Having a money sense is critical to becoming successful in life. When an entrepreneur chooses to get to the next level, it is imperative that he takes into cognisance such things that can mar his progress in business. Among the things that can make or mar a business is taking loans. People take loans to meet up with their expectations. However, it takes a wiser entrepreneur to decipher when to or when not to take a loan. Loans can do wonderful things for you when properly managed. It can help solve urgent problems, cater for substantial expenses and grow businesses. Though loans can work perfectly for those who have steady income, yet it has the propensity of entangling those who struggle to earn a living. It is very important for every entrepreneur to note that a mismanaged loan is hell. Credit quickly becomes a source of frustration and can cause real damage to someone’s future financial prospects.
This present generation is a credit bound generation. It is a loan-cultured generation! Countries borrow to finance projects, creating huge damages to their economy, while individuals, companies, organisations, etc delve into the same act of borrowing or taking a loan to make ends meet. Apart from emergency expenses, moving costs, appliance purchases, vehicle finances, wedding expenses, home remodelling, etc, people take loans to consolidate debt. Whatever be the reason to borrow, loan helps as well as entangles.
One of the dangers associated with taking a loan is its strangling nature. You are bound to get chocked if you don’t have your main capital which should exceed the loan. A loan is worth taking only to increase your capital base or to make much more money than the original loan.
Loans can be obtained based on certain terms of agreement between the lender and the borrower, and can come in two forms: secured and unsecured loans. Secured loans require collateral, which could be in a form of property, held back or seized if the borrower defaults payment. Unsecured loans don’t require anything as collateral but typically require a higher credit score. If a borrower fails to pay back an unsecured loan, there is the risk of being sued or having a lawsuit filed against the borrower by the lender or bank.
Money is good, very hard to make but so easy to spend. Our lifestyles most a times help to bring us to a tighter corner. We live so extravagant that our daily/monthly incomes cannot just be enough. Having an attitude problem is one thing, and devising a way to solving it is another. Some of us are ready to make a few tweaks in our lifestyle, stop a few money habits that are toxic to our growth, and take certain steps that will help us break from this cycle.
Growing up, I never knew what is called prudence. I lived so extravagant that it became a problem for me to save for the rainy day. My pocket money was the first to finish and in no time I will start looking for where to borrow. My fellow students were my first point of call. One day, I was deeply insulted by one of them when I approached him for a loan. I gave it a deep thought and decided to change.
Believe me, I was so liberal at school that I could give out my under-wears just to help other students. Little did I know that I was being foolish. Some of them would hide their things and come to share mine. I did not see it coming. I thought I was doing service to humanity. My eyes opened to reality the day I decided to become stingy, so to say. It could be that you have been plunged into perpetual debt, such that you even borrow to pay debt, no matter the interest. Many businesses have collapsed as a result of the owners eating up their capital. The moment they see money, they start spending, especially on irrelevant things. As a business man/woman, does what you spend your money on yield back profit to your business?
You go into a spending spree the moment money enters into your hand. Ask yourself few questions. Some of us have the belief that witches from the villages are the cause of our troubles. Let me tell you, the money in your hand belongs to you. It is only spent on anything by your own approval. If witches are there, you have power over them to control them. Just do the following:
- Track your spending – If you do not track the way you spend money, you are likely to underestimate how much you spend in certain areas or even to forget some expenses entirely. It is very important to keep your receipts and messages or connect your bank accounts and credit cards to an app that works out the expenses for you.
- Limit your exposure to debt – Realize that ‘too much credit’ can be very harmful. Taking on multiple loans at a time increase the risk of missing a payment and then getting stuck in nasty cycles of debt – constantly taking additional loans to pay off previous loans which you are already struggling to service is an abrasion. It is very important that you only apply for loans when you need it. A loan is a serious obligation and should be treated as such. Assess your needs prior to applying for a loan, and always try to ask yourself if it is worth it to take loan at this time.
- Start with the end in mind – Only take loans when you are certain you will have the means to repay on or before the agreed due date(s). Be sure to confirm all interest/fees associated with the loan prior to applying. Only proceed when you are comfortable that you will be able to service the expected repayments. Try as much as possible to avoid late repayments. Late repayments or defaults on loans are not only a breach of the contractual agreement between a borrower and a lender; they also come with very real consequences that can be hard to shake off in the long-term.
- Minimize your cost of living – When your cost of living is too high, it likely that what you term activities of witches and wizards are the result of high expenses you incur on daily bases. It is advisable to cut your coat according to your size. In other words, try as much as possible to review how much you spend on your fixed expenses and look for areas where you can downsize.
- Invest wisely – Not investing your money in profitable business can bring about redundancy. Investing helps you make money from money and keeps you financially secure. You basically let your money work for you.
- Avoid impulse buying – It is natural to say that only animals act on impulse. The animal nature of man can lead him into anything but wisdom. It is in the nature of so many people to get attracted to a nice pair of jeans at the store while buying some household items and so cannot resist buying them simply because they have money in their wallet. Impulse buying can be extremely bad and needs to be curbed if you want to stay away from debt.
- Avoid comparing yourself to others – Constant comparison between you and your colleagues or friends is never a good idea as you are bound to come across differences that make you see the need to catch up with them. That is not necessary. Focus on yourself, building your savings, and retirement fund.
It important to see patience in the line of what it is – a virtue. Being able to wait for something without being antsy or frustrated is a great skill to have. Break the cycle of living in debt. I did, and I overcame. You too, can!
By Vitus Ejiogu