My name is Harry. I am in my early 20s. I am married and work as a teacher at a private school in Nyanza. I pocket Sh17,000 monthly. I live in a rental house for Sh3,500. I pay Sh400 for water, and Sh7,000 for my child’s Grade One tuition. I pay Sh500 for power, do savings of Sh300 and spend the rest on food and miscellaneous expenses. I would like to start a secondary income stream by owning a taxi. How can I achieve this with my meagre salary? Please help.
Josephine Murage, an investment banker and personal finance consultant
From the money that gets into your pocket, the total that you can account for is Sh4,700. Assuming that Sh7,000 is a termly payment that breaks down to around Sh2,300 per month, you are left with Sh10,000 for food and miscellaneous expenses.
It is easy to assume that since your salary is on the lower end, it doesn’t need strict budgeting and accountability, and hence the lack of wholesome budgeting, which leaves Sh10,000 for miscellaneous and food.
You need to set and follow a strict budget to ensure that every coin goes to its rightful place. Financial independence starts on a foundation of financial accountability and responsibility, not necessarily on the amount of earnings. Once you get the fundamentals right, it will be easier to manage more money as your earnings grow.
There are no two ways about your situation other than to create extra income streams. One option is for your presumed spouse to start working and chip in on the household budget. For instance, if she can earn as little as Sh500 every Saturday and Sunday from simple hustles such as Mama Fua, your family will have an extra Sh4,000 at the end of the month.
Since you live upcountry where groceries are more affordable, you can also manage your food budget at around Sh9,000, which will leave you with an extra Sh1,000. If you manage this, your household will have around Sh5,300 for savings and investment every month (Sh1,000 hived off from groceries, Sh300 allocated for savings, and Sh4,000 contribution from your spouse). This is the money that can go into building share capital in a Sacco, which you can use to finance the acquisition of the taxi you have set out as a goal.
Save Sh4,000 in a reputable, well-managed Sacco with realistic dividends of between 10 and 13 per cent. Open a money market fund account and save Sh1,000 as your emergency money. You can then maintain Sh300 savings in a savings account, which you can access via mobile money for short-term liquidity.
Your aim should be to raise between Sh165,000 and Sh170,000, which will land you in the financing zone of around Sh500,000 using the 3X Sacco financing multiplier effect.
I would recommend that you do your research thoroughly before you commit to a financing arrangement. This includes understanding why you want to get into the taxi business. Befriend individuals in this area for better insights into how the taxi business operates and the potential limitations that you should expect.
For example, will it be a better option for you to run your taxi business outside of the online hailing apps or will it be to your advantage to enlist and contend with prices offered by online taxi apps? Will the facility you take to acquire the taxi be repaid from earnings generated solely by the taxi business or will you supplement repayments from your primary job? Will you afford the facility? Do you plan to employ a driver or do you plan to operate the taxi yourself?
Depending on the transportation sector in your area, you may also opt to start small with either a motorbike that will earn you a daily net of Sh300 or a tuktuk which costs around Sh250,000 new. This tuktuk could either be used for passengers within the township or it could be repurposed for transportation of goods and services within your area (for example, sale and supply of water) and still earn you decent money without strangling your monthly budget and earning capacity.
I would caution you against the temptation of a microfinance arrangement where you are asked to pay a daily fee and instalment for a motorbike or tuktuk. You are too vulnerable financially and in most cases, such arrangements have very punitive small print, heavy penalties for missed daily payments, and exorbitant hidden charges and interest rates.
You have mentioned that you are a teacher at a private school. I would want to assume that you have met the requisite necessities including enlisting for registration legally with the Teachers Service Commission. If you are unregistered, make haste if you have the requisite academic qualifications and ambition to formally practice teaching.
Note that only teachers registered with the TSC are eligible to interview for the various better-paying primary and secondary teaching job opportunities that the teachers’ employer may offer. Lastly, find out what hustles outside of your teaching work you can engage in over the weekend that could top up on your monthly earnings. Make every coin matter.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered in this column.
