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KALEMBWE SAKUBITA

Analysis: KALEMBWE SAKUBITA
DO YOU feel entrapped in debt? So do many Zambians. Debt obligations can come in the form of house loan, domestic debt, car loans, personal loans, school bills

or a combination of some or all of the above.
Following Bank of Zambia’s lowering of the monetary policy rate, most banks have accordingly been reducing their interest rates on loans since the second quarter of 2017. This will enable a lot of Zambians to borrow for various reasons. That, however, will make you more indebted in the months and years to come.
What this means is that the time to go to work on your debt is now.
If this is a process you have previously undertaken only to fail, do not lose heart but ensure that you do not rely on hope. Where possible, change your habit of paying bills as they come by making payments automatically. The less you have to think about it, the better.
But that is just step one in ensuring your success. Here are the habits you need to break and replace to start your journey toward financial freedom.
The first habit you need to change to get out of debt is that of not thinking about the future. Research in consumer behaviour has found that one of the major factors that drives high debt-to-income ratios is impatience, which can lead you to paying interest on your purchases. The truth is that the more impatient you are, the higher the price you will pay for everything. When people are asked about their financial behaviours regarding things like cash management, keeping a budget, tracking spending, debt management, saving, and spending less than they earn, a good number blame mismanagement on their impatience.
When you ask consumers how far into the future they tend to think or plan, there is a statistically significant correlation: Those who are more future-oriented are better at managing their money. That finding crosses many demographic boundaries including age, income, and education.
To change this habit, ask yourself what you want your money to do for you this year, in five and in ten years. The key is making it specific.
Another habit is that of bargain-hunting for sport. It is easy to feel like you are saving money when you buy something on sale – especially when the original price or percentage off is constantly trumpeted at you. But if you were not already planning to buy that item, you are not saving anything.
And the bigger problem is this: “People spend more money when they go bargain hunting,” says consumer psychologist Kit Yarrow, who has researched the phenomenon. “What people become addicted to is the thrill of what they think is winning, what they think is saving, what they think is being good with their money,” says Yarrow.
To change this habit, you need to wait until you need something specific before shopping. Better yet, do not buy anything that is not on a pre-made list. You also need to unsubscribe from daily deals and retailer emails, since they constantly force you to see bargains – which can take a considerable amount of willpower to resist.
The other bad habit is that of thinking you have no power. Which of these two statements do you agree with the most?
a) I create my own financial destiny.
b) My finances are largely controlled by outside forces.
Research suggests people who believe the former – regardless of income, education, age and other factors – are better managers of their cash, debt, and savings. You are not going to change your behaviour until you change your thinking. That is not easy, but it is not impossible.
To change this habit, repetition is key. Come up with a mantra, like, “My money, my choices,” or “When I own my money, I own my life.” Then tell it to yourself every morning as you look in the mirror. When you think about why you get into debt, often it is not simply survival-related; often it is feelings-related, and a simple way to feel better is to get in touch with the power that you have in your financial life.
The other trap you fall into is that of aiming for instant gratification. It is so easy to spend money in the age of swiping, and mobile payment technology. Technology has made it easier to spend money. Technology has eliminated the gap between when you decide to buy something and when you pay for it. That time is important to help you make prudent financial choices – and, as you will agree with me, it really does not take that much of it. If you would just devote an extra five minutes before making that purchase, I promise you would save money, so take that extra five minutes, or 24 hours, or two days.
You could change this habit by leaving the item in your cart, or on your mind, and see if you still want it after your allotted window has passed. And when you do decide to buy something, focus on the pain of loss in addition to the joy of gain. Even better, when you make a purchase, get into the habit converting the cost into the hours of work it takes you to earn the money.
The author is First National Bank Zambia consumer educator.



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