12 tricks to help you save and reach your financial goals faster

There is always an opportunity to save money to help you reach your goals faster. Here are some tricks you can use to help you save a little bit more if you are having difficulties finding money to save or in addition to your regular savings schedule 

1. Save automatically before you spend. 

When you get your income, before you do anything else, deduct your savings and put them into a savings account. To make it even easier, set up a check-off system from your employer (payroll department) to a money market fund or Sacco savings account or set up a standing order from your current/salary account to a savings account so that money is deducted automatically from your main account and transferred to your savings account before you touch it. Saving automatically is the best way to save without a struggle. 

For those who pay income tax (pay as you earn/PAYE), doesn’t the government take off 30% or so before you even touch your salary? And after the government and NHIF, NSSF, insurance, loans and everyone else has taken their cut, they leave the rest to you and you learn how to budget around it. Why not include yourself in the group of people who get their cut first, before you distribute what is left to your landlord, school and all those other people who are waiting for a chunk of your income? 

If you say that you will save after you have finished paying the bills, you will never have any money left to save, so prioritise and automate your savings. 

2. Save your loose change. At the end of every day, I empty my purse and divide the various coin denominations I find in there into two. For example all 10 bobs are put into two piles, then all 20 bobs and all 5 bobs. The first pile goes back into my purse, and the second pile goes into the piggy bank I use for saving coins. When it fills up, I top up if I need to and transfer it to my money market fund account.

 

3. Save all 50 bobs or all 100 bobs that pass through your hands. Just like in (2) above, you can decide to save all the Sh50 or Sh100 or any other denomination of your choice that pass through your wallet. 

4. When you finish paying off a loan, don't stop. What do I mean? Take that money you've been paying a loan with and set up an automatic standing order to a savings account or set up a check-off system to a money market fund. So say you've been paying Sh5, 500 for a loan every month and you have just finished paying your loan, instead of finding ways to spend that Sh5, 500, start saving it, preferably using an automatic standing order or check-off system. If you save that Sh5, 500 you used to pay your now paid-up loan with for 12 months, you will have Sh66, 000 to help you reach your savings goals faster. 

5. Save your salary increment. If you get a raise (salary increment) at work, instead of adjusting your budget/lifestyle upwards to absorb that money, continue living on the same amount you were living on before (as if you are still earning the old salary) and save the extra amount your employer has given you. So say you get a Sh6, 000 raise, you can set up a standing order to save that money automatically and in 12 months, you’d have Sh72, 000 in savings. This is the same principle in number (4) above. 

6. The same applies to if you “find” money. Finding money means getting money you were not expecting, such as a refund, a discount, reimbursement of costs by your employer, or even finding a Sh1, 000 note in a trouser pocket you had forgotten long ago. Instead of using that money, put it directly into your savings account without second thought. 

7. Save your lunch money. Carry lunch to work a few days a week and save your lunch money. For instance, if you usually buy lunch at work for Sh300, you can decide that on Mondays and Thursdays you will carry lunch from home, so that week, you save Sh600 and put it into your savings account. You could decide to carry lunch three days a week, so that week you'll save Sh900. You could decide to carry lunch the whole week, so that week you'll save Sh1,500 or more.

 

8. Save your fuel. You could do the same with your car. If public transport is cheaper than using your car, you could decide that three days a week, you'll take a matatu home and save the amount you would have spent on fuel on those three days. You could also decide that that whole week, you'll take a matatu and put the amount of money you would have used on fuel into your savings. 

9. Do a spending fast. In religious circles, to fast is to abstain from food/eating for a specified period of time during which one says fervent prayers for a specific purpose. You can apply this principle to personal finance to help you save. This is basically the principle behind point (5) and (6) above and it basically means cutting off everything that you don’t need to survive and saving the money that you would normally use on the non-essentials. 

To be able to do a proper spending fast, you have to first know where exactly all your money is going -- every last coin -- so first track your expenses for a month and then evaluate what you actually need (essentials/things that you honestly cannot live without) and things you can actually do without. 

Once you see where exactly your money is going, you can cut back on the non-essentials and the money you save by not spending, should go directly to your savings account. This could mean carrying lunch instead of buying lunch every day (if you carry lunch from home for a full month, and you usually spend Sh300 on lunch every day, you’ll be able to save Sh6, 000 or more that month. Put it into your savings account). You can also cut back on coffee and alcohol, you won’t die without them (unless you are addicted). Say you spend Sh3, 000 on alcohol every weekend, if you decide to reduce that amount to Sh1, 000, you will save Sh8, 000 that month. If you decide to do an alcohol-free month, you will save Sh12, 000 that month. You can even decide to do without DSTV for a month, you won’t die from not watching pay TV. 

I’m not saying that you shouldn’t have fun; saving is not all gloom and doom; on the contrary, if you learn how to optimise your spending, you will not only have more fun and less stress, but you will also be able to achieve those things you only used to dream about, but thought that you could never afford them. 

