Personal Finance: Getting Out of Debt

Personal Finance: Getting Out of Debt

Friday, October 16, 2020 2:15 pm


Bayo Adeyinka

By Bayo Adeyinka

I was neck deep in debt. I had made serious mistakes speculating while thinking I was investing. I borrowed to speculate and I paid for it dearly. Those were really dark days. I would drive home but constantly look back to see if anyone followed me. At a point, I thought of running away. I could pack my bags and travel out of the country. But then, running away from a problem has never solved it. 

I thought of how I could solve the pending problem. I could borrow more and invest in another high yielding investment and from there, repay my indebtedness and meet my obligations. So, I borrowed one more time and put the sum of $10,000 into forex trading. A trader who came highly recommended would trade on my behalf. I had access to view the platform on my laptop but I couldn’t control the trade. My problems were about to disappear or so I thought!

On the first day of trade, I got a profit of about $50. I was happy. I didn’t know this thing was sweet like that. I would have invested since. In my head, I calculated how much I would make by the end of one month. I was smelling financial freedom. I was about to enter my ‘breakthrough’. I was already thinking of quitting my job. Who needs a job when you can make about $50 daily? God has finally remembered me.

US dollars

On the second day, I got something like $20. That wasn’t bad. “At all, at all, an im bad pass”. Convert to Naira and I’m still balling. Nothing spoil. Let it just be constant. Little drops will make a mighty ocean. My God is a good God, yes He is!

The third day, a Wednesday, was a day I would never forget. I logged on to the platform to see how we were doing. I was alarmed. I saw how the fund was depleting at an alarming rate. My $10k had become $9k and then $8k. I called the trader. He asked me to relax saying that the market was turbulent but he was a professional. I had no reason to be worried. He would gain it back. I wasn’t totally convinced but what else could I do? My fate was in his hands. A short while later, I went back to the platform. My heart skipped a beat as I saw a balance of $6k. I called the trader again. Yet the same words that were meant to be soothing. “Don’t worry, I know what I’m doing. I’m a professional trader”, he said. I wasn’t comforted at all.

Then it became $5k. I broke out in sweat and loosened my tie. I felt all my world crashing down all around me. Another look at the platform showed me a balance of $4k. I called the trader again but this time he didn’t pick. My calls rang out. I wanted him to stop the trade but he didn’t pick my calls. I was desperate. I couldn’t sit down again and I paced all over my office. How could I be so foolish to have entrusted my fate into another person’s hands without a background check? What did I even know about forex trading before I jumped into it? Why would I join the bandwagon just because everyone else was doing it? 

I took another look at the platform. My jaws were opened as I saw the $4k become $3k and then $2k. Then $1k and finally $600. The trader logged out of the platform when my balance was $600. I had lost my ‘investment’ and I was neck deep in debt.

When it rains, it pours. That’s how I can describe the feeling. Great sadness overwhelmed me. I was trying to solve a problem but I was even in a deeper mess. Everything now looked bleak. I had been a fool and a fool and his money are soon parted. When I got home that evening, I couldn’t eat. I tossed around on my bed as sleep refused to come. I just couldn’t wait for morning to come so I could get to the office of the trader. Someone had to pay for this loss. 

When day broke, I took my bath and dressed up. I got to the Adeoyo office of the trader before 7am. The sight I met was unprecedented. Almost a hundred people were causing a commotion in front of his office. I went closer to know what was really happening. Alas, they were people like me who had lost money the previous day. I saw elderly men crying like babies- their whole savings wiped out. The scene made me forget about my own troubles momentarily. I got into my car and drove off like a whipped dog. 

I made up my mind to solve my problem by myself. I was in debt but I wasn’t about to give up. I had had enough of jumping from frying pan to fire. It was time to face my reality and craft a practical plan to get out of debt.

Let me assure you, the journey towards a debt-free lifestyle was not an easy one. It was tough but I achieved it within two years. I repaid ALL debts within that timeframe and started a lifestyle of savings and financial prudence. 

I will share the practical steps I took in Part 2. Watch out.

Rom 13:1 TLB- Pay all your debts except the debt of love for others…

 

Part 2

Greed is one major reason why many fall into financial troubles and lives are laden with debts. Many want to sow where they didn’t reap-often looking for shortcuts to prosperity. That misnomer of ‘ise kekere, owo nla’ (small work but big rewards) has led many into avoidable headaches including scams. 

Initially, I ignored all the news of people getting astronomical returns from their ‘investments’ after just week 3. I saw various testimonials all over but I resisted the pressure. The ponzi schemes came with very fanciful names and new ones sprang up on a weekly basis with ‘investors’ waiting to put money in Week 1 so they could cycle out quickly. It was when a friend showed me proof of his investments and returns that I decided to try it out. 

