a question: I am married with two children aged five and nine. I work in Nairobi but my family lives in the countryside. This is my third month of work and I am earning a net salary of Sh43,500. My budget is as follows: rent in Nairobi Sh9,000, rent in the countryside Sh7,000, household budget in the countryside Sh11,000, household budget in Nairobi Sh6,000, rent Sh3,000, rent in the countryside Sh1,200 (every two weeks). I have about Sh6,300 left but most of the time, I cannot calculate where this disposable income goes.
I have accumulated four different mobile phone debts totaling Sh36,700, which are bad debts; Sh6,700, Sh24,000, Sh2,500 and Sh3,500. I would like to pay off these debts and get out of CRB to get a bank loan of Sh250,000 to open a business in the countryside for my husband who is currently unemployed. I am thinking of opening a grain business or hairdressing salon. Please advise on how to achieve this.
answer: Getrude Njeri is an accountant, personal finance and investment advisor. She works as a community manager for an investment firm in Nairobi.
It’s great to see that you’re thinking about starting a business for your wife. You’re clearly focused on creating a stable future for your family, and that’s commendable.
Starting a business can be a huge change, not only for your family’s income, but also for your wife’s financial independence and growth.
However, before diving into this plan, you need to make sure that your current financial situation is organized so that you can move forward without compromising your current financial status.
Start tracking all your expenses. To understand where that 6,300 shillings is going, use a simple app or notebook to write down every purchase, how much you send home, and anything you spend in Nairobi. This will help you identify any unnecessary expenses. If you’re not sure of every item you spent money on in the previous month, or in August right up until today, you can start from the moment you receive your next paycheck. List all your expenses, big or small. Be aware that what may seem like small expenses at the beginning of your pay cycle can add up to big expenses by the end of the month.
Next, prioritize paying off debt. This should actually be your first priority. With a total of Sh36,700 in mobile phone loans, it is imperative to get out of default and off the lender’s blacklist. Start with the smallest debt (Sh2,500) and work your way up. Pay off Sh2,500 first (while making minimum payments on other loans) then Sh3,500, then Sh6,700 and so on. This is known as the snowball method and can give you quick wins to build momentum.
Reduce your expenses. Consider whether you can reduce your rent by moving to more expensive places. For example, if you can find places for 6,000 shillings and 5,000 shillings respectively in Nairobi and the outlying areas, you will save 6,000 shillings. Since you live alone, it may be particularly possible for you to find and access affordable rentals within Nairobi – with the caveat that affordability may not come with the convenience you might otherwise need if you were looking for a family rental.
Reducing your rent would reduce the percentage of your income spent on rent from 36.8% to 29.9%, which would free up money to pay off debt or build an emergency fund. It would also ease some of the financial pressures you face without significantly impacting your family’s living conditions.
Examine a family budget of 11,000 shillings in the outlying areas and 6,000 shillings in Nairobi to see if there are any potential savings. Small adjustments such as meal planning, reducing utility usage, or cutting unnecessary expenses can make a difference. One way to do this is to use your family’s travel time to the outlying areas to access affordable groceries for your meals in Nairobi.
Allocate any savings From cutting expenses right up to paying off debt to get back on track, consider setting up an education savings fund for your children. Even small, regular contributions can grow over time and help cover future education costs.
Before you take out a 250,000 shilling loan, research the market demand for cereals and hair salons in the area where you think you will set up the business. Talk to local entrepreneurs and identify the business that has the most potential, then create a simple business plan that outlines your startup costs, expected monthly expenses and projected income. This will help you determine how much capital is needed and whether the loan amount is realistic.
Given your current financial situation, taking out a large loan may not be the best move at this time. Focus on paying off your existing debts first and consider saving gradually or looking for alternative financing (such as a smaller Sacco loan or a work grant).
You mentioned that your wife is currently unemployed. Sit down with her and explore other income generating activities she can engage in that do not require a lot of capital. For example, based on her academic qualifications, what kind of job can she get in the countryside?
This exploration can also determine whether her qualifications will be more marketable in Nairobi and the approximate net salary she can earn, and based on that you can explore whether bringing your family closer to you in Nairobi and living under one roof will be financially feasible or not if you are both formally employed and earning an income.
Once you’re debt-free, start building an emergency fund to avoid falling back into debt. Set aside an amount that will cover at least one to three months of expenses at first. If possible, involve your spouse in finding ways to cut costs or increase income.
This could be through a side hustle, part-time work, or business planning assistance. By tracking your spending, prioritizing debt repayment, and making strategic budget cuts, you can regain control of your finances.
If you have any financial issues, email us at (email protected) and leave your contact number. Financial questions will be answered in this column.
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