Getting out of debt requires discipline.
My name is Judy. I am a TSC primary school teacher with a net salary of Sh36,000. I am married with one child. I have taken almost three loans with a deduction of Sh21,000 on my salary.
One is a bank loan of Sh450,000 with a deduction of Sh8,080, a microfinance loan of Sh275,000 plus add-ons, and another loan of Sh50,000 that I took recently.
I used these debts to start side hustles. I started a clothing boutique, an M-Pesa kiosk, a printing, typesetting and cyber café but all closed within months.
I am always broke with a lot of debt. I am afraid I am losing the motivation to work since most of my money is going into debts I can’t account for.
I have siblings and an ailing mother who needs my support and currently the only way I can help is by sinking further into debt.
What side hustles can I try? I also have a dream of owning land. I don’t want to be wholly dependent on my husband. Please help.
Alex Kibebe - founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
Getting out of debt will require you to be disciplined, get accountability and take on different debt recovery approaches. However, with the right commitment, you should be out of debt in about two years.
To begin with, avoid taking on additional loans to start a side business as startups come with a high risk and no guaranteed profits.
Instead, look for opportunities that do not require capital and which align with your career and strengths. You might consider providing teaching services to homeschooling students, offer private tuition or even author a text book for a publisher.
Additionally, you can explore online opportunities such as online tutoring, content writing, research and virtual assistant jobs that you can do in your free time.
These opportunities may play to your strengths and you can leverage your network to get leads. Research thoroughly to identify the best opportunity for generating some extra cash.
Consider targeting an additional Sh5,000 to Sh10,000 monthly from these ventures.
Next, consider requesting for financial support from your spouse especially during this period of getting out of debt.
Settling your debts
Be open about your current financial predicament and your willingness to get out of debt. You have mentioned that you have an ailing mother; it is important that you enroll her in a health insurance programme that will help offset hospital bills.
Another option you can consider is restructuring your debt. This involves replacing your current loans with ones that have more favourable terms.
For example, if you are a member of Mwalimu Sacco or any other Sacco, consider replacing your bank loan and Premium Credit loan with a Sacco loan that offers a lower interest rate and a longer repayment term.
If this option is available to you, it will reduce your monthly repayments and free up funds to save towards settling your debts.
Once you have taken these steps, save as much money as possible each month. I would advise you to pay the minimum amounts on all your loans and then save the balance in a Money Market Fund or Bond Fund account.
These investment accounts offer a convenient platform to invest and provide a return of about 15 per cent per year at the prevailing rates.
If you manage to save Sh15,000 each month in the Money Market or Bond Fund account, you should have approximately Sh193,000 at the end of the first year and about Sh400,000 at the end of the second year.
Discipline of saving
Given that you are still servicing your loans, this fund should help you get close to if not completely settle your debts.
Once you are out of debt, maintaining the discipline of saving will be much easier. This will enable you save towards owning land.
Continue saving in your Money Market or Bond Fund account as you search for a favourable piece of land to purchase.
You may also consider saving in a Sacco to access a loan to buy your property, if need be. Over time, you will have accumulated enough funds to buy your preferred land.
At the same time, be on the lookout for land ownership plans that are offered by Saccos and land-selling companies that could allow you to own a piece of land at your preferred location based on installments.
The caveat here is to check the interests and charges for such plans.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered on this column
