How do I survive in Nairobi with a net salary of Sh20,000?

My name is Martin Indeche. I’m 28. I have recently started living in Nairobi where I am working as a security guard. I earn a net salary of Sh20,000. I have one child in lower primary. My wife is a stay-at-home mom but I would like to start a kibanda business for her. How best can I survive on my little salary in Nairobi?

Rhina Namsia, the founder and chief executive officer of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory

Work with the 80/20 percentage rule. Your income is quite low. Most of your entire money is bound to go to essentials. But you still need to save and grow some other forms of income. The 20 per cent should cater for your savings. Here’s the breakdown:

80 percent of your net salary is Sh16,000. This Sh16,000 is expected to cater for food, rent, transport and school fees. The maximum amount you should allocate for rent is Sh8,000. You will certainly go into debts if your rent goes above this. Since you have a young child, you should consider the security of the neighbourhood you will be living in and the surrounding amenities such as schools for your child. Once you settle your rent, you will remain with Sh8,000. Allocate Sh4,000 for food. Buy things like cereals in bulk and store them for the month. Out of the remaining Sh4,000, you can send Sh2,000 to your mom back in the village. This shouldn’t be every month. You can arrange to be sending every two months so that in one month, you have Sh2,000 as miscellaneous or emergency savings.

With the remaining balance of Sh2,000, build up a fund for the kibanda business your spouse wishes to start. You can save this for about five months to come up with Sh10,000, which is adequate capital for a grocery business. When launching, the relationship you have formed with your local mama mbogas will come in handy in getting them to hold your spouse’s hand. You have now spent 80 per cent of your net earnings and have a balance of Sh4,000. This is the money that should go to your savings and investments. 

Join a table banking chama or a Sacco where you will earn dividends, as well as build your account for future financing. Think about adding extra sources of income. Your wife’s venture will be a good starting point. Sh4,000 is a significantly small amount to multiply into good capital. How else can you add on extra income? What side hustles can you do when you are not working? For instance, if you are a night guard, can you spare some hours during the day to work as a part time car washer? Picture this, at Sh50 per car, ten 10 will give you Sh500, which multiplies to Sh15,000 monthly. You must create an extra source of income to grow faster.

Chacha Nyaigoti Bichang’a, personal finance coach at financial consultancy firm, Chachanomics Limited

With your net salary, a budget is an emergency requirement in determining what you’ll be spending on food, transport, food, shopping, education, and miscellaneous expenses. Use the 80/20 rule to determine your financial allocations. This can be further broken down to 50/20/30. This means your allocations will be 20 percent savings, 50 percent necessary and very essential expenses such as food which should take around 20 percent, rent of around 15 percent, utilities of around 5 percent, and medical expenses of around 10 percent. The remaining 30 percent can be spread out for wants like airtime, bundles, gadgets and cable TV. This means that depending on your needs, your allocations can vary between 50/30/20 or 50/40/10. With these allocations, this is how much money will go to every item:

a). Rent (average 15 percent):   Pay a rent of around Sh 2,500, which is adequate for a single room. For a permanent single room house you may pay about Sh4,000 to Sh5,000. 

b). Food (25 percent):  You can spend around Sh5,000. Instead of buying the small packages of Sh20 or Sh30 (the Kadogo Economy), buy in bulk monthly to save.

c). School fees (not more than 20 percent): You can afford to pay Sh2,000 monthly totalling to Sh6,000 per term and Sh18,000 per year in a low cost private school. Alternatively, you can take your child to the City Council public primary schools which are much better than low cost private schools. The levies charged in public schools are more affordable. They will hardly exceed Sh3,000 per term. This will help you remain with some extra Sh3,000 disposable income for saving. 

d.) Chama (10 percent): Save Sh2,000 through an interest earning investment group with a revolving fund. In future, you can use your savings as collateral for a short-term financing.

e). Parents in the village (5 percent):  Spend around Sh1,000 as a token to parents every month.

f). Saving/Investment (10 percent): Save Sh2,000 via unit-linked fund managers. In one year, you’ll have Sh24,000 plus an interest of at least Sh4,000 totalling to Sh28,000. Deposit the savings in a well-run Sacco earning an interest of about 10 percent or buy shares of undervalued counters/companies with the saving of Sh2,000 per month. For example, Absa shares are trading at around Sh10 meaning that you can buy 200 Absa shares which is above the required minimum of 100 shares at any given time of trading.

g). Wife’s Kibanda business goal (25 percent): Save and then set aside Sh5,000. Rent for a Kibanda ranges from Sh3,000 to Sh5,000 per month. Three months’ savings will be enough to start a Kibanda business.

h). Ensure you have enrolled for the NHIF to be safeguarded in the event of a medical emergency.   BY DAILY NATION