In humans life debt is inevitable, that makes it very difficult to give
people advice on how to manage their finance. Reasons why financial expert find it very difficult in dealing with debt issues is the fact that people need and desire many things with their “limited” financial resources. There are two main problems about debt. Firstly, most of us commit to more debt than we can afford to repay. Secondly, most of us commit to repaying debt before putting money aside for future needs, things that should take priority like our children’s education, savings for emergency, and provision for our retirement.
These days people tend to live the life where the pressures to buy and to show off the things we have bought (materialism) is enormous. Our inability to afford these things or put money aside for them has pushed us to the direction of buying on credit (getting things now and paying for them over time thereafter). Sometimes it helps but it needs to be applying with caution and discipline, greatly improve the quality of our lives. It can afford us things that we need now that we do not have cash to buy, for instance, we may not afford to buy houses cash but may take a mortgage bond and pay affordable installments over time, or take out a hire purchase for a car personal or business use.
Experts say credit can become addictive resulting in impulsive buying habits (buying things that you do not need because you can afford them through credit facilities). The fact that you can afford something does not necessarily mean that you can have it. If credit is not applied responsibly, it can have tremendous destructive consequences.
However, these country people are judged by what they have, rather than who they are. This has developed traditions in which people compete against each other regarding material possessions. These actions drives people to wear expensive label designers, expensive cars, expensive houses with nice furniture and equipment leaving them with very little or nothing to save. There is absolutely nothing wrong with acquiring these things if you can afford them. There is definitely everything wrong in acquiring these things at the expense of the provision for your children’s education and your retirement savings. While we may need credit and debt at some point in our lives, it should not be a way of life.
As I always said in most of my write-ups, live within your means and you need to plan now for the things you’ll need in the future. The starting point will be to understand the difference between needs and wants.
Needs may be things that you may not live without or things that you must have or do, for instance, provision for your children’s education, owning a house, food, clothing, provision for your retirement, and transport for your office or business. Wants may be things that you desire to have and can live without, for instance, designer clothes, expensive furniture, expensive mobile phones, luxury houses, and so on.
You need to take care of your needs first before looking at wants.
Depending on credit is living on borrowed money which is a very expensive option. Try to save money for the things you may need that are not needed urgently. When you buy something on credit, you are actually borrowing someone else’s money. Borrowing money costs money.
Do not overspend your income and do not over commit yourself with credit purchases. Whenever you are thinking about borrowing money, or buying something on credit, ask them to tell you how much you will be paying in total – including all the interest, administration charges, fees and what have you. Find ways of reducing your hire purchase debt, for instance, paying a bigger deposit than required by the credit lender.
The most effective helpful way is to look for ways of making extra money. This should be something that will not require much of your time and should not cost you an arm and a leg.
TIAMIYU ADIO ISMAIL
