Pay Off Your Debt and Avoid Future Traps

Hi guys. Welcome back.

Today we'll talk about paying off our debts.

Debts weigh us down so much sometimes it's difficult to sleep.

If you're an everyday person like me, the temptation to borrow to augment your income will be ever-present. For instance, my car is currently down and I can't afford the cost of repairs. So, the car is in the workshop. To raise money for the bill, I will have to literally win a jackpot or do some real financial rearrangement. In the meantime, I'm at the mercy of the public transportation system in my country which is a real challenge.

Our public transport system is essentially in the hands of the private sector. Within that space, anything goes. If we focus specifically on Lagos, the transportation system is a wonder. 

Inadequate social services and an uncontrolled rural-urban migration has created a system unable to cope with daily transportation needs. So, the private sector is the big player here. Due to the lack of regulation, no means of transportation is off the table: motorbikes, tricycles, buses - 6-seater, 16-seater, 50-seater. Once, I sighted a double-decker.

Lagos Bus Garage

The aim of the transport operator is to optimize their income.  So the passengers' comfort is a distant consideration. The motorbike rider carries at least two passengers. You pay double if you insist on being the sole passenger. Tricycles are built for three passengers but carry four.  The fourth person shares the driver's seat.

 

Bike taxis carrying multiple passengers

Buses squeeze 4 passengers into 3-passenger seats. A completely unregulated sector, fares are at the discretion of the operators.

Tricycle taxi with a female operator

All that is on one side. On the other side is the mob - an army of enforcers who openly and forcefully collect money from transporters every day on behalf of the 'Union' (or for themselves, more like). They form groups along bus routes, stop buses, bikes and tricycles and collect 'dues' at multiple points all day.

A typical Lagos yellow bus

Apologies for the digression. But I needed to let you understand that owning a car in my country is not a luxury. And when you have one and it's down, there's a strong temptation to take a loan to fix it to escape the stress you would otherwise be forced to experience. 

So, we've had to take loans for one reason or the other. To better manage our lives going forward, we must seriously consider managing our debt situation as it can have a significant impact on our well-being. 

Here are some strategies for paying off debt and, more importantly, avoiding it in the future:

A. Create a Budget

A good place to start is to create a budget that includes all of your income and expenses. This will help you to identify areas where you can cut back on spending so more money can be allocated towards debt repayment. The following areas can be considered:

1. Reduce Discretionary Spending

This includes eating out, entertainment, shopping, and other non-essential purchases. Make a list and realistically quantify how much you spent in the last month or so. It may turn out to be significant. If it is, try to limit this category of spend and save where you can.

2. Cut Down on Utility Bills

You can reduce your utility bills by turning off lights and electronic gadgets when they’re not in use. You can install energy-saving light bulbs, optimize your water usage, and adjust your thermostat. For instance, eat your food once it is microwaved rather than leave it to go cold only to have to warm it again.

3. Negotiate Your Bills

Contact your service providers and negotiate your bills to see if you can reduce your monthly expenses. 

B. Prioritize Debt Repayment

Make a list of all of your debts, the interest rates and minimum payment for each. Order them by their interest rates and focus on paying off high-interest debt first. This will save you money in the long run.

C. Use the Debt Snowball or Debt Avalanche Method in Repaying Your Debts

The debt snowball method involves paying off your debts in order of smallest to largest balance. The debt avalanche method on the other hand, involves paying off your debts in order of highest to lowest interest rate. Choose the method that works best for you and be dogged with it.

D. Consider Debt Consolidation

If you have multiple debts with high interest rates with the same institution, consolidating them into a single loan with a lower interest rate can save you money on multiple interest rates. It will also simplify your debt repayment.

E. Negotiate With Creditors

If you are struggling to make your minimum payments, contact your creditors and see if you can negotiate a lower interest rate or payment plan. Creditors want to recover their money and will partner with you to facilitate their recoveries.

F. Avoid Taking On New Debt

Once you have paid off your debts, avoid taking on new debt by living within your means and sticking to your budget.

Save Money

Determine the percentage of your income you want to save every month. No matter how hard it is, include that line in your budget. Before spending, make a habit of first taking out your savings. You never know when the need will arise. That's your backup.

By following these strategies, you can pay off your debt and avoid falling into debt in the future. It takes discipline and patience, but it will pay off in the long run.

What's your opinion of article? Please share in the comments section. I look forward to connecting with you.

Have a beautiful day!

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