I have not paid rent since August 2021, and I have nothing to show for it. I live alone in my sister’s house. Work opportunities have been rare and sometimes I go more than two months without work.
In March, I got a short-term contract that paid Sh35,000. I worked for two months. I got another job in June that paid Sh34,000 for one month. In July, I didn’t have a job. In August, I got a job that paid me Sh50,000. Out of the Sh50,000, I would receive a daily allowance of Sh1,000.
After one month, I had received a total of Sh25,000 daily allowance. I managed to save Sh5,300 from the Sh1,000 daily allowance. We travel a lot and out of the Sh1,000 per day, I take around Sh500 to get a decent lodge without bedbugs, then about Sh200 for food. The rest is for airtime and family. As I didn’t start work on August 1, the salary was slashed by five days. I have a debt. I repay Sh2,200 and I send my parents Sh2,000.
My sister is moving in this November so I will soon start paying rent. I have been using the 50/30/20 model to save and have managed to keep Sh62,000 in an MMF (money market fund). I was using a different MMF as my emergency fund, but I have now depleted that account.
I always keep track of my money, but I don’t see where I wasted it. I have a daughter in Grade Three and paying for her school fees is a challenge. How can I invest my Sh60,000 savings? I am looking for short-term returns of at least three months that I can use for growth. We are on a two-week break, and I don’t know how long my current job will run. I might not even be recalled.
Dominic Karanja, a financial and investments consultant
You need to determine why you are struggling to manage your finances despite having a job and trying to save. You can apply the ‘5 Whys’ technique to dig deeper into the root cause of your financial challenges.
The technique focuses on asking why a problem is occurring and then repeating “why?” four more times until you find the root cause.
From my analysis, it seems that the root cause of your financial challenges is a lack of stable, long-term employment, which could be partly due to gaps in skills or qualifications.
Addressing this root cause could involve investing in skills development or education that aligns with stable job opportunities.
It is commendable that you have identified your challenges, which include unstable income, high cost of living, debt and limited savings.
Your income has been inconsistent, with periods of unemployment and low-paying jobs.
Your daily expenses for accommodation, food, and transport are significant and consume a large portion of your income. You have existing debts and school fees to take care of.
Your savings have been depleted, and you’re struggling to build up an emergency fund.
Although you have not provided a breakdown of all your expenses, such as the amount of your child’s school fees, I would urge you to carefully track all your expenses to identify areas where you can cut back.
Consult a financial advisor to discuss debt management strategies, such as debt consolidation or repayment plans. The financial advisor can also provide personalised guidance on budgeting and saving.
Even in tough times, try to build up an emergency fund. Be cautious about borrowing additional debt unless it’s for essential needs.
Don’t hesitate to reach out to friends, family or professionals for help and advice. Assisting your parents is a good idea but you need to do it within your means. Have a candid discussion with all your dependents so that they can understand your precarious financial situation.
Consider having additional income streams to supplement your income. Explore opportunities like selling items online or providing services that match your skills.
There are various investment options that you can utilise to invest the amount of money that you are holding now. However, it’s important to consider your risk profile and the timeframe of your investment. It is good that you already have some experience with money market funds (MMFs).
The MMF ensures a return on your investment while protecting your capital. You can also grow your portfolio by making regular contributions, and the funds are readily available if you need to make a withdrawal.
By saving the Sh60,000 in an MMF at a 14 percent per annum rate, net of tax and management fees, you will have at least Sh69,000 within one year. Given your need for short-term returns and safety, the MMF might be the most suitable option for you to invest the funds.
A fixed deposit account is also an option as it can offer a safe and guaranteed return on your savings, although the returns are low.
Treasury bills and bonds and commercial papers are other investment options you can consider in the short to medium term.
You need a minimum of Sh100,000 and Sh50,000 to invest in Treasury bills and Treasury bonds respectively. However, for the infrastructure bond you require a minimum of Sh100,000.
You can invest in a 91-day Treasury bill, which is safe and typically offers higher returns than MMFs, but you will need to increase the amount you have so that you can meet the minimum amount threshold.
The average interest rate of the latest 91-day Treasury bill was 15.7502 percent and the latest infrastructure bond tap sale issue had a coupon rate of 14.3990 percent.
If you are a risk taker and don’t mind holding your money in long-term investment, you can consider investing in stocks.
If you’re open to entrepreneurship, you could consider a small-scale venture that doesn’t require a huge upfront cost but can turn profits within three months.
You need to consider joining a Sacco because they offer savings, loans, and investment products. I would encourage you to always remember to capitalise your Sacco dividends to deposits to help increase your borrowing power and earning of high dividends in the subsequent years.
Saccos are a good source of development loans because they can advance you a loan amount that is three time your savings.
However, your income sources need to be enough to afford the monthly loan instalments.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered on this column
