Sunday 18 April 2021
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Buried by debt – avoid and escape the pit

They say debt is the money of slaves, and especially in our black communities, the slavery has been long normalized. It’s our daily bread.

Ever since the love for things we don’t necessarily need was introduced, Namibians have had it rough coming out of the very same debt pits they dug themselves. Land of the free, home of the broke.

I have met a couple of people who are not in possession of their IDs and bank cards, of course confiscated by the debt masters until such a time that the loaner can pay back the money they borrowed, plus interest.

Cometh month end, the loan sharks are first to attend to their already immature salaries. And if the amounts owed are massive, everything is cleared, forcing the worker to knock on another loan shark door and so the cycle continues. Moving on is as ambitious as expecting to float after taking a nosedive.

According to Francois Brand of the Financial Literacy Initiative, you cannot go broke if you have no debt. He says cash loans were introduced for a good reason but many Namibians are approaching them for the wrong reasons hence ending up in the debt cycle.

Stupidity in the financial world is when you are obsessed by things you cannot afford. And when you are not living within your means, you are forced to borrow to maintain your lifestyle. A little desktop research on a local cash loan greeted this publication with the following rates: for amounts N$100 and less, you pay 30% interest; for amounts N$100 and more, you pay 25% interest. Quite attractive.

For Wrong Reasons

“Getting a loan is not ultimately a problem. It becomes a problem when we take loans for the wrong purposes. For unproductive purposes such us furniture and funerals. But these are things that do not make money for you,” said Brand

It is nothing new for the Namibian community to take out a loan to buy the latest phone, furniture. In fact, an average young Namibian who just started working would already have three furniture accounts and an American Swiss for the bling-bling by the second month of employment.

Brand advises that as long as your loans does not bring you any money to repay that loan, then chances are that it is not best to take it. “If it does not bring in any money or for something very productive, then save for it.”

This could also be that when you have borrowed money for unproductive things and you lost your job or taxes go up, you are screwed. You may not have enough cash to cover that debt.

You will loose everything of the value of what you need to pay back. And if it gets worse, see you at Aucor where your N$400 000 car will be sold for N$80 000 (by someone who saved that money).

Save for Emergencies

Life inevitables such as deaths in the family, sickness and a sudden occasions that require immediate cash are just a tip of many other things that push people to knock on the doors of loan sharks. Some even go to the extent of pulling out a loan for their weddings or trips.

Brand said these are unproductive loans. “Funerals are part of life and so are emergencies and as such we should always be ready for them. Namibians should learn to save for emergencies and other things that are not a need.”

“It will cost you more money to borrow money than to save money. I advise people to save up for funerals and other emergencies. I also challenge people to challenge the status quo. For example Heroldt Pupkewitz was buried in a very cheap casket but he was one of the richest guys in Namibia. Of course the family knows that there is no need to spend so much.”

Brand cautioned that it becomes harder and harder to settle your needs after taking a loan for unproductive things and thus digging yourself in the debt pit.

When is it Safe, and Good?

Before sharing on when it’s safe and good to approach the cash loans, highlighted that it is not about how much money you make but how you use it.

“It is only safe to borrow when you know you can afford to repay the loan. So you need to understand how much will be your monthly repayment and if you can afford that.”

“It is good to borrow when you borrow for productive purposes. It is not a good thing to borrow when it is not for a productive purposes, then rather save for that,” cements Brand.

Brand said the situation has become worrisome because Namibians have accepted debt as a way of life. And the results in the long run are that you will never increase wealth when you are paying interest on the money that you borrowed. Meaning you will be constantly getting poor.

“We believe that people should first realize that the cycle of debt is not the way of life. It is so bad that when a fellow Namibian commits suicide because of their debt, Namibians are not shocked. When you tell a foreigner, they are shocked. So it shows us that we have a big problem because we have made it normal for people to commit suicide because of debt. This is how bad it has become.”

Brand concluded young people who have just started working to have a budget, save up for furniture and other things that don’t bring you money, and live within their means.

“Borrow for something that will bring you money.”

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