You’re usually encouraged to start with money that you can afford to lose but it’s a bait. Once your fish swallows the bait, you’re hooked. Most schemes started with 16k. By week 3, your reward is 32k. Many often rolls over the proceeds to get 64k by week 5. If you roll over again, you get 127k and this is where it gets interesting. If you rollover 127k, you’ll get almost half a million in just 7 weeks. No bank or investment will pay this kind of return.

That was the situation around 2008/9 when those schemes ran amok in Nigeria then. There was a particular rave in Ibadan then and I was introduced to the wife of the owner of the company. I asked her if the scheme was genuine. She replied in the affirmative but what was I expecting her to say? I also asked what businesses they were investing in that gave them those crazy margins. ‘Oil and gas’ was the ready answer. I saw a particular fellow who was one of the agents cruising a ‘Tokunbo’ car. It was purchased via the proceeds of ‘investment’. A friend also bought a plot of land. Could all these people be wrong? You would never know if you don’t find out.

I was paid an allowance at work so I took it and headed for the bank where the account of this particular company was domiciled. I paid it in and collected my teller. I can’t recall the week I joined again but I was full of expectation. I was about to join the league of millionaires. In just a few weeks, my life will never be the same again. The countdown started. A short while after, I started hearing rumors about some kind of trouble with the company. ‘It’s not possible’, I told myself. Not when I finally decided to invest. Which ‘kain’ wahala be dis? I went to the office of the company at Adamasingba in Ibadan. It was shut. I met ‘fellow investors’ there cursing and wailing. Anyway, I knew the wife of the owner of the company so that should offer me some form of immunity. I called her number. It was switched off. I tried that number every five minutes expecting to hear the woman’s reassuring voice. I’ve not seen the woman till date. 

I got home and started plotting how I would recover from this temporary setback. The problem with many is that they don’t know when to cut their losses and call it quits. I was told about a very fresh scheme that was in its second week. I thought that maybe the problem with the previous one was that it had already matured before I started. I borrowed some funds to invest in the new scheme. I was happy when I cycled out in two weeks and I was paid. Now, this is my Ebenezer. I rolled over immediately. I got back the new rewards in two weeks. I thought it was Ebenezer but maybe it’s Rehoboth- open doors. Greed has a way of sucking one in.

Then, I had a thought. Why was I investing small? Why not look for money to borrow and invest big time so I can cash out big time? Little investment, little returns but a big investment will yield bigger returns. If I had invested big a few weeks ago, I would have cashed out big. According to Lao-tzu, ‘There is no calamity greater than lavish desires. There is no greater guilt than discontentment. And there is no greater disaster than greed’. I borrowed some more and added it to my existing investment. I was waiting for my biggest payout ever. Mo fe ‘blow’- I wanted to blow. I started calculating all the things I would use the payout to do- my house was uncompleted then. I imagined the kind of roofing I would instruct my architect to use- state-of-the-art and very modern with beautiful finishing. Greed would always make you spend before you earn- at least in your mind. 

The payout never came. I was expecting a breakthrough but I was broken through and through. Around that time, there was another pyramid scheme where the investment amount was in dollars and part of the reward was travels around the world. The name was carefully crafted to depict freedom and we called ourselves a club. Anyone who registered was to look for downlines to also register. The more you register others under you, the more you’re able to rise and earn money. You could look up your position by logging online. One day, we just discovered the thing had gone bust. Many were left weeping and gnashing their teeth. This was my experience and the precursor to my dabbling in forex. Many go from frying pan to fire all in the bid to solve their money troubles. I was heavily in debt. My savings gone and I was owing two major creditors. I was getting letters reminding me of my outstanding indebtedness. 

You see, MMM, Get Help, Flip Cash, Binomo and a few others that came around recently are just recycled versions of those older ones. These schemes will keep thriving on people’s greed. There is actually nothing new under the sun. Here’s one of the lessons I learnt during that turbulent period- When you get little, you want more. When you get more, you desire even more. But when you lose it, you realize little was enough.

The late founder of the MMM Sergey Mavrodi.

Good news is I was able to resolve my indebtedness in two years. I’ve given this background so anyone who is indebted will understand that no matter how deep you are in that hole- even if you made silly money mistakes- you can get out and take control of your finances. I’ll now show you how I got out of the hole in Part 3.

Luke 12:15 ERV- Then Jesus said to them, “Be careful and guard against all kinds of greed. People do not get life from the many things they own.”

