9 smart money tips for a single-income household

Living on one income is a reality for many Kenyan families. What can you do to reduce financial strain? A financial expert Dr Paul Kibicho advises.

1. Choose sacco savings instead of bank

Why, you ask?

A.) When you take a loan from a Sacco, you are still saving, and you are still receiving dividends every year. If you take a loan with a bank, by the time you are paying it back, you will have no savings and you will pay interest on top of it with no residual value.

B.) When saving with a co-operative, they pay a benevolent fund if you die. They pay a certain amount for the funeral. The loan is also waived, but in addition to that, your family is given the amount of money equal two times the number of shares you had with them. The people you nominated will be given money according to the percentages you had indicated.

C.) You can also go for an emergency loan or a school fees loan that is cost friendly. They charge one per cent interest per month, at a reducing balance.

D.) While banks ask for a loan collateral like a title, share certificate or log book of your car , saccos only ask for guarantors.

2. Re-consider your school fees paying method

You do not have to pay school fees termly. Visit the school and negotiate with the principal so that you can agree on paying monthly instead of at the beginning of every term. You can also have an education fund for your children. There are institutions that take care of this. In my case, I have already paid my children’s school fees up to form four, so I will never have to have a funds drive in case of anything. By the end of it you may actually get a refund of some of your money, like I was given a refund of Sh19,000 when my daughter finished school at Limuru Girls and another refund of Sh22,000 when she finished school at Daystar University.

3. Other than savings, have an emergency fund

It is better to have an umbrella you do not require, than to require an umbrella you do not have. Anything can happen, especially on a single income. Access to medical care in Kenya is very expensive. If you get sick and require to be admitted to the Intensive Care Unit or High Dependency Unit for example, the minimum deposit just for admission is Sh400,000. You need to have a medical scheme, or at the very least be under the National health Insurance Fund (NHIF). It has been repackaged to cater for treatment even abroad and their premiums are pocket-friendly.

4. Significantly tame your bills

Want ideas?

Small things like leaving your lights on and powering luxury appliances means having an extra unnecessary expenditure. Avoid having ‘extra’ people in your house. You should not have a comfortable guest room. In fact, it should have a very thin mattress so that they are not tempted to stay more than one night. Guests are an extra expense.

If you have to take your family for a holiday, go during the lowest seasons. You can find accommodation in Mombasa that goes for Sh30,000 per night going for as low as Sh6,000 per night. Avoid competition with others in life. Do not keep moving homes.

Avoid renting if you can. It is better to be going to work from your own house in Kamulu than from a rented home in Runda.

Do not rack up your phone charges by talking on the phone unnecessarily. Don’t call everyone back.

Avoid impulse buying. Carry a shopping list and stick to it religiously because it controls your buying behaviour.

5. You must have life insurance

On a single income, only one person is the breadwinner. If that person dies, if they had life insurance, that insurance replaces the income that the breadwinner was bringing in for the family members. Without it, your family will be left in a very dire situation.

6. Create extra income

Robert Kiyosaki says, “It is more important to grow your income than cut your expenses. It’s more important to grow your spirit that cut your dreams.” The greatest disservice you can do to yourself is to continue relying on that one source of income. What if it, too, suddenly gets cut off? Where does that leave you? Only poor people oversleep. If you go on the road at 4AM you will see Prados, Landcruisers, and other big cars. At 6AM is when you start seeing the Proboxes and Vitzes. That should show you how early wealthy people wake up. When did you last see Bob Collymore trapped in traffic? If you have an 8 to 5 job, what are you doing between 6 and 8? Do poultry rearing, get a dairy cow – anything it takes to get an extra income during your extra hours.

7. Utilise your energy levels

Between the age of 0 to 25, you were a non-producer but a consumer and were taken care of by your parents.

Between 25 to 60, you become a producer, by earning your own living, but you are still a consumer. Because your energy levels are high, this should be your prime earning time, but most people consider it their prime eating time. This is also when you have added responsibility due to marriage. Between 60 to 100, you become a non-producer but you are still a consumer. A wise person would be relying on the investments they had made during their prime earning time and not their children. Have retirement plans for your old age.

8. Manage your debts

Do not keep borrowing without a plan. Let the money you borrow go to its intended purpose immediately. Do not keep it in the bank. When you do this, needs arise and you end up using it for those needs. Only have debts that have meaningful consumption. Do not take loans for home improvement. That is a want, not a need.

9. Be open about your earnings

Many people hide their payslips from their non-working spouses, which is a recipe for familial disaster. Show your spouse what you earn to avoid domestic problems, failure to which can mean spending more money down the road as you try to resolve problems between you. Being open about your earnings also means being honest if you cannot afford some of the family’s wants (not needs). Do not take debt to cover unnecessary costs. Living on debt means that you are treading on water, and this means that you will eventually sink and drown. Spend wisely and spend less than you earn. Avoid living large.

Dr Kibicho is also the CEO of Panorama Consulting Company Limited