Secondly, if you do your spending in moderation and do your spending fast for limited periods of time (rather than forever -- that would make you a miserable miser), you will find money to boost your savings. (We’ll talk about having fun while still being able to save in another post.) 

10. Carry only the exact amount of money you need. This goes hand-in-hand with the spending fast. So say my fare is usually constant at Sh200 for the trip to work and back and I use Sh200 for lunch, that day I will carry exactly Sh400 in my purse or Sh500. I will make sure that my Mpesa balance is zero (and resist the temptation to opt into Fuliza), that my bank accounts are not linked with mobile money, so I can’t transact from my phone, that I don’t carry ATM cards, etc. This means that even if I am tempted to buy things on impulse, I simply cannot because I don’t have any money on me to spend. (We’ll tackle impulse buying in another post). 

11. Round it up. When you buy something and the cost does not end in 0 (zero), save the amount of money it would take to get the cost to end with 0 (zero). For example, if you buy something costing Sh42, put the 8 bob change in a piggy bank or transfer an equivalent amount to your Mshwari Lock account. If you use a piggy bank, when it fills up, you can transfer the full amount to your savings account or money market fund. 

12. Lastly, make it difficult to access your savings. A savings account without a debit card (ATM withdrawal card) and with limited withdrawals, is best. I have a Sacco savings account that only allows you to withdraw money at the end of the year. 

I have a money market fund account where withdrawing money takes like three days and where the first withdrawal is free, but subsequent withdrawals are charged Sh1,000 per withdrawal. 

When I think of paying Sh1,000 to withdraw, I just let my savings be unless I have actually accumulated the exact amount I need to meet a certain goal, then I can withdraw and pay for my goal without feeling the pinch. So do whatever it takes to create a barrier between you and your savings, to make it hard for you to withdraw your savings anyhow and any time. You are saving for a purpose and you cannot achieve your financial goals if at all you can withdraw your savings randomly to buy things on a whim. 

I hope these tips help you save more money, and if there are additional tips you use, please share in the comments. Happy saving! 

*These tips were first shared in the 52-Week Savings Challenge Kenya in 2016

Affordable housing in Kenya: How it's going to work

The government plans to build 500,000 houses as part of it's affordable housing project. According to the affordable housing portal (Boma Yangu), this is how it is going to work.

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Kenyans will register and state the kind of house they want and in which county on the affordable housing portal. Right now the registration is to gauge interest and assess needs (what kind of houses people want).

Once you register, you'll get a unique identification number to use to make monthly contributions to the Housing Fund, managed by the National Housing Corporation (NHC).

Making contributions

You can make your contribution as:

1.   Statutory contributor – This is the mandatory contribution deducted by your employer from your salary (1.5%) and submitted to the Housing Fund every month. Contributions are capped at Sh2,500 per employee and employer per month.
2. Voluntary contributor – If you choose this option, you can contribute as much or as little as you want. You can withdraw these funds after five years for housing related activities or after 15 years or upon reaching retirement age (65 years). Your contribution will not be taxed at the time of withdrawal. If you choose to make voluntary contributions, you will not be able to access your money at any time. You will be subject to withdrawal rules (after five years for housing-related projects or after 15 years or retirement age).
3.  Joint contributors – This option allows you to make a contribution towards one house at a time with your husband or wife, but you can each choose to contribute individually. You can also do this jointly with other people towards one house. If you apply jointly, your incomes will be assessed jointly and the title of the house will be issued in the name of all the joint applicants.

You can monitor your contributions on the portal. If your income changes, the contribution made towards the Housing Fund will adjust proportionately to reflect the change.

Will my contributions earn interest?

Your contributions will earn a return every year, which will be announced based on the Housing Fund’s performance.

Allocation of houses

Allocation of houses will start when construction begins. Civil servants, the police and other members of the disciplined forces will get the first right to 30 per cent and 20 per cent of all available housing units, with the rest going to other Kenyans. The allocations will be computerised (done by an algorithm that sifts through profiles in the portal to prioritise those who need the affordable house most). If you don’t get allocated a house in the initial allocation, you will be put on a waiting list and given priority in the next allocation round. You can only buy one house under the affordable housing plan.

Factors to be considered in allocation:

1. When you registered (first come, first served)
2. Your income
3.  Family status (families will get preference)
4. Vulnerable groups
5. How much deposit you’ve accumulated through monthly contributions
6. Your assets
7.  Demand for your preferred type of house

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What kind of house do I qualify for?

The affordable housing scheme targets people in the following income groups (low and middle-income or people who earn less than Sh100,000 per month). The kind of house you qualify for will be based on your income.  

