Many young Filipinos today find themselves entangled in a web of financial obligations. Social media platforms have amplified FOMO (Fear of Missing Out), pushing individuals to spend beyond their means just to keep up with the aspirational lifestyles of social media influencers. Add to this the “sandwich generation” responsibilities — supporting aging parents and young children — and it’s clear why debt levels are climbing. Credit cards, home and car loans, personal loans, and microloans stack up, creating a financial burden that can feel overwhelming.
Addressing debt isn’t just about balancing numbers; it’s about securing your future. The longer debts linger, the more interest they accrue, eroding your financial stability. Tackling debt early sets the stage for financial freedom, reduces stress, and opens doors to opportunities like home ownership, travel, or starting a business. By taking control now, you’re investing in a brighter, more secure future.
Mastering debt is not easy, but it’s doable. We at Globewest Finance would like to share some tips on how to get started.
Step 1: Assess your situation
The first step in conquering debt is understanding the full scope of what you owe. Create a comprehensive list that includes:
- Credit cards. Note the outstanding balances on each card.
- Home and car loans. Include any government or private loans.
- Personal loans. From banks, lending institutions, or even personal agreements.
- Microloans. Small, short-term loans that may have higher interest rates.
For each debt, get into the specifics:
- Interest rates. Higher rates mean you’ll pay more over time.
- Minimum payments. The least amount you must pay each month to avoid penalties.
- Loan durations. How long it will take to pay off the debt if you only make minimum payments.
Understanding these details helps you identify which debts are costing you the most and need immediate attention.
Step 2: Create a realistic budget
Track your income and expenses. This process reveals spending patterns and highlights areas where you can make adjustments.
- Record your income. List all sources, including salary, freelance work, side hustles, and passive income.
- Log expenses. Track every expense for at least a month using budgeting apps or spreadsheets.
Identify cutbacks. Review your expenses to find opportunities to save.
- Non-essential subscriptions. Do you need multiple streaming services or seldom-used gym memberships?
- Dining out. Reduce food expenses by cooking at home
- Entertainment. Seek free or low-cost activities instead of costly outings.
With a clear understanding of your finances, you can now allocate your funds wisely.
- Prioritize debt payments. Allocate a specific portion of your income to pay down debts.
- Set financial goals. Short-term (paying off a credit card) and long-term (saving for a house).
- Stick to your plan. Discipline is key. Regularly review and adjust your budget as needed.
Step 3: Prioritize your debts
There are two primary strategies for prioritizing debts: the snowball method and the avalanche method.
Snowball method. This method focuses on paying off the smallest debts first. With the snowball method, pay only the minimum on all debts except the smallest. Allocate your extra funds to the smallest debt. This method quickly boosts motivation and celebrates small wins. As each debt is paid off, roll that payment into the next smallest debt.
Avalanche method. Alternatively, you can tackle debts with the highest interest rates first. With the avalanche method, focus on paying off high-interest debts first. Save more money over time by reducing the total amount of interest paid.
There are pros and cons to each of these methods:
- Snowball pro. Quick wins provide motivation and a sense of accomplishment.
- Snowball con. May pay more in interest over time.
- Avalanche pro. Saves money by reducing total interest paid.
- Avalanche cons. Progress can feel slower, which might affect motivation.
Choose the approach that aligns with your financial situation and personal psychology. The best method is the one you’ll stick with consistently.
Bonus strategy: Debt consolidation Debt consolidation involves combining multiple debts into a single loan with one monthly payment. It allows you to simplify your debt payments and reduces the risk of missing them.
Consolidation loans may feature rates lower than those of credit cards or other loans. Moreover, consistent, on-time payments can boost your credit rating.
Here are some ways to obtain a debt consolidation loan:
- Balance transfer credit cards. Move high-interest debt to a card with a lower rate. Be cautious of transfer fees and introductory rates that may increase.
- Personal loans. Obtain a loan with fixed terms and interest rates to pay off existing debts.
- Microloans. Consider microloans as a consolidation option. Globewest Finance offers tailored microloan solutions designed to simplify your debt repayment process, potentially at more favorable rates.
When exploring consolidation, compare interest rates, fees, and terms to ensure the option benefits your specific situation.
Make more possible!
Debt doesn’t have to dictate your future. By assessing your debts, creating a realistic budget, prioritizing payments, and exploring consolidation options, you’re taking proactive steps toward financial freedom. If you’re seeking assistance in managing your debts, reach out to Globewest Finance. With flexible microloan options and personalized service, we can help you take control of your financial future and make more possible!
