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A character on squid game, a film that highlights the debt cycle most people are in.

Have you watched the Squid game? I had to after it trended on Kenyan Twitter for a week. While most people concentrated on the violent scenes, an underlying theme that is most relatable is the growth of debt and economic inequality. The characters barely in their 40’s are deep in debt. Like most of us, the characters have money habits that trigger them into spending more than they earn.

The protagonist of Squid game, Gi-Hun. A show that airs on Netflix

The main character Gi-hun lives with his mum who works a lot. He lost his job after the company he was working for went out of business. Gi-hun turns into a gambling addict and in the process finds himself in debt. He decides to join the game after a promise of winning 45.6 billion. Same as Cho-Sang, a businessman in 6 billion debt. Cho-Sang is very intelligent, but with very poor money habits; he steals money from his clients and loses it all in the stock market.

Squid game depicts how our financial habits have translated into a debt crisis. The increase in the digital economy across the world has witnessed a growth in mobile lending. Kenya is home to about 100 mobile lending apps, including Okash and Opesa, both owned by the Chinese-owned browsing giant Opera, and which have faced claims of using predatory lending tactics in Kenya. Out of every 3 Kenyan adults, 2 have already used digital lending applications.

How predatory lending is turning the youth into heavy borrowers

Digital lending has turned youths into heavy borrowers.

Steve Down, a personal wealth coach, says that technology is the best invention for Generation Z. He argues that digital lending provides previously underserved clients with high quality and affordable financial services. A quick loan may help you pay school fees in a short period of time, expand your business or attend to a quick emergency.

He adds; while digital applications promote convenience they are addictive. An example is Safaricom’s overdraft services. Safaricom CEO Peter Ndegwa has attributed the growth to increased revenue from M-Pesa, accelerated by the high uptake of overdraft facility, Fuliza.

If you have to consistently borrow to stay afloat, you are living beyond your means. Or you could be a poor planner.

What you need to know about debt

1. Not all debt is bad

Good debt is when you borrow money to make more money. Debt is only good when it is tied to an appreciating asset.

Bad debt on the other hand requires drains on depreciating liability.

It is important to understand where your loan category falls under.

2. Appreciating asset vs Depreciating liability

Appreciating assets increase in value after purchases. Taking loans for these kinds of assets may be a great idea.

Examples of good debt;

• Education loans; investment in education is a good investment. This was a popular saying in the ’90s. Currently, with the rate of unemployment, it is important to do thorough research on the industry trends you intend to delve into.
• Building a house; some people prefer saving to build, which is equally a good option. But if you are debating whether to take a loan or not, it is justifiable to take a loan for constructing a house. For this, you will also need a solid debt repayment plan.

Risky options;

• Business: Scaling your business through loans may not be the best idea. It may be inevitable but weigh your options before taking a loan to start or expand your business.

Bad debt

• Clothes/accessories– Spot a dress in town that is irresistible? Pause, plan for it after. Do not fuliza to buy clothes. It is not an emergency.
• Car– To some, motor vehicles are a necessity. Saving towards a car purchase is the best option.
• Household goods: Poor planning will get you into a vicious cycle. Plan by budgeting enough.
• Health reasons: Ask anyone who has been sick, they’ll tell you how important good health is. While sickness is inevitable, having emergency funds will ensure you weather the storm. Investing in good health insurance will save you from borrowing
• Birthdays/Funerals/ Weddings: To mark significant aspects of your life, it is indispensable to properly plan for them. Borrowing for ceremonies is the worst financial mistake you can ever make.
• Partying: Never borrow to set standards on social media.

Breaking a cycle of debt is not easy, but it can be done.

How to end a cycle of borrowing

When you spend more than you make, you will be on the financial treadmill. Until you come to terms with;
• How much you make
• Total expenses in a month
• Track your expenses

You will be able to calculate how much you spend in a month. From this information;

1. Create a spending tracker

At Financially Fit, we do not believe in budgeting. Like most restrictive diets, budgeting hardly works.

Instead, track your expenditure. Know where your money goes to then;
• Cut unnecessary expenses
• Make bulk purchases to repeated expenses
• Reward yourself after planning towards it.

2. Unsubscribe from all digital lending applications

The solution to staying on course is to get rid of all temptations. Make a commitment to follow up on your debt-free pledge.

3. Reward yourself every time you clear any loans

Congratulate yourself each time you complete a loan payment by rewarding yourself.

4. Join our online financial literacy program

At Financially Fit, we teach how to live a debt-free life. Join our program by dialing 483229# and start your journey to financial freedom.

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