Question from a reader
Earning Ksh 30,000 in my mid 20’s. Should I start with buying a Car or Land?
Congratulations if you have a job in your mid 20’s. in April this year, data from the Kenya National Bureau of Statistics (KNBS) showed that the number of Kenyans without jobs increased to more than 2.97 million in the last quarter of 2022.
Sadly, more than half of Kenyans without jobs were between 20 and 29 years, showing the growing crisis of youth unemployment. Therefore, you are lucky to have a job in your mid 20’s.
With that in mind, before I answer on what you should buy first, let me mention budgeting, because investing starts with good budgeting.
I have done a video explaining the 50/30/20 budgeting rule where at least 20% of your income should go towards saving and investment. You can check that video on my YouTube channel to learn more.
If we use that formula and I assume the Ksh 30,000 is your net salary, this is what you should have
Budgeting Rule
| Item | % allocation | Allocation |
| Needs – Housing & related bills | 50% | Ksh 15,000 |
| Wants – Entertainment etc. | 30% | Ksh 9,000 |
| Savings & Investments | 20% | Ksh 6,000 |
Where should you start?
As a young person first of all find an ideal savings plan where you can consistently save for 6 months or 1 year. Some of the options you can explore include: A Sacco or Money Market Fund. This builds your saving discipline and accumulates some funds. Within 6 months you will have saved Ksh 36,000 or Ksh 72,000 in one year. You can do this consistently even as you plan on your first investment.
What Next?
Back to the question of buying a car or a plot while earning Ksh 30,000. My simple question would be why do you really need that car or plot?
The reason why most people buy a car is for family needs, convenience, work requirements, status, prestige etc. On the other hand, the reason why most people buy a plot is for investment, building a home, future development, farming, to start an income-generating business such as rentals, events ground etc.
Based on your situation which one do you need more? A plot or a car?
Let’s Analyse Further
Comparison Between Investing in a Car and Land
| Car | Plot or Land | |
| Appreciation Rate – Resale Value | General data show that a car loses between 10 -15% of its value every year | Land appreciates in value over time. For example, the average appreciation of land in Nakuru is 12.7% therefore you are assured of increase in value |
| Maintenance Cost | A car requires regular maintenance and other mandatory expenses which is unlike land | Maintenance cost of land is low and at times you may not need to do anything on the land and the value will still increase. |
| Valuation | Car valuation reduces over a period of time because it is a depreciating asset | The value of land keep rising especially with population growth, infrastructural growth and developments |
| Income Generation | A car is a liability unless used for car hire, taxi business, for selling items etc. Therefore, you can consider buying a plot then later a car | Land can generate income for example leasing, farming, events garden, temporary stalls, tree growing etc. |
| Risk levels | Every investment has risk levels. Owning a car comes with some risks such as breakdown, theft, accidents etc. as such you can consider the risk levels of your first investment | Land has low to zero risk because once you have a title deed you have legal ownership |
| Collateral | You can use your logbook as a collateral for a loan, however, the amount may be lower due to depreciation | You can use your title deed to take a loan for other uses. The amount is higher due to appreciation |
In conclusion, my advice to young person in their 20s is to consider building up savings and investing in an income generating asset. For example, there are cases where a car is used to generate income or for work requirements that’s okay.
In a case where you need a good investment with low maintenance go for real estate. My advice is start with a land in a well selected area such as Nakuru City then later on invest in a car because ultimately you will own both a car and a property.
