How can I afford a plot and rentals on my Sh57,000 salary?

My name is Daisy. I am married and have two children who are in sixth and fourth grade. My husband earns between Sh120,000 and Sh150,000 net. It takes care of a lot of the family budget including rent since we haven’t bought or built our house yet. We live in the Nairobi metropolitan area.

I earn about Sh57,000 net and the monthly expenses I meet are as follows: House maid Sh7,000, two fun tours Sh3,000 each, airtime Sh2,000, clothes Sh4,000, beauty and salon products Sh7,000, my mother Sh5,000, and transportation Sh4,200. I’ve always wanted to own property. I asked around and the prices of plots in my area were around Sh600,000 per 40 x 80 plot.

How can I get one and build houses for rent and how long will it take? I would also like to go into dairy or pyrethrum farming near my mother’s rural home in Nakuru County, but I’m not sure how to start or if that would be a good venture.

From your details, you have a combined net household income of at least Sh177,000 with the potential to have a net income of Sh207,000. Individually, your net income of about Sh57,000 after statutory deductions ends up being Sh21,800 after deducting your listed monthly expenses of Sh35,200.

You have not calculated this amount, which indicates poor budgeting. He also points out that in addition to the overhead I mentioned, you can spend more diversified.

You need to determine where this money is going by tracking all of your monthly expenses. It is worth noting that in the space of one year, this unaccounted figure comes to Sh261,600, which is 43.6 percent of the total budget you need to acquire one of the Sh600,000 plots you are targeting.

Immediately after you finish tracking where this amount goes, you will need to exit the Chama round where you contribute Sh6,000.

Withdraw after fulfilling all your outstanding obligations. Although playful moles have social value and seem to be a good starting point for a novice saver, they do not grow money.

There is no interest earned from it and over time, your money is lost to inflation. This money can be better invested in a money market fund (MMF) as your emergency fund that you do not currently have.

When you invest in MMF – a low-risk scheme – your money will benefit from daily compound interest earned. You’ll also have quick access if you need to use funds.

Given your other expenses, there are areas you may want to cut back. One of the traps of over-reliance on a higher-earning spouse is the risk of spending your money poorly due to ensuring your family’s needs are met regardless.

This seems to be the trap you fall into based on your allotments for your expenses. The best principle is to budget as if you were completely dependent on your payslip.

This increases the amount you have set aside for savings and investments, ultimately benefiting your family. For example, you have Sh7,000 allocated to a house girl.

Find out if there is a real need within your family for this expense and if this is something you can do without. You also have an allocation of Sh11,000 for clothing, beauty and salon.

Are these monthly expenses or are there situations where these expenses can be reduced? For example, do you buy new clothes every month? Can you deduct Sh4,000 from these expenses? Your expenses also have a monthly black tax of Sh5,000.

While it is important to support parents and siblings, it would be better if you encouraged them to achieve their financial independence.

For example, sit down with them and evaluate what little economic activity they could start in the village, such as commercial poultry farming or dairy farming.

Over time, this could be a more satisfactory option for them than the current monthly salary of Sh5,000 – unless current circumstances allow them to engage economically.

Depending on the result and experience gained, you will be in a better position to decide whether to invest in large-scale dairy farming or pyrethrum farming.

By making these adjustments, you will have saved a total of Sh38,800, of which Sh6,000 goes to the MMF. This means that alongside your MMF – which will now become your emergency fund – you will have Sh32,800 in savings for investments. Within 24 months, this will amount to Sh787,000 which will be enough to buy your target plot of land without taking out a loan.

To get maximum benefits, save this money in a Sacco account to earn a minimum of 11 percent dividends. Your money will grow to about Sh900,000.

Once you have the plot of land on cash terms, consider obtaining financing for rental homes. Saccos is now collaborating with real estate investors to finance rentals.

This means you should also be clear about whether the Sacco you’re joining has this program when doing your due diligence. Besides targeting real estate, you may also want to compare your expected returns with existing investment alternatives such as infrastructure bonds in the market.

Even though your intention is to own property in your name, I encourage you not to hide it. It is best to be financially compatible with your spouse.

If you have any financial problems, send us an email to (email protected) and leave your contact number. Financial questions will be answered in this column