There are 4 major categories of debt (to the layman. Am sure to some financial advisor somewhere, they're like 68 categories)
a) Calamity Debts:
Some debt is impossible to avoid. Your loved one gets sick or gets laid off or your car get written off in some silly accident. Or if you're in London, some hoodrut steals your clothes on the line (infact you don't even need to be in London for that). Anyway, bad things that are unforeseen happen and suddenly all that money you had saved up and planned for dwindles faster than you can blink. And your only other option is to go into debt.
This is unfortunately the category I fall under. I have to have control of everything. So I get into debt because I am not humble enough to let someone else carry the weight. Apparently this little debt factor affects mainly men (and unfortunately me!). Not only do you have issues being left behind by others, you have issues letting go of things you don't need. Those unnecessary things are what keep you buried in debt. To beat this kind of debt, you need to beat your pride.
c) Contentment Debt:
"2 Tim 6:7 we came with nothing, we shall die with nothing" The Bible can be rough sometimes but if you think about it. You have a debt because you want to drive European instead of Asian. your landlord keeps hunting you down at the locals because you refuse to move to a neighbourhood that's "beneath" you. Your children go to school on a loan because you don't "like" the current education system. Contentment shall be the death of us. This debt is collected because we have no patience to wait until we can comfortably afford "contentment". Apparently it's a disease called Affluenza: 1 wife, 2 kids, 3 bedroom house, 4 wheel drive, 5 acres of land, 6 figure salary....
d)Bad business choices:
Whether it's bad luck or bad advise or an acquaintance who has just sabotaged you, this is probably one of the biggest debts people fall into and the hardest to get out of. This is because everything you own, will own or are owed, goes directly to that business. Your strongest belief is that the business shall work. (Prepare yourself for more statistics)75% of all start ups around the world tend to fail. If you're one of the lucky ones then good for you. Unfortunately, when people are doing start-ups they have only faith to their names. No money, no credit, nothing. This kind of debt requires perseverance and belief that someday, something good will come out of this.
So, there you are, looking daftly at your ATM, hoping someone, anyone will save you. Some super accountant or your rich long lost uncle 18th removed. There are 3 basic questions you should ask yourself at that ATM before you make your next withdrawal:
i) Are you fully aware of your financial position? Do you even know how much you owe or do you go collecting debt like some sort of entitlement.
ii)Do you know why you are in debt? Is it necessary.
"Everything is permissible, but not everything is beneficial" (1 Corinthians 10:23)
iii)Have you fully disclosed your situation to those closest to you? What happens to them after you pass on.
"Be careful that as you exercise your freedom, you do not become a stumbling block to the weak" (1 Corinthians 8:9)
Pride usually doesn't allow us to sit and finally tell ourselves that my financial life is a mess and I might need more than a little help to clean up. What we don't seem to realise is that your debt affects everyone else and everything else. Debt even tends to change you as a person. So there you are at the ATM, what happens next?
Step out of your denial. It is not just a river in Egypt. Be very truthful about your situation. First to yourself. The longer you wait, the deeper you sink. Then you need to disclose to your spouse, life partner, family, brother etc etc. Their insight on the way forward might surprise you. And they are the ones who will get most affected should something happen to you. It would be good to prepare them. Then if you are Christian inclined like myself, you have to reveal this debt openly to God. He cannot help you if you have refused to tell Him what is going on. Finally, disclosure to a professional. A mentor, life coach, financial advisor,accountability partner, pretty much anyone who will make sure that you stick to the plan you have come up with.
"What do you have in your hands? What is your current stream of earnings? What can you liquidate to increase your cashflow and more importantly reduce your debt? And now more importantly, what can you do to increase your earnings without compromising what you already have? Kama wewe si mtu wa biashara, try and get advice on your best way forward, kama wewe ni mtu wa biashara, you know what to do.
Every budget you draw up, should have debt repayment at the top of the list. For morale booster, pay the small debts first. That 1000 bob, you borrowed to buy that ka-top, that 200 you used for lunch. No need for the small money to hung over your head for no good reason. Anything with a high interest rate should be top of the list. Involve the people close to you as you budget. Like I said, they will surprise you.
Now that you are slowly crawling out of debt, the worst thing that could happen is for you to go jumping back in head on. Not everything is important and so you need to train yourself to know what is important and what is not. You need to embrace that debt free lifestyle that you're working towards. Train yourself to embrace all that advice you have sought. Train yourself to trust that everything will actually be fine without those rims or even without that car. Move out to a cheaper place if your rent is draining you, eat at cheaper restaurants (or carry food from home), plan a cheaper wedding (esp. plan a cheaper wedding). It won't kill you to simplify.
"Give us this day our daily bread" (Matthew 6:11)
(see what we did there with the letters :-)This is an issue that affects more than just me. I keep thinking, I can honestly not be the only one who hyper ventilates every time I have to walk to the ATM. Debt is a burden and not a right. It's not a rite of passage and neither is it a cool thing. Are you in DEBT?
(paraphrased from Cents and Sensibility- Janet Mutinda)