I am 48, married with three children who are all in private schools. I earn Sh175,000. My wife calls me ‘Mr Torn pockets’ because she doesn’t understand where I take my money, and even thinks I keep other women. These complaints have become more profound after I suggested that we need to transfer our children to public schools. I don’t own a plot or home upcountry.
My expenses are as follows: House rent Sh30,000, DStv premium Sh11,000, internet and power Sh6,000, food and groceries Sh20,000, fuel 15,000, tithe 17,000, wife allowance Sh10,000, wife’s parents Sh5,000, my parents Sh5,000, househelp Sh12,000, school fees Sh30,000 monthly, miscellaneous Sh5,000 and table banking work group Sh7,000.
My wife works as a public health officer, but I don’t ask for her money. I believe in providing as the head of the home. I am planning to complete the final dowry payment stage at a cost of Sh300,000 in December as well as upgrade my family car. I drive a 2006 Toyota Fielder, and I am aiming to get at least a second-hand, well-maintained SUV valued at Sh2 million. I have savings of Sh430,000. I am worried that my best years are running out fast and I am getting closer to retirement. How do I stabilise and realise my goals? Teddy.
Benjamin Cheruiyot - the Engagement Lead at Abojani Investments
At 48, you should be in the assets compounding and cash flow maturity phase. The financial ages are as follows. The 20s are for learning and building skills, 30s are for steadying income and acquisition of primary assets like land, the 40s are for exponential growth (compounding) of assets and home ownership plans.
At your age, you should be relying on cash flow assets to fund some expenses, so allocate more cash from your salary towards the continuous growth of assets.
While you've only accumulated Sh430,000 in savings, you don't have much to your name. You can only be "Mr Full Pockets" if you adhere to a strict plan for asset accumulation.
Over-reliance on salary income is a ticking time bomb as you're only 12 years from retirement. To overturn this, you should have a budget geared towards personal growth. Allocate at least 20 per cent of net income to investments.
In your case, Sh35,000 should be sweating harder every month in cash asset classes like dividend stocks, unit trusts, and treasury bonds every month. It is even fair that you do not have any debt.
On the flip side, this could suggest that you are risk-averse, hence fear to take on debt for asset acquisition, or delve into moderate risk, moderate return investments. You have mostly saved with a table banking group and have likely not been in it long enough to build impressive savings.
At Sh350,000 that's only four years of monthly savings at Sh7,000, or about three years if there's compounding interest from group loans.
There are certain huge, unnecessary costs in your budget. Your wife holds a government job that's well-paying and enjoys pension savings. Since you contribute to all household needs, the Sh10,000 you give her monthly is better off channelled to serious investments.
You spend Sh11,000 on DStv Premium yet also spend Sh6,000 on the internet. You could switch to a cheaper TV package and save about Sh9,000 monthly.
If you were to break down your budget to your wife and review your expenses together, she would realise you are shouldering all living expenses, stop the mockery and be kind towards you. She would likely take over the house help expense and relieve you of Sh12,000. These cuts will amount to Sh31,000 freed from your monthly expenses.
Tithing on empty is ill-advised. Could you reduce this amount by half, or defer it altogether until your financial coast is clear? This could add up to Sh48,000 monthly disposable income.
You could put Sh30,000 in a money market fund or bond fund and accumulate over Sh2 million in five years. Sh18,000 could be put in a Sacco and accumulate over Sh1 million in five years, which could allow you access to Sh3 million loan subject to repayment ability.
You could finance a building project with a cheap Sacco loan or create a "freedom fund" to finance long-term education costs and medical expenses.
Your savings could also be seed capital to start a business or invest in lucrative but regulated investments such as "special funds" that invest in global assets and have net returns of 17 per cent annually.
While table banking groups build social cohesion and capital, they may not have a longer-term objective that could help you realise your life goals. Again, they could be rocked by member loan defaults or exits.
Your plans to upgrade your car are ill-timed. Considering your fragile financial situation, you are better off waiting a few more years. What would happen if you suddenly lost your job? How long would you survive? Probably two months if you liquidate your Sh430,000. You cannot even get a loan now unless you trim your expenses drastically.
Selling your Toyota Fielder would fetch Sh600,000 if you're lucky. You'd need 150 per cent of this amount to import the cheapest SUV in the market, or a low-mileage locally used unit.
Fake displays of wealth that are enhanced by lifestyle inflation result in an extended stay in the rat race. Focus on home ownership in the medium term as the rent you pay will go higher and stunt your growth.
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
