The Payday High: What Makes You Feel Rich & Why It Is Dangerous

Greetings, and welcome to the 44th edition of the Wallet Wellness Newsletter - your midweek source of practical financial tips to elevate your money management skills!

We hope you got a chance to read last week’s edition, where we discussed why you keep dipping into your savings and how to stop. This week, we shift gears to what makes you feel rich on payday & why it is dangerous.

As always, be sure to check out the Concept Corner below for a deep dive into the money concept of the week.

Let’s dive in!

MONEY254 TIP OF THE WEEK

The Payday High: What Makes You Feel Rich & Why It Is Dangerous

The moment your salary notification, whether an M-Pesa message or bank alert, arrives, a chemical rush floods your system. This is the Payday High, a fleeting but potent feeling of euphoria, control, and perceived wealth. For a brief 24 to 48 hours, you feel rich, powerful, and capable of saying "yes" to every want.

This feeling, however, is a dangerous psychological trap. It's the primary reason why so many Kenyans find their bank accounts depleted in two weeks, leaving them stressed and scrambling for the rest of the month. Understanding this cycle is the first step to breaking it.

What Fuels the Payday High?

1. The Illusion of Abundance: For the first time in a month, you have a large sum of money and your brain mistakenly equates it with unlimited resources. The immediate scarcity of the previous month is gone, leading to an overestimation of your financial capacity.

2. Emotional Relief and Reward: Payday is a reward for a month of hard work. The urge to "treat yourself" is strong because spending releases dopamine—the pleasure chemical. This is the simplest way to get instant gratification and validate your effort.

3. The Social Pressure to Perform: In social settings, there is often pressure to be generous or participate in expensive activities right after payday. Buying rounds, upgrading your look, or covering the cost of an outing feels good because it temporarily boosts your social standing.

Why the Payday High is Financially Dangerous

1. It Sabotages "Pay Yourself First"

The greatest danger is that the emotional high prevents you from making rational decisions. You put off saving and investing, thinking you’ll do it with what’s left over. Since the high encourages immediate consumption, there is rarely anything left. Your savings become a last-minute chore instead of a first-priority investment.

2. It Leads to High-Cost Convenience

When you feel rich, you prioritize convenience over cost. For instance, for food,  you skip cooking and order delivery or eat expensive lunches, justifying the Ksh 500 to Ksh 1,000 cost because "it's only one meal." Over a week, this single habit can cost you more than your month's electricity bill.

3. It Inflates Your Lifestyle

The Payday High encourages lifestyle creep. You briefly live a lifestyle you cannot sustain for a full month. This makes it harder to return to your normal, budgeted spending habits in Week Two, leading to resentment and financial stress.

4. The Debt Cycle Starts Here

The high can make you overconfident in your ability to repay. You might take out a small mobile loan or use a credit card for an expensive purchase, rationalizing that you'll pay it back easily because "the money is coming." This sets the trap for a vicious cycle of debt.

How to Break the Cycle and Harness the High

The goal is not to eliminate the joy of payday, but to redirect that positive energy toward actions that secure your future.

1. Automate Your Financial Discipline: The moment your salary hits, strip your primary account of all crucial funds immediately.

   • Action: Set up standing orders to pay your Sacco contributions, MMF investment, and rent first. This ensures your money works for you before your emotions can veto the decision.

2. Delay the Reward: Postpone all non-essential discretionary spending until Week Two or Three.

   • Action: Allow yourself a small, budgeted "treat" on the actual payday (like one nice meal), but dedicate a specific day later in the month for your main discretionary spending. This allows the initial high to subside and lets rationality guide your purchases.

3. Divide and Conquer: Never see the whole lump sum.

   • Action: Divide your spending money into four weekly M-Pesa wallets or separate bank accounts. You only allow yourself to access one week's worth of spending at a time. This visually and practically limits your consumption during the critical first seven days.

By making your most important financial decisions in the moment of highest perceived wealth, you harness the positive energy of the Payday High to build genuine, lasting financial freedom, rather than just a fleeting feeling.

CONCEPT CORNER

Flat Rate Interest 

This is the kind of interest that is calculated on the principal loan amount and stays the same throughout the loan tenure. This means that the interest you pay at the start of your loan repayment will be the same as the interest you pay on the last month of your repayment. Flat rate interest is calculated based on prevailing market rates, the lender's policy, and borrowers' eligibility. It is a common type of interest structure used by many lenders in Kenya when taking a personal loan or buying a product on hire purchase terms. Read more.

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All You Need to Invest in the CIC Global Balanced Special Fund

As returns from local Money Market Funds continue to dip, more Kenyan investors are exploring new ways to earn higher and more stable returns.

One promising option is the CIC Global Balanced Special Fund — a Dollar-denominated fund launched by CIC Group in October. It gives investors exposure to both local and international markets, creating a balanced and diversified portfolio.

Designed for those seeking growth with managed risk, the fund pools resources from multiple investors and strategically allocates them across markets for stability and long-term value.

This video breaks down everything you need to know about the CIC Global Balanced Special Fund. Watch now to learn more!

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That's it for this edition of Wallet Wellness. We hope these financial tips have added some energy to your hustle. Stay tuned for more practical insights in our next edition of "Wallet Wellness" next week, and watch out for Money Weekly in your inbox this Friday.

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Cheers to your wallet's well-being!

Money254 editorial team.