You took a loan but your circumstances have now changed. You lost your job, your business collapsed or a loved one was diagnosed with a serious illness costing you a fortune in medical treatments. The financial institution that extended the loan to you will still expect you to pay up. They are custodians of people’s money and cannot therefore afford to lose the money that is entrusted to them. Here are 5 simple steps to enable you live debt free.
You cannot get out of a hole if you keep digging. Yes, people around you believe that you are worth a certain standard of living but struggling to impress them is only going to push you to a life of misery. Sooner or later the bubble will bust and you might find yourself facing auctioneers so stop complicating your life.
If you can’t afford a car, don’t buy one. If you had already bought a car on loan and can barely stay afloat; sell it. Plan how you are going to afford to buy one and work on a plan to make that a reality. It is definitely difficult to learn to operate without a car after being used to one but struggling to maintain a lifestyle you cannot afford will have disastrous results in the long run.
This sounds really easy yet many people actually don’t do it. Begin with a plan. Money that is not planned for can end up anywhere. Spending money without a plan is like getting into your car and driving off without any plan where you are headed. Budget carefully before you begin to spend your money. A budget will help you identify expenditures you could cut out.
The money you have is all that you have to work with so you have to learn to either trim your expenses or to grow your income. You will need to learn where to buy stuff cheaper, how to do some stuff such as hairdressing at home rather than paying for the services, how to carry packed lunch to work rather than eating in restaurants and other cost cutting measures. You will have to learn how make better use of your time, how you can be creative during your free time so that you can earn some extra coins.
Be careful when it comes to cutting your expenses. You could end up creating bigger problems in the name of cutting costs. Moving to a cheaper house in an unsafe neighborhood could lead to massive losses as you get targeted by thieves. You could even get physically harmed. Cutting down on the budget for food without due diligence could compromise your health and that of your family if it results in unhealthy diet in the name of cheap.
It does not matter what your level of income is, not having any savings is like driving a car without oil. Failure to save is the number one cause of debts. Unexpected things happen from time to time such as some equipment that you cannot do without breaking down and requiring major repairs or replacement, or sudden illness of a family member. People borrow when emergencies strike and they have no emergency fund.
You will not be able to get out of debt if you continue with the same habits that created it, so learn discipline if you want to become debt free. Once you earn your income, save the amount that ought to go to your savings, ideally not less than 10% of your income, then figure out how to manage on the balance.
If you cannot make ends meet on the balance after savings, do not think of borrowing or spending your savings in order to fill the holes. Evaluate your lifestyle and identify areas where you can cut out some expenses or think of creative ways to supplement your income.
You cannot fight an enemy you do not know and neither can you deal with debt you do not know. List all your debts down, whether big or small. Classify them according to interest rates.
You want to get those debts with the highest interest rate out of the way first, even as you still service the other debts. It is very easy to ignore or even forget some debts if they are not documented, which can have disastrous results when payment is suddenly demanded, catching you unawares.
Whatever extra money comes your way, use it to make getting out of debt a reality. Being debt free is the best treat you can give yourself so make it your top priority. Sometimes someone visits bringing you shopping that saves you cash or you manage to purchase something at a discounted price.
There is no money that is too little when it comes to dealing with debts so no matter how little the extra money is, use it to pay off some debt. People who are in debt still spend money on unnecessary things, probably because they feel that the debts are too big and the amount they have is too little to have any impact.
Every coin you pay not only reduces your debt but also portrays your commitment to clearing the debt. It is better to pay 500 shillings than to pay nothing at all. Making frequent small payments will work in your favor should you need to renegotiate the payment terms with the lender.
To stay out of debt, you need to respect every coin. Giving out money freely without expecting those being given to take any responsibility is lack of respect for your money.
Enabling irresponsible people then feeling resentful and complaining endlessly about them is a sign that you do not respect your money. Work to establish healthy boundaries.
Failing to be watchful over your money and spending it like you are on a free fall not only messes your finances but trains you to become an irresponsible person.
What effort did it take you to earn your money, or were you given for free? Become a fierce defender of every coin. You will not buy stuff you do not need however cheap it is or even if it is being sold at a discount. You also will not dish out money like you are the savior of the world. You respect and take care of every coin.
Consider investing in professional help so that you heal childhood wounds that sabotage you. A negative money blueprint programmed in childhood sets you up for financial self sabotage.
We are however, not always in control of everything that happens in our lives. Financial fortunes change and sometimes we find ourselves in debt. The mountain of debt can look so big that you give up making efforts to scale it.
Take charge by taking care of every coin and paying off your debts one step at a time. A journey of a thousand miles begins with one step. It is better to pay a few coins towards reducing your debt than to spend those coins on something you do not really need.
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This article is written by Susan Catherine Keter
Financial Independence Africa