How To Get Out Of Debt in the Philippines: 10 Ways That Work

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Debt is like a sinking ship… unless you escape, it’ll drag you down with it.

But you can get off. Even if it’s just your feet, eventually, you’ll find deep enough waters to stand on so you can start building back the life that got lost.

To help you get started, here are 10 of the most effective ways I’ve found of taking control over your debt and getting yourself out of it quickly.

1. Change your spending habits

The first and foremost thing that needs to change is your spending habits. You can’t get out of debt if you continue to add to it, after all.

If you keep living like you’ve been living, you’ll never get ahead. And if you think about it, this is a pretty obvious point; the definition of “debt” is simply money owed for something that has already been bought or consumed. The more money goes towards things already purchased or consumed, the less money left to pay off debts.

This means cutting back on unnecessary expenses and being aware whenever a purchase crosses the line from necessary cost to a luxury item.

Constantly re-evaluating discretionary spending will go a long way towards helping you get out of debt quickly in the long run, but it won’t help in the short term. So you’ll want to set specific goals for the total amount of savings you need to pay off all debts.

Identify your variable expenses

Variable expenses are specific chunks of your monthly income that you tend to spend and every month. Some examples are entertainment, groceries, bills, clothing, debts repayment, etc.

You need to understand your variable expenses and find ways to cut them down without significantly impacting your life.

Focus on needs, not wants

It is easy to get into debt because you want things that you do not need. You spend too much money on luxury items, clothes, and food at the expense of your debt. Try to focus on needs rather than wants so that you spend less money without sacrificing all the fun life has to offer.

2. pay off debt with a budget

person holding paper near pen and calculator

Most people are in debt because they have spent more money than they brought in.

If you want to get out of debt, you need to find a way to bring in more money or cut down your spending so that there’s less going out.

The first step is creating a budget and ensuring that all your expenses (bills and things like groceries) stay within your set limits.

With a budget, you record the amount of money you’re going to spend on several items in a given period to achieve a goal, in this case, paying off debt.

Get started by making a spreadsheet that lists your monthly fixed expenses, followed by your variable costs.

3. Cut back expenses

One of the simplest ways to get out of debt is to cut back on your expenses. This does not mean living like a hermit. It means making lunch for work instead of eating out, watching movies at home instead of in theaters, and planning free or cheap activities.

You should also consider taking on an extra job if you can handle it or ask for a raise at your current job.

Think about it this way: even if one more dollar per month came into your life, how long would it take you to save up enough money to pay off one less credit card payment? If every peso counts, then make sure you are earning all the money possible.

Look for ways to lessen your expenses as much as possible.

For example, do you pay for cable? Is Netflix part of your routine? Think about whether you need it. It might seem like an extra P500 and no big deal, but that can quickly add up to hundreds of pesos, depending on how much you pay for subscriptions.

If you go through one or two cups of coffee on your way to work each day, don’t buy it on your way in. Make it at home instead and take it with you to save money and time. Follow these steps if need be. It might help convince a coworker to join in since two people can drink from one pot of coffee!

If you’ve cut back expenses to their minimum and you’re still coming up short, you’ll need to look for ways to expand your income.

4. Earn extra money

This is the simplest way to pay off your current debts and avoid taking on any new ones.

Whether you do it through a side job, selling unwanted stuff around the house, starting your own business, or inventing something that will sell like crazy on Amazon if you can make extra money, go for it!

And don’t just save it to pay off the debt later. If you have an emergency fund in place already, use some of the extra cash towards clearing out your high-interest credit card balances rather than stuffing it away in your savings account where it’s not earning much.

Related: How To Save Money Consistently In The Philippines: 9 Easy Ways

5. Prioritize debts

The first thing you have to do is create a list of your debts, how much each one costs, and the minimum payments. To prioritize them, start with the account that has the highest interest rate first.

Next to each debt, write down how much you can afford to pay towards it per month. After the priority debt is paid off, start moving on to the next one and so forth.

When making minimum payments along with prioritizing debts, you’ll feel a sense of accomplishment when one debt is paid off completely. This feeling will inspire you to keep going until all debts are eliminated. [And once they’re eliminated, don’t go getting into debt again!

6. debt Repayment methods

Debt Avalance Method

When you have a lot of high-interest credit card debt, your best bet is to use the avalanche method. This quick and easy method will have you out of debt in no time! Here’s what you do.

Make a list of all your debts from highest interest rate to lowest. Include installment loans like mortgages as well as revolving debt like credit cards.

Your goal is to pay off the debt with the highest interest first while paying the minimum on all other debts so that they don’t accrue more interest than they’re supposed to.

Debt snowball method

A debt snowball is where you pay off your debts from smallest to largest instead of biggest to smallest (the “normal” way).

This puts you in a better frame of mind because each time you make a payment, it’ll be a victory against a small amount of debt rather than a defeat against your biggest debt.

Moreover, you’ll pay less interest because the smaller debts will be paid off sooner than larger ones (the snowball effect).

Automate Your Debt Repayments

person holding black android smartphone

Once you’ve found an automated method that works for you to avoid missing payments (like the first four steps), it may be smart to automate your debt repayments too. This way, you can’t forget or miss a payment because all your debts will automatically be paid on time each month.

7. Earn cashback whenever you spend

Cashback credit cards

Look for a way to earn cashback whenever you shop. A good cashback credit card will allow you to earn as much as 5% on every purchase — and sometimes more! It’s like getting free money just by doing what you already do – shopping – but with a nice bonus.

Cashback Apps

Shopping through a cashback app or website makes it simple to earn easy, passive money. Shopback is free legit alternatives that will pay you cashback on your shopping.

You can even earn more commission for referring your family and friends.

8. Make Faster Payments With Balance Transfers

Do you know that credit card you’ve been using to rack up debt?

Odds are it charges high-interest rates—18% or more. That’s why it’s smart to transfer your balance onto a new card that has lower rates (try asking your current creditor for another card with lower rates; if they don’t budge, try looking around at other cards online).

Of course, this only works if you can make two payments per month without falling behind on anything else (which shouldn’t be too hard if you’re good about following the first four steps).

9. shop around for insurance

Every year when it comes time to renew your car insurance, home insurance, and life insurance policies, take the time to shop around and see if there’s anything better out there. There very well could be!

You’ll want to consult with a financial planner or similar professional before switching companies. They will help you understand the consequences of your switch (e.g., whether canceling one policy will result in losing any discounts you had).

10. Consider debt counseling

person in red and black plaid long sleeve shirt using black laptop computer

It’s not just for people in financial trouble.

More and more, young adults are finding themselves with too little income to cover necessary expenses like student loans, credit cards, and rent.

survey says that an estimated 41 percent of Filipino investors are dealing with “overwhelming debt”—the second-highest proportion in the region after Malaysia.

Without enough income to live up to their monthly obligations, they need help getting back on solid ground. A growing number of these people are turning to nonprofit credit counseling organizations for guidance.

But beware of these services, though. Before signing up with any debt relief service, ask them to explain their fees and conditions in advance.

Bottom line

Getting out of debt is possible. It may not be easy, but it’s achievable.

We’ve compiled ten ways that work for people in the Philippines to get back on track with their finances, and hopefully, you’ll find one or two ways that suit your needs (and budget).

If you’re struggling financially like many Filipinos are, don’t give up hope. You CAN do this if you plan to follow through until you reach your financial goals.

Tackle it sooner rather than later, and follow the strategies mentioned in this article.

What other tips would you add? Comment below!

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