Debts can make life hell for the borrower. It literally sucks the juice out of your life. It is like an unseen weight hanging over your shoulders. It can create bitterness and destroy the best of friendships. Debts and friendships don’t seem to go well together. Often the creditor may be forced to choose between money and friendship. Even when a decision is made to forgo the money and keep the friendship, the memory of the unpaid debt still lingers like a ghost from the past.
I try to keep myself from falling off the chair as I hear people confess what they borrowed money for. It ranges from weddings to naming ceremonies, baby dedications, children’s birthdays, wedding anniversaries, burial ceremonies, remembrance services, aso ebi, fashion accessories, mobile phones, summer camps, vacations, school fees, house rent, you name it. Many get so tied up in debts that they borrow to repay existing debts. Many fall into the hands of moneylenders. In some cases, their total income is not enough to service the debts, let alone settle them outright. Many have wept bitterly as they shared their story.
Why do we borrow to spend?
Why would someone use his own hands to heap debts on his head? Why would anyone incur expenses without cash backing? It is bad enough if you squander your hard-earned money on liabilities, but borrowing to spend is taking it to a whole new level – spending money you are yet to earn, essentially spending your future today.
There are a thousand and one reasons why we spend money we don’t have. This ranges from family pressure, societal pressure, peer pressure, the need to show that we are not doing badly (me too syndrome), etc. It all boils down to one thing – the fear of rejection. We are afraid that others will be offended and hence reject us if we don’t conform or meet their expectations. It takes courage to say no. It takes guts to stand your ground and resist the desire to please people or meet their expectations when it is out of alignment with your financial realities or goals.
The interesting part is that the people you are trying so hard to impress do not remain impressed for long. Nobody remembers in five years how fantastic your child’s birthday was. It is long forgotten. Nobody remembers your wedding was the talk of the town 10 years ago. What is making the news is the fact that you have been evicted by your landlord or your children sent back from school. Public opinion changes with the weather.
Who cares if you conduct your naming ceremony in your sitting room or serve only soft drinks and meat pie? Who remembers if the governor went to a public school or spent his vacations at the farm? Who remembers that you were among the first to buy iPhone 4 when it came out in 2010? Whose business is it if you visit an orphanage on your 40th birthday rather than paint the town red? Why give yourself a heart attack over your children’s school fees when moving them to a cheaper school can leave you with excess cash? What prize do you win for pleasing your family, friends, or in-laws? Will they become so impressed that they bail you out from your self-imposed financial distress? Whose life is it anyway?
You do have options
Whenever you want to do something or a demand is being made on you, there are always options and you have a choice to make. Each choice has its own consequences. Consequences are both short-term and long-term. In the heat of the moment, one option always seems to loom large and crowd out other options. This is usually the popular option. Often, it is presented as if it is the only option when in reality, they are others. The same goes with consequences, we often see only the immediate consequences while we are blinded to long-term consequences which may not be obvious in the heat of the moment.
Let’s use an event as an example. You are expected to sew special attire. It could be ‘aso-ebi’ or if you are getting married, a new suit to go with your best man or a new wedding gown. The pressure may become so much it begins to seem like heads will roll and blood will flow if you don’t do it ‘the way it is done’. If you don’t have the money, you have options. You can wear what you have (and in the case of a wedding gown, rent or borrow) and the heavens will not fall.
The immediate consequence if you don’t wear the ‘aso-ebi’ is that you will be the odd person out, you may be ostracised temporarily (which is unlikely) and people may murmur behind your back. When the event is over, it will all be forgotten, and possibly one of the people who were ‘compliant’ will approach you privately for a loan to help pay their child’s school fees.
The interesting thing is that when you make your stand known, people will come to respect it, and make no such demands on you in the future. They may call you Ijebu (which is a group of people I admire a lot for their industry) and may make snide remarks. Deep down, they admire you and wish they were bold enough to stand their ground and be themselves rather than spend money they should be investing on frivolities.
Good debts and bad debts
Not all debts are bad. There are good debts also. Good debts make you richer while bad debts make you poorer. If you borrow to acquire an item that pays for itself with profit, you have good debt. If you borrow and still have to pay back the loan by yourself, you have bad debt. So the key question is – will the item you borrowed to acquire repay the loan?
One common mistake people make is to assume that the item will pay for itself, only to borrow and end up in bad debt. Don’t assume that the thing you are borrowing for will make money. Try it out first with your own money, and when it works out well, then you can borrow to expand it.
Let’s say for example you want to start a business, don’t borrow money to start it. Use your own savings to start on a small scale, and make it grow before you borrow to expand it. If you borrow to rent a shop and stock it with goods but people are not buying, you end up with bad debt. Don’t pump money into an untested idea. Test it first and when it works, then you can take it to the next level.
Cash flow is the lifeblood of personal and corporate finances. Always be aware of the cash flow around you. If money is coming in one way and leaving many ways, you are not getting it right. Before you borrow, ask who will pay back the loan. If it is you, then you may be creating more problems for yourself. Have mercy on yourself. You have enough already as it is.