1.  Social housing – Kenyans who earn up to Sh19,999
2.  Low-cost housing – Kenyans who earn between Sh20,000 and Sh49,999
3. Mortgage gap – Kenyans who earn between Sh50,000 and Sh100,000

Those who earn less than Sh20,000 per month will be offered three options:

1.  One-room house at a cost of Sh600,000
2. Two-roomed house at a cost of Sh1 million
3. Three-roomed house at a cost of Sh1.35 million

Those who earn between Sh20,000 and Sh150,000 per month, will also get three options:

1.  One bedroom house (30 square feet) at a cost of Sh1 million
2.  Two bedroom house (40 square feet) at a cost of Sh2 million
3. Three bedroom house (60 square feet) at a cost of Sh3 million

You will be advised on the projected monthly rent-to-own payments based on the 3% to 7% per annum interest rates.

To ensure that those who qualify for social housing are the actual beneficiaries of the houses being built for them, the government plans to verify and register them in their communities. If there is more demand than supply for social housing, those who need affordable housing more will get priority.

How will I pay for the house?

Eligible Kenyans (those who earn less than Sh100,000) can buy the houses through the National Tenant Purchase Scheme (a rent-to-own model). What this means is that once you are allocated a house, you will be living in the house and paying “rent”, but in this case, that money goes towards owning that house, such that once you have paid for the full cost of the house, it belongs to you and you can stop paying rent. The mortgage or home loan will be offered at a fixed interest rate of 3% to 7% per year over a 25-year period. This means that your “rent” will not change/in the 25 years you take to pay for the house.

Monthly costs (service charge)

Apart from the monthly rent-to-own payments, you will also be required to pay an affordable service charge to a company contracted to maintain the facilities including the common areas and to fund major repairs of the housing complex. You will continue to pay the service charge long after you have finished to pay for the house.

What happens to those who earn above Sh100,000?

If you don’t fall within the above income groups (you earn more than Sh100,000), you will contribute to the Housing Fund (remember there are mandatory contributions for those who are employed, and you can also do voluntary contributions), but because you are not eligible to be allocated an affordable housing unit, you will have access to cheaper home loans from banks and Saccos through funding from the government’s Kenya Mortgage Refinance Company (KMRC).

You can also get your contributions after five years and use them for other housing-related activities, such as a deposit (down payment) for a mortgage, mortgage repayment or to improve your house.

 If you don’t claim your savings for housing-related activities, you can get them back after 15 years or upon attainment of retirement age. So say you earn Sh100,000 a month and you pay Sh1,500 a month (1.5%) for the Housing Fund, in five years you will have contributed Sh90,000 and in 15 years you will have contributed Sh270,000 (if your income doesn’t change).

If you contribute Sh2,500 a month, in five years you will have contributed Sh150,000, and in 15 years you will have contributed Sh450,000.

Tax relief

Those registered on the affordable housing portal are eligible for tax credit/relief equivalent to the amount contributed or the lower tax payable, up to a maximum of Sh9,000 per month. Self-employed Kenyans who are registered on the portal will also get tax relief, and both mandatory and voluntary contributions will get tax relief. For the employed, the deductions and tax relief will be handled at payroll. For the self-employed, you will get your tax credit when filing your taxes. First-time home owners/buyers will not pay stamp duty.

Who is building the houses?

The houses will be built by private developers, who will then sell them to the government, which will then offer the houses to Kenyans registered on the affordable housing portal. The government will provide land for building the houses, including in the counties, build access roads and the transport network, and set up infrastructure (electricity and water and sewerage). The housing portal will help in automated identification of the buyers.

Upcoming projects will be announced on the housing portal, in the newspapers, on radio and in Huduma Centre.

Rural areas

The government will support homeowners in rural areas to improve the homes they live in or to build new ones using locally-available quality building materials such as stabilised soil blocks. Already, 92 Appropriate Building Technology (ABT) centres have been constructed across the country, with a plan to have one in every constituency, then one in every ward across Kenya. Staff at these centres will offer technical assistance and equipment to members of the public to improve the quality of their houses. There will be Matofali machines, which are used for the manufacture of stabilised soil blocks, for hire. TVET colleges will also train members of the public on how to use cost-effective and environmentally-sustainable building technologies and how to modernise construction practices while preserving cultural values. Kenyans living in rural areas can apply for funding from the Housing Fund at 7% interest rate.

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Can I get a house if I don’t have a regular income?

Yes, but you have to prove that you are able to make regular monthly loan payments.

What if I am unable to pay the monthly payments?

The payment terms are designed to be affordable and flexible, geared towards helping you secure your home. However, every case will be looked at on a case by case basis. The government will engage insurance companies to develop home insurance products to cover home owners/buyers against losing their home if they lose their income/job. The cover will pay all or part of the monthly mortgage payment for a limited time, if a person loses their job involuntarily or if they lose income due business disruption, disability, hospitalisation, death.

Can I sell my house?

You will have to wait for eight years before you are allowed to sell the house. If you want to sell it before eight years have lapsed, you can only sell it back to the Housing Fund and retain the equity build-up i.e. the amount of your home you actually own, based on the amount of money you have already paid for it.

What happens if I die?

The house can be transferred to your next of kin.

For more information log on to:

 http://bomayangu.go.ke

http://www.housingandurban.go.ke/wp-content/uploads/2018/11/Development-Framework-Guidelines-Release-Version.pdf