I am a family man with Sh43,000 net pay. How can I afford a home and a car?

My name is Derek. I earn a total of Sh60,000. After statutory deductions, I take home about Sh43,000 but end up borrowing. My family’s household expenses are as follows: Rent – Sh11,000, School fees for my child per month – Sh10,000, Transportation – Sh5,000, Shopping – Sh5,000. Can you advise me? I want to buy a piece of land, build a house in the countryside, and finally buy a car without taking out a loan.

From the financial breakdown you provided, your total monthly expenses come to Sh31,000. This leaves an amount of Sh12,000 that you have not accounted for. You should list all of your loans and the places you borrow them from. I assume you are stuck in a cycle of mobile borrowing loans whose interest is very expensive. Re-examine your budget, cut excesses and use the money generated to pay off monthly debts.

To make progress in managing your money, you need to know where each currency goes. This means listing your recurring monthly expenses, allocating financial resources to them, having a diversified budget allocation that is manageable and realistic, and setting aside savings geared toward investment.

To do all of this, start tracking your expenses. You may need to get help from your spouse on this matter if you are unsure about your family’s spending habits. You can list all the expenses you spent money on in October, and then list them for the current month of November. A spending pattern will start to emerge, and this will tell you which areas you need to cut back to accelerate your financial growth.

Adopt the 50:30:20 budgeting method, where you will allocate 50 percent to needs, 20 percent to wants, and 30 percent to savings and investments. Note that these percentages can change as your financial situation changes.

You may want to evaluate how your spouse can financially contribute to offloading some of your household expenses. This will free up more money that you can allocate to your savings. For example, what are their qualifications and employability? If you can find work that brings in at least Sh15,000 to Sh20,000, your household could be Sh10,000 to Sh15,000 closer to achieving some of your savings goals.

As you determine your savings, you need to be clear about what is realistic and how long it will take. You mentioned the land, the house, and the vehicle. These are not short-term goals, since you have indicated no savings and apathy towards asset financing. Set short-term, medium-term, and long-term goals.

Each of these goals should bring you closer to your long-term goals. It should be realistic, time-bound and achievable. In your current financial situation, I wouldn’t encourage you to prioritize buying a car, unless you can create a secondary income stream from it – such as weekend car boot sales or running an evening and weekend taxi business.

On top of proper financial management, you need to come up with ways to improve your current bottom line. To do this, you may need to gain additional qualifications and skills by going back to school, attending relevant seminars and masterclasses, and enhancing the production of your work.

This may require little financial input which means it can be one of your medium term goals which will then push you towards your long term goal of owning a home.

You intend to acquire land and build a country. What is the benefit of this decision? Why the country? You need to be clear about whether your goal is related to costs or the need for a retirement home, and how moving within the country could affect your business. Also set a budget for this. There are places where you can get land for as much as Sh100,000 or even less, but there is no value, especially if the need for liquidation arises years later.

Set your sights on a specific location, work with current prices and create an estimate allowance. Loans are not always as bad as you make them out to be. In fact, by committing your savings to Sacco, you will not only earn earnings at a much higher rate than what is offered in a fixed deposit bank account, but you can also get a financial boost equivalent to three times your savings and an affordable repayment rate. If you have land in a strategic location, some Saccos offer affordable construction support through Kenya Mortgage Refinance Home Loans.

However, before you take out a loan, your ability to repay the repayments must be proportional to your net earnings.

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.