Living paycheque-to-paycheque may not be the worst thing after all

Broken piggy bank

Over dinner recently, a friend explained that she and her husband – both full-time employees – feel like they’re living pay cheque to pay cheque. This is despite their pulling in more than Sh2.5 million in combined annual income.

But it soon became clear why they’re living pay cheque to pay cheque.

It turns out that my friend and her husband are doing an excellent job saving money, planning for the future and building wealth. And they have zero debt.

Once they’ve covered the big bills (rent, childcare, utilities, food and the car), and put away savings (emergency, retirement, a down payment for a house), they’re left with a little on top.

So why aren’t they celebrating their economic success?

It’s because wealth is suffering from a case of mistaken identity. Despite the popularity of books like The Millionaire Next Door, which portray the thrifty, hard-working habits of the wealthy, most people want to believe that being rich means having a lot of money to throw around. At one point, my friend even said, “I can’t believe I still don’t get to buy whatever I want.”

Bleak picture

That’s because ‘living pay cheque to pay cheque’ has become the designated phrase for individuals who are broke, who can’t manage their money. Google ‘Kenyans living pay cheque to pay cheque’ and the results paint a bleak picture, with headlines like ‘87% of Kenyans are living pay cheque to pay cheque’.

While there was a real economic downturn last year that knocked out the savings of millions of Kenyan families, there’s also a perception problem that worsened the situation.

Many people do live pay cheque to pay cheque, but not because they’re flat-out broke, but because they’ve wisely allocated their income into all the necessary buckets.

But we don’t have a word or a phrase that translates into: ‘Hey, I’m living within my means, I’m super secure, I enjoy life, and I sleep well at night.’ In reality, living within your means (and living well, within your means), should feel a lot more successful than it does, but unfortunately we’re creatures of comparisons.

We view consumption and savings relative to others around us. As investor Charlie Munger is known to say: “Nothing distorts a man’s rationality as the sight of his not-so-intelligent neighbour making more than they do.”