Why Do Wealthy People Borrow Money?

James leaned back on the plush leather seat of his SUV, his eyes fixed on the blinking fuel gauge. He sighed. Payday was still five days away, and his bank balance was dangerously low. He reached for his phone and scrolled through his contacts before calling his close friend, Mark.

“Hey Mark, can you lend me Ksh20,000? I’ll sort you out by next week,” James said, trying to sound casual.

Mark hesitated for a moment. “Uh… yeah, sure. But… James, why do you always seem to need a bailout? You’re doing well financially, aren’t you?”

James forced a chuckle. “Yeah, yeah, just a small cash flow issue. I’ll be good next week.”

But James knew that wasn’t the whole truth.

Read Also: Money Confessions: I Took a Loan to Become The New “Bazuu wa Mtaa”‍

The Reality Behind James’s Lifestyle

From the outside, James appeared to have it all together. He lived in an upscale apartment with floor-to-ceiling windows and a panoramic view of the city. His weekends were spent brunching at high-end restaurants and attending exclusive events. His Instagram was a highlight reel of exotic vacations, designer clothes, and luxury cars.

But beneath the polished exterior, James was barely keeping his head above water. Every month, his salary vanished almost as soon as it hit his account—rent, car payments, credit card bills, and lifestyle expenses left him with little to no room to breathe.

James’s situation raises an obvious question: How could someone so well-off struggle to handle day-to-day expenses?

Theory 1: The “Asset-Rich, Cash-Poor” Dilemma

James’s wealth was tied up in assets rather than cash.

He owned two plots of land and a luxury apartment but these assets weren’t helping him cover his daily expenses. Owning property increases net worth on paper, but it doesn’t mean you have money in hand when the bills are due.

When James’s car insurance and utility bills hit at the same time, he didn’t have enough liquid cash to cover them. Selling land wasn’t an option—it would take months to process and likely involve complicated legal procedures.

This is the classic “asset-rich, cash-poor” trap. James had prioritized long-term wealth over short-term liquidity. While his portfolio looked impressive, his day-to-day finances were fragile because he lacked accessible cash.

James had been so focused on building wealth through property and possessions that he overlooked the importance of cash flow. When unexpected expenses came up, borrowing became the easiest solution.

Read Also: Assets, Liabilities, and Net Worth: Understanding Your Financial Wellbeing

‍Theory 2: Living Above His Means

James’s lifestyle was also a major part of the problem.

To maintain the image of success, James was spending far more than he was earning each month. The high-end apartment, the SUV, and the vacations were all funded by his paycheck—but his income wasn’t enough to sustain it all comfortably.

Social pressure played a big role. James’s circle of friends was filled with professionals who seemed to be thriving. Nights out, luxury getaways, and shopping sprees were part of their routine. James didn’t want to feel left out or seem like he couldn’t keep up.

So, he financed the gap with short-term borrowing. Borrowing Ksh20,000 here and there didn’t seem like a big deal—he always paid it back. But over time, it became a cycle: borrow, repay, borrow again.

James was caught in the dangerous habit of spending more than he earned to project a lifestyle he couldn’t afford.

Read Also: 10 Warning Signs You are Living Beyond Your Means‍

How James’s Theories Match the Real World

James’s situation reflects two common financial behaviors seen in many high-income earners:

1. Building Assets Without Liquidity – James focused on accumulating valuable assets but neglected to build an emergency fund or maintain accessible cash flow. This left him vulnerable to financial shocks despite his outward signs of wealth.
   
   
2. Keeping Up Appearances – The pressure to maintain a social image pushed James into a spending pattern that outpaced his actual income. The need to "look successful" was driving his financial decisions more than his actual financial reality.
   
   

How James Can Turn It Around

James’s friend Mark eventually sat him down and gave him some advice:

•  Build an Emergency Fund: James needed to start setting aside money for emergencies so that he wouldn’t have to borrow every time life threw a curveball. Even three months’ worth of expenses would give him enough breathing room to handle unexpected costs.
•  Create a Realistic Budget: James needed to be honest about his income and expenses. Cutting back on expensive dinners and unnecessary spending would help him stay within his means.
•  Diversify His Investments: James could still grow his wealth, but he needed to focus on cash-generating investments like dividend stocks or a side business. Assets that create regular income would help him cover day-to-day expenses without relying on borrowing.
•  Pay Himself First: Setting up an automated savings plan would help James build a financial cushion. Treating savings like a mandatory expense would ensure he always had cash on hand.
•  Track His Spending: By using a budgeting app, James could monitor his cash flow and spot issues before they became problems.

The Wake-Up Call

It wasn’t easy, but James started to make changes. He cut down on his lifestyle expenses—he swapped fancy weekend brunches for homemade breakfasts with friends. He moved to a slightly smaller apartment that cost less but still had everything he needed.

Most importantly, James stopped borrowing. When his car insurance came due the next time, James didn’t have to call Mark—he had the cash ready.

James learned that wealth isn’t just about how much you own—it’s about how well you manage it. True financial stability doesn’t come from flashy cars and expensive trips; it comes from knowing that when life happens, you have the cash and the confidence to handle it.

The Lesson

James’s story reflects the hidden truth behind many "wealthy" lifestyles. Having valuable assets and a high income doesn’t automatically mean financial security.

Being truly wealthy means having the financial flexibility to handle life’s surprises without relying on debt.

So, next time you see someone with a flashy lifestyle borrowing money, remember—it’s not always about how much they have; it’s about how well they manage it.