 

Part 3

 

Being in debt is a terrible experience especially when you find it difficult charting a pathway out of the problem. Every phone call makes your heart beat faster. Each knock at your door makes you break out in sweat. You avoid going to certain places out of fear of being embarrassed. Many suddenly fall in love with staying indoors. A few will turn their back and run. Things take a new turn for many as they experience the vicissitudes of life. 

On May 8, 1939, the whole estate of Chief Obafemi Awolowo was auctioned by the order of court in respect of judgment debts. His property at Ikenne was auctioned for £40. His Chevrolet car was sold for £25. His clothes were sold too. He was present at the auctioning and when a police constable saw him, he remarked “you are indeed a man”. By 1942, he was able to purchase the property back. He resolved the indebtedness in 3 years. I resolved mine in 2 years.

Obafemi Awolowo: Was in debts but he later succeeded in life

There are certain mistakes you need to avoid while resolving the issue of indebtedness. Avoiding these common mistakes will go a long way in making you see the pathway more clearly and setting everything in proper perspective. Here are 7 common mistakes people make while trying to get out of debts: 

1. Running from the creditor

That’s a common mistake many make. They avoid the creditor. Some run from that location and settle in another. Many refuse to answer their calls again. The problem will escalate when you avoid your creditor. Most are assuaged if you keep talking and re-assure them that you’re working on a repayment plan sincerely. Demonstrate your willingness though you lack the capacity. Creditors are more lenient with customers who show willingness. Don’t run. 

2. Borrowing your way out of debt.

In my own case, I wanted to resolve my indebtedness by borrowing more money which I threw to forex but it backfired. If you don’t have a clear strategy and repayment plan, taking on additional loans in order to resolve a current one is a major mistake. You would be digging your hole instead of trying to come out if you do that. If you are thinking of taking an additional loan so as to resolve your indebtedness, you should be sure that it will generate enough returns to service the outstanding obligation and pay down the new one. Otherwise, you would have succeeded in increasing your debts. 

3. Keeping the same habits

It was Albert Einstein who said, “Insanity is doing the same thing and expecting different results”. You can’t keep the same habits that got you into the rut in the first place and expect to have your problems solved. You must strive to change certain habits after a holistic appraisal- most especially your spending habits. You can’t maintain the same lifestyle pre and post-indebtedness. Anything that takes money out of your hand must be scrutinized. Determine to make small cuts or eliminate totally. If you eat out a lot, can you start making your breakfast and lunch at home? Can you change your DSTV bouquet to a cheaper alternative like GoTV? Can you either eliminate your vacation or choose cheaper destinations? I can’t fathom anyone in debt going on expensive annual vacations. That’s irresponsible in my opinion. 

4. Not having a clear repayment plan or strategy

Your debts will never be settled by mere wishes. You can’t beg your way out of indebtedness. Crying is not even a strategy.  You need to know exactly how much you owe. Take out a book and write everything out including your monthly expenses. Then write how you want to sort them out. Is it through your salaries? Do you have a side hustle? Are you selling an asset? Is it debt forgiveness? Are there expenses you can take out or reduce? How much income can you free up? 

5. Trying to pay multiple debts at once

If you have multiple debts, don’t try to pay all at once unless you really have the capacity to do so. Many don’t have the capacity so it’s better to resolve by identifying the priority levels of each debt. If you’re owing 4 people, the best strategy is to focus on one debt at a time. There are two ways to do this. Which one is more urgent? Which one can you pay down that will lower your interest rate urgently? The first method is to arrange the debts in order of priority and start payments from the most pressing to the least. The second method is to clear the smallest loans first and reserve the biggest for the last. Clearing the smallest loans first will give you enough motivation to face the rest. 

6. Waiting to make more money

I have seen instances where debtors claim to be waiting to make more money before they pay their debts. They forget that the unserviced loan will attract huge interest and will take more effort to repay. If you’re owing and you have the capacity to make payments, do so immediately and as frequently as possible. Every Naira paid adds up. When the money being expected comes, it will assist in defraying the outstanding. 

7. Not addressing the root cause of the debt

Why did you get into debt in the first instance? Were you trying to fund your consumption? Were you feeding a particular habit? Were you trying to acquire assets that were not within your means? Were you living beyond and above your means? Were you trying to keep up with the Joneses? You need to do a honest self-appraisal and address the root cause. What can you do about this? If you need help, please seek for help. If you don’t address the root cause, you’ll be treating ringworm instead of leprosy. 

I will show you the specific steps I took and how I finally paid all my creditors and resolved my indebtedness in the next episode. 

-Mr. Bayo Adeyinka, writer, banker, social entrepreneur and public affairs analyst, writes from Lagos.

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