Last Updated on April 5, 2024 by Arurhose
We’ve all been there, living large one -minute and then facing the harsh reality of empty pockets the next and you are just wondering how in the world you spent that money. The next thing you know, you’ll have to borrow some more money. But fear not, because there’s always a way out of a debt trap! How exactly do I reduce debt? How can you eliminate the never-ending cycle of bills, always asking “Where did my money go?”. This article provides some useful advice on sustainably reducing your debt.
First things first, brutal honesty is key. Grab a pen and paper and list every debt you owe, from that five thousand Naira “loan” to your brother for foodstuff (we’ve all been there) to the monster that is rent. So you have a clear picture of how much debt you need to service.
Have a Realistic Budget
The first step to facing your debt cycle is having a realistic (emphasis on realistic) budget. By realistic, I mean you need to be honest with yourself by differentiating between needs and wants. You’ll need to list out your income and expenses. Under your expenses, list your recurring bills (electricity, Internet, Water, etc.), food, and every other form of spending. Next is to be ruthless and trim your spending. Identify areas where you can make budget cuts. Maybe you don’t need to buy perfume and a body spray all at the same time. Maybe for the next few months, you’ll stop paying for YouTube premium, endure and wait to skip those ads. The point is to reduce your spending and set aside more money to clear your debts.
Allocate Your Spending
What percentage of your earnings can you dedicate to reducing your debt? You can adopt the classic budgeting strategy, 50/30/20 rule. Think of your income as a giant pie, and you can divide it into different parts. If you have dedicated Fifty percent to goes into bills and Thirty percent to discretionary spending (buying pizza, buying Aso-Ebi for that friend’s wedding. I mean, a good Owambe is a must!). But remember, we are on a mission. Split the thirty percent in half. One part is for enjoyment, the other to attack debts. Finally, the last twenty percent goes straight into your savings – your personal war chest for any unexpected wahala.
Sneaky expenses love to disguise themselves as needs. Be honest, how many times have you strolled through a supermarket for one grocery item and ended up with three? Resist the urge to splurge! Pack leftover Jollof rice for lunch instead of buying food every day. Find free online workout videos instead of that fancy gym membership. Every penny saved is a victory dance in the face of debt!
Focus on High-Interest Debts
If care is not taken, high-interest debts can become so huge and paralyzing. That’s why you should focus on addressing your high-interest debts first. You can dedicate 70% of your “debt clearing” budget and 30% to the low-interest debt.
Draft a flexible payment plan.
Drafting a flexible and realistic payment plan is the best way to go. If you lay out a convincing plan with your creditor. They are human too! Even if you owe an institution, a human runs the loan department. A monthly repayment plan goes a long way in convincing your creditor that you are responsible and you know what you are doing.
Increase Your Income
This might seem like a no-brainer, but it still needs to be said. Start a side hustle. Freelance online, sell crafts, or even rent out a spare room – all ways to generate extra income specifically for debt repayment. You can learn how to have two jobs and grow your income.
Seek Financial Education
Dedicate some time to understanding how money works and how you can manage your finances. A 10-minute read on YouonFI or listening to a podcast about personal finance will go a long way in helping you deal with debt and build healthy financial habits.
A Few More Hacks
But wait, there’s more! Here are some extra hacks to conquer debt. Find a reliable group and contribute a fixed amount regularly like “ajo.” These groups keep you accountable and disciplined because if you save for the week, you will find your name in a list. But the reward is worth it because when it’s your turn to collect, you’ll have a nice chunk of change to put towards a debt.
The next one is the “No Weekend Owambe” Challenge. Owambes are fun, but they can drain your wallet. Limit yourself to attending just one a month. The money saved can go a long way. The third one is to sell what you don’t need. Do a little decluttering. Clothes you don’t wear anymore, electronics gathering dust – turn them into cash! Jumia and Konga are great platforms to sell your stuff. The extra income can be used to pay off a debt or pad your savings.
With all this said, remember, boredom is the enemy of your wallet. When you’re feeling restless at home with nothing to do, your head starts whispering buy this; you are craving this. Don’t listen! Develop hobbies that don’t cost a dime – curl up in your room with a Chinua Achebe novel, explore your environment by walking or learn a new skill. This keeps you entertained, saves you money, and makes you a better person – talk about a win-win-win!
Conquering debt is like winning a highlife competition – it takes dedication and some sweet moves. Sometimes you want to give up, but with a strategic plan and a sprinkle of discipline, you’ll be financially free in no time. So come on, let’s do this thing!
Awesome. It’s worth trying.