I’m newly employed with Sh26, 000 salary. How do I survive and thrive?

My name is Anthony. I am a newly employed teacher by the Teachers Service Commission. I live in Eldoret. My basic salary is Sh. 26,000 per month. I am in my 20s, single and don’t have a child. How do I start budgeting my salary? Within two years, I would like to buy a car or a plot of land at Sh. 500,000. Which of the two should I buy first? How do I save for them? Please help.

Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money
To survive and thrive on Sh26, 000, you should do the following:
1). Use the 80/20 rule to determine your financial allocations. This can be further broken down to 50/20/30.

This implies that as soon as your salary hits your bank account, channel 20% to savings, 50% for the necessary and very essential expenses such as food, transport, rent, utilities and medical expenses.

The remaining 30% can be spread out for wants or not very essential expenses like airtime, bundles, cable TV, gadgets, household accessories, entertainment etc. Depending on your needs, your allocations can vary between 50/30/20 or 50/40/10.
Considering the above financial allocation guideline, the following is a simple guide on how much should go to every item or vote-head.

a). Savings (30%): This should be the first priority expense before anything else is done. This means you should channel Sh7,800 to your savings' accounts: one for emergency funds (10% translating to Sh2,600) and another for investment (20% translating to Sh5,600). The emergency fund should be channelled to an insurance company that provides a unit trust called money market fund (MMF). If you save Sh2,600 in a MMF earning at least 8% compound interest, you will earn Sh. 101,288 in three years.

This fund is crucial in cushioning you against any unforeseen eventualities. As for the 20% saving for investment, you can channel it to any well run local Sacco owned by teachers. In three years, you will have saved Sh201,600 whose benefits are two-fold: you will earn dividends at a rate of not less than 10% every year and it will act as collateral for a loan of about Sh. 600,000 which you can use to buy a plot. But you will need to be patient and save with consistency for at least three years and not two.

b). Food (20%): Spend no more than Sh. 5,200. Purchase foodstuffs and other consumables such as cereals and cooking oil.

c). Rent (15%): Look for an affordable rental house and spend around Sh3, 900 for a one bed-roomed house.

d). Transport (10%): Spend no more than Sh. 2,600 per month. This means you will spend Sh130 or less per day.

e). Utilities (5%): Spend a total of Sh. 1,300 on electricity and water bills.

f). Bank and mobile charges (5%): Spend Sh1,300 for airtime and transaction charges including bank and M-Pesa.

g). Black tax / donations (10%): Spend Sh2,600 to build your social capital. This includes giving tokens to your parents and siblings where necessary.

h). Miscellaneous expenses (5%): You need to leave some money aside to cater for any emerging and unbudgeted expenses called miscellaneous or contingency funds.

2. Besides living within your means as shown by the budgetary allocations above, you need to find out what else you can do to earn an additional income.

Which side hustle can you engage in when free, especially late in the evening, on weekends or during holidays? For instance, you can do house-to-house tuition, write revision pamphlets on your favourite teaching subjects, give mentorship talks to youth or teenagers in schools and churches within your vicinity. When choosing a side hustle, it is important to consider your inborn talents, resources available, abilities or skill set, and potential.
 

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Rhina Namsia, the founder and chief executive officer of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory.
This being your first salary and with no family yet, you can start with the 50/30/20 rule as your budgeting guideline. With this rule 50% of your money (Sh13,000) goes to your Needs, 30% (Sh7,800) to Wants and 20% (Sh5,200) to your Savings & Investments.

Some of the Needs include your rent, food, clothing and personal care, transport to work and utility bills. When it comes to Wants, these are things that you can do without but are necessary for everyday life and they include lunch outs, your weekend entertainment, TV Subscriptions etc.

The 10% is the amount you want to put aside for future needs and investments such as buying land, a house saving for emergency fund, a project, holiday and future ambitions and growth.
Save some cash (Sh1,200) in a money market account where you can easily access it but earn a small interest, save at least Sh3,000 with a Sacco and at least Sh1,000 in a personal retirement account. On land versus a car, focus on acquiring land first. Land is a better asset, but a car comes with its other expenses.

For a half a million shilling land within 2 years, you need to save around Sh21,000 per month for the 2 years. Your income may not sustain this. Find a way to add on another stream of income which can be a side hustle business or even carrying out tuition for kids other than the normal teaching. Start saving with a Teachers’ Sacco as well. With as little as Sh3,000 per month, you would have Sh. 72,000 minus interest at the end of 2 years of which the Sacco can give you a loan at three times this amount. (216,000). Still, this will be halfway your target if you don’t get an extra income. Still, you can find a piece of land in the outskirts of Eldoret at nearly this price. Also, you can negotiate with your Teacher’s Sacco on how to acquire the half a million plot of land since you’ll have a permanent job and a regular job.
 

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