I received a question that said: Hello Yusuf, I work with the state government and my salary is 30,000 monthly. The problem is that I am always in debt. At the moment I owe over 200,000. I have been embarrassed several times and I usually simply borrow from one person to pay the other. Please help me. - John B.
My answer was:
Debt is a very difficult situation to find yourself in. I have battled with debt and paying off many times and so I connect with what you are passing through. Many times I felt like a slave to the people I owed because even when I earn something little I remember that I was owing someone. In my situation I followed some simple steps that I hope will help you also just as they helped me to get out of debt. By the way, I use the acronym GOOD to help me remember. It simply means; Get Out Of Debt. G for get, O for Out, another O for Of, and D for debt. So whenever you forget remember to do the GOOD thing and get out of debt!
The steps are simple.
1. I made a firm commitment to get out of debt. I didn’t just want to be debt free or even say I will be debt free but I made a commitment to it. A commitment is greater than mere desire to be debt free. It was a desperate craving for me. Being debt free was like a river of flowing water in the middle of a desert for me. So, make a commitment and write it down as a goal. Remember that a goal must be realistic. This means that you must be able to believe you can achieve it. For example, don’t say you will pay off your debt in one month. In your case that will not be realistic because as you said you earn 30,000. Also, ensure your goal has a timeframe. State clearly when you will be debt free. If you say you will be debt free one day you may never be debt free. But when you set a realistic timeframe then you will stand higher chances of attaining your goal.
2. Spend less than you want to spend. I had to take the difficult step of spending less than I desired to spend. Our tendency is usually to spend more than we can or everything we can. Both of these is a very bad thing to do if you will be debt free. When I have one thousand Naira with me I make sure I never spend it all. When you begin this it will be difficult but after some time you will adjust.
3. don’t buy brand new things. This will sound funny to some people but I often resort to this when I need to pay off debts. I don’t buy what I cannot afford even if I have the money to do it. technically, when I have money but am in debt I actually don’t have the money because it belongs to someone else. So instead of buying a phone for 30,000 I will buy the fairly used for 15,000. This way I save 15,000. Rather than buy a shirt for 5,000 I will buy a fairly used one for 2,000. All this is to buy me time until I pay off my debt.
4. buy things off season. What I mean by this is that you should not buy things when they are HOT in sale. Buy them when no other person wants to buy them. Delay buying an air conditioner or fan until the harmattan season. For example, a small room warmer, which normally costs 2,500 during the hot season, costs 9.000 during harmattan. So, delay until it is off the season it is desperately needed then take some money and buy it cheap.
5. don’t buy under pressure. Whenever something suddenly comes on you and requires that you pay immediately, practice stepping out of the environment and ask for some time. Simply say you want to think or that you don’t have the money with you at the moment to pay. This technique will save you thousands of naira if you use it. most spending decisions we make under pressure are the wrong decisions. Some time ago some health officers came to my work place and made a tremendous big deal over Hepatitis B and C and how it can be contracted by sharing clippers. They concluded by presenting us with clippers for sale at 4,000. Although they were right with their information, they took advantage of the duress they placed us in. under the pressure of not wanting to contract Hepatitis and eventually die I coughed out 4,000 from money that didn’t belong to me and bought the clipper. When I got home I realized that the market value of the clipper was actually 1,900. When my wife asked how much I bought it I told her we it was given to us for free. I felt duped but only had myself to blame because I knew that I shouldn’t have bought under pressure.
6. call your debtors and explain. This is one step many people fail in. the truth is that the pressure you are under because of your debts will be greatly reduced when you know your lenders aren’t angry with you. What most people do when they are in debt is stay as far away as possible from their lenders but when you keep in touch you are helping yourself. On the one hand your lender will know you have not forgotten and are willing to pay. On the other hand you buy yourself the much needed time to settle and pay gradually.
7. create a spending plan. Ok, so the “b” word has to fit in at some point. In truth, a budget is just a spending plan. It will help you stay on the straight and narrow with your current debt payments, or your new accelerated payments. A spending plan is something you lay out to make sure that you are spending less than you earn.
Some people say that they don’t like budgets, but have these people ever tried one? Better yet, if you've lived all this time without a budget, how do you know you won't like having one? After trying a realistic budget on for size, most people agree that the alternative—being in debt—is much worse.
The sooner you start dealing with your debt, the sooner you'll have it paid off. The next few years will pass whether you pay it off or not, so start by trying at least one or two of these strategies. You've really got nothing to lose!
If you need help getting started with a plan, or if you're not sure if your budget is realistic, contact me for a confidential appointment. My appointments are either over the phone or preferably through emails. I will review your whole situation with you and then suggest options to help you reach your goals. The earlier you contact me, the more options you'll have.