How to Get Out Of Debt| 9 Practical Tips for Kenyans 2021

Getting out of bad debts has become a regular topic of discussion in many savings forums in Kenya. It seems many people cannot manage their funds and only take loans they are able to service on time. 

I personally don’t think that many people with bad debts are living beyond their means. My observation is that people take one loan, mostly small, with the intent to pay it. The simple action later has a snowballing effect on their personal debt. 

Here’s what I’m talking about…

A friend of mine took a small mobile loan to buy groceries at the early stages of the pandemic. She had every intention of repaying the loan on payday. However, her employer announced pay cuts of 50% because of a decline in sales. So, her check only had enough money to cover her monthly bills. 

She took another small loan to pay for daily expenses while she applied for a check-off loan. This was before people started working from home. Her work Sacco told her she has to wait for a while to get the loan. Cash flow issues. 

So, she had two small loans that she couldn’t pay with her new salary because of the pandemic. 

Long story short, she kept on taking small 2-4k KES loans for small emergencies. By the third month, she had 20K debt and accruing an interest of 7.5% per month or more. 

My Point is…

Most people struggling with debts right now are the ones who didn’t intend to accumulate debts. Sure, there are a few irresponsible individuals who take loans to party, buy fancy stuff, or spend it on useless stuff. 

What If You Have Debts Due to Bad Spending Habits?

Understand something, everyone has bad spending habits. 

Everyone has a list of stores they can’t pass nearby without going inside to see what’s new. Everyone has that one thing that makes them spend money spontaneously and recklessly. 

The trick is to manage your bad spending habits to avoid overspending. Therefore, remember that you aren’t the only one with impulse shopping issues. It happens to everyone. 

Let Me Tell You About My Impulse Spending Habits

I’m a young lady, but I don’t fall for the usual pitfalls of shoes, makeup, jewelry, or cloths. Also, I don’t overspend money on household furniture or kitchen stuff. My soft spot is junk food. 

Kentucky Style Chicken 

Nowadays, I can’t walk anywhere near Chicken Inn without asking the day’s offer. I hate going to places near Chicken Inn because I know I will spend KES 400 and above on impulse. 

I once bought the 3-piecer pack for three evenings straight.  

As I write this, I’m considering buying the current 3-Piecer offer. Whoever is coming up with the current offers truly understands the how much Kenyans love chicken. 

I mean, take out the 350 ml soda and replace that with an extra piece of chicken. Enough about chicken!! Onto my next item I can't resist buying. 

Pizza 

Another one of my shortcomings is Pizza. If I look at Pizza offers, I will buy pizza that day. 

Moreover, I don’t believe that anything short of the large pizza is worth it. I try to avoid anything pizza related, especially if it’s a pizza joint I love. 

Funny thing is I always have money for pizza, but I rarely have cash to promote my blog 😂. The irony!

Anyway, I never go near any pizza joint when I’m hungry because I will ‘eat’ my fare and walk home. 

Ice Cream

If you want me to come to your party, buy ice cream. I will take ice cream over booze any day of the week. Ice cream cravings a real and they take a considerable part of my income whenever I get them. 

Fancy Meals 

I love, love going to hotels with fancy meals. Trying out new foods is one of my costly hobbies. 

It is costly because a plate can cost anywhere from KES 1,500 to KES 2,500. Therefore, I do a forehead slap when I realize I spent 10k per month on 5-6 meals, excluding the fast food impulse buys. 

The bottom Line is…

The cost may seem small, but comparing the cost with eating Ugali + Quarter Nyama brings some clarity. 

Fast food is expensive compared to home cooked meals. I do try to cook at home, but it has always been a battle. 

Overall, I try to keep my personal debt low. But my love of junk foods can lead me to use up my weekly budget on the second day. All other debts are business related and I usually have several income options for repayment. 

Tips to Get Out of Debts

The most irritating kinds of bad debts are mobile loans. You will get an SMS first thing in the morning for two weeks straight. If you have several outstanding mobile loans, you will receive several SMS consecutively. 

However, the angry and insulting calls from loan officers can ruin your mood for the day. Therefore, you need to pay any bad debts and only take loans with low installments. 

Here are 9 tips you can use to get out of bad debts. 

Change Your Spending Habits

You need to learn the areas that lead to do impulse buys and note them down. It helps if you note your expenses for your impulse buys for future analysis. 

You may notice that you buy clothes and shoes worth 5K every time you have an upcoming event to attend. Sometimes, you’ll notice you spend 10k when you go to one on your favorite joints. You could have just bought a few bottles of Vodka and Whiskey. 

Note the areas that you can change, NOT CUT OUT. Cutting out bad spending habits leads to backsliding. 

For Example, I have a rule of buying 1 pizza per week, if necessary. Therefore, I can go for 1-2 weeks without pizza. That way, I don’t feel guilty when I end up buying pizza after several weeks. I’m still working chicken cravings, but I’m good as long as I don’t go near Chicken Inn, Pepinos, or any place that has amazing chicken combos. 

Reduce your bad habits instead of cutting them out. Chances are you developed your bad habits because you weren’t allowed to have whatever you buy as a child. So, learn how to buy the minimum you can for a given period. 

Ask for Help

Ask a professional or friend to help you identify your bad spending habits and create a reasonable budget. Be wise when choosing someone to help you get out of debt. Some people will see all of your spending as unnecessary expenditure despite your income. 

Find someone who understands where you are coming from and whatever needs your expensive spending habits cater to. Don’t settle for a professional finance manager who admonishes you (anakukemea) for all your pricey expenses. You will begin such expenses to avoid being shamed or stop trying to get out of debt. 

