Are you worried about your current debt, or unsure whether you can make your payments on time? Don’t panic! Just like any other money problem there is, find out how you can make the situation less heavy on your wallet by first looking for the root cause of where all your money is being shelled out on. We’ve rounded up the top helpful tips to help you get back on track and keep your money health in good shape.
1. Ask Yourself: Why Are You In Debt In The First Place?
Did you get a loan with a really high interest because you needed the money so badly? Or did you borrow money from a personal friend and now avoiding him because you feel ashamed?
Generally, you should only muster the confidence to get a loan if your total monthly debt payments does not exceed at least 30% of your income on your annual salary. So if you’re earning P20,000 net per month, you can only have a maximum of P6,000 to allocate if you plan on getting a loan.
This helps you provide a buffer so you can handle your expenses and when you’re paying back your loan.
2. Know The Difference Between Good Debts and Bad Debts
It’s considered a good debt if you start investing so you can increase your earning potential. For instance, education is a really good investment. Getting a house loan as compared to shelling out money for rent is also a good investment.
Bad Debts on the other hand include impulse purchases that you buy through your credit card. It’s probably a good idea to skip buying that designer bag even if it’s 50% off. You want to make wise spending choices from now on that you have existing debt to pay off.
3. Make a Spending Plan
Many of us include in our New Year’s Resolutions a goal to be more mindful of our spending habits. A good way to start is to create a simple budget plan where we include our income, our expenses, the bills we have to pay, and our debts. This provides a better overview of how we handle our finances and make us more conscious to our spending habits.
Having a spending plan can also serve as our roadmap so we can ultimately get rid of debts and make realistic payments to the debts we’ve previously incurred.
4. Cut The Plastic
Many of us think of the credit card as a lifesaver especially when we’re running low on cash. We should think of credit cards as the extension of our hard-earned money that even earns finance charge when we are unable to pay it in full when the statement arrives. If you have credit cards, try opting for promos under the “0% Interest” program and just resort to using it for emergencies.
Remember: It’s often a better idea to pay in cash as it automatically does not tie you to any loans or interests from past purchases which may cause a dent in your wallet.
5. Get Rid of Unused or Unwanted Items
Turn your closet filler into instant money that you could add to your savings. Do spring cleaning and even sell the stuff you don’t want to make extra cash or to solve short-term money needs.
If you feel stuck in a rut, have a valuable item you’re not ready to get rid of just yet, you can choose to try pawning your items at PawnHero, the first online pawnshop in the Philippines and in Southeast Asia. PawnHero offers only 2.99% monthly interest rate as compared to traditional pawnshops today and only requires you to have a camera-enabled gadget and the Internet to find out how much you could initially get for the item you want to pawn.
So keep in mind these tips to help get your debt low and radically transform your life to make better and smarter spending decisions!
Rock your way to abundance!