I am Isaiah, 30 years old, have a wife (who is schooling) and a two-year-old. My monthly net salary is Sh170,000. My monthly expenses are as follows: Rent Sh9,000, Utility bills (Water, Power, and WiFi) Sh5,000, Shopping and upkeep Sh10,000, Tithe Sh3,500, Credit Sh2,100, Savings Sacco Sh15,000 (Normal deposits Sh5,000), Sacco 2 Sh15,000 (Normal deposits Sh10,000 and Share capital Sh5,000), Sacco 3 Sh15,000 (Normal deposits Sh10,000 and Share capital Sh5,000), Son’s 10 years education policy Sh10,000, Wife school fees Sh10,000, Loan 1 Sh30,000, Loan 2 Sh20,000, Welfare Sh1,500.
Wife's monthly expense is as follows: Rent Sh6,800, Utility bills (Water, Power, and WIFI) Sh2,500, Shopping and upkeep Sh7,000, Tithe Sh3,500, Credit Sh2,100, Chama Sh4,000, Hairdressing Sh1,000, Black tax Sh7,000. My financial portfolio stands as Sacco 1 Sh62,000 (normal deposits Sh60,000 and Share capital Sh2,000), Sacco 2 Sh1.1m (normal deposits 800,000 and share capital Sh300,000), Sacco 3 Sh210,000 (normal deposits Sh150,000 and share capital Sh60,000) and education policy Sh240,000.
Loan balances: Loan 1 Sh1.2m and Loan 2 Sh600,000. I would like to be debt-free within the shortest possible time, build a one-year emergency fund, and have investments that can generate a passive income of 200,000 per month. Kindly advise.
Dominic Karanja, a financial planning and investments consultant
It is commendable that you are proactively planning for your financial future. It appears that you and your wife manage separate finances in certain areas, which is an important factor to consider in our analysis.
At present, your total monthly expenses (including savings and loans) equate to your total monthly income, leaving no capacity for accelerated debt repayment, emergency fund accumulation, or investments.
Although you are in a strong income position, your cash flow is currently constrained by high debt repayments, dual household costs, and substantial commitments to savings and obligations.
A strategic approach is key to managing debt, building an emergency fund, and creating passive income. Here’s a guide to efficiently achieve financial freedom:
Short-Term financial goals (Within two years)
Expedited debt clearance: Focus on repaying outstanding debts. Loan 1 (Sh1.2 million), Loan 2 (Sh600,000), and credit commitments (Sh2,100 each).
The aim is to clear all debts and release Sh54,200 in monthly repayments. Commence with Loan 2 due to its lower balance, enabling quicker repayment.
Utilise surplus funds from reduced expenses and reduced Sacco and chama contributions to expedite repayment. Target complete settlement of Loan 2 within 12–14 months.
Subsequently, address Loan 1 by applying a combined monthly repayment of Sh50,000 along with savings from reduced expenses and Sacco and chama contributions. The estimated timeframe to become debt-free is 24 to 30 months.
Enhance monthly savings capacity: By minimising expenses (considering consolidated living arrangements) and potentially increasing income, strive to generate a significant monthly surplus for debt repayment and emergency fund building.
Evaluate reducing black tax, wife’s chama contribution, and consolidating household expenses. This additional cash flow should then be allocated towards debt reduction and savings.
Establish an initial emergency fund. Begin accumulating a safety buffer equivalent to three to six months of essential living costs, targeting approximately Sh460,800.
To accomplish this, temporarily reduce Sacco contributions (for example, Sacco 3) and direct about Sh20,000 monthly into a Money Market Fund or high-yield Sacco account. This target can be achieved in approximately 24 months.
Intermediate-term financial goals (within five years)
Develop your emergency fund to encompass 12 months of essential expenses, approximately Sh921,600. Upon clearing your debts, allocate the funds previously utilised for loan repayments (Sh50,000 a month) into a Money Market Fund or high-yield Sacco savings to accomplish this goal.
With a stable financial foundation, consider investing in assets that can generate passive income. Start with low to moderate-risk options such as dividend-paying shares, money market funds, or small-scale real estate ventures that require manageable capital investments.
Optimise your savings and investment strategy. Conduct regular evaluations and modifications of your savings and investment plans to ensure they are effective, yield profitable returns, and align with your long-term objective of achieving financial independence.
Support your wife in completing her studies and entering the job market or entrepreneurship. Her additional income will help scale your savings and accelerate investment efforts.
Long-term goals (more than five years)
Attain Sh200,000 monthly in passive income. To reach this target, build a diversified investment portfolio that includes real estate, stocks, bonds, and other income-generating assets.
Achieving this goal will require substantial capital growth and consistent reinvestment of returns. Aim for a portfolio valued at approximately Sh20–25 million, delivering an annual return of 10–12 percent.
Maintain regular contributions to the current education policy and consider additional long-term investments to support your son’s university or tertiary education once the policy matures.
Develop a steady asset base that can sustain your lifestyle independent of a formal job. Starting a side business such as agribusiness, digital ventures, or consulting could provide an extra income stream and help achieve financial independence.
Invest in retirement products like pension schemes or personal retirement plans to secure long-term financial stability after your working years. A strong foundation has been established through current Sacco savings and education policy.
By adhering to these strategies with consistency and financial discipline, it is possible to eliminate debt, create a solid emergency fund, and eventually generate passive income.
If you have any money problems, send us an email at simburu@ke.nationmedia.com and leave your number for contact. Money questions will be answered on this column
