Reader's Question Published in Saturday Nation 26/02/22
Hello! My name is Wafula. I graduated
recently from KMTC and have a practice license from NCK. I am not formerly
employed but been working for sometime on locum basis even before I had
completed my education. I make up to Ksh.2000 daily but can’t save any money. I
pay Kshs.11,200 house rent, Ksh.1500 DSTV, Ksh.3,000 cousins rent (university
student), cousin’s fee Ksh.5,000 monthly (short course at ICS) and her
transport and lunch upto Ksh.3000, Ksh.food 6500. My girlfriend moved in
recently and so I support her sister who schools nearby with some food and
personal effects Ksh.2500 monthly, house wifi Ksh.1,000, miscellaneous upto Ksh.6000.
The family thinks I get too much money and so the financial requests keep
inflating. I am forced to work day and night so as to meet the costs. I hardly
save anything. I am struggling to do farming back at home at our disputed family
land. Kindly assist because it seems no one understands me. Thank you.
From your financial situation, the following points
can be observed.
1. Living beyond your means. Your expenditure is emotionally determined by both
internal (personal desires or wants) and external influences (by family members
and other people).
2. Lack of savings.
Your impressionistic lifestyle makes it hard for you to save. This implies that
you seriously lack financial literacy skills on financial planning, budgeting,
saving and investing.
3. Working hard.
It's commendable that you are working hard day and night which makes it
possible to earn upto Kshs. 2,000 daily translating to Kshs. 60,000 a month
which is tax-free. Your total expenditure is Kshs. 47,700 which means that you
are left with Kshs. 11,300 disposable income that can be chanelled to a saving
account for emergency, or investment. Maybe due to poor financial planning and
lack of proper financial records, this money cannot be accounted for or could
be part of the miscellaneous expenditure.
4. Lack of medical cover. This makes you vulnerable in case of any sickness.
5. Lack of personal financial education. It seems your focus is to please your girlfriend,
family members and relatives with your hard-earned money. That is why you find
it difficult to save any money yet you work day and night.
To overcome your financial problems, you need to do
the following:
1. Reduce your expenditure. You need to cut down on the following expenses so as
to remain with a good disposable amount of money for saving and investment.
a) Rent. Your expenditure on rent is over 20% of your total
income. You need to trim it to a maximum of Kshs. 8,000 and save around Kshs.3,200.
This could mean moving to an affordable but decent house.
b) Family giveaways. You need cut it down by half, that is, Kshs. 2,500.
This is a type C expenditure which is unnecessary or not very essential.
C) Lunch.
Though taking lunch is essential but you can learn to prepare packed lunch and
save about Kshs.1,500. This will save you both time and money.
d) Transport. The expense on fare can be reduced from Kshs.3,000 by
travelling off peak and trying out car-pooling so as to reduce expenses to
around Kshs.1,500.
e) Stop funding your girlfriend's
sister's school fees and reduce expenses on your cousin's
short course. Instead of putting up with your girlfriend who has introduced
another burden, you could have organised you stay with your cousin till he or
she completes the short course. This would have made you save on rent and
meals. But still you can share your cousin's education expenses by teaming up
with your uncles or other cousins. You shouldn't be the only one footing the
bill.
f) Food.
Learn to buy foodstuffs and other household items in bulk. This will enable you
to save a significant amount of money.
g) Miscellaneous expenses. You can purpose to reduce your miscellaneous
expenditure of Kshs.6,000 by half and channel the money (Kshs.3,000) to a
savings and investment account.
2. Acquire personal financial skills. You need to learn about the importance of financial
planning, budgeting, tracking your money, setting financial goals, debt
management, saving and investing. Once you learn these cardinal financial
skills you will live below your means, budget your money using the 50/20/30
rule, reduce wastage, save and invest more. You will learn the difference
between needs and wants, good expenses and bad expenses. You will ultimately
become not only financially disciplined but also a wise spender.
3. Hold a candid conversation with family members. You need an honest discussion with your cousin,
girlfriend and other family members. You need to tell them that you have set up
some financial goals which you need to achieve this year like enrolling for
further education, saving to buy a plot and build a house etc. Even if they
don't understand, go ahead and cut down the expenses as advised above.
4. Get a medical cover. Because you're not formally employed, you need to
apply for NHIF and pay Kshs.500. Even if you are a nurse or medic, you need to
get an NHIF cover which is more affordable than other insurance medical covers.
5. Establish another source of income. Though you have pointed out that you are struggling to
do farming at your disputed family land, you can go ahead and identify a
profitable source of income. You can also start a small business for your
girlfriend.
6. Open a savings account. Once you reduce your expenses, you will be able to
save around Kshs. 23,000 which can be split as follows: Kshs.10,000 should be
deposited or saved every month with a reputable Sacco, Kshs.10,000 channelled
to an emergency fund account with Money Market Fund, and Kshs.3,000 set aside
for irregular expenses such as donations, social welfare or any unplanned for
sporadic expenditure.
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