Here's a Strategy to Pay Debt Even With Low Salary

This blog already moved to www.savingspinay.ph If you want the latest tips and stories on budget, savings, investments, productivity and making extra income go HERE instead.

Getting out of debt is one of the best financial move you can do in your life. It promotes financial peace and security, more money to spend without guilt and improves your ability to save and invest. One thing I will be forever thankful for to my parents is how they never ever let us go in debt. We never experienced going to the neighbor asking for money or things or food. They manage to resolve all financial issues before we even knew they existed.

But I know not everyone is in the same situation as I am. I don't even have idea until when will I stay debt-free. And so debt is an important matter for me too. Today I decided to post a strategy that will let you pay debt even on low income. I hope this post will help you manage debt before 2016 ends.

Here's a Strategy to Pay Debt Even With Low Salary 

Paying debt on a low income can be a real challenge. You need enough resources to sustain both your needs and your bills. As much as you want to save and pay your creditors, you feel like there isn't enough money coming that will enable you. Thus, people often end up with more debt instead.

The very first thing you need to do is to treat debt-payment as a goal. 

If you see it as a task or obligation you will easily feel discouraged to pay. When you allow your debts as a goal you want to accomplish at a give time (deadline) you'll certainly arrive with a debt-payment plan in no time. 

Evaluate all your good debts and bad debts and write them all down. Good Debts are those with low-interest and debt you accumulate reasonably. Examples are your house mortgage, car loan and debt due to emergency situation. Bad Debts come with high interest rates that can be fatal to your budget. These includes credit card debts and personal loan to pay for luxurious items. READ: Day 1: Gaano Kalaki Ang Utang Mo

Once you have written all your "utang" and the amount of each you can now create your debt-payment goal. 

Simply feel in the blanks:

My goal is to pay an amount of _________________ to ____________ by _________ .

Example: My goal is to pay an amount of 30,000pesos to my Personal Loan with Kumpare Jose by end of 2016. 

Other variations are as follows:

My goal is to pay __________ every __________ to ______________.

Example: My goal is to pay 2,500pesos every month to my debt-payment fund.

My goal is to finish paying my ____________ before ________________. 

Example: My goal is to pay my student loan before 2017 ends.

Once you make your debt a goal rather than a task you'll see it as a big project with small and manageable next actions. I will assure you that this mind set is way better and will help you pay even on a low income. 

Next is to know your Debt-to-Income Ratio

Not everyone knows this method in assessing debt you can have and you can pay based on your salary. The Debt-to-Income Ratio will strategically place your money to reply your current debt. Professional lenders use this equation to evaluate whether a debtor can really has the ability to pay the debt on his/her current income.

The formula is very simple:

Total Debt (Good or Bad) / Total Net Income Month) 

= Debt-to-Income Ration

• • Total Debt is the amount of your good and bad debt that you need to pay.
  • Total Net Income is your take home pay on a monthly basis.
  • Differentiate the Debt from the Bill. We are talking about debt here and not the monthly bills like electricity, rent etc.

Example:

Juan's take home pay is 13,000pesos. His total monthly debt (credit card, housing loan, salary loan) is 4,000pesos.

Total Debt (Good or Bad)  divided by Total Net Income (Month) equals Debt-to-Income Ration

12,000 / 4,000 = 0.33 or 33%

The Meaning

A low debt-to-income ratio shows a good balance between debt and income. Financial advisers suggests a good 10-20% as Debt-to-Income Ratio.

A higher debt-to-income on the other hand suggests that a person has too much debt for his income. Thiscan cause financial loop hole in the long run.

Looking at Juan's Debt-to-Income Ratio as an example means that 33% of Juan's salary just goes to pay off debt. This percent is alarming because it it is almost 50% of what Juan is getting on a monthly basis.

So what should Juan do?

1. Create a Budget

Add debt on the amount you need to pay. If you remember the 50-20-30 Rule of Budgeting you can use this and alter the 30% for Lifestyle Fund to your Debt-Payment Fund. With 12,000 income Juan can use 6,000 (50%) for essential expenses, 4,200 (35%) for debt-payment and 1,800 (15%) for savings fund.

