I have no doubt that “broke” is a dreaded word in everyone’s mind.

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What being broke really means: Some smart financial decisions

By Eliazar Babu

I have absolutely no doubt that “broke” is the most dreaded five-letter-word in everyone’s mind. Some of us have reached such a point once or twice in our lives. I reckon that many would agree with me that it is not the most favorable state to be in. However, there are a couple of things we can learn and do to prevent us from being broke.

In Sub-Saharan Africa, no less than one percent are born into wealth whilst under ten percent are born into the middle class according to The World Bank. In general, we are not enlightened through any formal framework on how to keep money or grow it—basic personal finance skills are difficult to learn. As a result, even when a young adult starts earning more than they need to survive, they end up living from paycheck to paycheck because they think about their incomes mostly in terms of spending and haven’t learned how to save or build assets in proportion to what they earn. Broke means, if you lost your primary income source today, you wouldn’t be able to maintain the lifestyle you have become accustomed to because you have no assets that supplement your primary source of income to rely on. Many people have built expensive lives they can’t sustain because they incessantly splurge everything they earn and as such, have a revolving door of sort for their money.

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We must annihilate the idea that we shall always make more money. We have a finite amount of productive years to work; many people will never be as agile both mentally and physically as they are now. What happens in thirty years when you can’t work as hard and have no cushion to fall back on? Poverty and dependence on others are inevitable. In order to build wealth, this mentality has to change.

 What it means to be wealthy

We tend to measure financial success based on spending patterns, but our metrics are faulty. For example, Lady X lives in one of the best parts of the Kenyan Coast, has a decent job, and lives a lifestyle that many can only dream of. She is one of the hundreds of thousands moving up the income-earning scale, able to afford material things that were once out of her parents’ reach. For the uninitiated, she has an enviable life    and there’s an automatic premise that she is wealthy. However, building wealth is more about how much you keep.

Broke people and rich people approach the same amount of money differently. Broke people think it is about how much you earn but smart money people know it’s about how much of your income you are able to keep and convert into assets that can provide you with income tomorrow. The key difference is that wealthy people understand the relationship between how we earn and how we spend and they know where the balance is. Active income is the money you get from services rendered; it is the income from your job or business. Passive income is the money you make while you are sleeping.  It is the income you get regularly from investments you’ve already made.

What Is  Financial Freedom?

This is achieved when passive income surpasses your expenses. Ideally, the goal is to get to a point where the assets you’ve accumulated can pay you enough of an income to pay for your lifestyle. Case in point, income from a side-business you run can sponsor a holiday to Dubai or dividends from your stock portfolio or Sacco can buy you a Louis Vuitton or Chanel bag.

Knowing your net worth

Your net worth is the total sum of your assets minus the total sum of your liabilities. This gives you a candid picture of where you stand financially. You don’t have to be a genius in mathematics to do this.

Calculating your net worth

Illustration of a balance sheet for net worth of self evaluation.


  1. Make a list of everything you own of value (property, land, investments, home goods, cars, and cash) and them up.
  2. Make a list of everything you owe (mortgages, soft loans, or debts) and add them up.
  3. Subtract your total assets from your total liabilities.
  4. Don’t be embarrassed by the number. Calculating your net worth now will let you know your starting point.
  5. The figure is not as important as the trends in net worth. As long as you make a commitment to keep growing it, you’ll be good.

So, if you are distressed about being broke, why don’t you try and fix it today?

financial advice, net worth, wealthy

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