I’m 31 years old and earn a monthly income of Sh71,000. I have taken in my boyfriend, who has been unemployed for the past five months, despite us being unmarried. I provide him with a monthly allowance. My financial breakdown includes rent (Sh9,000), food and groceries (Sh15,000), GoTv (Sh1,850), water and electricity (Sh2,000), supporting my boyfriend (Sh10,000), transportation (Sh5,000), salon and fashion (Sh8,000), primary school fees (Sh15,000 per term), and assistance to my mom (Sh5,000).
I am considering taking out a Sh300,000 bank loan to renovate my mother’s house and fulfill a vow I made when I graduated from university. I don’t have any savings or investments. Additionally, my boyfriend is pressuring me to take a loan and buy him a small car for a Bolt taxi business, threatening to end our relationship if I don’t comply. I’m seeking advice on how to manage my finances in this situation.
One effective way to manage your finances is by following the 50-30-20 rule. This rule involves categorizing your spending into needs, wants, and savings/investments. Needs are essential for your survival, wants are non-essential but desired expenses, and savings/investments are for your future goals. Let’s break down your financial situation based on this rule:
- Needs: You are currently spending Sh44,600 on essential expenses, which is 62% of your net income. This includes rent, groceries, utilities, school fees, and supporting your boyfriend.
- Wants: You spend Sh15,000 on non-essential items like salon and fashion. This makes up 21% of your net income.
- Savings/Investments: You are not currently saving or investing any part of your income.
To improve your financial situation, consider the following steps:
- Start Saving: Aim to save at least 20% of your net income, which would be Sh14,200 per month. Begin with a small amount, even Sh5,000 per month, and gradually increase it as you adjust your budget.
- Cut Down on Wants: Reevaluate your spending on non-essential items like salon and fashion. Try to reduce these expenses to a more reasonable level.
- Emergency Fund: Before taking a large loan for your mother’s house, build an emergency fund that covers at least three times your monthly needs. This will provide a safety net for unexpected expenses.
- Loan Options: Compare different loan options, such as bank loans and Sacco loans, to choose the one with the lowest interest rate and most favorable terms.
- Prioritize Your Goals: Evaluate the importance of your boyfriend’s request for a car and weigh it against your financial goals and obligations. It’s essential to set clear boundaries in your relationship regarding financial support.
- Focus on Your Mother’s House: Before considering additional loans for other purposes, ensure that you meet your initial financial obligations and goals, such as renovating your mother’s house.
Remember that your boyfriend should not be the primary focus of your financial decisions. It’s crucial to assess his contribution to the relationship and set healthy financial boundaries. Taking out a substantial loan for a non-family member’s vehicle may not be a prudent decision, especially in your current financial situation. Prioritize your financial well-being and your long-term goals.
