Debt Part 1

06 July, 2020

Debt kills options – period!

A couple of decades ago, a friend of mine had a small credit-card balance of a few hundred pounds and was paying just about the minimum payment monthly. He also had a payment-protection insurance which he paid monthly. The trouble was, despite paying the minimum monthly payment and the payment-protection insurance, the balance was not reducing at all. My friend was flummoxed. He did not realise that paying the minimum monthly payment barely covered the extortionate interest rate, and, if not for timely intervention, it would take decades to pay off just a few hundred pounds. When he told me about it, I volunteered to pay off the debt if he would cut up the credit card and become financially literate. He agreed. The first thing I did was cancel the useless payment-protection insurance and then paid off the balance in about three instalments. Since then, my friend has become quite financially astute. He has one or two credit cards now but pays the full balance monthly.

A lot of people struggle with debt. Generally speaking, spending more than you earn automatically creates debt no matter how much you earn. Debt destroys your options. Nevertheless, no matter how bad it is, you can get rid of debt. It might take time but it can be dealt with. To get rid of debt you must first stop adding new debt to your debt, decide to live well below your means, develop a spending plan or budget which includes payment of debt. You must not pay the minimum payment because it will take you almost forever to pay it off. Pay off your debts first before you start saving. Try and find ways to increase your income. When you have cleared your debts then divert all the money budgeted for debt repayment into your savings account.

Broke is too much month at the end of the money.

 

Author: Yomi is a wordsmith, passionate about books, reading, education, healing and health. She has appeared several times on television and radio; speaking about her passion. She has Master’s degree in Medical Immunology from the College of Medicine, University of London and worked at a postgraduate college of medicine in London for over a decade before pursuing her passion for writing. She is the author of four books.