How To Come Out of Debt Trap

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Tom, a young lad in his early 30’s has a good job with a good take-home Salary. Before Tom, could start enjoying his hard-earned money, he was already in a cycle of debt. A few times he borrowed to enjoy certain pleasures of life like going out to the beach or to upcountry resorts to have fun with his buddies but that cycle continued. Tom banked on some money from his employers to sort out a few of his debts and before the money could come, he still had to borrow to manage his life, pay rent, transport, and eat.

Tom’s getting into debt wasn’t necessarily intentional but one of them was circumstantial. However, a big gaping hole has been left in his life as he sorts out his debt problems. I encouraged him by telling him that one good thing is, he still has a good job and that he should work with what he has while cutting out big expenses that could dent his financial purse.

One of the biggest traps in this world isn’t just going to jail, one of the biggest traps is debt itself. Financial enterprises like banks, microfinance keep selling their debt products, many of them are consumer debt. The debt is often marketed as a big-time solution to a lifestyle that people want now, and impulsive buyers surely fall into this trap with their eyes wide open. The marketing done by these companies is so well thought out that an attractive image of a beautiful woman with her sleek car or a couple smiling with their state of the art bungalow or apartments in the background is used. Surely who wouldn’t want that kind of lifestyle, the message settles in your mind and you start thinking maybe the easiest way to get that house, car, land, etc, is a loan.

From his book “How to Secure a Financial Future”, Dr. Sunday Adelaja in regards to Ad companies associated with banks or credit services says, “They use the power of subliminal messaging to associate the credit card with those things. A lot of people do not think there is anything wrong with credit cards or consumer loans; it affords them the lifestyle they want. But if you have to borrow to afford your lifestyle, isn’t that a trap? It’s just a matter of time before the house of card crumbles.

Before yours truly, had started work, the talk around money that came from every person I talked too was, “You need to get a loan”. That is the type of financial education I was getting introduced too. However, they wouldn’t say get a loan to develop, it would be man, we earn so little, so just get a loan. Loans can only be good when invested, but you surely do need a clear plan or goal for that money and you need to know that getting it is the easy part but paying back is the real deal. There is a need for proper financial education, people need to learn about saving, investing, debt, taxes, business, entrepreneurship, etc. All this is missed throughout our years of education yet learning them would make strides in grooming people who understand money and how it works from infancy.

Anyways while talking to this friend of mine, I told him that it is good that he is open about his situation and that that is the first step to coming out of a debt cycle. I told him that he needs to: -

1.       Have a debt payment plan and be as open to the people or institutions he owes.

2.       Increase his income by using his extra time (meet a need by providing a service, product, exchange time for value, etc) to make money that can be used to pay off his debt, For the small loans they can be kicked off one by one as a big chunk of the money goes to clearing the bigger debt.

3.       He needs to stick to basic spending and that will include rent, food, and transport. He will need to sacrifice events that take out a lot of money, such money can be channeled to clearing the debt.

4.       For any increment in his pay, the increment can be channeled to investment because we all know salary can do as much and that he needs to grow his money to have financial peace going forward.

Unfortunately We Are All Trapped

I have been following a discussion on a forum where some one got so agitated and shared a message from their BANK (I will not mention the bank) Titled "CHANGE OF INTEREST RATES ON YOUR PERSONAL LOAN".

The person wrote to the bank and told them, "Please stop cheating/exploiting customers". The person wrote that and brought out the fact that the Central Banking Rate (CBR) issued by Bank Of Uganda had gone down to 11-13%. They wondered why the Banks rate hadn't gone down and they called that predicament names like, "DAY TIME ROBBERY" .

In response to the discussion, one person wrote and said, "Banks are here to cheat us and that is how they make their profits." So this brought many questions to my mind, Are Banks really in for the development of people or they are here to trap people? When you look at television adverts from Banks, they rush to tell you how easy it is to get a loan and that mind control of making it look like you can purchase your dream very fast has become a phenomenon. 

People are getting loans to wed, loans to consume and have luxuries (cars, mansions etc), very few are getting loans to invest in already existing businesses that could be probably 3% of wealthy Ugandans who get to invest, this basically means that control of money is taken away from you because some one else has chosen to control your finances. 

Each time you get paid, instead of investing first, you have to pay off your debt, (DEBT IS A TRAP), remember what the bible teaches, it says that a borrower is a slave to the lender (Proverbs 22:7) and it doesn't have to be your portion .

Some one then wrote and said that, "May be we should organize a strong SACCO and lend to ourselves, they said SACCOs give out good loans at about 14% per annum. Then he exclaimed by saying, UNFORTUNATELY MANY OF US ARE TRAPPED SO IT DOESN'T HAVE TO SOUND LIKE A QUICK FIX".

A good number of people have bank loans and because of inflation and the unstable economy the prime lending rate keeps changing and at times they say it affects even old loans. The reason the guy said that they are all trapped it is because, somehow everyone has a loan and they have to first clear that before they can borrow from other sources that would have been relatively flexible with their interest rates.

