Economy

Dealing with the bondage of debt and Surety – Part 1 | Max Manimbi Jr

Basic definition: An individual or corporation makes a commitment to purchase a product or service and agrees to pay the obligation in the future. This obligation normally takes the form of principal and interest payments.

However, debt is much more than monthly payments.

People can fall into the spirit of debt. When you get entangled in the spirit of debt it controls every minute of your day. You become a slave. It decides what you eat, what you wear, eats away at your self-esteem. It can render you useless to the work of God, delay the achievement of your personal goals and family goals. This is a result of lack of self-control, greed and little to no financial planning.

In PNG many working professionals are victims of loan sharks and predatory lending from our financial situations. The average money market operator charges 30% per K1 sold. For example, if you borrow K100 you repay with K130 following fortnight. Failure to do so means the interest is doubled!

Banks on the other hand have made a killing from offering same day approved unsecured personal loans. From scanning the market, I gathered that they charged anywhere within the range of 20 – 40%. Interest on every kina loaned. An unsecured loan is a loan against your fortnightly salary and is the riskiest because it assumes that you will still be employed during the loan period.

Never borrow from Peter to Pay John – JUST PAY JOHN!

As crazy as it may sound, many who are caught in this death trap of borrowing resort to more borrowing to solve the problem! Pressed by the bank and the constant harassment of loan sharks (money market operators) they make the mistake of “Borrowing from Peter to pay John”. What that means is to make John happy, instead of working out a plan to pay him off, they borrow from Peter to pay him off. They never really come out of debt, they just passed on the burden to another day! This is the very attitude that prolongs the vicious cycle of debt.

Lifestyle Check: Who are you trying to keep up with?

It’s all in our lifestyle. If you make K100 but live a K200 lifestyle, how do fund the other K100? Short Answer: You borrow. If you spend less than what you earn you will have a surplus. If you spend more than you earn than there’s a high chance you will be caught high to your neck in dinau!… Cut the false public image, don’t put up a front that you are not. Be true to you. Many eat out at fancy restaurants and take expensive trips funded not from money saved but “personal loans”.

Never borrow from Peter to Pay John – JUST PAY JOHN!

The Borrowers Guide:

Debt is a tool like other financial instruments. Use debt to finance your business ventures that has a potential financial return. Limit borrowing for personal expenses that do not generate revenue for you. Life however throws us curve balls. There will be times where you might have to borrow for personal reasons. Here is my tip;

Open an account with a Savings and Loan Society. Deduct on a fortnightly basis an amount of your choice. This is the most secure way to borrow because you are doing so against cash that you already saved.

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Max Manimbi, Jr is an accountant with a ‘Big Four’ accounting firm. His passion is in helping people get better with their finances. You can follow him on Facebook: https://www.facebook.com/Maxie360 and on LinkedIn linkedin.com/in/max-manimbi-jr-3b1ab76a

3 comments on “Dealing with the bondage of debt and Surety – Part 1 | Max Manimbi Jr

  1. Pingback: Dealing with the bondage of Debt and Surety – Part 2 | Max Manimbi Jr – My land | My country

  2. Very helpful. I think I have missed this brilliant advice during my past working days. Many thanks for sharing this. Thumbs up bro??👍👍

    Like

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