Friday, 16 December 2016

Pay back your Utang!!!

Utang or debt is a very important lesson that you need to understand to achieve financial freedom. To have a financial freedom, you should have a debt free life. Don't bury yourself with credit card debts or personal loans.

Reasons Why you cannot get out of debt:

First, "You are Spending more than what you are Earning", it means you are living above your means as the popular advice of financial advisors "Live below your means" but many are not following this advice. The attractive promos of credit card companies with 10 - 20% cash back every time you spend, it makes you blind on interest rates, service charges, and penalties for late payments.

Second,  "Hindi ka IN kung wala kang Latest Gadgets", there is a long queu line on Apple stores every time they released a new version of iPhone, I lost my count on the versions of iPhone. The peer pressure and media advertisements  (special offers, no down payment, zero interest rates) push you to spend and take a monthly installment plans for gadgets, cars, appliances,  etc. etc.

Third, "Pahiram naman , bayaran ko agad may Emergency lang".  "Gasgas na phrase ito". We keep using it every time we don't have enough money and continuously borrow from our families and friends until we cannot keep up with the promise date of payments. "Dagdag ka lang ng dagdag ng utang at hindi ka naman nagbabayad."

Three Practical Tips on How to handle utang:

First,  Pay back your Utang, Pay first the highest interest rates  among your debts and it should be prioritize or negotiate with the banks or institutions to restructure or buy back the loans at a lower interest rates.

Second, Build your emergency funds, "Marami ang nababaon sa utang dahil sa mga emergencies at ang unang tatakbuhan ay 5, 6 or bombay". You should build emergency funds for unexpected events or storms in life, it can be your protection for financial problems. Start building your emergency funds.

Third, Utang only for Good Debts, "I said avoid only bad debts", there are investments that you will encounter along the way and there are possibilities you don't have extra cash, this is the time you can "Utang for Good Debts" . For example: Rental properties, borrow from the banks to buy property that you can rent out, use the power of leverage.

I'm looking forward for you to get out of debt.

Sincerely yours,

Jonathan I. Ruiz, CPA, MIB

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