Hello, my name is Joseph. I am 24. I am currently expecting a child with a 20-year-old woman. I don’t have a permanent job. I work as a construction fundi. On average, I earn Sh1,200 daily. Sometimes I can go without a job for a week or so per month. On average my earnings per month is Sh24,000 or more depending on the jobs I get. My rent is Sh4,500. I don’t have a budget for how I spend the rest of the money which means I can’t account for it. Please help me plan for a better life for myself and my child.
Alex Kibebe, the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
To get you started in managing your finances, you will need a budget. And because your income is inconsistent and uncertain, I recommend having a priority budget. A priority budget lists all your expenses in order of priority. You start by listing your most essential expenses at the top and the expenses that you can do without lower in the list. You will start by meeting the expenses from the top of your list.
In your case, your priority list would probably start off with food items, then rent, transport, essential home consumables, savings, clothing and other personal effects, and then entertainment. A priority budget ensures that you meet the most basic items on months of low income while allowing you to spend on other expenses when your monthly income is higher.
In a month when you make your average income of Sh24,000, I recommend setting aside 50 percent or Sh12,000 for your basic expenses. Allocate about 30 percent or Sh8,000 to savings so as to meet your financial goals as well as cover you for the months that you make less income. You can then spend the remaining Sh4,000 for other personal and non-essential expenses.
I recommend saving the Sh8,000 in either a Money Market Fund (MMF) account or a Sacco account. These two saving accounts will have your funds grow even as you save. A Sacco is ideal if you plan on taking a loan to fund some of your future goals while an MMF account gives you easy access to your savings. You can research the various Sacco’s and MMF providers in order to identify one to save in. Once you have settled on a budget, you then need to set investment goals. Investment goals fall in three categories; short term that you plan to fulfill within two years, mid-term (between 2-5 years) and long-term (more than 5 years). Your short-term goal should be the financial preparation for your soon-to-arrive child. You will need to save up for the prenatal expenses, costs of child delivery and other expenses related to having a newborn.
Your midterm goals, should be on growing your family income. There are various ways you can achieve this. If feasible, you could work at growing your career say from being a fundi to a foreman, then a sub-contractor and eventually a registered construction contractor. Another way you could consider to grow your income is starting a side business. You can run the business after work or on the days you are out of a job. Start a side business based on your opportunities and strength. For example, you can provide home repairs services such as plumbing works, fixing instant showers and the like in your free time. You can also start a business for your woman or help her get a job once your child gets older.
As your income grows, ensure that you increase your savings. To do this, work at maintaining your savings at between 20-30 percent of your income. Depending on your personal preferences, your long-term goals may include owning a home, starting a more capital-based business, establishing a farm or building rental property. For you to afford these, you will need to be consistent in your savings. You may also want to diversify part of your savings to other investment products such as stocks and treasury products. You however need to do some thorough research and get advice from a certified consultant.
Since you’re paid daily, it is important to have a method of payment that does not tempt you to spend without accountability. For instance, you can have the money go to a dedicated account from where your budgetary allocations are set. This will remove the temptation of impulse spending. BY DAILY NATION