Most of us have experienced debt but for some Filipinos are having a hard time eliminating or are buried in debt. Bad debt is commonly accumulated through excessive spending or spending your money for “wants” instead of “needs”. Eliminating debt is a common problem that most Filipinos face. Before you move to investing you should first face and eliminate your debt in order for you to reach your financial freedom. If you don’t follow your budget and you keep on building debt instead of your wealth chances are that your debt will eat mostly your savings or earnings! So the soonest time that you can eliminate your debt the better.
If you want to be debt free then you should be committed, focused and disciplined in paying your debts. Some financial gurus advise that you should pay your debt first before you build your emergency fund. This is mostly true especially if your debt interest is higher than your emergency fund’s interest. The longer you keep your debt the higher money you need to pay for your debt.
You can also follow Rowena Suarez, Registered Financial Planner, advises that she shared in her interview at ANC Money.
13 steps on how to get out of debt
- Face the problem. Running away will only make your debt bigger.
- Commit to get out of debt.
- Decide of the time frame. Set aside part of your salary to pay for your debts.
- Make an inventory of your debt. It’s easier to track your debts if you have a list.
- Record your expenses – Getting out of debt is like going on a diet, you need to be aware of everything you eat.
- Determine your needs and wants. Give priority to your needs than your wants.
- Let go of your wants.
- Use your wants money to pay your debt. If you have extra money, allot it to your debt as well.
- Choose Debt with the lowest interest rate then pay it off first. This payment system is called debt-snowball method
- Work out a payment scheme with your creditors.
- Pay with Cash.
- Find other source of income.
- Learn from your experience and make it your life choice.
The above mentioned steps are really practical ways that anyone who are buried in debt should follow. Remember that getting out of debt or eliminating your debt needs commitment, focus and discipline in order for you to succeed. If everything fails then I highly advise to check other debt payment method or debt reduction strategy that will work for you.