ALTERNATIVE WAYS TO STAY OUT OF DEBT
To speak frankly, the best way to stay out of debt is to not be in debt at all. Well, tell that to the man who earns ₦150,000 a month with three kids to send to school, a family to feed, clothe and provide a roof over their heads, then you will realize that debt is inevitable.
Sometimes, living without debt is not just feasible, even if you want to avoid it. I’m not talking about bad debts; I mean the necessary kind, like student loans, mortgage loans, and other loans taken for investments. The point is to make sure you stay out of it as much as you can and making sure all your income does not just go into paying back what you owe.
Debt is a major defining factor of the finances of anyone. It isn’t how much you have in your bank account that defines your financial prowess, but how much is left after you have paid what you owe. You are as rich as your income minus debt.
So, other than not taking unnecessary loans, how can one stay out of debt?
1. Payback loans on time: If you have already accessed a credit facility, no problem, but make sure you do not accumulate outstanding loans. This can pull you into more debts which can be very overwhelming when the creditor comes knocking.
2. Take loans only for things that can provide returns: One of the reasons why people go into bad debt is because they take loans to take care of wants and to pay off other loans. This is like shooting yourself in the foot because then, you will not be able to pay back. If you have to take a loan, take a loan for investments or only priority needs and make sure your income can handle it.
3. Earn more: This is one proven strategy to escape debt. Earn more than you can spend. If you can handle it, take on more jobs. Take Olamide for example, who is a freelance graphic designer with multiple remote jobs. He assigned all of his income from his many jobs to different needs of his own.
The income from one of those jobs took care of his basic needs like food, transportation fare, etc., the other one took care of certain fewer priority needs and wants, and he saved and invested the income from another, another one took care of his rent, another he would use to take care of his mom and siblings, and so on. This has worked for him for years and still does today. Maybe you should try it, it might just work for you.
4. Develop a healthy saving habit: Yes, I know. This already sounds like a broken record but sacrifices aren’t easy. No matter what you earn, you must make this sacrifice. At least 10–30% of your income should go into a savings account, with a double-digit interest rate of course. Consider this a fallback emergency fund for when you get into some unprecedented trouble.
Always make sure your money is working for you at every point in time. Do not leave your cash laying around, doing nothing. The Naira is constantly losing value and you can’t afford what you worked so hard for to not be able to afford you the life you’ve been working so hard for. Better still, convert your Naira to any foreign currency with a higher value (like the dollars and pounds) and save them in foreign-denominated instruments. This might seem like a really big sacrifice but it’ll be worth it, trust me.
5. Stop impulsive buying: Impulse buying is a very slow and dangerous poison. At first, it might seem harmless and needful, until you realize you didn’t need what you bought and you begin to question the rationale behind buying that thing in the first place. BUY ONLY WHAT YOU NEED!
6. Have a budget and stick to it: To prevent yourself from buying impulsively, always write down a budget- and stick to it. This is very important. You will find out that you will be able to tackle your needs more, save more, and have little or no reasons to take a loan.
These tips have worked for a lot of people for years, especially Olamide. Bottom line is, if you can’t stay out of debt altogether, you can learn to manage the ones you have. Let us know in the comments which one of these tips you will be adopting.
