Useful tips on how to properly manage your debts

11:18:00 PM

I bet you've experienced that point in your life that you are focused to purchase something you really need or want and you start saving money but because of other priority expenses that you have to pay for, you just can't save enough for that item, then you begin look for an option that can eventually get that "something". Unfortunately, there comes the time that your only option left is to borrow money either from a person, bank or other money lending services. Actually, having debts is not always a bad thing, you just have to know how to manage the borrowed money properly. 

I'm not an expert when it comes to this topic but thanks to Mr. Aya Laraya of Pesos and Sense and to Arnel Bautista, I was again able to attend Sun Life Financial's #Money4LifeChallenge with the topic "Checking Debts". 

I would like to share to you what Sir Aya discussed last session and hope this will be very helpful to you as much as it has been a big help in my financial endeavors.

First let's define Debt. It is simply "using other people's money" may it be directly from a person you know, through credit cards, banks or via lending companies. But before you enter a deal of borrowing money from all the options above, you must ask yourself these questions:

  • Why are you borrowing money?
If you are borrowing money for your business, home (if you are planning to stay in the Philippines for good), car (personal use) or anything that can generate or enhance your revenue, then that is good use of borrowed money. Unfortunately, that is not what a lot of people are doing with their debts because usually they use it for consumer goods, emergencies and bad businesses which are considered "bad debts".
  • Do you have to borrow money?
  • Have you considered other options?
If you have answered these two questions with Yes, the next thing that you must take note is "How much debt can you have?" 

  • For credit cards, one must have less than his/her average net income
  • For businesses, it should not be more than or equal to its total net worth
More often than not, people with debt tend to have a hard time paying their borrowed money in whole every cut off or scheduled payment date because of poor management resulting to additional fees, etc. When the unfortunate time comes that you want to get out of the Debt Trap, here are some of the tips shared by Sir Aya:

  • How much do you really owe? - You have to be aware of the total amount of money you borrowed minus all the other fees that was charged to you.
  • Inform them on how much money you can pay at a certain date.
  • Cut off the credit card
  • Create a payment plan that the lending company/bank would hopefully approve
When you already have an agreement, make sure that you pay them on time and with the correct amount of money you agreed upon. Try to talk to the authorized person and propose a different type of payment besides issuing checks (which is the most common way given by lending companies) because once you started issuing checks and one accidentally bounces, the company can file a case against you, which we don't want to happen to anyone.

With all these questions asked, you may think that it is very hard to have a debt, but it is actually very easy. Just make sure that you keep in mind the tips that I've shared to you on this blog post. Hope this helps you as well when it comes to managing your debt. 

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