This is the final instalment in a series of three stories that explored the personal budgets of three different Kenyans. I will point out what works and share tips on how individuals can make smarter money moves.
To even out the playing ground, I have used the same budget lines for each of the budgets under scrutiny. I edited the budgets these individuals shared with me to fit into these budget lines.
This is the budget of a lovely lass we will call Jane.
Profile of Jane
Age: 26 years, female
Relationship status: Single
Employment status: Salaried on contract. No medical cover or retirement benefit
Obligations: No children, lives with her retired parents and three siblings in Nairobi
Budget
Income
– Salary: Sh70,000
– Business income: Nil
– Investment income: Nil
Total income: Sh70,000
Expenditure
Rent: Nil
Loan repayment: Nil
Emergency fund: Nil
Cash savings to Bank: Sh20,000
Cash savings to MMF: Nil
Sacco savings: Nil
Chama savings: Sh3,000
Retirement policies: Sh5,000
Education policies: Nil
Other investments: Nil
Parents/siblings: Sh7,000
Grocery shopping: Sh3,000
Mama mboga shopping: Nil
Utility bills (Water, electricity): Nil
Internet: Nil
Fuel: Sh6,000
Personal development: Nil
Personal shopping and grooming: Sh12,000
Personal entertainment: Sh8,000
Family entertainment and holidays: Sh6,000
Total expenditure: Sh70,000
CASH FLOW: NIL
How Jane budgets and spends her money
- Jane makes a fairly decent income of Sh70,000. She has no other source of income, neither from a business or from investments.
- The budget Jane shared with me was simple and straightforward – it had very few lines and easy-to-understand descriptions. Jane says, “This helps me stick to it. I maintain my budget from my banking app.”
- Jane tells me she has a rule that if any money is leftover in her account at the end of the month, she will spend it on something. Sometimes she will spend it on entertainment, other times her siblings and parents, other times on personal shopping.
- Her parents are financially stable, she says. They were both employed and had retirement benefits. They also had their own personal retirement policies. The annuities from both policies sustains their current lifestyles.
What Jane is doing right
Looking at her budget, here is what Jane is doing right with her money:
- Jane is saving to a separate bank account. A savings account she tells me she can only withdraw from after three months.
- She is saving for her retirement. A savings of Sh5,000 to an insurance company. The retirement age in Kenya is 60 years – Jane has been saving with the policy since she was 25, meaning she has given herself a 35-year head start to retirement. Jane says, “It’s my mom who really insisted I start now to save for my retirement. If it wasn’t for her I would have been spending that money on shoes, ha-ha.”
- Jane is investing her money with her friends in a chama. They haven’t made any significant investments yet but they save consistently.
- Jane loves to travel, and goes on holiday at least twice a year. Some of her savings are to finance her travels.
Smart money moves Jane should consider
Here is what I believe Jane can do to manage her money more smartly:
- Jane is spending a great deal of her money on fun. That’s entertainment and shopping. I suggest Jane cut down on some of that expenditure and redirect it to savings and investments.
- Jane is putting too much money into the bank. Saving with the bank does not return a handsome income in interest. Jane should save a larger portion of her money into a money market fund, and develop the discipline of not withdrawing it.
- Jane should also join a Sacco and redirect some of her money there.
- The same mindset that Jane has with saving for retirement is the same one she should apply with her emergency fund: start early, build slowly and maintain the pace.
- Jane should have six to nine months of living expenses in her emergency fund. Her living expenses are Sh70,000. So she should have between Sh420,000 to Sh540,000 in her emergency fund.
- Jane lives at home with her parents and doesn’t have too many obligations. These are the years she should develop herself as an individual. She should consider going back to school for a second degree or sitting professional courses.
- In that same breath, Jane can afford to finance a huge personal loan for a huge income-generating project. If she tightens her belt and cuts down some of her expenses, she can easily create a stream of business or investment income that could surpass her salary. BY DAILY NATION