Releasing Yourself From The Debt Crutch

Just don’t do it.  Taking that loan is not the answer. Things will not get better next time.  You will not magically find yourself in a better position this time next year.  A position that will ensure you don’t borrow. You will not magically be in a better position the next time school fees or car insurance falls due.  If you look back even last term or last year you probably thought you would be in a better position by now but you are not.  What happened?  Your access to credit became a crutch. The only solution became borrowing – last time, this time and if things do not change, that will also be your solution next time. Your ability to borrow based on your salary can be a good thing but many people have found themselves tangled in web of debt because of it. Many of us do not realise it but we have started thinking that the solution is always to borrow more.  Now, I am not talking about the person who borrowed intelligently to build a business, to invest, to develop a property etc.  Majority of people in debt problems have borrowed to buy a car a TV, furniture, clothes, pay school fees and even buy food.  We have access to credit though Banks, SACCO’s, mobile accounts, micro-finance institutions, multiple credit cards, store cards etc.  Many of us get into difficulty not because we have borrowed to invest, but because we borrow to consume.  Even worse is that our ability to consume starts to be pegged on how much we can borrow.  In our classes we have seen enough people who ask for certain salary increases having done the calculation of what credit they will be able to access with that increase and what they will be able to buy. I can go for a certain type of holiday if I can borrow enough to fund it. I can buy a bigger TV if I can borrow for it.  My children can go to a certain type of school if I can borrow.  This is not sustainable. You will eventually hit rock bottom.  Just like a car will eventually run of gas and not be able to move, you will one day not be able to borrow anymore. There will be no more room on your income to borrow against. Then what?

The first step to getting out of this cycle is obviously to stop borrowing.  But I’m sure many readers are thinking that this is easier said than done.  You are right it is.  It is difficult to stop borrowing but it is the only way. When I was a child, I got burnt with hot water from a kettle on my hand.  I have the scar until today.  I never played with hot water again. With debt many of us run away from the burn and continue working our way into the bonfire.  You have got to let yourself feel the burn. That’s one of the most effective ways of breaking the cycle. When I first went into business, I had gotten into the habit of borrowing from a micro finance company.  I hit rock bottom and it was clear that I had no money coming in to borrow against.  I had to have a conversation with my colleagues and tell them that I could not afford to pay them. I felt the burn.  I have never borrowed in that manner again.  One of our clients admitted to me that he had to remove his children from a certain school when he realised that he was funding it from money that he did not actually have.  He has never borrowed for school fess again.  The best school for your child is the one you can actually afford. I have seen people make drastic changes to their lifestyles to pay back debt.  I have seen others sell cars and even liquidate investments.  When you allow yourself to go through the pain of debt repayment i.e. allow yourself to burn – you are not likely to repeat the same mistake. However without the pain, the mistake usually recurs.  For example if you got an unexpected gift and paid off your debt or someone paid off your loans.  Chances are you borrowed again. There was no scar to keep the lesson fresh in your mind. Get the debt scar. Yes, something very uncomfortable may happen if you don’t take that loan.  You may not be able to drive that car to work tomorrow.  You will worry about what other people will think of you.  This too shall pass. They won’t bother talking about you next week. Don’t wait to hit rock bottom and be forced to take extremely drastic measures. Your first step may be as simple as identifying expenses you can do without at least temporarily.

Once you have faced this head on, the practical aspect becomes easier.  There is no secret formula to getting out of debt.  You get out of debt by paying it back as quickly as possible. Put extra money into your debt payments and you will be out of debt in a much shorter time plus you will have paid less interest. If you have gone through the pain I have talked about you no longer identify borrowing as the sole answer to your problems. You have let go of the debt crutch.