If we have been in debt for a while now or we’ve just recently found ourselves in debt, most times, the upper most thought on our minds is how to pay back. But debt and repayment are a process. Something led to them, so the first step here is to take time and think of how we got to this point. And then, most importantly, look for ways to get out and stay out of debt.
I think everyone at one point or the other have found themselves in either small or big debts; it’s not uncommon. Companies or business owners borrow constantly to finance their business; students borrow to finance education; and people borrow when unforeseen expenses arise.
It becomes a burden when it piles up so much that it becomes hard to get out of, or to payback, leading to financial setback.
“Running into debt isn’t so bad. It’s running into creditors that hurts.”
Call Your Creditors
The worst decision we can make when in debt is to hide.
The longer we do this, the more difficult it would be to resolve our issue. I think the first step we should take is to call our creditors to explain our present situation. Creditors could be commercial or micro-finance banks, fellow business partners or even friends. They might be aggressive or furious, but they’ll be informed, at the very least.
- Have a clearly stated payback plan before calling.
- Do not make promises you cannot keep.
Following this step might result in the following:
- Creditors might reduce the payment.
- Might extend the period of payment
- Might reduce the interest rate on the money borrowed.
- Or charge debtor to court or jail.
This approach might not lead to a positive end result for everyone, but once in debt, we owe creditors a trail of information that assures them that they’ll get their money back.
Cut Spending And Make A Realistic Budget
A quick approach to getting out of debt is to cut our spending. This seems really hard but it’s inevitable. A way to do this efficiently is to save, make a realistic budget weekly or monthly and stick to it.
Stick to it!
I am repeating this again because it is easy to prepare a realistic budget, but carrying it out and following it is the hardest part. When doing this, we can take note of the following:
- Review what you spend money on the most and try to cut down cost. For example, I spend a lot on data subscription and I’m presently cutting it down.
- Cut down wants (luxury items) and focus more on needs
- Allocate spending ratios to expenses e.g 15% to food, 7% to clothes, 20% to transport etc
- Make sure after preparation, you have enough left to pay installments of your loans/debt
Doing all these, would help save towards paying back the debt.
Talk To Someone or Get Professional help
No Man Is An Island
This point is very important and should not be overlooked. From research, talking about your debt issue with a trusted knowledgeable person or a finance coach eases the stress. I know most of us might not buy this idea yet, but it works.
Presently, we have a lot of finance coaches that can put us through the process of managing our finances and reducing our debt.
Professionals can guide us towards understanding and carrying out the following:
- Proper understanding of why we need to take control of our finances
- Creating an emergency fund– having this created is a step towards debt freedom. This funds should be locked away and should be used only in times of emergencies. I recommend Piggybank.ng as a platform to help you lock funds away till needed.
- Work out on how you can increase your income e.g additional jobs.
- Investments to engage in to enable us use the returns to pay off debt.
There are lots of helpful lessons to learn from financial experts.
I really want us to focus on the article above and avoid falling into situations like this. You can share in the comments section about your debt experiences and how you overcame them.
Have a great week, and until next time,