The moment you’ve decided to put an end to your debt predicament, find some quiet space, sit down with a copy of your paycheck (copy of your payslip if available), then identify and capture all the details of exactly how much you owe, to whom, at what rates, and for how long.

Being engulfed in unending debt can not only give you sleepless nights, but it can also destroy your life, and possibly kill you! People are ensnared into debt from all the good and bad sources such as excessive spending (overspending), borrowing to spend on emergencies,  loss of source of income such as employment, development reasons such as building a house or purchasing  a piece of land, payment of school fees, and from bad habits such as gambling, drug and alcohol abuse et al.

So, you are not alone! Today, the number of people trapped in debt is as ubiquitous as the many lenders and creditors that continue to open shop everywhere, day in day out.

The truth is, debt is fun to acquire, but it takes blood and sweat to pay it back. And there is never something like free money from the lenders or creditors. You can’t even get such free money from lotteries since you must first purchase relevant tickets!

The moment you’ve decided to put an end to your debt predicament, you need to find some quiet space, and sit down with a copy of your paycheck (copy of your payslip if available), then identify and capture all the details of exactly how much you owe, to whom, at what rates, and for how long. Clearly capture the amounts of the car loan, personal loan, credit card, mortgage, student loan, loans from shylocks, etc. you owe, to which creditor/lender, at what rate, and for how long. Without writing down these exact details and figures, it would be difficult to acknowledge that you are truly in debt.

Afterward, you should identify the circumstances that drove you into acquiring each debt. Was it an emergency, a necessity, want, or you got into that debt for the fun of it? You need to clearly establish the cause of your debt predicament because if you don’t know where you are coming from, it would be difficult to set up your direction, and thus your destination. If you don’t know what got you into that debt, paying it up would only pave a smooth the way for you to run back to it.

Once you’ve identified the circumstances that drove you into acquiring each debt, classify them into two groups; the good ones, and the bad ones. If you borrowed money to purchase a house, a piece of land, or to pay school fees (or to acquire assets with appreciating values), then such would fall under the good ones.

But if you borrowed money to purchase lifestyle-related items that you could have comfortably saved for, or wasted it all on bad habits such as gambling, (or wasted it on liabilities with depreciating values) then such would fall under the bad ones.

And moving forward, you must shun all the habits that drove you into acquiring the debts you’ve grouped under the bad ones if you want to realize healthy results.

Just because your payslip has a space to accommodate a loan deduction doesn’t mean you should commit that deduction towards paying installments for items you can comfortably save for, such as a new TV, a new high-end music system, a new classy furniture, organizing a costly wedding, or going for a holiday. Such would be an abuse of that credit.

And do you know some of the most common traps that lure people into debt? Take a look at the below the seven most common debt traps for salaried people.

1. Taking more loans to pay out other loans: One grave mistake made by some salaried people engulfed in debt is trying to take more loans, from different lenders; even with higher interest rates, to pay out other debts. You’ll seldom get out of that debt trap.

2. Unplanned debt consolidation: Others take one major loan in pursuit of paying off other smaller loans. In most cases, such huge loans are usually given for an extended period. In the long run, they end up paying the major loan for a longer duration of time, and sometimes at a higher interest rate.

3. Topping up existing loans: Lenders and creditors will always encourage you to ‘top up’ your existing loans with slightly higher amounts and at sometimes slightly higher interest rates. A typical example is borrowing a five-year loan to purchase say household electronics.  After diligently paying the credit for say two and half years, you are lured by the lender to top-up the loan and use the little amount on top to purchase other personal stuff with non-increasing values. This is a common trap many salaried people find themselves in. They keep on topping up their existing loans to the point that they carry the loan burden into their retirement!

4. Unplanned borrowing: The fact that you qualify for a loan or have an easy and quick access to a credit facility should not be an excuse for you to take it if you have no planned use for it. Equally, you do not necessarily need to borrow money simply because you’ve seen your colleague or friend do so. It’s a common debt trap that many people walk into with their eyes wide open.

5. Investing more in liabilities than in assets: If you buy land today, in five year’s time, its value shall have increased. But if you buy a personal car today, in five year’s time, its value shall have depreciated, and you shall have spent an almost similar amount of its buying price to maintain it. Unlike assets, liabilities usually have no or minimal returns. Consequently, borrowing to spend on more liabilities than on assets often traps people in unending debt.

6. That wedding loan: Some people are lured into borrow money to help them organize a memorable wedding. However, any successful wedding should not propel any newlyweds into spending the rest of their married lives in debt. Some new couples have had their beautiful marriage dreams short lived because they either knowingly or unknowingly lured themselves into a wedding debt, but none of them is now willing to take full responsibility of paying that debt. And this is further complicated if there are children in the marriage.

7. That holiday loan: Borrowing money to go for a holiday is an outright abuse of that credit.
8. The structured settlement and annuity loan. While not really a “loan” as you are selling your future payments, getting the right company to help you with the process is vital. Stressed over making the decision? It’s easy, just simply navigate here and begin the process.

Key Points

• Being engulfed in unending debt can not only give you sleepless nights, but it can also destroy your life, and possibly kill you!

• Debt is fun to acquire, but it takes blood and sweat to pay it back. And there is never something like free money from the lenders or creditors.

• The moment you’ve decided to put an end to your debt predicament, find some quiet space, sit down with a copy of your paycheck (copy of your payslip if available), then identify and capture all the details of exactly how much you owe, to whom, at what rates, and for how long.

• Afterward, you need to identify the circumstances that drove you into acquiring each debt. Then classify those circumstances into two groups; the good ones, and the bad ones. And moving forward, you must shun all the bad ones if you want to realize healthy results.