Having “utang” is not inherently a bad thing, but for some Filipinos, debt becomes too big, too fast due to unhealthy financial practices. To keep it at a minimum, here are some strategies to employ.
Being debt-free is the ultimate goal for many of us, especially in the working class, but there are certain debts that we can’t go without. Unless you can pay in cash, you would have to take out a loan to buy a house, a car, start a business, and other expenses that are too big to pay off all at once.
That said, having debt is not necessarily bad if the money is used for something essential, such as a house or a car. However, being irresponsible with your debts can force you in a downward spiral of financial ruin in a blink of an eye.
To build a good credit score that the fintech companies and credit bureaus in the Philippines can see, keeping your debt low is one of the best ways to go. Moreover, it is the best way to protect yourself against financial problems in case something goes wrong, such as loss of income or a medical emergency.
Here are the best ways you can keep your debt at a minimum:
1. Practice responsible swiping
Your credit spending plays a significant factor in how your credit history looks. Hence, it is a sound financial practice to only charge what you can afford, meaning what you can pay in cash. For example, if you want to buy a Php25,000 item, only charge it on your credit card if you can pay it in full when the bill is due. Furthermore, keep track of what you charge on your credit card so that you can be mindful of your spending.
By being responsible with your credit card usage, you can avoid biting off too much that you can chew. In turn, you won’t have trouble paying off your dues every time the bill arrives, which is better for your peace of mind than worrying about the bills 24/7.
2. Avoid personal loans
Whether it is from a friend, a family member, or a lending institution, avoid getting a loan if you don’t need it—especially if you’re not sure if you can pay them back on time. Sure, a medical emergency can be a valid reason for borrowing money, but other than that, it’s better to find different ways of acquiring money than getting into debt.
3. Borrow only what you can afford
When applying for a home loan or leasing a car, stick to what you can afford based on your current income. Don’t bank on the possibility of getting a raise or a promotion in the future–think about what you can afford today. In this way, you can avoid biting off more than you can chew in terms of debt, and you can become debt-free much sooner.
Being buried in debt is a struggle that you never want to experience in your life. When your debt inflates beyond your capacity to pay, everything else in your life can be affected, especially your family and your lifestyle.
Therefore, use these strategies to keep your debts at a minimum. Without a debt to think about, you can enjoy your money more and make the most out of your investments.