Security: Why you should pay yourself first
Waithaka Gatumia @PeopleDailyKe
“How in the world can you tell a man with a family, earning Sh15,000 a month, to even think about paying himself first?”
This was the question shouted at me on national TV last week by my fellow panelists when I suggested the idea to a security guard.
Mr Security Guard* was a union representative surrounded by financial experts debating whether he could survive on minimum wage.
I must admit, the question haunted me for a while, and I had to do some soul searching later in the week to see if I had been too harsh or completely out of touch.
After some thought, I am even more convinced that this is one of the first steps towards creating wealth for anyone. Pay yourself first means that you save and invest before you pay the bills.
Ask anyone about their dreams and ambitions and you’ll find that paying rent, repaying loans and grocery shopping will not be at the top of the list. However, we almost always find these three items at the top of most personal budgets.
At the same time, saving and investing, which will help you get to your dreams and ambitions, often do not even show up on the budget. In order to create wealth, we need to change this.
Take Mr Security Guard for example. After a little probing, we found that he was not accounting for all his income. He most likely has a side hustle, like washing cars, that is bringing in another Sh3 to Sh5,000 per month.
After some more questioning, we found that his wife is probably bringing in more than Sh15,000 per month only that her income is a daily wage rather than a salary.
So rather than starting with a monthly income of Sh15,000, it is now over Sh30,000 for Mr Security Guard’s household.
As the panel discussion heated up we found that Mr Security Guard still finds a few hundred shillings every month to bet on football. He had forgotten that he spends a few shillings on services such as ringtones on his phone every day.
He and his wife also face so many social obligations like funerals, weddings, and fundraisers for health emergencies, that they often can’t keep track of the amounts going out each month.
After accounting for all your income you need to account for where it is going. Try tracking your spending for a month and discover the truth about your money.
Those unplanned amounts can be repurposed and used to pay down debt, keep you out of bad debt, or help you grow towards your goals.
Mr Security Guard; once you know where all your money is coming from and where it is going then it is time to make a decision. Before you pay everyone else, save some and invest some.
Pay everyone else first and there usually is not much left. So pay yourself first! Those small daily choices add up over time and the dreams that seem impossible will become reality faster than you think. *Not his real name
The writer is Chief Executive Officer at Centonomy Ltd. [email protected]