The Salary Trap

Why Your Payslip Feels Smaller Than Your Promotion

Mercy got the promotion. Her savings did not notice.

Mercy Atieno is a procurement officer in Nairobi. Last year she was promoted, and her gross salary went from KES 80,000 to KES 120,000 a month. That is a fifty percent raise. She told her mother first, then her two closest friends, then she took herself out for dinner.

Fourteen months later, she sat on her bed with her phone in her hand, looking at her M-Pesa and bank balances, and did a quiet calculation. Her savings were almost exactly where they had been before the promotion.

She was not careless. She did not gamble, and she did not buy anything ridiculous. She simply could not find where the raise had gone.

I want to show you where it went, because I suspect it is going to the same place in your life too.

Mercy is a fictional character. Her story reflects patterns many Kenyan women will recognise.

The first leak you cannot see

A fifty percent raise is not a fifty percent raise

The first thing Mercy never worked out is that her raise was announced in gross pay, but she lives on take-home pay. Between the two sit NSSF, SHIF, the Housing Levy and PAYE, and the more you earn, the bigger the share that PAYE takes from each extra shilling.

Her gross pay rose by KES 40,000. Her take-home pay rose by KES 25,634. For every KES 100 of raise, about KES 64 reached her account. The rest went to deductions, and nobody sent her a message about it.

This is not a reason to feel cheated. These contributions fund things, including your pension and your health cover. But you cannot plan with a number you have never actually calculated.

The second leak you chose without choosing

The raise was spoken for before it arrived

With that extra KES 25,634 a month, Mercy did what almost every one of us does. She upgraded her life one reasonable step at a time.

• 01Her rent went up by KES 10,000, because the new flat was safer and closer to work.
• 02A car instalment of KES 9,500 arrived, because her new role felt like it needed a car.
• 03Her monthly support to her mother and her younger brother rose by KES 4,000, because she could now afford to, and because the family had noticed.
• 04Eating out, delivery and subscriptions quietly took another KES 2,000 to 3,000.

Add it up and you get roughly the whole raise. None of these decisions was wrong on its own. Together they meant that Mercy was earning fifty percent more and saving exactly what she had saved before.

This is the Salary Trap. It does not feel like a trap, because every step feels like progress. It feels like being a woman who has made it. The trap closes quietly, because your costs rise to meet your income and then, one month, a little above it.

What I want you to do instead

Decide where the raise goes before it lands

Here is what I would ask Mercy to do, and what I am asking you to do before your next raise, bonus or new client.

• 01Know your real number. Work out your take-home pay, not your gross, and plan only with that. Our free take-home pay calculator will show you in about ten seconds.
• 02Give the raise a job before it arrives. Decide in advance that a fixed share of the extra take-home pay goes straight to savings or investing on the day you are paid, before you can spend it. Mercy could have set aside KES 8,000 of her KES 25,634 and still lived better than before.
• 03Give your family support a plan. Support for family is love, and it deserves a line in your budget that you choose, not a figure that grows each time someone notices your promotion.
• 04Let your lifestyle follow your savings, not lead them. Build a month of cover, then three, before you take on a car loan or a bigger rent.

For more on how money can grow once you pay yourself first, read Edition 024, Her Money, Her Future. For the small leaks that eat money before you notice them, Edition 007, The M-Pesa Money Traps, is worth reading again.