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My name is Taleb. I am 25 years old and single. I just completed my undergraduate degree and found a one-year job opportunity earning Sh38,000 a month after taxes. I am currently living in a bedsitter worth Sh6,000 but I am unsatisfied and want to move to a one-bedroom rental house.
In my area, one-bedroom rentals are going for Sh11,000. I spend Sh15,000 on food and other expenses. What can I do that does not involve much of my effort, because I have very little time off-duty, to get extra money to pay for a one-bedroom rental and for the other expenses including food, without touching my salary? I also want to plan for the future because I do not know if I’ll still have a job after one year.
Josephine Murage, an investment banker and personal finance consultant
From the breakdown you have provided, the total amount of money you have accounted for in expenses is Sh21,000. This is made up of Sh6,000 rent and Sh15,000 food and extras.
This leaves some Sh17,000 that is unaccounted for. Since you have not accounted for this amount as either going to miscellaneous expenditures, or savings or investments, I can deduce that your budgeting is deficient.
More so, if you have worked in your new job for more than a month. A working personal finance formula is anchored on a budget where every coin is accounted for.
You need to track where your money is going by listing all the expenses you spend money on. Draw a list of the items you used your September pay on. This list should include needs and wants.
This will help you classify what the necessary expenditures were, and what you could have done without. If your memory falls short, you can develop the list for your upcoming October pay schedule. You have already established food, groceries and rent.
At 25 and single, you have the huge benefit of age on your side. This means that you don’t have to move to the fancier but more expensive one-bedroom rental house.
Note that making this move will cost you Sh60,000 over the one-year duration that you expect to hold your current job. This is money that you can instead pool in a Money Market Fund as a form of an emergency kitty.
Although the figure will fall short of the required threshold, it will be a good starting point. It will also mean that your money will be growing.
By implementing this, you will be left with some Sh12,000. Out of this, start saving Sh8,000 in a Sacco account that will earn you dividends at a rate of above 10 per cent. Make sure you do your diligence on the nature, reputation, management and track record of the Sacco you settle for.
Within 12 months, your Sacco savings should be around Sh96,000. They should cross the Sh100,000 when you factor in your dividends. This means that by the end of one year, you might save over Sh170,000 using both a Sacco and the MMF from the amount that you currently aren’t accounting for.
Within this one-year period, explore the possibility of getting a contract extension. Enhance your competitiveness, marketability and employability to secure an extension at the end of your tenure.
One way to do this is by boosting your resume with short certifiable courses and masterclasses, of which there are dozens you can access online at little to zero charges. Target and apply for grants and scholarships.
You will have a surplus of around Sh4,000. This can go into miscellaneous expenses where necessary.
At 25, you have ample time to actualise your investment and retirement goals by the age of 60 by delaying instant gratification such as the urge to move to a bigger house and live large.
Take advantage of the compounding power of time to make the most of your future income and investment returns. Two financial traps that you might want to avoid at your age are mobile debts and gambling.
Although your current contract will run for a year, it is important to set medium and long-term goals to fuel your savings. Savings anchored on goals and ambitions are usually more achievable than savings pooled just for the sake of conformity.
Although your off-duty time during your work week is limited, explore what you could do over the weekend to generate extra income.
No money is limited! For instance, Sh1,000 per weekend will translate to Sh4,000 per month which is two-thirds of the total rent you are currently paying.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered in this column.
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