Monday, August 15, 2022

Why Kenyan men get rich in their 30s then go broke in their 40s

Former deputy presidential candidate Ronnie Osumba had his whole life ahead of him. At the young age of 30, he was already a senior manager at leading telecommunications firm, Safaricom.

He had settled down in marriage, had one child and a series of properties. “I was married with one child, owned a home, two parcels of land and two cars,” he said.

At age 33, he had two children, three cars, and more land, and was a deputy presidential candidate. Within the next seven years to age 40, Ronnie lost nearly everything he had, including his marriage. “At 40, I lost all those things except my children,” he said.

According to financial advisory firm Tenon Recovery survey, men in their 40s are more likely to suffer a financial crisis than a midlife crisis. This is due to the accumulation of various factors and responsibilities that demand for more financial wherewithal.

“As people reach their 40s, any increase in wages over the years is counter-acted by a disproportionate increase in outgoings, such as paying college bills. These additional costs mount up, making it easy for debts to spiral out of control,” Tenon said in their survey report.

So why do Kenyan men get rich in their 30s then go broke in their 40s? The breaking apart that comes in the 40s could be the result of decisions the man may have taken in his late 20s and 30s.

“Finances are the largest component in the breakdown that occurs past age 40. Finances are however compounded by other factors such as deteriorating marriage, family and black taxes, and societal pressures,” says Rhina Namsia, the founder and chief executive officer of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory.

She points out that in the twenties, you will be building your career and wealth, and in the process, you will rake in long term mistakes from your financial decisions, whose consequences will only show up in your late thirties and early 40s.

“It’s said that life starts at forty. Literally, this is when the results of what you have been doing in your twenties and thirties financially become manifest,” says Rhina.

In an economy where it is nearly impossible to get rich at a young age, men who get wealthy young face the curse of young money.

According to sociologist Johnstone Miriti, many of these men will hardly have gone through the life processes that teach the value of money and delayed gratification.

“They will neither accept mentorship because of the socio arrogance that is common with young money, and the belief that they don’t need social mentorship since they were able to crack wealth on their own,” he says. “Should things hit the fan in their late thirties, survival becomes nearly impossible because they were never accustomed to it.”

He points out that a young man who went to good schools and got a six-figure paying job immediately after graduating from the university has a very high chance of becoming a multi-millionaire by their mid to late twenties. He also has a high chance of establishing a family before age 35.

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If there’s a bad turn in fortune such as a job loss and a major investment loss, this young man could easily find himself in the middle of wilderness he has not known before. “He isn’t familiar with the value of a shilling, joblessness and what it means to be broke.

And because he is a prominent figure with a reputation for being wealthy and flashy, he could rake in debts to maintain his lifestyle and social appeal,” says Miriti. He may also turn down jobs if they don’t match the salary and status he was used to.

This will inevitably set in motion a series of conflicts in his marriage, most of them revolving around mismanagement of resources and ballooning debt. These conflicts will in turn trigger emotional disconnection, depression, and possible divorce if untamed.

On the opposite extreme though, Miriti says that a man who went through the life processes and learned to appreciate the both ends of wealth and poverty could stand a better chance at proper financial management in his mid-life.

“This will however happen if he is not gluttonous and resists the urge to overindulge in his spending to compensate for the lack he experienced in his early 20s,” he says.

According to a study by R3, a US-based professional association for insolvency practitioners, men are also more likely than women to enter bankruptcy.

The study highlighted the leading reasons for men going bankrupt as job loss and business failure. But the midlife crisis also plays a role.

According to psychologist Patricia Waruguru, with midlife crisis comes concerns about health, stagnancy in a long marriage, physical aging, elderly parents, being neck-deep in a child’s college tuition payments, mortgage fees, or anemic retirement funds.

Where there is marital breakdown, it is easy for a woman who walks out to take the blame for leaving after fortunes have changed.

But marital breakdown is not always the result of the woman taking off when finances run thin. “My marital issues had absolutely nothing to do with finances. I think it is very unfair to always assume that women take off at the first sign of trouble. Life happening is never a single event. It is a series of events and decisions that build up over time!” said Osumba.

What to do to be financially safe heading into you 40s

There are steps you can take to ensure that you don’t falter when getting into your forties. Here are some of them:

Retirement

You must draw a retirement plan by the time you get into your thirties. This includes deciding the age you’ll retire and the type of lifestyle you’ll want in retirement.

Estimate how much you’ll need and begin with 80 per cent of your present living expenses. There are online financial calculators such as the CalcXML you can use to estimate how much you should save from your annual pay at your current age to attain your desired retirement figure.

Consumer debts

Get out of your high interest consumer debts. According to personal finance advisor and author of The Soldier of Finance, Jeff Rose, you must get out of high-interest consumer debt. If you have other debts, draw a repayment plan on how you can accelerate the repayments.

Lifestyle inflation

Rose says that you must keep your lifestyle in check. Instead of scaling your lifestyle upwards, consider scaling your retirement contributions.

New skills and gigs

If you have been used to a single source of income, this is the time to adopt new additional skills that can help you diversify into side gigs such as consultancy. This will cushion you in the event your primary source of income shuts down.

Housing and the school fund

As you head into your forties and you have a family, you will want to work on providing stable shelter. This could be through housing. Evaluate the most affordable options for you and choose that which you can pull through in the worst of scenarios.

Don’t put a down payment if you don’t have the money or source of money to fully fund. Work on your kids’ education fund too. Education policies can come in handy when your earning power starts to go down.

A version of this feature was published in the Saturday Magazine. The Saturday Magazine is a publication of the Nation Media Group.

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