Debt undeniably takes a toll on the borrower. I have given many talks on this particular subject and the one thing I always tell my audience is that one only gets out of debt by paying it off. You clear your credit card balance by paying it off. Same thing with a car, Sacco, personal or business loan or a mortgage. You pay! So the challenge most of the time is how to get the money to pay it off. Again, this is fairly straightforward; cut your expenses or find a way of generating more income.
Getting out of debt is looks fairly simple, right? Simple, yes, but not easy. The issue I have found with many of us, is that we are unwilling to do what is uncomfortable. Waking up early on Saturday morning to work on your ‘side hustle’ so it can make you some extra money is uncomfortable. Declining to go for a friend’s birthday party and instead using that money to make extra payments on your credit card is uncomfortable. Selling your car to pay off a loan is uncomfortable. So is telling a relative that you can no longer afford to give them money is uncomfortable. The list can go on and on.
You just have to decide, which is the greater discomfort. These things you may have or want to do on the one hand or the debt on the other. Many of us remain in debt because we have not decided that the debt is the greater discomfort. The nice lifestyle, evenings out, nice cars, spending time in front of the TV or simply justifying oneself as being a victim of life are far more preferable.
That is why we keep hoping something will happen that will miraculously get us out of the mess. However, even if this miracle was to happen, say chancing on an unexpected amount of money, we usually find ourselves back in the exact same situation — in debt! This shows that we need a motive that is far much stronger than getting out of debt, especially if we intend to stay out of debt. Let me share some lessons from success stories that have come my way.
Imagine what your pay slip could do for you if you did not have loans. Imagine all that money coming, as indicated, into your bank account every month. What will that empower you to do? This is the picture that Samantha kept in her mind for two years as she kept non-essential expenditure to an absolute minimum. She had realised that she was working for the bank and the Sacco because a cool forty per cent of her earnings wee going there.
Visualising the life that she could have without this burden gave her the impetus to see this through. In particular, she latched onto the school she could take her daughter to. Earlier, she had assumed that she could not afford it but in essence she could. She earned enough money but she was being held back by her loan repayments. In addition to sending her child to the school of her choice were the other things she could also do for herself. She was able to enrol for a business course, have an annual holiday and start investing properly. Not to mention her peace of mind. In her own words she can think without the cloud of consumer debt.
To make this lesson practical, I suggest you write a whole new budget. Plan your money assuming the debt is paid off. Make allocations accordingly. Include how you would treat yourself the way Samantha did with a holiday. Does that motivate you? You can even phase this out and do it one loan at a time and allocate that money accordingly. Doing this practically at this level will leave an imprint in your mind. Knowing how you could be living without debt will disturb you enough to take some action.
Ken had wanted to start a digital agency for four years. He had been doing it off and on during this time as a side hustle. Every year, he would set a new resolution. He would declare that this is the year that he would leave employment and pursue this dream. He worked as a lawyer but he truly had a passion for communication and wanted to do this full time. However, Ken was in debt. Every year, the debt would stop him in his tracks. He, of course, had other family responsibilities but that was not what primarily frightened him. It was the payments on his loan that curtailed him from pursuing his dream.
One day, a young man walked into his office. He was looking for a lawyer to do certain agreements for him. The young man had started his business four years earlier. The same time period that Ken had been dilly-dallying with his idea. Guess what his business was? He was running a digital agency as well. His turnover was, at that point Sh30 million a year and growing! What would you feel if you were Ken?
In Ken’s own words, it was like his dream had been stolen from him. The opportunity cost struck him like lightening. However, this young man had not stolen Ken’s dream. Debt had. Ken is now working tirelessly to pay off his debt. He is dedicating most of his free time to his side hustle and his aim is to pay off half his debt and then take the big leap.
What vision is your debt costing you? Write it down.
Between the quality of your day to day life and your long-term vision, debt, and in particular consumer debt, has a steep price. Is it worth it? If not, what will you do to avoid being robbed any further? What to you makes the discomfort worth it?
Get out of debt as fast as you can and as soon as you can. You will never be able to buy the years, life, dreams, hopes that it is stealing from you!
Centonomy runs a program to help people get out of debt. For details email Waceke on [email protected] or Facebook/Centonomy