I am 30, unmarried and without children. I live and work in Kisumu. I have been working on contract basis with Sh55,000 salary and I have managed to save Sh660,000 at the bank. My contract has been renewed multiple times over the past few years but with the tight economy, my employer is scaling down operations and will not keep me. The current contract is ending in August and if I squeeze my budget, I can raise my savings to Sh700,000.

I spend Sh35,000 on my personal expenses, support my parents with Sh7,000, and save Sh10,000. How can I continue sustaining my life? I am thinking of starting a taxi business in Kisumu or Nairobi while I search for another job. Please advise me. – Jacob

Chacha Nyaigoti Bichang’a, a financial coach at Chachanomics Consulting Firm and the author of Mastering Your Money

Your total expenditure is Sh52,000 against a monthly salary of Sh55,000 which leaves an unaccounted balance of Sh3,000. At 30, you are in a stable financial position because you have saved Sh700,000 in a bank account, you do not have any loans or consumer debts nor children. You are only facing two major financial challenges that are likely to wipe out your savings within a short period of time. Loss of salary in August when your contractual job ends, and likelihood of losing your savings should you invest in a business you do not understand.

First, determine your actual financial position by calculating your net worth, reviewing your expenditure and tracking your money. Find the sum total of your assets minus liabilities. So far you have only one main asset, that is the Sh700,000 savings. Should you lose your job in August, you will be able to survive for about 17 months if you maintain your average expenditure at Sh42,000, without savings anything. This amount will cushion you against helplessness as you search for another job.

Two, review your recurrent expenditure based on the 50/30/20 guide. This implies that 50 per cent of income (Sh27,500) is spent on essential expenses like rent, foodstuffs, utilities and transport, 30 per cent (Sh16,500) is channeled towards savings and investment while 20 per cent (Sh11,000) is spent on wants like entertainment, grooming, subscription, and black tax. You are spending Sh35,000 (64 per cent) on personal upkeep which is more than the recommended average of 50 per cent (Sh27,500). Cut down on unnecessary expenditure and save Sh18,500.

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You are saving Sh10,000 which translates to about 20 per cent. You are spending Sh7,000 on parents which translates to 13 per cent. You can scale down this amount to around Sh4,000 and save Sh3,000. Alternatively, you can do away with it once you lose your job, but reinstate it upon securing another job.

Three, track your money to determine where every shilling goes. This habit will help you in drawing a realistic budget and avoiding wastage.
Avoid making hasty decisions. Avoid buying a taxi now. A second hand car will take up about Sh650,000, leaving you with Sh50,000 which is hardly enough to meet the maintenance expenses. Other challenges include driver dishonesty, car getting damaged, the business failing to break even and the job search may take long. Equally, the cost of running a taxi business (fuel, repairs, insurance, downtime and driver management) may wipe out the profits.

Do not relocate to Nairobi. You will incur higher rent and transport costs and increased daily living expenses.

Protect your savings. Instead of leaving your Sh700,000 in a bank account that earns very little interest, channel it to a compound interest earning money market fund (MMF) fetching around 10 per cent. MMF ensures your principal is secure, earns you higher returns than an ordinary bank account and the money can be redeemed within two or three days. Consider investing the money in a three-month Treasury bill with the option of rolling it over. Divide the money into two: Sh500,000 invested in MMF and Sh200,000 for transition or job hunting mission.

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Consider job hunting as a full time job. If you can secure another job earning you Sh50,000 and Sh70,000 within the next six months, your entire financial trajectory will change significantly. Spend the job hunting fund on professional courses, networking travelling for interviews, better internet connectivity and communication. A Sh30,000 professional certificate will yield better returns than a Sh700,000 taxi.

Start a small business instead of a big one. Set aside around Sh100,000 to Sh150,000 for purposes of learning but not necessarily making a lot of money. Consider online trading, service-based work, distribution of products, specialised side hustles based on your skill set and responding to emerging needs within your residential area.

Consider enrolling for a financial literacy masterclass and hiring a personal financial coach to guide you on budgeting, establishing a saving and investment strategy, taking calculated risks, managing debts, ring-fencing your assets and developing an abundance mindset.

If you have any money problems, send us an email at mburusymonn@gmail.com and leave your number for contact. Money questions will be answered on this column.

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