I am 39, married with two children who are aged 11 and 9 years old. I have an outstanding debt of Sh2.1 million. I pay around Sh51,500 per month. This is the balance of a loan that I had taken to put up rental houses on a plot that I had acquired through a chama. The rental houses give me about Sh42,000 per month, which is not enough to pay the loan on its own. So I have been topping up the balance of Sh9,500 from my salary. I earn about Sh65,000 net. I don't pay rent as I live in one of my rental houses. I pay school fees of Sh36,000 per month, groceries and shopping Sh17,000, wife Sh4,000, entertainment Sh3,000, my parents' support Sh5,000, family clothes/welfare Sh5,000, personal pocket change Sh3,000, miscellaneous Sh2,000. At my age, the only thing I can point to as an achievement is my rental property, which is not paying itself off. I have nothing else to speak of. I feel stuck and don't know what I'm doing wrong. Please advise me. Chris

Chacha Nyaigoti Bichang’a is a financial coach at Chachanomics Consulting Firm

Chris, at 39, you are not entirely starting from zero since you are at the peak of the financial take off stage. Your total income is Sh107,000 against a total expenditure of Sh102,500, which leaves you with Sh5,000 which is not accounted for. You live in your own house, you have an income generating rental property, a steady salary, a family you are supporting and a loan that financed an asset rather than consumption. You have more than what your peers would have at the same age. Your biggest challenge is cash flow, which would make you feel stuck, yet you are on an upward asset building trajectory.

To address your cash-flow challenges, review your expenditures, build an emergency fund, complete paying off the loan, increase your rental income and monetise your passion or skill-set.

Read: Help me budget my Sh41,000 salary so I can buy land

1). Review your expenditure: Cut down on your necessary and unnecessary expenses. Reduce your spending on these expenses: groceries from Sh17,000 to Sh14,000 (save Sh3,000), wife from Sh4,000 to Sh2,000 (save Sh2,000), entertainment from Sh3,000 to Sh1,000 (save Sh2,000), parent support from Sh5,000 to Sh3,000 (save Sh2,000), clothes/family welfare from Sh5,000 to Sh3,000 (save Sh2,000), pocket money from Sh3,000 to Sh1,000 (save Sh2,000) and miscellaneous from 2,000 to Sh1,000 (save Sh1,000). You will end up freeing roughly Sh14,000 per month, which can be utilised for other essential expenses such as creating an emergency fund and increasing the loan repayment monthly instalments. Besides, monitor your expenses on a daily basis, do weekly vote-head summaries and prepare monthly financial statements showing the cash inflow and outflow.

2). Build an emergency fund: You do not have a financial safety kitty to cushion you against unforeseen eventualities like illness, incapacitation due to injury or accidents, being laid off or suspended from duty. Create a financial buffer to save you from unnecessary stress due to unpreparedness. Channel at least Sh5,000 towards a compound interest-earning MMF fetching an annual yield of 9 percent or 10 percent depending on the prevailing market trends. You will realise Sh206,274 in three years and Sh376,588 in five years, which will be enough to sustain you for at least six months (Sh361,200) in case of any eventuality. The amounts are inclusive of the 2.5 percent annular account management fees and 15 percent withholding tax.

Read: How do I buy a Sh1.5 million car on a monthly salary of Sh46,000?

3). Complete paying off the loans: This should be one of your biggest priorities. Increase the monthly loan repayment by Sh10,000 (from Sh51,500 to Sh61,500), which will ultimately take you about four years to offset the loan instead of a minimum of five years. Once the loan is cleared, your rental units will generate more passive income than merely servicing debt.

Read: I'm about to lose my job, what do I do with Sh700,000 savings?

4). Increase your rental income: Do not buy or invest in any other asset other than building on a real estate portfolio. Ask yourself: Are the rent rates below the market value? Can the units be improved to justify higher rents? Is there unused space that could be developed to generate more income? Could you add services like water storage, wi-fi, parking or other features that tenants value? Consider increasing the rent by Sh500 to Sh1,000 per unit, and this will make a noticeable change over time.

5). Monetise your passion or skill-set: Grow your income outside your salary and rental income. An additional Sh10,000 per month from a side hustle would significantly change your financial trajectory. Think about consulting in your profession, weekend teaching, online tutoring, small agribusiness, commission-based work or any other payable skill.

Overall, you need to shift your mindset from feeling stuck to working towards becoming financially free by age 45. Draw a five-year financial plan which can be reviewed every two years. Increase your financial literacy, enrol for further studies, control your debts and take more calculated risks.

If you have any money problems, send us an email at mburusymonn@gmail.com.

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