Overall, whoever you work with should understand you as a human being and work with you for the best results. After all, you are trying to create habits that will curb you bad spending habits in the future. 

For Example:

I know some shoe lovers with many pairs ranging from 8-13K KES. I never tell any of them to stop buying the shoes as a way to manage their expenditure. Instead, I tell them to reduce the number of expensive shoes they have at any given time to 2-3 pairs. 

That ways, they have fancy shoes for any occasions and they invest in some regular shoes for daily activities. 

For example, walking shoes are meant to be replaced every 3-6 months. Therefore, you can buy affordable walking shoes instead of expensive brands. 

Create a Practical Budget 

Paying off bad debts is like weight loss. The trick is reducing your expenses without feeling like you can’t spend on anything. Cutting out all your ‘unnecessary’ expenses will work out for a short time and you’ll backslide into your old spending habits. 

Create a practical budget that trims your expenses. Most people think creating a practical guide is by cutting out all the unnecessary expenses. That is true, but you need to be mindful of your emotions when you a creating a budget. 

Your budget should include necessities only, and maybe a simple reward for following your budget every week. Start trimming the expenses you don’t need first. Review your budget periodically to determine what else you can trim. 

Focus on One Debt At A Time 

If you have multiple debts from different organizations, you need to focus on the highest interest ones. Start with the debt that incurs the highest interest per month. Pay that debt until it is settled, and then move on to the next one. 

I know the advice doesn’t make much sense, so I’ll give you an example. 

When I used to be a loan officer, I always ensured the biggest loan installments where paid on time or before the end of the month. That way, my Portfolio At Risk (PAR) was low by the close of the month. 

One day my manager called me into the office and told me I was slacking on my job. It happens that I focused too much on the big loan installments there were small loans on my portfolio that hadn’t been serviced in three months. 

The small loans went unnoticed because they had a small impact on my portfolio. Which was the same reason why I didn’t focus on the small loans in the first place. 

Therefore, paying off the biggest loans and loan installments first will make a significant impact on your bad debts. Also, you will reduce a significant option of the monthly installments you pay. 

Don’t Delete Loan Apps or Close Bank Accounts 

Most people know that a credit score is affected by the number of outstanding loans you are not servicing. Not servicing your personal loans significantly lowers your credit score. 

However, having multiple credit lines available to you increases your credit score. Therefore, don’t delete loan apps or close a bank account after repaying your debt. 

The banks will report that you don’t have an existing loan with them, but you can borrow up to XX amount. The reports will help you grow a bad credit score in the long run. 

However, if you don’t trust yourself not to take more loans, close the accounts and delete apps after repaying your loans. 

Have Emergency Savings 

Having emergency savings when you are knee deep in debt seems like bad advice, but I will clarify in a second. 

What do you do when you have an emergency and no money? 

You take a loan, most likely a high interest mobile loan. Hence, you increase your debt. 

The last thing you need when trying to get out of bad debts is to get into more debts. Ergo, you need to set aside some emergency funds for a rainy day. It will come in handy because as long as there is sunshine, rainy days are around the corner. 

Dedicate at least 5% of your earnings to the emergency savings. It will save you when you need it the most. Moreover, emergency savings ensure you don’t take more debts when you are in a tight spot. 

Prioritize Your Debts 

It isn’t obvious to people who want to get out of debt that they should make it a priority. A simple way to prioritize debt repayments is to pay what you get at any time. 

Don’t wait until you get a reminder so that you can submit payments. Any time you forfeit an expense, direct the money towards paying your loans. That way, you won’t have extra money lying around and tempting you to go out or shopping or partying. 

Write a Shopping List and Stick to It

If possible, do your shopping in a wholesale shop instead of a supermarket. Supermarkets are designed to tempt you to buy stuff and stay longer inside. 

How many times have you walked into a supermarket to get water and come out with three extra items? It’s probably many times. 

Make a shopping list and stick to it when you go to buy groceries. Avoid going into a supermarket without a shopping list when you are going to get groceries. A shopping list will prevent you from spending an extra KES. 500. 

Generate More Income/Get a Second Job

Get a second job. 

It is possible to do a second job in Nairobi. There are many odd jobs that no one wants to do. Also, you can learn a hand-on skill like plumbing or electrical stuff to earn extra cash. 

Direct all your earnings from your second job to loan payments. If you think you can’t do a second job, calculate the hours you have between leaving work and getting in bed. If you have 3+ hours, you have enough time for a part-time/side job. 

Reasons to Focus on Your Debt

There are many reasons to focus on your debts. Here some of the things that should motivate you to find ways out of debt. 

You’ll sleep soundly at night. Being in deep debt has a way of making people to wake up at 2-3 am to think about their situation. That feeling of hopelessness you feel in the wee hours of the morning will reduce once you start repaying your debts. 

Paying your bad debts gives you back control over your life. Bad debts have a way of ruining your life. It may be the rude phone calls from loan officers or the inability to buy basic stuff like food. 

Bad debts came with a level of crippling fear that someone will come to your home and auction your belongings. Many people who move around a lot, do it to avoid creditors and auctioneers. 

Paying off bad debts allows you to live freely and start investing in your future. Borrowing from friends and family can affect how you live if you haven’t repaid the debt. People will always assume you have money to blow if they see you at a fancy place, even when it’s on someone else’s bill. 

Bottom Line 

Bad debts will affect your life negatively. Always try to keep your personal debts to a minimum or ensure you get favorable installs.

Overall, getting out of bad debt is good for your physical, emotional, financial, and mental health. Be brave, dedicated, consistent, and patient until you clear your outstanding debts. 

Keep your eye on the goal until you are Debt Free.