I have a friend called James whom we met in Campus and shared a room for four years. James has a sharp mind and actually studied at Alliance High School. He was extremely good in anything science and was quite a fountain of knowledge. I remember one time he made me understand Schrödinger equation; some crazy equation in quantum mechanics. He also was a local grandmaster in chess and taught me how to play the game. I only beat him once in the four years we played numerous matches; and I guess he was sleepy. He was lucky to get a job as a systems developer a month after clearing our undergraduate. His employer wanted some more developers and James invited me over and soon we were crunching codes together for a meagre 20k pay. Back then we had loads of passion for the job and we could work overnight and on weekends in the name of making the codes work mostly at the expense of our social lives.
Despite his sharp mind in as far as formal education is concerned, I had started noticing some fundamental flaws in how he was dealing with money issues. He used to borrow me cash and rarely would we reach month end before he asked for a few coins. I once advised him that we join a Sacco but he said whatever we were earning then was too little. One day I convinced him that we go view some plots that were being sold in Syokimau by a land buying company. Back then the area was sparsely populated and you could even see some gazelles and antelopes and the plots were going for a paltry 100k, approximately 2 km from Mombasa road. He returned a verdict that the area is too remote and in any case we could easily get conned by the sellers. I bought one which I later resold for 600k. After 8 months of developing software, I got another job with a bigger corporate and soon after we lost contact with James.
Fast forward: The next time I saw James was 5 years later (2009) when we met at a house warming bash for a former classmate in Campus. When I saw him he looked much older and with a small pot belly. He was now a married man with two kids. While we were enjoying the meat, drinks were served and I noted he was happily taking some Tusker. That was quite strange because the James I knew was a CU member and he never used to partake of the Ruaraka waters. When I asked him what happened, he coyly said that problems engulfed him and he normally drowns his sorrows by partaking of that stuff; that way he forgets his problems a little bit. I was curious to know what his problems were and I knew after taking several bottles, he would open up. I long stopped taking beer and James would never stop teasing me that the reason I stopped was to get rich. By the end of the evening, I had noted that James was in deep financial crisis and a mountain of debts (his own words) had engulfed him. I knew that this long lost friend needed help. I therefore, proposed to him that we meet over coffee in a few days since he was already drunk and soon after he was not even coherent in his speech. When guests started leaving, I jokingly told him to stop taking more beer because he needed to drive himself to his place. He laughed aloud and informed me that his jalopy let him down and refused to start so he had used a matatu. I offered to drop him at his place and my parting words were we link up three days after and discuss his crisis further.
We finally met over coffee and he set the ball rolling. In front of me was a dear friend, who had never moved from his first job, was extremely frustrated by his boss and was no longer enjoying what he does. He recounted how he has had numerous pay rises to take him from the 20k as a fresh graduate to 80k, within a period of 6 years. And so I asked him in his own words what his problem was.
He said “Joshua (the boss) has given me those pay rises but interestingly I did not feel them as the cost of living seemed to have consumed them. In fact am living worse off than I did when I first got employed. An analysis of my pay check is quite interesting. I earn a gross pay of 80k. The obvious deduction is PAYE (pay as you eat of 22,000), then of course the statutory deductions (NSSF and NHIF), they also deduct HELB loan (5k), car loan(6k), a deduction of 7k of an unsecured loan that I took and attempted a side business that collapsed soon as after starting. The loan balance stands at 150k. This leaves me with a net income of 39,400 which is approx. 50% of the gross pay. Once I receive the net pay in my account I immediately pay my rent (13,000) & electricity & water (1000), school fees for my kid (3000 per month), then we do family shopping (8,000). The rest I fuel my car, repay some soft loans from friends and deal with any miscellaneous expenses within the month. Of late even fuelling my car has been a burden so I am forced to use it occasionally on weekends. As you realize, I have no allocation for entertainment because there is simply no money. I also have to deal with relatives who keep asking me for money (they educated me) as well as my in-laws who are not doing so well financially. Neither do I save any coin, in fact am forced to borrow before end of the month sometimes to deal with basic expenses. I wish I’d be able to save some money maybe in a Sacco and I’d want to do my masters. I also would wish to buy a plot for future development of the family home. I also need to have some cash for future school fees for my kids (one is already in school and the other is almost).My wife would have assisted me but she is not employed. How do I get out of my predicament and achieve financial freedom?? Please help me”
A careful analysis of this fellow indicated that he was clearly in the rat race though he was willing to get out of the mess. This is an above average Kenyan going by his earnings. He failed to catch the little foxes, and they have ended up ruining his vineyard (Songs of Solomon 2:15). With a little bit of adjustments here and there, this fellow can get out of the mess and progress up to a point where he achieves financial freedom. Some if not most of us can identify with him and his shortcomings.
I probed James a little bit and I found out that he had the following glaring flaws:
1. He never had a clear budget and he had no grip of his expenses beyond the obvious ones. Like I noted he even forgot they buy gas, the have a house help, he eats lunch while at work, he takes beer that he buys etc.
2. He was certainly living beyond his means evidenced by growing mountain of debts.
3. He had no financial goals and plans.
4. He was not saving / investing even a dime.
5. He was no longer enjoying his job. Lost all passion.
6. He was escaping from realities and drinking himself silly.
7. His expenses kept rising with higher pay, so he had a bigger problem than money.
So we agreed we will embark on a road to financial freedom and he was willing to play his part. We agreed that the easiest thing he must first do is to understand his spending, because therein was one of the little fox that he had to deal with. A very simple exercise we identified was to religiously jot down his expenses at the end of each day irrespective of how small they were. The exercise was to be done for two months. The importance of the exercise was to identify the holes in his pocket that he thought he had.
The next lesson will focus on what the expenses tracking for the twomonths revealed. It was quite a discovery for him.