My name is Freddie. My monthly net salary is Sh170,000. Every month, my expenses are as follows: Rent Sh45,000, groceries and shopping Sh20,000, transport Sh10,000, parents’ upkeep Sh10,000, bank loan Sh16,000 (outstanding loan balance is around Sh210,000), car loan Sh45,000 (outstanding loan balance is around Sh420,000), school fees Sh30,000 (two children in grade one and three), the rest of my money goes to mobile loans (I have Sh9,000 mobile loans that I pay and borrow again) and miscellaneous.
I would like to save enough money over the next three years to buy a plot worth Sh1 million within the Nairobi metropolitan area, preferably in Kiambu County. I would also like to construct a Sh5 million three or four bedroomed bungalow to avoid paying rent in the city. How do I manage this given that I am left with about Sh5,000 after expenses and loan deductions?
Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
Your goal of buying land within three years and building a home is certainly achievable, but it will require discipline and a structured plan. At the moment, much of your income is tied up in loan repayments and this limits your ability to save. The most effective way to achieve your goals is to first create room for savings by prioritising the repayment of your existing loans.
You can start by clearing the recurring Sh9,000 mobile loans within the next two months. This can be done by trimming some of your discretionary spending, such as reducing your shopping budget by Sh3,000 and managing miscellaneous expenses more tightly. Eliminating these mobile loans will free up cash and stop the cycle of frequent borrowing.
Once you’ve cleared the mobile loans, redirect the freed-up Sh4,000 towards your loans to help accelerate repayment. Since your car loan has just about a year left, focus the extra Sh4,000 entirely on the other bank loan. By doing so, you should clear both loans by around June 2026.
Once these loans are fully repaid, you will have freed up Sh61,000 every month (Sh45,000 from the car loan and Sh16,000 from the bank loan). If you add the Sh4,000 you were already saving, you’ll have a total of Sh65,000 available for saving.
I recommend saving these funds in a money market fund (MMF) account. You can review the available licensed fund managers to identify one to invest with. MMFs are currently offering returns of around eight to 11 percent annually and they are ideal for investing in the short term.
If you stay with this plan, you should have saved about Sh1 million by October of 2027, enough to buy the piece of land you are aiming for. As you save, take time to do your due diligence on potential plots. Work with reputable agents, land-selling companies and trusted networks. Before committing to any purchase, ensure all documentation is in order to avoid future disputes.
Once you have secured the land, shift your focus to building. Continue saving the Sh65,000 monthly for another year as you finalise the land transfer, get architectural plans and obtain the necessary approvals. Within this period, you should have accumulated close to Sh900,000, which will serve as a deposit when applying for a home construction loan.
At this stage, I would advise you to consider taking a Sacco loan of about Sh4 million to top up your savings and finance your home construction. Many Saccos offer home construction loans, and you can compare options and identify one with favourable terms to work with.
A Sh4 million loan repaid over eight years at 12 percent interest will require monthly payments of around Sh65,000 – which is the amount that you will be saving monthly. There is also the subsidised mortgage financing option under the Kenya Mortgage Refinance Company (KMRC) that is offered on a reducing balance basis by select banks and Saccos to fund construction.
Once you have completed your home, potentially by 2029, channel the Sh45,000 rent savings to your money market fund account to build a fund to cover your emergency. Over time, you can use this fund to accelerate your home loan repayment or to finance other financial goals.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered on this column.
