Saturday 25 January 2020

A Solution To The Detty December to long January Pay Day Brouhaha - Your Social Capital

The month of January has been dubbed the 'longest month of the year' and rightfully so with good reasons.

After Detty December characterised by parte after parte, comes long January pregnant with bills to pay and financial responsibilities. And if you have not mastered the art of frugality during Detty December, the wait for payday in January could indeed seem like the wait for eternity.

A friend was joking on social media the other day saying that it seems the month of January consists of 90 days and we are presently on day 75!

The long wait to payday propels several people to resort to borrowing to meet urgent financial needs and cushion the effect of financial responsibilities. If you are faced with an urgent need that cannot wait till payday, my earlier post on loans could bring some succour. 

Money being exchanged to meet an urgent need
Money Changing Hands

It is not uncommon to hear family and friends requesting for short term loans with a promise of repayment by the end of the month. What amazes me however is the rapid attitudinal change of the borrower, once he receives the said loan.

Before receiving the loan 
Borrower: Please can you lend me abc amount of money? I need it to settle an urgent financial issue that just came up. I promise to repay by xyz time once my expected income has come in. 

(The lender obliges and gives the borrower the loan).

After xyz time 
Borrower: Silence... no communication. Borrower fails to repay the loan

Lender reaches out to the borrower to demand his money. The myriad of excuses then begin - 

Ah, what I was expecting has not come. Ah my son fell critically ill and hence I could not repay you...Pls give me some more time, I will repay you.

Some excuses are even more brazen, like the ones below:

Why are you disturbing me? Is it because of only abc amount of money you are chasing me up and down with calls? I dont have money now, what do you want me to do? 

It is unpleasant experiences like these and many more that have prompted many people to stop lending out money to people in need. Such people have incurred bad debts and have had to cancel many-a-loan given in good faith to family and friends. These experiences have made them adopt a stance of 'whatever I can not give and forget about, I cannot lend out' to limit their exposure to bad debts.

Come to think of it. Why should anyone give you a loan? What criteria does a lender consider before giving out his hard-earned money to someone else? Why would a lender decline a loan request of the same amount from one person and grant it to another person?

I'm of the view it is because of your Social Capital.

What is Social Capital?
Social capital may be considered as the measure of goodwill, esteem, trust or respect a person has for someone else. It is a function of one's social network.

Social capital can be grown, built or increased. Conversely, it can also diminish or be destroyed.

You can build your social capital by investing in relationships in your social network. 

Every time, you lend a helping hand, give a listening ear, render advice or give support either in terms of time, help or financial and/or material resources, you are building up your social capital from which you can draw from in times of need.

Hence the reason why in times of need, some of your friends are willing to go out of their way to render assistance and/or even money to you; something they would be reluctant to do for another person who has not made such investments in their lives.

However, if a person has been a fair-weather friend, unreliable, not trustworthy or dependable, takes people and relationships for granted, then that person's reputation and social capital is depleted. On the day of his need, very few will respond to him and he will be left in the cold.

How to leverage your Social Capital when in need

1) Never ever borrow money from anyone when you do not have a clear and reliable means of repayment.
2) Set realistic times and modes of repayment as outlined in terms of the contract even if it is oral.
3) Respect the terms of the contract between you and the lender. Repay your loan as at when due.
4) If for any reason, you are unable to meet up on your due date of repayment, get in touch with your creditor BEFORE the due date explaining the circumstances. You may thereafter ask for an extension of time with the option of repayment with interest for the time-lapse. After all, time, they say is money.
5) Consider getting a gift as a token of appreciation for your creditor on complete repayment of the loan.

Follow the above steps and watch your credibility and social capital soar and grow in leaps and bounds. They may be used to leverage individual or corporate/financial institutions.

Financial institutions use what is known as your Credit Score, which is an aggregate of your financial reputation and credibility to determine whether you are eligible to be given a loan or not. I would talk about the Credit Score in another post.

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1 comment:

  1. Thank you sir. This is so educative. But I did not see much on how to beat the detty December/ long January syndrome. I was looking for a few tips, outside of borrowing to survive January.


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