Tuesday, July 31, 2018
Usapang utang
Usapang utang
In some of my previous blogs, Ive shared about the importance of improving ones cashflow which is one good step in doing proper personal finance management (How to Increase your Cash Flow)
In this post, well read about an equally important second step - getting out of debt (if you have any).
Below excerpt is taken from one chapter of Efren Ll. Cruzs simple but powerful book Pwede Na! - The Complete Pinoy Guide to Personal Finance (2010 edition). Grab your own copy as I think its a good reference and comprehensive guide for anyone starting to draft ones financial plan.
Happy reading!
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All of us come face to face with the allure of debt, particularly consumer debt. But please dont get me wrong. Credit can be a tremendous tool, especially when used as leverage to earn more assets. It is, however, the misuse and abuse of debt that leads to trouble.
Debt problems can be harmless at first. Take the case of credit cards. Credit card companies give pre-approved credit with the joining and annual membership fees for the first year waived. Telemarketing companies are even set up to promote credit cards and credit card products. Then you say, "Oh Ill just keep it for emergencies." Most likely, you would have opened Pandoras box as emergencies will take on a new meaning.
Emergency lunches at the newly opened Italian restaurant can easily be rationalized. Then you wander through the mall and find that items on sale become emergency purchases. But you say that you will pay off the charges in full when the credit card billing comes, or so you think. Before you know it, you would have racked up so many charges that you are only able to afford paying the minimum amount.
Taking Stock of Your Debt
Managing debt is much like trying to lose weight. The first step is to see how much you currently weigh. Managing your debt also requires that you know how much you owe and what kinds of debt you need to pay.
You should classify what you owe by when they are payable. The simple reason for this is that you need to know if there would be enough cash to pay for a certain debt when it falls due. Just lumping your debts under one total will not make good financial planning.
Types of Debt | Short-Term | Long-Term |
Personal Loans | X | |
Credit Card Debts | ||
Straight Purchases | X | |
Deferred Payment | ||
Payments due in < 12 months | X | |
Payments dues in >12 months | X | |
Car/Housing Loans | ||
Payments due in <12 months="" span=""> | X | |
Payments due in >12 months | X |