This brings us to a place where we need to ask ourselves, if it is sustainable to keep going to the bank or to form investment groups/SACCOs. May be it is high time people came together to form groups with proper guidelines and lend to one another. The group must be a team of committed, trustworthy, hardworking, and people willing to see others develop.

I have read about and heard testimonies of SACCOs that have helped people develop with less stress and such stories are true. They will tell you how they are able to pay back because of flexibility and the aim of the SACCO is really to empower but not destroy.

However, we all need to know that we should owe no one a debt except the debt of love, always think before you get a loan or start changing your mindset by saying let me SAVE a certain portion of my income for a certain period of time, if you need to beef up the money to do something mega then that's where you start analyzing whether you need it or not.

Financial discipline is important to the quest for financial freedom. Invest the money you get, use it wisely. One of the laws of money is that money must be increased otherwise it diminishes (The parable of the Talents is a good pointer Mathew 25:14-30).

We can not live on one source of income and the scriptures tell us that we should diversify our investments, you can read the whole of Ecclesiastes chapter 11. Use your skills, Do you have land that is idle, maybe its time you think of planting the food you buy from the market everyday, We also need to cut off expenses that aren't important, this means budgeting must become a part of your everyday life.

Debt can be beaten with such knowledge applied everyday. No one has to be trapped. People perish because of a lack of knowledge, when you get knowledge, it is like light or insight to a prevailing situation, then don't just get the knowledge make use of it by APPLYING IT.

Debt Doesn't Have To Be Your Portion

According to Merriam Webster Dictionary DEBT is  "a state of being under obligation to pay or repay someone or something in return for something received : a state of owing"

No one on this earth wants to be under the spell of debt, the scourge of being taunted all the time that you owe this or that. One of the greatest forms of slavery in this modern day and era is financial slavery which comes through borrowing. This is coming about because people have a big appetite for luxuries, they want to own 5 fleets of cars, yet they can only drive one at a time, they want to build many homes to stay in yet they can stay in one instead of building for rentals so that they can make income out of it. The good debt would be the one you get to put in an income generating asset but normally we get debt to consume, buy luxuries etc.

We live in a fast paced world where people want things in an instant, talk about quick money (Proverbs 13:11), students have ended up betting their tuition fees with the hope that they will make more money and pay later, it hasn't always been the case that money will be made, in fact it has gone the other way round. A lot of lack is needed to do gambling (betting), it is a real fight against the odds, you make it one time and win and you start feeling like you can do this over and over forgetting that in life, a point comes where things won't work the way you want. This even kills the desire and value for work. Check out my blog on how Work Is Profitable https://arthurkmo.blogspot.ug/2017/06/work-is-profitable.html

We have reached a point where Financial Services Companies like Banks, Mobile Money have learnt that people love to consume, and consumers are easy targets for all kinds of things. These banks or service industries work with great advertising firms to do eye catching adverts that leave you wanting, If you look at adverts around from Banks, you will be told, you can get a loan for a car (instead of saying save for a car), you will be told you can get a loan for a wedding (instead of being told save for a wedding), This is a way of killing your patience and building on your drive and desire to want things on an instant. Some people have been saved a lot of trouble by exercising patience but it's a virtue build over time after failing and being hit many times. 

You will be told by telecom companies that you can borrow airtime or money when your charge is running out, as much as money is being made by these companies or organizations, we the consumers are turning out to be slaves to these schemes. Many times when your airtime is low, you will get a message telling you that you can borrow so that you can keep chatting, they already have power over us but we can choose to have power over our lives by planning and making the right decisions. The messages are becoming normal and we are becoming victims. But we can control our own space, money and time by managing ourselves.

Fight DEBT and bury it, give yourself the ability to to be a LENDER and not a BORROWER. We all know the consequences of racking up debt especially if it has not been put into something that generates income. Debt is something that takes a way your peace until it is dealt with, you can not do much since it consumes the whole of you. Buy your freedom back by fighting Debt.

If you are to get a loan, it has been said, only get it to improve what you are already doing. However if you can avoid it, please do and work on your personal finance journey, make sacrifices, be obedient with your budget, create avenues to give back to the world otherwise Debt is a trap used by the world system.

Proverbs 22:7– “The rich rules over the poor, and the borrower is slave to the lender”

"Most of us have heard this verse a million times, but most of us still use debt to fund our lives. 2/3 of all people, and 1/3 of high income earners are living paycheck to paycheck because of debt." - Jason Cabler

"Debt limits your freedom to live life the way you want to live it. As long as you have debt you are obligated to put much of your time and energy toward paying it off. Just think how your life would be different if you had the freedom and choices that come with having no debt."
- Jason Cabler

The bible says we should owe no one anything except the debt of love. If you want true financial freedom in your life, then commit yourself to getting out of debt. You will be amazed at the difference it makes in every aspect of your life.

Having debt undermines your ability to build wealth and puts your financial plan at risk. It’s simple. Steer clear of debt - Dave Ramsey Read more from this link on how to achieve financial freedom