“The man from the cash loan came this morning and scared her.
By that time, Daisy* already had the daily threatening sms from the store card debt collectors. She hadn’t checked her post for ages - for fear of receiving another notice about the outstanding balance on her card. She even hadn’t gone to the wedding at the weekend - she was avoiding her aunt who wanted her loan repaid. Then the furniture company truck turned up outside. Daisy had a bad, sinking feeling…”
Once upon a time (not so long ago) we would go shopping with cash in our wallets to pay for goods. We’d stand in a queue at the bank and cash a cheque - that was the only way we could get money from our account.
We’d receive a balance from our bank with the amount we’d drawn and the balance left in our account. We would always know where we were with our money.
There were no credit cards or debit cards, no holes in the wall (ATMs) to give us money when we put in a piece of plastic and punched in a PIN. Lenders were few in the marketplace, most commonly banks giving housing loans and overdrafts. If we needed money quickly (and if we had no savings) we would have to visit our bank manager or sacrifice something precious at the pawnbrokers. As our financial lives were this simple, we always knew how much money we had.
The financial world has changed
Unfortunately money just isn’t this simple any longer. What changes have come about to make our finances so complicated? The simple answer is: Easy access to Debt. We’re sold credit at every corner. Effectively we’ve been taught to spend more than we earn. It’s become too easy to get our hands on “money” that we haven’t yet earned. We live in a society that advances all the time technologically, and we are all trying to “keep up with the neighbours.” If our friends have it, we want it. Often we can’t afford it, so we borrow the money to buy it. We’ll worry about how to pay it back later. After all, there are always those special offers where you can have a “Premium Holiday” or the kind where we pay a few months back and then get a “Top-up Loan”.
Borrow today, pay tomorrow
We often forget that borrowed money is an expense that we have to pay back at a later date; it’s easy to blot out the thought that it actually makes our future self poorer. We must remember: borrowing isn’t free money without consequence. Lenders make their money by charging us interest on our debts. The longer the loan term, the more interest we pay. In many cases the money you pay back on a loan can be more than double what you originally borrowed.
The debt trap
The debt trap starts when you spend more than you earn and start taking loans. If you’re already spending everything you earn each month, how
Think about your future self
If you’re living beyond your means now, and you’re buying on credit, how do you think you will afford to pay back your loans next month? You must make a monthly budget and commit to sticking to a spending plan. The first step to financial freedom is to plan every thebe you are going to spend, and work out your bills and commitments. By doing this, you’ll know how much money you have left to spend on extras during the month. Sometimes it’ll show you that you don’t have enough money to pay for all of your commitments, and you’ll have go without something. Perhaps you’ll have to arrange to work some extra hours for the extra money you need.
The way out
You will also need to plan your debts. You must list all of your debts: how much you must pay each month, what the interest rate is on each and how long you still have to go before they are paid off. Please see the graph for more information.
Prioritise your debts
Next, put your debts in order based on which one you are going to pay off first, and second, and so on. First, you MUST pay off the debt that worries you the most. For example it could be the one you owe to a family member, or it could be the one that costs you the most interest, or it could be the one that messages you every day and phones you at work. Write that one down first, and then follow with the order you are going to pay off each debt. Don’t stop paying any of your debts, but do try to pay more to that number one priority so that you can get rid of it faster. You’ll sleep a lot better without it worrying you.
As soon as you pay the first one off, use the extra money you save to pay off the next one even faster. When you’ve paid that one off, pay the third one off at triple the speed! You’ll soon be debt free and back in control of your money, especially if you keep using your budget each month.
Get debt free!
Most importantly, DON’T Get Back Into Debt!! Save first, and then buy, it’s a much cheaper way to buy the things you really need…
*Neo Tshekedi is sales manager at Kalahari Training Institute (Pty) Ltd, known as KTI. Kalahari Training Institute is the premier provider of vocational training in Botswana, working with employers to upskill all Batswana in the workplace for personal growth and productivity. KTI offers over 50 BQA accredited courses in all fields of business and industry.
*Names in this article have been changed