Guide on How To Break Away from Chain of Debts from Financial Experts
DEBTS – Here are some helpful tips on how to pay off your multiple credits and achieve financial freedom the soonest time possible.
Undeniably, one of the things that many people share is the pool of debts. Truth be told that the cost of living is high nowadays and not everyone earns a good amount monthly that can provide for all the needs in the family.
Are you one of the people who want to break away from the chain of debts? It is really different when you have the financial freedom and is not always running after a due date. There are actually steps that you can take towards your goal to have financial freedom.
Based on the video of ABS-CBN News anchor Karen Davila for My Puhunan, here are some tips on how to break away from the chain of debts:
List down all your debts
The first move is to list down all the credits that you have to pay for — in descending order or from the one with the biggest amount to the lowest loan. This kickoff of your journey towards financial freedom will give you the overview of how much is the total debt that you need to pay off and how much you will need.
Determine your monthly income and expenses
It is also important to write down your monthly expenses so you will really see how much you will have left from your monthly income. Karen Davila stressed that it is important to be honest in listing down your expenses to achieve the right results.
Drop off unnecessary expenses
Once you already have your complete list of expenses, it is important to make that decision to drop off the unnecessary expenses so you can save some money. The news anchor also stressed that the main priority should be the basic daily needs.
Karen Davila has also sought the tips of licensed financial advisor na si Suzane Mabulac in breaking away from debts. She clarified that not all debts are bad and they are usually because of the following factors:
- cost of living
- emergency needs
- ease of borrowing
- lack of financial education
If you want to break away from debts, here are the other tips from Mabulac:
Build your emergency fund
Mabulac suggests saving money that is equal to thrice up to six (6) times of your monthly expenses. In this way, if you unfortunately lose your job or your source of income, you don’t have to turn to borrowing money right away. You have your emergency fund to provide for your expenses while you look for work.
Track your expenses
The licensed financial adviser stressed that it is important to know where your money is being spent. It is also through tracking your expenses and knowing where you use your money that you will have the chance to improve your spending ways.
“You cannot improve what you do not measure,” Mabulac cited.
Create a budget
According to Suzane Mabulac, creating a budget is like making a plan on where to use your money. It can help make things clear with you on your budget priorities.
Delay non-essential purchases
The licensed financial adviser also cited delayed non-essential purchases as one of the ways on how to break away from the chains of debt and achieve financial freedom. She stressed that there are times when we want to buying certain things but we don’t actually need them.
Based on the video, Mabulac suggests just saving money for your target item so when the time comes that you have saved for it, there is a possibility that you will realize that you don’t need it, thus, you can use your money in other more important matters. You can save it as an emergency fund or invest your money.
Live below your means
Suzane Mabulac also advises living below your income. According to her, you should set yourself free from the social media pressure. It is important to only spend on the things that you can afford so you do not need to go into debts.
Conclusion:
While borrowing is entirely inevitable most especially if you were not born with a silver spoon in your mouth, a breadwinner, or the sole earner in the family, knowing the tips above means there is a way to set yourself free from debts or avoid being hooked by its chains. It is important to really govern your money and it should not be the other way around.