What you need to know:
- Out of these debts, about Sh300,000 are from my family members and friends.
- Sh86,000 are from mobile phone apps (I have been borrowing from one to pay the other), Sh400,000 are from a Sacco loan.
- I also have Sh160,000 debt from two table banking groups.
My name is Sammie. I am 38, single and without a child. I have accumulated debts over time that now amount to Sh950,000. Out of these debts, about Sh300,000 are from my family members and friends. Sh86,000 are from mobile phone apps (I have been borrowing from one to pay the other), Sh400,000 are from a Sacco loan. This amount has been in default for the past three months. I also have Sh160,000 in debts from two table banking groups. I work in the informal sector as a broker, and my monthly earnings are around Sh50,000. My monthly spending has been rising and leaves me with between Sh5,000 and Sh8,000 which I can’t account for. I spend Sh16,000 on rent, Sh8,000 on fuel, Sh3,500 on Pay TV, Sh2,500 on airtime and data, Sh5,000 on black tax, and Sh8,000 on food. I used part of my loan money to pay college fees for two of my siblings, and part of it to improve my mum’s furniture in the village. I am so broke that I can’t even afford a girlfriend. I have nothing to show for my years of hard work even though I have a marketing degree. Please guide me on how to repay these debts as fast as possible. Please advise me on whether to go into employment (though I have never been enthusiastic about being employed).
Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
You need to do all it takes to get out of debt as soon as possible, and this may require you to make some temporary sacrifices.
First, you need to prioritise your debts by listing them from the most expensive to the least. From what you have shared, I would expect the Sh86,000 mobile debts to top your list, followed by the Sh400,000 owed to the Sacco, the Sh160,000 from table banking and finally the Sh300,000 owed to family and friends.
Next, you will need to identify sources of funds to settle these loans. Given that you can save about Sh8,000 a month and your debts total Sh950,000, consider selling off some of your assets to reduce your loans.
You mentioned spending part of your income on fuel. I therefore infer that you own a car. I suggest you sell the car to pay for part of your loans. If the car proceeds can settle your mobile app loans, Sacco loan and part of your table banking loans, it would leave you with a more manageable debt.
If you have other assets that you can sell, consider doing so to further reduce your loans. Remember that this is a temporary sacrifice and you can always recover once out of debt. The alternative would be to convert your vehicle into an income-generating asset.
For example, if it is high on fuel consumption, you could substitute it for a more fuel-efficient unit that can also double up as a taxi. This will not only cut the funds you use on fuel but maintain the efficiency you are used to while generating income for you.
Another way you can raise funds to settle your debts is by reducing your expenses. From what you shared, I would advise you to reduce Black Tax contributions to Sh2,000 and cut off Pay TV to save an extra Sh3,500.
You can also save about Sh4,000 from your transport expenses by using public transport. If you do this and top this to the Sh8,000 that is extra every month, you should raise Sh17,500 to settle your debts. However, to achieve this without getting into further debt, you will need to get into the habit of writing a budget and sticking to it.
If you find this to be a challenge, I would advise you to consult with a debt counsellor or get accountability from a trusted friend.
You have stated that you are not enthusiastic about being employed. However, if this option is available and with better remuneration, you should take it.
If you still prefer to be self-employed, you could always resign after settling your debts. Moreover, you can convert your brokerage activities into a side hustle if you find employment that offers better remuneration.
Once out of debt, keep living by a budget. You can invest the extra money you save each month in a Sacco, Money Market Fund (MMF) or other investment product to build your wealth. You can then use your investments for emergencies and to fulfil other goals such as owning a home or buying another car.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered in this column.