 plot would be about Sh500,000 in areas outside town that aren’t too far off either. How can I achieve my goals? How do I start budgeting my money and how do I start saving

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

The secret to financial security and wealth accumulation is risk and debt management, which entails being adequately medically insured, paying off short term loans and living within your means by establishing a budget and adhering to it.

You are at the right age to acquire more skills in masonry and expand your expertise for more lucrative contracts. You also need to make short, medium-term and long term plans. I commend you for setting the short term goals of making a budget and building savings, and the medium term goals of plot ownership and settling down to marriage.

You should be left with some significant amount after paying rent, buying foodstuffs and meeting other personal expenses. With an estimated monthly earnings of Sh28,800 you can do better with savings if you budget appropriately. Savings should start immediately you earn an income. It is recommended that you save at least 10% of your income when you are starting work. As your income increases, you should increase savings to between15% to 20% of your income. In your case, to truly meet short term needs that may include having sufficient emergency funds covering at least 6 months of your living expenses, you need to be aggressive in this. Assuming in a rural area rent costs Sh3,000, and food costs Sh5,800, plus personal expenses amount to Sh10,000 (inclusive of parental or siblings support), you still have at least Sh10,000 that isn't allocated to any need. Joining a Sacco is recommended. Find one that accommodates jua kali artisans and the wider informal sector - especially where your colleagues at work are, so that you are able to get guarantors for loans in future. Saving via Sacco inculcates a healthy habit and enhances discipline.

Buy dry foodstuffs in bulk, especially when in season, which is highly possible in rural areas. Buy clothes when there is an off-season sales promotion. Sacco monthly savings of Sh5,000 will earn interest of Sh6,000 at 10% annual interest in the first year. Doing this consistently for three years will add up to Sh200,000 if interests earned are reinvested. This will allow you up to 3X loan multiplier, thus a Sh600,000 loan for the purchase of a plot and build at your own pace, ultimately eliminating rent from your budget. Repayments will average Sh12,500 for 72 months due to reducing balance formula. You will continue earning interests from the Sacco deposits as you service the six-year loan. You may reduce the monthly savings to Sh3,000 to accommodate the loan repayments should circumstances get tough. Save Sh2,000 in an ordinary bank account for short term savings. Any extras 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.

Although everyone's situation is different, financial advisors typically recommend the establishment of an emergency fund of 3 to 6 months of monthly expenses. In your case, the Sh3,000 balance can be invested in a money market fund. With your monthly expenses estimated at Sh18,000, 6 months' worth of expenses amount to Sh108, 000. This will take you less than 3 years to achieve. These savings will earn interests monthly. For instance, saving of Sh3, 000 amount to Sh40,000 in the first year at 10 percent net interests. You may use these savings as a buffer for any unforeseen circumstances or to finance adjustments to accommodate your life partner and later realize plans to build your own home.

At your age, consider formalising your skills by taking certified short courses in masonry from government vocational and technical institutions. This will make you eligible for foreign construction jobs where certification is mandatory. It will also set you on path to becoming a foreman which will improve your earnings.

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.