I like reading your personal finance articles and the advice is always appreciated. My name is Leah Obote. I am 35 years of age, married with 2 children in primary school. I earn a net salary of Ksh100,000.
I have been working for the last 4 years in my current job yet I haven’t saved up much – I save 5k monthly in a sacco and contribute 10k monthly to a chama.
My husband works also and pays rent and school fees, while I handle domestic bills. I would like to make a fresh start to build a stable financial position since time is not on my side.
Kindly advise on how I can manage my 100k salary to save and invest for the future without running broke.
Leah Obote, marketing manager, Nairobi.
First of all, I’d like to commend you for prioritizing savings through a chama and a Sacco. You also appear to have a very good financial understanding with your husband seeing that you have shared responsibility for your bills.
This is a good foundation for managing money in a marriage. It reduces friction since everyone knows what is expected at the end of every month. There are some expenses we are not sure who covers so we are going to make some assumptions.
Based on the background you’ve given us, here is what we think you should do to build a stable financial position.
- Create a budget
A budget is the foundation of personal finance. Start by tracking all your expenses and create a budget that aligns with your income. Identify areas where you can reduce unnecessary spending and allocate that money towards savings and investments. We will give you a sample budget at the end of this article.
- Emergency fund
Establish an emergency fund to cover unexpected expenses, such as medical bills or car repairs. Save for emergencies with your husband since an emergency fund can be used to cover your household’s expenses in case any of you loses your income.
Aim to save at least 3-6 months’ worth of living expenses in a separate savings account that is easily accessible. You can save your emergency fund with the Zimele Savings Plan. The more you save, the more protected you will be in the future.
- Set financial goals
Determine your short-term and long-term financial goals. Short-term goals could include saving for a vacation or buying a new appliance, while long-term goals might involve retirement planning or children’s education. Having specific goals will help you stay motivated and focused.
- Save for retirement
Contribute to a retirement savings plan. Many people defer saving for retirement until it’s too late. Starting early helps you maximize the power of compounding over time. Luckily for you, you still have time.
Saving for retirement is all about using your working years to build up savings that will replace your income once you stop requiring. This is fundamental in financial planning. You not only need to start early, you also need to save enough. Use the free retirement advisor tool at www.zimele.co.ke/advisor to make a plan.
- Manage debt wisely
You did not mention whether you have any debt. We hope that you don’t. Having an emergency fund is the best way to avoid debt in the first place. Avoid debt if you are in a position to do so. Only consider debt if you want to use it in an income-generating activity. In such cases, ensure the returns you are getting from these activities are higher than the interest payments you are making.
If you already have debt, prioritize paying off debts with the highest interest rates first while making timely payments on other debts.
- Insurance coverage
Protect yourself and your family with health insurance. These policies can provide financial security in case of an illness. They also make sure that you don’t dip too much into your savings to cover hospital bills.
- Continuously educate yourself
Stay updated on personal finance topics and seek knowledge through books, online resources, or attending financial literacy workshops. Building financial literacy will empower you to make informed decisions and improve your financial situation.
- Communicate with your spouse
Maintain open communication with your spouse about financial goals, budgeting, and investments. Review your finances together regularly. Working together as a team will help you both achieve financial stability and align your efforts.
Please note this is a sample budget. You can customize it to suit your personal financial situation.
|Rent||Covered by Husband|
|School Fees||Covered by Husband|
|Weekly Shopping||4,000||Covers for Mboga, Snacks, etc. 1,000 per week.|
|Utilities||Covered by Husband||Since he pays the rent, we are assuming your husband also pays for water, electricity, internet, TV subscription, etc|
|Retirement Fund||10,000||If you save this amount monthly until you are 60 years, you will have saved about 11 million. This is enough to generate an income of about 80,000 per month.*
If your husband matches your contribution, you will have 22 million in retirement.
|Goal-based saving||10,000||This is savings for any goal you might have. Whether it’s buying a new appliance or a toy.|
|Other Household Expenses||10,000||We are not sure about your other household & childcare expenses. You can break this down further on a monthly based on your needs.|
|Personal Expenses||10,000||There are your own personal expenses like entertainment, beauty, childcare, Etc.|
|Miscellaneous Expenses||14,000||These are for your other expenses that might come up during the month.|
*We are assuming you will invest in a pension fund with an income of about 9% p.a. Once you retire, you can invest the funds in an Income Drawdown Fund.
Remember, building a stable financial position takes time and discipline. Be patient, stay consistent, and make adjustments as needed. Seek professional advice when necessary, and most importantly, celebrate your progress along the way.
Got a financial situation you need expert guidance on? Send your detailed information to [email protected]