Why many of us earn good money but are always broke

Broke woman

Your needs have increased, therefore you are spending more and still saving less.

Photo credit: Shutterstock

I recently found myself contemplating about the irony of life. Everyone, apart from those who are born into rich families, start life small.

A cheap room somewhere in a dusty, polluted and cramped neighbourhood where the kadogo economy, a lifesaver, thrives.

The cost of transport here is never fixed, it varies depending on the time of day.

Waking up in the wee hours of the day to catch the very first matatu to town means you save some money, while going home late, after 10pm, means you pay much less than you would have had you headed to the bus stop during evening rush hour.

At this stage, life is usually one big struggle because what you earn is never enough to meet your needs and no shilling goes to waste.

And then your business begins to get better or you progress in your career and get a salary increment.

If you are like most people, the first thing you do is move out of that impoverished neighbourhood you live in to a slightly better one, which means moving into a more expensive ‘house’, say a bed-sitter, where you, at least, won’t have to share a toilet with a thousand other tenants.

Had you stayed put in the same neighbourhood, you would have managed to save a good chunk of money, but, as we like to say, life is for the living, and since you live only once, why continue living in the midst of poverty when you can leave some of it behind?

As time goes by, your business continues to grow and you decide to open another branch. You also figure that you have outgrown the bed-sitter and move into a one-bedroom rental in an even better neighbourhood.

Rent here is four times higher than what you had been paying for the bed-sitter. Food is also more expensive, so is bus fare and all other needs and services. It also occurs to you that you need to start dressing better, after all, everyone else in your new hood dresses a certain way, and it is human nature to want to fit in.

With all this in mind, and if you’re like most, you’re not saving more than you did when you were living in the one room. You’re earning more, but your needs and wants and the money it requires to acquire them has gone up too. Upgrading comes with a price.

And the cycle continues. You buy a car and with it comes fuel. By then you’ve moved into a three-bedroom house since you are now married and have a child, and since you go to work, you need to employ a house help too.

Your needs have increased, therefore you are spending more and still saving less. You might be living a better quality life, but you’re still hustling, struggling to make ends meet, living from hand to mouth, month to month.

But you continue earning more each year and each time you upgrade your lifestyle. Bigger house, maybe you take a mortgage. You also move your children to a more expensive private school and even ditch your modest car, which could run on Sh1,000 for a day-and-a-half for a bigger car that consumes buckets of fuel, money that you could have saved and invested, but hey, you work hard, so why not play hard? At this point, you’re earning ‘good money’, but you’re always broke, thanks to an extravagant lifestyle.

What I’m I getting at? Many of us never achieve financial freedom in spite of working long and hard for our money. If you asked a financial coach, he or she would probably blame it on lack of financial literacy. That majority of us know how to make money, but have no idea how to hold onto it, or better still, how to grow it.

The writer is editor,  Society and Magazines, Daily Nation.   Email: cnjunge@ ke.nationmedia.com