Many religious leaders have led their congregation to pray fervently against debt. This is a prayer of ignorance. No wonder most of these people, though prayerful yet poor. Not every debt is bad. Some debts can bring you prosperity.
In your journey to financial freedom, your money alone may never be enough to build wealth, you may need other people’s money also.
The wealthiest people are usually the ones that owe the largest debts but they do not lose any sleep over it because they have skills to manage the debts.
Debt is not a bad thing to pray against. It is the leverage that can help you to create wealth. Every wealthy man took a loan at one time in their life.
Debt in itself is neutral; it is neither good nor bad. It all depends on what you use it for. Bad debt is when you use a loan for a personal need. Good debt is any debt that makes you more money after repayment.
Bad debt means you are taking money from your future to spend today while good debt means that you are taking money from your future to secure your tomorrow.
Any debt that will increase your net worth is good. A loan is one of the greatest tools in the hands of a financially intelligent person. So, a wise decision is not to avoid debt but rather to know how to use debt to create wealth.
Often time, before you take a good debt, you already have a means of paying it back. Most times, your returns from the investment are more than enough to pay your debt.
I have been in debt before. At 25 years, I have taken loans from friends, loan apps, and even from the bank. Sometimes, I take loans to complete some of my projects.
If you know how debt works and how to manage your debts, you will be ready to take as many loans as possible.
Staying out of debt permanently is almost impossible if you are serious about financial freedom. Wealthy people maximize good debts and make more money from them.
Whether you have borrowed to support your cost of living, settle an emergency or raise capital for your business or investment, delaying your debt can rob you of your dignity.
Those who borrow money but cannot pay back are dubious, while those who can pay back but have no intention to pay back are wicked people. If you value a good name, you will pay your debts faster.
Delaying your debt can rob you of your peace of mind, especially when the deadline is closer. Until you pay up your debt, your integrity is at stake. You may never be able to secure a loan again.
You may not be able to enjoy your life to the fullest when you are in bad debt. You may even feel like you are not moving forward.
Imagine using 75 percent of your monthly income to pay your debts. Imagine not being able to buy Coldstone ice cream because you are in trying to pay off your debt.
If you are in bad debt already, you need to first understand how and why you got into that debt.
If your monthly expenses are as much or more than your monthly income, your chances of taking a debt are higher. Overspending will make you think that you need more money to survive.
If you do not earn enough money, you are more likely to borrow money always, no matter how frugal you are. Telling people whose monthly income cannot even feed them adequately till next Friday to “spend less and save more” is unrealistic.
Imagine someone earning ₦50,000 every month who has to pay rent, buy foodstuffs, pay utilities, and pay black tax. Tithe and offerings too. How on earth would you advise such as person to aspire to perspire on that income?
If you are addicted to debt, you will always take a loan if you have access to it, even when you do not need it. Debt can become a cycle that may be difficult to break because it gives you the feeling that everything is free.
I remembered a lady who asked me to lend her ₦40,000. I got to know later that she needed the money for her birthday. Borrowing to impress others. Borrowing to organize parties. Borrowing for vacations. Borrowing to rent expensive apartments.
If you wear an oversized coat to impress people, they will soon mock you. They will mock you because the size of the coat will show that it is too much for your size. Why should you be driving a car that you cannot maintain, such that you are now borrowing money to buy fuel?
Borrowing to acquire depreciating items is a foolish financial decision. Why? You are going to be paying back debt plus interest on a liability.
If a medical emergency, job loss, or fire outbreak happens, if you do not have an emergency fund set aside, you are surely going to borrow, whether or you like debts or not.
How long do you want to keep running away from your lenders? How long do you want to avoid calls and messages from people you owe? There are 8 ways to pay your debt faster:
- Make a list of all your debts
Know how much debt you owe, the interest rate charged, how many months are left to pay, and the minimum monthly payment. It is a simple way to get organized at the start of debt repayment. It will help you to prioritize your debts.
2. Track the numbers
Knowing how much you earn and how much you spend every month will serve as the starting point. Ideally, 50 percent of your income should be used to finance your basic needs (food, utilities, and rent).
30 percent of your income should be used to fund your wants (vacation, DSTV or Netflix subscription, cinema, asọ ẹbí) while 20 percent of your income should be used to finance your savings, investments, or debts.
If you want to pay your debt faster, you have to cut off unnecessary wants to free up more money and devote it to paying your debts. Also, you have no business investing when you have unpaid debts.
3. Reach out to your lenders
As long as you are in debt, you are accountable to your lender. If you have multiple debts to pay or your total debt is more than 50 percent of your annual income, it is time to open up with your lenders.
Stop ignoring their messages and calls. Keeping in touch with them often and explaining your efforts and challenges will make the pressure less on you. You may even find favour before your lender.
4. Pay your high-interest loans first
Sort your debt from the highest interest rate to the lowest interest rate. This is because the higher the interest rate, the more money out of your pocket. If you have taken a loan from a loan shark, pay them first before you settle anyone else.
Because the interest on your loan keeps accumulating the more you delay. Your ₦50,000 debt may end up going high as ₦100,000 in less than a month.
5. Pay off the smallest debt first
Don’t be tempted to settle your largest debt first because your budget may not be sufficient enough to pay it off quickly. It can be discouraging too.
Most people often make the error of attempting to gather the total money before paying. This will cause further delay. You may even spend the money gradually before your debt repayment deadline.
Begin by using a budgeted amount to repay your small debts first. It is an easier approach. Then you move to the next one till you are done repaying the largest.
You feel motivated to continue clearing all your debts eventually. the satisfaction of paying off your debt one by one keeps you excited.
6. Increase your income
The larger your shovel, the faster you can dig. Increasing your income will ultimately help you to save more money to pay up your debts. You can get a second job or side hustle and use that income to settle your debts.
7. Sell your old items to raise money
If you have some household items, furniture, clothes, or gifts that you no longer want or use, you can sell them to get some money to pay off your debts easily and faster.
8. Don’t you use a loan to pay back a loan
Whether old or fresh, debt is a debt. On no account, must you take a loan to pay off a loan. You are only digging a fresher hole by doing that.
© Kingsley Ndimele
Your Reliable Consultant