I’ve been earning Sh90,000 monthly for 18 months now, but I have no savings or investments

My name is Gilbert. I’m 29 years old and have been working in my current job for about one and a half years now. My net monthly salary is Sh80,000, and I earn an additional Sh10,000 to Sh20,000 from client tokens and appreciations. Despite this, I’m struggling financially.

I don’t have any tangible savings or investments to show for my earnings. I own a car, which I purchased with partial funding from a microfinance institution. I’m currently paying Sh35,000 per month towards the loan, with an outstanding balance of Sh420,000, including interest. I also support my sister, who’s in college, with Sh15,000 monthly.

On top of that, I rent a two-bedroom apartment for Sh18,000. I enjoy spending weekends with my girlfriend and friends, going for drives, and having a good time. Unfortunately, this lifestyle has left me with nothing to save or invest.

As the New Year begins, I want to take control of my finances. My goals include saving, investing, and improving life for my parents in the village. I also dream of starting a family before I turn 35, pursuing a Master’s degree, and owning a home by the time I’m 40. But just like last year, I’m not sure where to start. I even tried the 52-week savings challenge, but I ended up breaking the piggy bank after just three months and spent the money. I need help.

Dominic Karanja, Financial Planning and Investments Consultant

Gilbert, you have admirable financial goals and a genuine desire to improve your financial situation. To achieve them, let’s start by analysing your current finances and creating a plan.

Your current financial picture:

Your fixed monthly expenses amount to Sh68,000:

• Car loan repayment: Sh35,000
• Support for your sister: Sh15,000
• Rent: Sh18,000

With a monthly income of Sh90,000 to Sh100,000, you’re left with Sh22,000 to Sh32,000 for discretionary spending. This covers weekend drives, outings, and personal expenses.

Step 1: Categorise your financial goals

Start by dividing your goals into:

1. Short-term (within 3 years): Budgeting, debt repayment, emergency fund creation, and savings.
2. Intermediate (3–5 years): Homeownership, higher education, and family planning.
3. Long-term (5+ years): Retirement planning and wealth building.

Short-term goals

1. Debt repayment: Focus on clearing your car loan as quickly as possible. Redirect part of your side income to make extra payments. Once the loan is paid off, you’ll free up Sh35,000 per month, which can then be allocated to savings and investments.

2. Emergency fund: Build an emergency fund equivalent to at least six months of living expenses. Since piggy banks didn’t work for you, set up an automatic transfer to a savings account every month.

3. Cut expenses: Reduce discretionary spending. Cut back on luxury weekend drives and outings to save an additional Sh5,000 to Sh10,000 monthly. Use budgeting apps to track your expenses.

4. Savings and low-risk investments: Consider low-risk investment options like money market funds or government securities. Joining a SACCO can help you save consistently while giving you access to low-interest loans.

5. Sustainable support: While supporting your sister is commendable, explore more sustainable options, such as scholarships or student loans, to reduce your financial burden.

Intermediate goals

1. Homeownership: Start saving for a down payment on a house. Research mortgage options to find one that aligns with your financial capacity.

2. Further education: Plan for your Master’s degree. Look into scholarships, grants, or part-time study options to minimise costs.

3. Family planning: If starting a family is a priority, begin creating a family plan with your partner that aligns with your financial goals.

4. Parental support: Enhance your parents’ quality of life with manageable projects like poultry farming or other income-generating activities.

Long-term goals

1. Retirement planning: Enroll in a pension scheme. This will not only secure your retirement but also offer tax advantages.

2. Diversified investments: Educate yourself on different investment options and diversify your portfolio to mitigate risks.

Building wealth requires time, discipline, and consistent effort. Track your progress regularly, adjust your plans as needed, and celebrate milestones along the way. Consider consulting a financial advisor for personalised guidance as your circumstances evolve.

By taking these steps, you can create a stable financial future while achieving your dreams and goals. Stay focused and remember that every small step counts towards the bigger picture.

If you have any money problems, send an email to [email protected] with your contact details. Questions will be addressed in this column.