I’m 26, earn Sh26K net, and I’m in debt because of my generosity

I am a young man called Derrick. I’m turning 26 and I earn Sh30,000 and after deductions, it gets to around Sh25,000 (I also get small commissions but they are not guaranteed). I live with my mum (I am thinking of moving out) so I do much of the monthly expenses. My transport to and from work is Sh5-6,000 a month and I also tithe. I don't have any savings in my 2nd year of working. By the end of the month, I find myself in debt of up to Sh10,000 which I can't explain. I want to build my mom a house in like 2-3 years (we don't have land) and have a side hustle. I am thinking of putting a matatu in one of the long-distance Saccos. Are these goals realistic? If not, how do I plan for them? I am not a spendthrift but super generous. Help me budget my salary to realise these goals.

Inziani Khasiani, financial consultant and the executive director at Klientele Kenya

Derrick, your financial questions can be split into three. The first is how to stop getting into debt.

You admit that you are a super generous person. I recommend trying some or all of the following to curtail on your generous spending.

Set yourself goals and master self-discipline. Self-discipline is a learned behaviour. And just like any other skill you want to master, it requires daily practice and repetition. It must become habitual. Set a budget for yourself and stick to it. Contrast it to your actual expenses, including the items you take the Sh10,000 for. This will help you control your impulses to give away money.

Be mindful of your actions. One of the consequences of your generosity is debt. Of what value is a debt to you that has been incurred without any tangible results? Who are the beneficiaries of your generosity? List them and devise a plan to stay away from them. As the saying goes, “out of sight, out of mind.” People can sense your generosity and abuse it. Cut off the money you give away including tithes until you are free from debt.

The second question is how to build a house for your mom in the next two to three years using the net salary of Sh25,000. If you deduct Sh6,000 you use for transport, the net amount comes to Sh19,000. I will assume that the amount available for savings towards a house is Sh15,000.

An amount of Sh15,000 saved through a Sacco for 36 months will give you Sh540,000. Using the multiple of three, this amount will allow you to borrow Sh1,620,000. Is this amount adequate for a living house? It depends.

With this amount, I would advise you to buy a plot and build. Depending on the location where you may wish to buy/build a house, the available figures indicate that you need upward of Sh2,000,000.

The third question is starting an income-generating project- a long-distance matatu business. Using the same figures as above, this project can only take off after three years of Sacco savings. At the end of the day, you will have to choose whether to build a house for your mum or to start an income-generating activity that can then be a source of accelerated savings for the house project. Should you choose to start with a matatu purchased on loan, you will need to do your due diligence on the routes and matatu Sacco you'll join, and how regularly your vehicle shall be allocated slots at the Sacco terminals.

At your age, you might also want to prioritise improving your skill set to be more marketable and boost your basic earning capacity. This might involve acquiring additional academic and career-oriented certifications through part-time training. These do not necessarily have to be an additional expense as there are multiple sponsorships you can search and tap into.

If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered in this column.