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Dominic Karanja, a financial and investments consultant, says:It would be regrettable if, after working abroad, you will return home empty-handed.
It is time to take strategic steps to enhance your financial situation and move towards achieving your financial goals.
Your monthly expenses and debt repayments total QR4,200 leaving you with an extra QR800 which is 16 per cent of your income. However, you are unable to account for this surplus income. To effectively manage your finances and achieve your objectives, it is essential to begin by crafting a comprehensive financial plan and a budget.
Budgeting plays a crucial role in efficiently managing your personal finances and reaching your financial goals.
Create a detailed budget that includes your monthly income and expenses such as loan payments, living costs, and any discretionary spending.
It is good that you have already identified your major expenses, which include rent, groceries, transportation, loan payments, and supporting your parents.
It is crucial to monitor all expenses to understand your spending habits better.
Instead of assigning fixed amounts to each expense category, consider establishing target percentages for greater flexibility.
This approach allows the trade-offs in your spending decisions, helping you identify areas to cut back.
Given that you are currently allocating 24 per cent of your income to rent, exploring more affordable housing options could be beneficial.
Prioritising the creation of an emergency fund is essential. Aim at saving at least six months worth of living expenses for financial security.
Given that you are currently experiencing financial pressure, it is important to explore avenues to boost your income. This might entail pursuing a better-paying job, taking on extra employment opportunities, or enhancing your skills to increase your value in the job market.
While you have not disclosed the remaining balance or the purpose of your current loan, it is advisable to refrain from borrowing for consumption purposes. It is essential to prioritise clearing your debt so as to allocate more of your income towards savings and investments.
If possible, consider negotiating with your lender for more favourable loan terms.
While supporting your parents is commendable, you should always make sure it is within your means. Have a candid discussion with your dependents concerning your financial situation and explore other ways you can help them without putting undue strain on your own finances.
Currently, you are allocating 20 per cent of your income to familial obligations, commonly known as black tax. Although there is no prescribed amount for black tax, I suggest limiting it to no more than 10 per cent of your income.
By maintaining this discipline, you can aim to save at least QR500 per month from the remittances you send home.
I suggest you start your savings journey with a Sacco (Savings and Credit Cooperative Organisation). It is important to consistently reinvest your Sacco dividends into deposits to bolster your borrowing capacity and maximise your dividend earnings in subsequent years.
There are several Saccos that offer a range of savings, loan, and investment products tailored for individuals in the diaspora. It is advisable to choose a Sacco where you can establish connections with individuals who could potentially act as guarantors if you require a Sacco loan.
Saccos are a good source of development loans, often offering loan amounts up to three times your savings. Nevertheless, it is crucial to ensure your income streams are sufficient to meet the monthly loan repayments.
When exploring investment possibilities, it is essential to evaluate your risk tolerance and investment period. If you prefer low-risk options, you might contemplate investing in a Money Market Fund (MMF).
MMFs offer guaranteed returns, preserve your capital, and allow portfolio growth through regular contributions, with funds readily accessible for withdrawal if needed.
I recommend allocating at least 70 percent of your emergency fund to an MMF. Other short and medium-term investment options include treasury bills, treasury bonds, and commercial paper.
Aim to allocate at least 20 per cent of your income towards savings and investment.
If you are thinking about moving back to Kenya, take time to carefully consider the advantages and disadvantages of that move. Look into the job opportunities, cost of living, and how the move would impact your financial outlook.
Returning home does not have to be viewed as a failure as it could be a smart decisio
