I write a column for a certain publication and have come across many people drowning in debt who want a quick solution to getting out of debt. The truth, as I always share, is that there's not quick-fix to handling an enormous amount of debt.
One of the very interesting and recurring queries that I've come across often go something like this:
"My name is [Person’s name] and I am in quite a lot of debt. I was thinking of getting a loan from the bank and using it to trade so I can make money and work on paying off my debt. Where can I learn how to trade quickly?”
“I came across a trading site that offered me 50% returns. They have a 30-hour course that costs R20,000. I’m thinking about getting a loan from the bank, buying the course and learning how to trade. I’ll use the rest of the funds as capital for. If I can do that, I know I’ll make that money back and pay off my debt.”
When I got my first message along these lines, I gasped in wide-eyed shock.
But over the years these just keep coming. As fly-by-night Instagram traders gain (undeserved) fame, and Bitcoin traders promise overnight riches, these kinds of requests become more frequent.
But for anyone who's seriously considering trading, be aware:
You won’t learn how to trade in a weekend.
If your plan to get out of debt is trading your way out, get a new plan.
Never use money you can’t afford to lose to trade – whether it belongs to you, a bank, or loan shark. Don’t do it.
Despite what Instafab traders tell you, trading is not a ‘get rich quick scheme’ and you won’t master it in a weekend.
Is your platform promising you guaranteed returns? Run, it’s probably a scam.
With some trading products, losses can exceed deposits. This means taking a gamble with money you can afford to lose could land you in more trouble should you lose more money than you deposited.
Understand what you're doind at all times. Understand the products you're dealing with and the risks involved before you jump in.
Of course, always keep in mind that “if it’s too good to be true, it probably is”. This list is by no means exhaustive and you should always do due diligence on a trading site before you commit your capital. Find out what users have to say about the platform: how long has the site been up and what are people’s experiences with it. A lack of information should be a red flag. Don’t just rely on testimonials from site users. You can’t verify whether those are real or not.
Be careful when searching through sites like Twitter. It’s easy to stumble across bots – fake accounts that are created to push particular content. Look out for the same tweets coming from different accounts.
More importantly, if you’re in deep financial distress, it’s better to think about calling up your creditors and negotiating your repayments so you’re not overwhelmed by your financial obligations.
If you want to be a successful trader, seasoned, and honest, traders will tell you that it takes a lot of learning, self-education, losses and dedication. It’s not a walk in the park.
Use the resources at your disposal – you can see what we have on the community blog, learn or talk section, where youc an also interact with other traders. You can also visit sites such as JustOneLap.com or Investopedia, which have great educational resources that are invaluable in your journey as a beginner trader or investor. If you want to learn a bit more about financial markets, you can check out our podcast series of Financial Markets for Beginners.
(For anyone who'd like to add to why trading your way out of debt is a bad idea, please share in the comments section below.)