Mismanagement of Debt will ALWAYS lead to an unmanageable future – Pauline Wairimu.

​We all need to create the future we want by investing for it and ensuring that we do not carry any sort of baggage into it. One of the main ways of robbing from our future is taking debt that we can do without to do things that do not matter much to us. To understand more in addition to the two board classification of debt i.e Good and Bad debt, debt can further be classified as

​  i. Impulse debt: This is debt that is accrued through the habit of impulse buying that then manifests itself through credit card balances and bank overdraft fees. When an individual is used to buying things just because they would like to have them and yet can not afford them, they may get into serious impulse debt.

​   ii.  Premeditated debt: This is debt that one chooses to get into after careful thought, deliberation, and planning. Examples include mortgages, car loans, and student loans.

​  iii. Crisis debt: this is debt that is incurred from the occurrence of some sort of misfortune like the sudden loss of a job or the diagnosis of a sudden chronic illness whose treatment is expensive like cancer and kidney disease.

​One should plan accordingly to ensure that they at all times work on getting the premeditated. Ways in which one can do this include among others :

​ i. Creating a budget and sticking to it

​ ii.  Cultivating a savings and investments culture. Here one should ensure that have at least and emergency portfolio that they can easily access in times of need. One should put away the investment s money away first before they even start spending the rest

​   iii. Avoid peer pressure and following the crowd. Spend on that which you can truly afford.

​   iv. Avoid easy accessible debt eg the credit card debt.

​When on has decided to get into debt, before getting into debt:

​    i.  Understand the Debt’s Terms & Conditions- The terms explained and those in the loan documents could vary read and you could even have a  lawyer review.

​     ii. Assess your Finances & Evaluate your Ability to Settle the Debt

​    iii. Look for an insurance policy on the debt read and Understand the Insurance Policy on the Debt. It is good to ensure you have been ensured against some of the key risks like lost of income, death and disability

​    iv.  Look at the time horizon of the debt with the aim to pay the debt within the shortest time possible

​When you are already having some debt issues, some of the things you need to do include:

​     i. Stop digging yourself further into debt. Stop taking more debt

​     ii  Look for ways to offset the debts by selling some of the assets

​    iii. List the debts you have by amounts and interest rates

​    iv. Commit to paying for all the debts the minimum amounts, select one debt that you pay more than the minimum amount. Here there are two schools of thoughts pay the most expensive debt first and others pay the most expensive first. I am of the view that you pay the list first as success leads to more and more success.

​   v.  Consolidate some of the debts if one has the opportunity to do so

​All in all it is good to know that debt is not necessarily bad what you do with debt money is what makes the debt bad.

​For more information on debt management reach us on​ info@elizabethnkukuu.com or reach Pauline info@debtmanagementsolutions.co.ke. ​Click here to register for our masterclass on wealth creation.