Few things in life could be harmless; yet, potentially terrifying as debts. When you start out on the path to becoming a debtor, you’ll observe that it is quite easy to get some money from family and friends. Later, you’ll take a loan from your corporative society, ask your bank for an overdraft, take it a notch higher with loans from work, and then visit loan sharks when the going becomes though. The dangerous thing about debt is that it will give you the proverbial cap in exchange for your head and then ask for some more.
This piece seeks to expatiate on three reasons (out of many) you can’t seem to build enough momentum to get out of debt. I will also attempt to give you practical insights that could help you overcome those barriers to getting out of debt.
Faking It Until You Make It
The first reason many people will perpetually remain in debt is the Nigerian concept of faking it until you make it mentality in keeping up appearances. Hence, many people will take a second car loan while the first car loan is not fully paid just because their neighbors now have two cars. Faking it until you make it is the same reason folks will borrow money to fly first class when all they can only afford is to fly economy.
However, keeping up appearances just to appear more successful than you really are will successfully entangle you in an intricate financial mess where you need to take new loans to offset old loans in a vicious cycle. For what it is worth, the people you are trying to impress with your “successful” lifestyle are not as interested as you think they are; hence, you’d have only succeeded in impaling yourself financially when you are faking it and you are not likely to get to the point of making it if you are always in debts.
Keeping Expenses Constant When Income Reduces
The key to financial stability and peace of mind is to keep your expenses lower than your income. You’ll always be financially buoyant if your monthly income is N100,000 and your monthly expenses are N70,000. Conversely, if you monthly income is N400,000 and your monthly expenses is N430,000 you’ll scarcely have enough and you’ll always be anxious to know when next month’s salary will be paid.
However, many people do not make a conscious decision to get into debt, but an unexpected change in their income and expenses could send them to debtville. Take for instance that your monthly salary in January was N100,000 while your monthly expense was N90,000 you’ll about N10,000 that you can invest or flush down the drain based on your whim and caprices.
Now, if your monthly salary is reduced to N80,000 in February, you’ll most likely want to maintain your previous standard of living and still keep your N90,000 monthly expenses. Hence, you’ll be running your finances at a monthly deficit of N10,000, which will most likely come in the form of debts.
In essence, you should act quickly in reconciling a reduction in your income with a prompt reduction of your expenses. If the reduction in your income is temporary, you can consider a temporary reduction in expenses and a permanent reduction of your income should be followed by a permanent reduction of your expenses. If you’d rather not reduce your expenses; then, you’ll need to go the extra mile to get your income back to the previous level.
Choosing Instant Gratification over Delayed Gratification
The commonest reason why most people fall into the pitfall of debts is that they want everything Now, NOw and NOW. Many young folks who are just starting to earn a living want to live in highbrow neighborhoods, drive the latest model of their preferred brand of car, and outfit their house with the latest gizmos and gadgets in line with the standard of their uncles, aunts or parents.
However, while it is good to have big dreams, your uncles and parents did not record those achievements in single day. In fact, those uncles probably acquired all the stuff you want to acquire in a year over the course of a 20-year career. Saving up money to bankroll major expenses or capital-intensive projects might be a better alternative to taking up loans to offset the expense immediately.