Debt is a common problem for many people in Kenya, especially those with a low income. Being in debt can be stressful and overwhelming, but it is possible to get out of debt even when you don’t earn a lot of money.
In this article, we will discuss some practical tips for getting out of debt on a low income in Kenya.
1. Create a budget
The first step to getting out of debt is to create a budget. You need to know how much money you have coming in and going out each month. List all your sources of income, including your salary, any side hustles or part-time jobs, and any government benefits you receive.
Next, list all your expenses, including rent or mortgage payments, utilities, food, transportation, and any debts you have. Be sure to include all your debt payments, including credit cards, loans, and any other debts you owe.
Once you have a clear picture of your income and expenses, you can create a budget that works for you. Look for areas where you can cut back on expenses and find ways to increase your income, such as picking up extra shifts at work or starting a side hustle.
2. Prioritize your debts
Not all debts are created equal, and it’s important to prioritize your debts when you are trying to get out of debt on a low income. Start by listing all your debts, including the amount you owe, the interest rate, and the minimum payment required.
Next, focus on paying off the debt with the highest interest rate first. This will save you money in the long run by reducing the amount of interest you have to pay.
Make the minimum payments on all your other debts, and put any extra money you have towards paying off the debt with the highest interest rate.
Once you have paid off the debt with the highest interest rate, move on to the debt with the next highest interest rate, and so on. This is called the debt snowball method, and it can be a very effective way to pay off your debts quickly.
3. Negotiate with your creditors
If you are struggling to make your debt payments, don’t be afraid to negotiate with your creditors. Many creditors are willing to work with you to create a payment plan that works for your budget.
Contact your creditors and explain your situation. Be honest about your financial struggles and ask if they can reduce your interest rate or lower your monthly payment. They may also be willing to waive late fees or penalties if you are making an effort to pay off your debt.
4. Cut back on expenses
Cutting back on expenses is one of the most effective ways to get out of debt on a low income. Look for areas where you can reduce your spending, such as eating out less often, canceling subscription services you don’t use, and finding cheaper ways to entertain yourself.
You can also save money on groceries by shopping at discount stores, buying generic brands, and meal planning. Make a list before you go to the store and stick to it to avoid impulse purchases.
5. Increase your income
Increasing your income is another effective way to get out of debt on a low income. Look for ways to earn extra money, such as taking on a part-time job, selling items you no longer need, or starting a side hustle.
You can also consider asking for a raise at work or looking for higher-paying job opportunities. Investing in your education or training can also lead to higher-paying jobs in the future.
6. Seek professional help
If you are struggling to get out of debt on your own, consider seeking professional help. Many organizations in Kenya offer debt counseling and financial education.
These organizations can help you create a budget, negotiate with your creditors, and develop a plan to get out of debt.
They can also provide you offer advice on debt consolidation, which involves taking out a loan to pay off all your debts, leaving you with one monthly payment and a lower interest rate.
However, it’s important to be cautious when considering debt consolidation, as it can sometimes lead to further financial problems if you’re not careful.
Additionally, if you’re facing overwhelming debt, you may want to consider seeking legal help. In Kenya, the Insolvency Act provides for a procedure known as voluntary arrangement, which allows individuals to come to an agreement with their creditors to pay off their debts over a set period.
7. Stay committed
Getting out of debt on a low income requires commitment and discipline. It may take some time, but if you stick to your budget, prioritize your debts, and find ways to increase your income, you can eventually become debt-free.
Remember to celebrate your successes along the way, no matter how small they may be. Each step you take towards becoming debt-free is a step in the right direction.
In conclusion, getting out of debt on a low income in Kenya is possible, but it requires dedication, discipline, and a willingness to make changes. By creating a budget, prioritizing your debts, negotiating with your creditors, cutting back on expenses, increasing your income, seeking professional help when needed, and staying committed to your goals, you can achieve financial freedom and peace of mind.