Lessons of Debt

It is a very common practice for Filipinos to loan money to buy things especially big purchases like a house and lot or a car maybe.

As for incurring debt, three lesons have been shared.

1. It always depends on the purpose. If the purpose is wrong, debt is bad.

I remember a qoute told by David Ramsey thatngoes this way, "We buy things that we don't need with money we don't have to impress people we don't like." If you think you fit this qoute then i think you have a problem.

It is not bad to be ahead of everyone. It is not bad to have things. But if you accumulate things the wrong way, i am 100 percent sure that you are going to dig yourself deeper and deeper until there is no more space for younto breath.

Lesson: "Do not keep up with the Joneses. Who are they anyway?"

2. Size of debt versus income matters.

Think of it this way. You are applying for a loan and your records show that you are paying your bills on time with instances of paying more what is required in your credit card. What is the probability that the bank will lend you money? Actually it is high.

On the other hand, if you are so indebted and your debt is close to your monthly salary then the probability is very small. The bank analyzes cashflow. The mere fact that your debt to income ratio is closer to 1 signals a red light.

3. Debt Management Approach

Paying debt requires financial management. It requires discipline. You cannot depend on other people. It is you who is responsible. Start managing your debt or your debt will begin to manage you. The smaller your debt the more cash will be put to your bucket and the faster younwill achieve financial independence.

Dream On

When I started attending a series of financial literacy seminars first thing that struck me was their tagline, "Financial independence is not a dream, it's a reality!"

All my life, no one told to me about financial independence and its importance to my life. So naturally I was taken aback when I first heard it.

First let us define financial independence. According to wikipedia, it is the state of having sufficient personal wealth to live independentlynwithout having to work activelyfor basic necessities. His only means that the tag line suggests that a person can accumulate wealth to sustain his needs. Only if he makes it a priority.

From that day on, I committed on making my dream a reality. The journey is not a joyride. Actually it is difficult. I have to learn how to restrain myself from buying and accumulating things. I have to immerse myself with books on personal finance. I have to take advices from different people, media, internet and bloggers. I need a total overhaul.

To this day i continue the discipline in handling my finances. I am more confident to talk about money now. I am more informed than before. I am able to foresee my future and can lay down financial plans easily. The seminars and the discipline are now bearing fruits. Everything is part of my system now.

I am confident that I can reach my target this year. And I am confident that I can exceed what is expected. Thanks to the community, now i can start "Dreaming on!"

Hello readers!

It’s been a while since my last post and I’m excited to write again. It’s been a busy year for me. Had lots of things to settle before I can continue with this passion.

Let’s start the year right by greeting each one a Happy New Year! May we all have a great one this time.

Expect the usual “Looking Back” and “What To Do this Year” entries soon. And don’t forget the “Goals for 2012” and the crossing out of achieved goals for the past year.

For now, let’s all have a great New Year celebration!

HAPPY NEW YEAR everyone!

~Till then.

13th Month Pay Arrived, So What Now?

My prorated 13th month pay arrived last weekend while I was camping at Mt Batulao. I immediately took the money and went shopping! Oooooooopppppppss! NOT TRUE! hahaha.

Few months before the bonus pay out, I already planned where my 13th month pay will go. So off my bonus to one of my favorite investment facilities - my long term health care.

I am saving for it for almost 4 years now. It was a plan designed to pay my hospital bills even at the age of 60 and beyond. The good part is, I am going to save for it for just five years. It took me lots of guts and will power to pay my plan but I am pleased that I went on through the process because today I know my money has a longer way to go.

I hope you have your long term health care also.

~Till then.

Marriage and Debt - How to Deal with It

Okay, you are married and you're both in debt.

You are paying for your mortgage, your car loan, your cable, your phone lines, your electric bill, your water bill, your credit card bills and of course your nanny all at the same time. On top of that you need to buy milk, diapers and vitamins for your baby. And of course who will forget the monthly check-up for the kiddo?

You thought you have enough for the bills. You plan pretty well and thought can survive until one of your loans are settled.

But at one point you splurged. You overspent. That was when everything went shaky. You started delaying your mortgage payment, your cable, your water bill, your credit card bills and sad to say including your nanny's pay. The interest in your credit card bills became overwhelming because you cannot pay even the minimum amount required. It became a ticking time bomb.

With all these bills to pay, how are you both going to cope up?

First thing first. The couple need to sit down and talk about their finances. They have to admit that are broke and the need to re-arrange everything should be on top of their priority list.

It is a very stressful situation for couples to have financial problems. More often than not, this is one o the main reasons why couples separate. So before that happens, they need to do something.

Here are some tips I gathered to help couple straighten their finances.

1. The couple should make a list of their debts first. They can arrange them from the highest to the lowest or from the one with the highest interest to the lowest interest.

2. They should decide what debt to settle first. For me it is best to settle the smallest debt first so that the feeling of successful paying off a debt can be felt which can actually drive them to continue paying off the others. In this method, the list should be arranged from smallest to highest. Then they have to determine how much is the minimum payment for all their debt. Then the smallest debt should be paid a little higher so that it can be finished sooner. After paying off the smallest, they need to go to the next on the list and so on and so forth. After each successful payment, don't forget to celebrate a bit so that you'll really have the feeling of success. (But please DO NOT SPLURGE.)

3. Look at your house. Inspect all your things. Are you accumulating assets or liabilities? Is your house full of junk that just lie on the floor or on your cabinet? Well it's time to let go of all the things that you don't really need. Have a garage sale on your yard. Invite people and neighbors to look at your yard sale and make money out of your trash. You can also learn ebay.com and sell stuff there. Remember, your trash can be someone else's treasure. The money you'll be making from the yard sale will be used to pay-off one of your credit card bills.

4. Live a simple life. One thing that everybody tends to forget is to live simple. It is just a human nature to want more as your salary grows. But try to learn to curb the want and think with your mind not with your heart. Most of the times, people commit mistakes when they think emotionally. And mind you, emotional thinking tends to make you spend more.

5. Do not mind what other people will say. It's your life not theirs. Why bother what other people will say. Will they help you when you tell them you need money? I think not.

6. Find ways to lessen your expenses. Find a house that suits your budget. Use public transport from time to time. Skip the soda and switch to water. If you can live without a cable connection then do so. If you can maintain connectivity by dropping the broadband connection then do so. Hand wash your clothes once a month and hang them to dry. Plant some vegetables in your backyard. There are actually tons of ways to lessen expenses. It all boils down to what things you value more

7. Don't forget to smile and pray. With a little bit of determination and strong decision making you will eventually climb up the pit of debt. So don't forget to smile and pray. Don't let depression overpower you. Don't let self pity put you down. Every problem has a solution. You just have to hang on.

~Till then