Working at Vinestalk Kenya has equipped me with the prowess to ascertain whether an individual is living beyond their means or not; you see, as a Fintech company we are privileged to have the skills to differentiate between Gross Income and net income. From the vast experience I have amassed working at Vinestalk for less than a year, I have managed to conduct an in house interview on our clients.

Sarah (hypothetical) walks confidently to Vinestalk and meekly tells me she wants a loan of KES. 150,000.” What do you want the loan for?” I ask. She replies’’ I lost my father last year, my brother is bedridden due to cancer and I took in his kids, then I lost my job and didn’t pay my rent for 6 months, But I have a new job now.’’ She quickly adds. I immediately look at her with so much compassion and sympathy. Sarah shares her bank statement with me to carry out due diligence, and I immediately realize that her net salary is KES. 300,000 and that she has been receiving it for the past two months from her new job.

I enquire more about her new job and how she is coping with it. It’s evident that she is getting a good salary, bearing in mind that getting such a generous employer isn’t easy in Kenya. Sarah discloses that she just needs this loan to clear her rent arrears of KES 150,000. This prompted me into finding out how much her rent per month is and the kind of lifestyle she lives. She was staying in one of the leafy suburbs paying a rent of KES 60,000 per month for a bedsitter. YES A BEDSITTER! Moreover, she used taxi every day to work as opposed to public means of transport and eats out at least 5 times a week.

At this moment I was hit with a swarm of concern, I called Sarah aside for a little private chart seeing as what I deduced from all this was that Sarah was living beyond her means. I went ahead to give her unsolicited advice. I had to. I guess it comes with the territory of working in a financial institution.

The 50-30-20 rule. Here she would use 50% of her income on needs, 20% on savings and 30% for her wants.

In this scenario, her needs are:

• Rent 60,000

• Transport 45,000

• Shopping & utilities 60,000

• Brothers chemotherapy 100,000

Total 265,000 while 50% of 300,000 is 150,000

Her wants:

• Dining out 25,000

30% of 300,000 is 90,000.

Her total needs & wants = 290,000 while ideally they should total to at most KES 240,000 so that she can at least be able to save 20% of her salary which is KES 60,000 and this would go a long way in helping reduce her accumulated rent arrears.

So as you can probably tell, she could not qualify for a loan of KES 150,000 with her current lifestyle.

If were to look at Sarah’s expenditure and revamp it, I could easily get the extra KES 50,000 to enable her save at least 20% by using public transport as opposed to Taxi which would be 200 per day i.e. 6,000 per month instead of 1,500 per day i.e. 45,000 per month …..Resultant saving being KES 39,000.

For rent I would move to a more spacious house of even 40,000 in close proximity. Why subject yourself to live in a bedsitter at a leafy suburb just so you can associate with the area? Societal pressures! …..Resultant saving being KES 20,000.

And dining out I would bring it down to KES 5,000. If I’m doing a house shopping of KES 60,000 it had better have some good groceries in it…… Resultant saving KES 20,000

Therefore my total saving including the initial saving of KES 10,000 comes up to a whooping KES 89,000.

Money is just a game of numbers. Let’s be smart people. Budgeting is an important tool to use in your spending. We, Vinestalk are available for consultations on this topic. Talk to us.

If there’s anything to learn from the covid – 19 pandemic, is that living within our means and setting aside emergency funds enough to cover living expenses of at least 6-9 months is prudent. We have seen clients losing their incomes during this period and left with totally nothing.

“He who spends/buys what he does not need, steals from himself.” Do not be a statistic.