Money Talks: Budget of a single millennial

To even out the playing ground, I have used the same budget lines for each of the budgets under scrutiny.

Photo credit: Pool

What you need to know:

  • Jane is spending a great deal of her money on fun.
  • That's entertainment and shopping.
  • I suggest Jane cut down on some of that expenditure and redirect it to savings and investments.

This is the final instalment in a series of three stories that  explored the personal budgets of three different Kenyans. I will point out what works and share tips on how individuals can make smarter money moves.

To even out the playing ground, I have used the same budget lines for each of the budgets under scrutiny. I edited the budgets these individuals shared with me to fit into these budget lines.

This is the budget of a lovely lass we will call Jane.


Profile of Jane

Age: 26 years, female

Relationship status: Single

Employment status: Salaried on contract. No medical cover or retirement benefit

Obligations: No children, lives with her retired parents and three siblings in Nairobi


Budget

Income         

- Salary: Sh70,000

- Business income: Nil

- Investment income: Nil

Total income: Sh70,000

Expenditure

Rent: Nil

Loan repayment: Nil

Emergency fund: Nil

Cash savings to Bank: Sh20,000

Cash savings to MMF: Nil

Sacco savings: Nil

Chama savings: Sh3,000

Retirement policies: Sh5,000

Education policies: Nil

Other investments: Nil

Parents/siblings: Sh7,000

Grocery shopping: Sh3,000

Mama mboga shopping: Nil

Utility bills (Water, electricity): Nil

Internet: Nil

Fuel: Sh6,000

Personal development: Nil

Personal shopping and grooming: Sh12,000

Personal entertainment: Sh8,000

Family entertainment and holidays: Sh6,000

Total expenditure: Sh70,000

CASH FLOW: NIL

           

How Jane budgets and spends her money

  • Jane makes a fairly decent income of Sh70,000. She has no other source of income, neither from a business or from investments.
  • The budget Jane shared with me was simple and straightforward – it had very few lines and easy-to-understand descriptions. Jane says, “This helps me stick to it. I maintain my budget from my banking app.”
  • Jane tells me she has a rule that if any money is leftover in her account at the end of the month, she will spend it on something. Sometimes she will spend it on entertainment, other times her siblings and parents, other times on personal shopping.
  • Her parents are financially stable, she says. They were both employed and had retirement benefits. They also had their own personal retirement policies. The annuities from both policies sustains their current lifestyles.


What Jane is doing right

Looking at her budget, here is what Jane is doing right with her money:

  • Jane is saving to a separate bank account. A savings account she tells me she can only withdraw from after three months.
  • She is saving for her retirement. A savings of Sh5,000 to an insurance company. The retirement age in Kenya is 60 years – Jane has been saving with the policy since she was 25, meaning she has given herself a 35-year head start to retirement. Jane says, “It’s my mom who really insisted I start now to save for my retirement. If it wasn’t for her I would have been spending that money on shoes, ha-ha.”
  • Jane is investing her money with her friends in a chama. They haven’t made any significant investments yet but they save consistently.
  • Jane loves to travel, and goes on holiday at least twice a year. Some of her savings are to finance her travels.


Smart money moves Jane should consider

Here is what I believe Jane can do to manage her money more smartly:

  • Jane is spending a great deal of her money on fun. That's entertainment and shopping. I suggest Jane cut down on some of that expenditure and redirect it to savings and investments.
  • Jane is putting too much money into the bank. Saving with the bank does not return a handsome income in interest. Jane should save a larger portion of her money into a money market fund, and develop the discipline of not withdrawing it.
  • Jane should also join a Sacco and redirect some of her money there.
  • The same mindset that Jane has with saving for retirement is the same one she should apply with her emergency fund: start early, build slowly and maintain the pace.
  • Jane should have six to nine months of living expenses in her emergency fund. Her living expenses are Sh70,000. So she should have between Sh420,000 to Sh540,000 in her emergency fund.
  • Jane lives at home with her parents and doesn’t have too many obligations. These are the years she should develop herself as an individual. She should consider going back to school for a second degree or sitting professional courses.
  • In that same breath, Jane can afford to finance a huge personal loan for a huge income-generating project. If she tightens her belt and cuts down some of her expenses, she can easily create a stream of business or investment income that could surpass her salary.


Do you have questions for the writer? Email to [email protected]