How Far will the Multi-millions in your Hands Go?

Do you know that you will make between one hundred million to a billion shillings in your lifetime? If you were absolutely certain of this, what choices would you make? If you did a forecast of all the personal income you will make from your salary or business, you’ll see that you are very close to these numbers.

Companies always do forecasts. They project how much they want to earn within a specific time frame, how much they want to spend and how much they want to be worth. Why don’t you do the same? Let’s take a typical person who goes to college and then works from the age of twenty five until the retirement age of sixty. Some people start working much earlier, so when you do this forecast for yourself, let your personal circumstances guide you. Let’s give him/her a starting salary of Kshs. 30,000 and increase it between ten and twenty percent every year. This means that if they start at Kshs 30,000 per month, the next year they’ll earn Kshs 33,000 per month and so on. People go through some moments where their income jumps a bit more than the standard inflationary increase, hence the range.

Let’s call our young graduate Sylvia. On the first day of work, Sylvia is given her contract. What if Sylvia is also told that given what we know about the career she has chosen, inflation rates etc, she will earn Kshs 430 million in the next 35 years? This means that for the duration of her working life, she will earn almost half a billion shillings. There are some people who start off by earning Kshs 70,000 in their first job, and these will earn over a billion shillings in their working life.

Bust the Myths

Given what we’ve seen here, let’s throw out the myth that ‘we can’t earn money at whatever level we’re in’. Starting from the day you start working, chances are that you will earn multi-millions or billions. The question then is, “How much of this money will show up at the end?” If at the end of life on earth you had to give an account of what you did with the financial resources you had, what would we see?

Even after we deduct tax, Sylvia still has over three hundred million shillings to account for. What if she says that over the years, she’s spent another 62 million on house rent? This is about 20% of her earnings! If you knew in advance that unless you do something differently this is the cumulative amount of money that you’ll pay in rent, what would you do? (Click to Tweet) Maybe you wouldn’t be so quick to move to a more expensive house every time you had an increase in income. Maybe you would start working on a plan to buy or build your own house, which may be much more efficient than sixty two million. Maybe you would simply purpose to invest more money than you pay to your landlord.

Expand the Conversation

Let’s talk about entertainment. Are you happy to pay the amount that you’re currently spending on entertainment? I have sat with people who admit that they spend up to one million shillings at the bar every year (three thousand shillings per day). Apart from what that will have done to your health, imagine what you feel when you have to account for it at the end? Will you be happy knowing that you drank that amount of money but you were not able to take your child to university? Sometimes, we hide behind the excuse that certain universities are too expensive, so the bar becomes a bigger beneficiary to your money than your child.

You may also realize that you never got to do the things you really valued. Would you have preferred to travel the world instead of buying lunch every day? If Sylvia buys lunch every day for her entire working life she will spend over fifteen million shillings (Click to Tweet). Let’s also talk about savings. We have such a poor savings culture in our country that even if Sylvia only manages to save and invest 10%, she will still be among the few that do. Do you think she will be content to realize that out of Ksh 430 million, she only made forty million shillings work for her?

It Takes Time

The amounts we have been talking about happen over time. We need to think, “What is the equivalent of that amount right now?” One shilling ten years from now is not the same as one shilling now. Let’s say that today, Sylvia’s employer is willing to give her a one-off amount and then never have to pay her again for 35 years. They will not give her 430 million, because that amount is only earned over time. The equivalent in today’s money is closer to 15 million. If you had sh. 15 million today and invested it for ten years, you would end up with Sylvia’s amount in 35 years. So Sylvia’s employer is valuing her future based on current information about her, and has priced it at 15 million.

Would you Trade it Off?

Would you trade your future earnings for a similar amount? No? You’re already doing it if you don’t consciously start to push the boundaries of what you can earn and what you can do with it. Most people are doing the same old thing at work, displaying the same old attitude and expecting miracles to happen when salary reviews are done. If Sylvia doesn’t believe that her potential is only worth fifteen million shillings, she needs to proactively work towards developing herself, meeting targets, bringing her best to work, etc. This way, her earning potential will increase and consequently, her current value will be higher, today. In tandem with that, she will also start to make her savings work for her to grow and generate income.

Look at your finances the same way an organisation would. Forecast for the long term so that you can truly make the decisions that will have an impact in the next five, and then ten years. Decide how you’re going to spend the billions that will make their way through your hands over time. Work towards the income you want to receive, and let’s continue this conversation in the comments section below. Now that you know that you command multi-millions and possibly billions, what different results would you like to see?

Waceke Nduati-Omanga runs programs on Personal Finance Management and Entrepreneurship. 

Find her at waceken@centonomy.com| twitter @CekeNduati| Facebook.com/CekeNduati