With a 50K Salary, How Do I Balance Saving in a Sacco & Buying Shares?

I earn Ksh50,000 monthly and currently save Ksh5,000 in Sacco. I want to start investing in stocks but don’t know where to begin. How do I balance between saving and investing on such a budget, and what’s a realistic first investment goal? - Peter, Juja.‍

You earn Ksh50,000 a month and already save Ksh5,000 in a Sacco. This shows you're prioritizing saving, which is excellent.

With Ksh50,000 a month, you have to balance your essential expenses, savings, and investments. To get started with investing, it’s important not to stretch yourself too thin. Your savings goal is important, but so is laying the groundwork for your future financial growth.

You have to strike a balance between saving and investing as saving is for financial cushion whilst investing is for future security. Thus, it would be important to know what to allocate where.

Investing in stocks:Start small: Since you’re just beginning, don’t invest large amounts right away. Start with a small portion, perhaps Ksh5,000 a month, and see how it feels. The Kenyan stock market has affordable entry points with stocks that can be purchased at relatively low prices.

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Research & Learn: Before diving in, it’s important to understand how stocks work and where to invest. Look into Kenyan stocks (Nairobi Securities Exchange, NSE), mutual funds, or exchange-traded funds (ETFs) as lower-risk options. Some platforms like Absa Stockbrokers, provide easy access for beginners.

Diversify: If you have a bit more capital in the future, consider diversifying your investments across multiple stocks or funds, which helps reduce risk.

Goal: Your first investment goal could be as simple as building your portfolio to Ksh100,000 over a year or two, or generating Ksh1,000 per month in dividends (depending on the stocks you choose). This is realistic for beginners, but be patient as stock investments typically take time to grow.

You can also use the 50/30/20 rule in balancing between your needs, wants and investments. Since you are already saving Ksh5,000 from the Ksh10,000 - that is 20% of the Ksh50,000 you can start off the stocks journey with the balance of Ksh5,000. This can be adjusted upwards if you can cut off your wants or if you get extra income.

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Also setting up an emergency fund in a money market fund even as low as Ksh2,000 per month will go a long way to help you curate a balance in your savings, even as you focus long term.