Imagine your landlord/landlady banging on your door before the wake of dawn for his/her rent or utility bills or MTN ready to deduct any money that drops into your Mobile Money (momo) account as a result of your indebtedness to their “Qwikloan” scheme. That must be stressful! Financial problems e.g. high debts are undoubtedly stressful, and many people have sleepless nights over how they will get out of their indebtedness. Sometimes, they even challenge the health of your relationships with friends and relatives – because you owe them.
Debts are monies you owe. Common debts include rent, loans (student loans, car loans, mortgages etc.), credit card debts etc. Borrowing is very easy; the toughest task lies in repaying. Most of us are swamped with loads of debts which have become headaches. But debts should not stress you, although effectively managing debts is not a walk in the park. You need operational ways to manage and eventually get out of debts, and in this blog post, I outline five strategies you can employ;
- Know how much you Owe – to be able to manage your debts effectively, you must first and foremost know exactly how much you owe and who you owe. Make a list of all your creditors, the amount you owe each of them, interest rates and due dates.
- Create a repayment plan – Create a debt repayment plan, how much you want to repay weekly, biweekly, monthly etc. Your plan should include a portion of the principal and interest (if any). If you borrowed from a bank, you will have a repayment plan, try as much as you can to follow through. No matter how much you owe, a repayment plan can guide you in your repayment.
- Do not delay your monthly repayment – try as much as possible to pay your debts on time, you’ll be able to avoid late fees/penalties and debts accumulating. Charges usually increase with late payments. Timely payments are effective in managing debts.
- Pay off debts with higher interest rates first – prioritize your debts, debts with higher interest rates must be paid first to avoid buildup of interest. Credit card debts usually have higher interest rates, it is advisable to pay off credit card debts first.
- Always have a budget – In your monthly budget, you must factor in your debt repayment plan. On how to prepare a budget, refer to previous post.
Take control of your finances, avoid debts as much as you can!