Getting Out of Debt: Rule# 4

"Pay off your debt!"

My mother owns a small sari-sari store. As what usually happens in this type of business, a lot of people owe money from her. There are some who don't pay their debt and instead start avoiding my mother and patronizing other sari-sari stores, my mother's business competitors. This really upsets her...who can blame her?

When my mother is upset with a debtor she would usually tell me, "...if only Mr./Ms. So-And-So would pay me P20 per day I would be fine with that rather than seeing him/her pass by my store as if nothing happens, and with no explanation why he/she couldn't pay as promised."

No matter how big or small your debt the only way to get out of it is to pay it off. Ignoring your debt is not only very irresponsible, but also immoral. You don't only owe money to your creditor, but you also have moral obligation to him/her. Don't forget that during your times of need your creditor was able to help you, so it's only right, and fair that you treat him well by paying off.

However, if you have too much in your plate then instead of avoiding your creditor, why not talk to him/her. Apologize if you have to -- you owe that also to your creditor if you can't pay as 'you' promised -- and negotiate for a easier payment term, something that you can afford while not spending more than you earned.

Like my mother, your creditor would still be upset specially if he/she needs the money, but at the same time you will earn his/her respect for doing what is right even when it's very unpleasant. Your creditor would mostly like agree to receiving smaller down payment than not receiving anything from you at all.
 
Taking legal action is too much hassle, not to mention costly, to your creditor as much as to you. But if you make him/her angry then he/she might bite the bullet and sue you. And this would only add trouble to your existing troubles.

Getting Out of Debt: Rule# 3

"Cut your losses! Stop borrowing money that you can't afford to pay."

Getting out of debt and managing money boils down to one very important human trait, self-discipline - the ability to calmly say no when your body is itching do something foolish like spending till bankruptcy.

The main reason many people are buried in debt or can't manage their money is because they cannot say no to their want or to the want of their love ones even if the want is not really a need.

I don't mean that you have to be stingy to yourself, your spouse or your children. But you have to be realistic as to what you can afford. You've got to draw a solid line that says 'stop, nothing more beyond this.' This should be clear to you and to your love ones. And you should respect this stop line with all your heart and mind.

In my family, for example, we have what we call 'Family Night' and we do this every Friday evening. In celebrating this event we follow two unwritten rules: (1) We have to spend within the allocated budget  (2) Even if we don't have money, we celebrate it anyway; there were times that we just stayed at home and watched one video because I don't want to cross the stop line.    

So before you swipe that shiny credit card or borrow money from the Bombay in motorcycle to buy something, ask yourself these questions:

If I don't buy this will I die? Will my family cease to exist? Is this really very essential?
Can I put off buying this until later, when I can afford already?
Do I have money to pay for this? Can I pay this one time once the bill arrives?

What good does a new cellphone, a new laptop, a new tab, a new home theater, etc. bring to you if your bleeding inside from debt, and the only way for you to pay it is to borrow some more?

Stop your losses! Use that credit card only if you can pay the full amount one time. If you pay only the due amount, then you're still bleed from hidden interest. You are not cutting your losses.

NOTE: To me there are only two valid reasons to borrow money: (1) When life hangs on the balance (2) When you want to grow your money by putting up a business or by investing.

Getting Out of Debt: Rule# 2

"Keep your money off your pocket!"

Once you honor Rule# 1, the next rule to honor in order to get out of debt or stay free of bad debt is 'Keep your money off your pocket!'

What do you do after you receive your salary or your income or your commission or your sales? Spend it? Keep the money in your pocket or wallet or ATM? Or do you allocate it first?

You response is very crucial to getting out of debt or staying free of bad debt.

If you keep you money in your pocket or wallet or ATM, you can kiss your money goodbye. The money in your pocket or wallet or ATM is money here today and money gone tomorrow. And usually you won't even remember where did it go! So keep only in your pocket or wallet or ATM the money that you can afford to spend.

If you choose to spend first before paying your debt then chances are that nothing will be left to pay off your debt. All the while the interest keeps piling high, burying you deeper into debt.

However, if you choose to allocate first before spending anything then you are putting yourself in a better position to pay off  your debt or stay out of bad debt.

This is my suggestion to you. Once you receive your salary, income, commission, sales, etc. allocate them right away! For example, put inside an envelope (with appropriate label on it) your payment for electricity, telephone, water, debt, etc. Don't spend this money.because these money are not yours anymore.  

Getting Out of Debt: Rule# 1

"Stop spending more than you earned!" -- My mother

If you are looking for the most important rule to follow in order to get out of debt starting today, and to stay out of bad debt, this is it! Look no farther.

The truth is that, if you subtract a big number (say 9) from small number (say 2), you will always end up with a negative answer; it's -7 in this case. This holds true anywhere you go. So to get a positive result, most people would gladly crawl into a hole called debt by borrowing.

Here is the hard truth. If you couldn't stop yourself from spending more what you earned and instead become a habitual borrower, then you would always end up gasping for more money even if you would be promoted every year. And no matter how many businesses you will put up, all of them will collapse sooner or later. The law of subtraction is universal.

So stop fooling around. If you really want to get out of debt, make that firm decision today to honor Rule# 1 and do yourself and your family a favor.


(I don't claim that my mother is the originator of this timeless wisdom, but I want to honor her for introducing this to me, and drumming it into my head usually over dinner.)

Why Manage My Peso?

Can you still remember the time when looked at the balance of your savings account in your favorite ATM machine, scratched your head, and thought out loud, "Where did my bonus and 13th month go?"

Because what was left was a small fraction of the money that used to be there, and you only have a vague idea of where did your money go.

Welcome to the world of mismanaged income!

Or how shocked you were when you opened that crisped credit card Statement of Account only to find out that your Total Due Amount was almost one half of the income you would receive by the 15th?

Welcome to the world of mismanaged spending!

How about the time you got promoted and received a substantial raise only to find out later that your income was still not enough?

Welcome to the world of mismanaged lifestyle!

From my own experience I believed that these three 'MIS' are the leading causes of the financial woes of many families most specially the average income earner, and the middle class.

It is from these beliefs and the desire to help address this that this blog is born. So the purpose of this blog is to help those Filipinos who are average income earner and those who belongs to the middle class to overcome their financial woes caused by mismanagement of financial resources like mismanaging income, mismanaging spending, mismanaging lifestyle, and others through sharing of simple, practical, and easy-to-follow ways of managing financial resources that we've learned from the school of hard knocks as well as from the Bible.

After all who knows better about managing financial resources than the Creator, the source of life? 

We don't claim to make you rich. There are other sites that specialize on this. But our simple vision is to see you get out of debt, live free of bad debt, keep and enjoy your hard-earned money, and grow your money. If this is what you have in mind then...

Welcome to How to Manage My Peso!