2. Pay the Most Expensive Debt First

According to Dave Ramesey's Money Makeover a great strategy to get out of debt fast is to pay the most expensive debt first. Arrange your debt from highest to lowest interest rate (or even amount) and alongside write down the maximum amount you can pay monthly. 

 

3. Don't Get into More Debt

Pay first your current debt before accumulating a new debt. This maybe a hard one but just please, refrain yourself from getting into more debt.

4. Find out means to decrease your expenses

There may be items and habits you do that cause you to spend more than your means. Kyle's guest post will teach you how to really live below your means. 

5. Increase you income

If your goal is to really pay your debt then you might need to look for extra income.

Related Links:

Proven Ways You Can Diversify Your Income - SavingsPinay

SavingsPinay : How To Earn Extra Income in the Philippines

SavingsPinay : 15 Smart Ways to Earn Extra Income

The Secrets Behind Creating Multiple Sources of Income

SavingsPinay : The Three Types of Income

SavingsPinay : Turning Your Salary to Income

Final Notes from SavingsPinay

Your debt will not adjust to you ever. It doesn't work that way. You need to adjust yourself to your debt in order to pay. You have the ability to be debt-free even on low salary as long you incorporate good financial habits with discipline. Soon you'll realize that you don't actually need that much money to get rid of your debt but just more will to commit to the goal. Read 20 More Ways to Pay Your Debt.

Go over the this discussion on SavingsPinay FB Community to find accountability partners on your goal to be finally debt-free.

Have you commit yourself to a debt-payment plan yet?

• Follow the SavingsPinay FB Group and join the conversation at : SavingsPinay
• Follow my official Facebook page at : IzzaGlinoFull
• Stalk some behind the scenes in my Instragram: @izzaglino
• Follow me too in my Twitter account: Izza Glino
• Subscribe to my Youtube channel: IzzaInTheUkayCloset
• Email me any question or topic suggestion at izzaglinofull@gmail.com
• Or leave a comment below!!!

This blog already moved to www.savingspinay.ph If you want the latest tips and stories on budget, savings, investments, productivity and making extra income go HERE instead.

How to Get Your Finances In Order Before 2016 Ends

It is less than five months before 2016 ends and I can honestly feel the pressure. Am I the only one who feel like the year flew by too quickly? Aside from the excitement of the coming -ber months I am also extremely pumped up to get my finances back in order just before 2016 ends. I've put a lot of small and big financial goals that I want to ponder upon. 

Today I will walk you through some steps you could do in order to sort things out financially. Its time of the year to face the truth about our finances and live the few remaining months savvy. Here are Ways on How to Get Your Finances In Order Before 2016 Ends.

1. Tidy Up the Inside of Your Wallet

Let's be honest, most of us have messy wallets filled with different cards and receipts and crumpled bills gathered for so long. Now a fat and bulging wallet isn't always a sign of wealth. It is often a characteristic of a disorganized human being. Ouch! So why not try to cut down the inside of your wallet only to the essentials? 

A. Your Credit Card and/or Debit Card

If you own one then you should bring it with you always. I suggest limiting your credit card to only one bank provider or to as many as your finances can handle. Debit card on the other hand are nice because they allow you to avoid the temptation of credit cards and can be used on small to medium purchases. READ: Unionbank Credit Card First Impression

B. Cash

Of course you need your bills and coins inside your wallet for either food and transportation allowance. Always keep smaller bills and coins in case you encounter a store or a service who has no change. Put your loose coins in a piggy bank if you want to save some money at the end of the month. 

C. Identification Cards

Your IDs from work to government issued should always be inside your wallet. This will come in handy in case something happened to you. There are also buildings and locations that will ask for your ID before entering so you better have one. Now its also important that you take care of your government-issued ID such as your Social Security card because it might be a gateway to identity theft. 

D. Rewards Card

Some rewards card can offer you discounts and savings in your every purchase. Keep the most used rewards card always in your wallet. READ: Does Customers Rewards Card Really Work?

Items you shouldn't carry inside your wallet are definitely receipts that can take up a lot of space inside your wallet. Also refrain from carrying too many cards like extra credit and debit card you won't really use and need. It is also nice not to bring a note with your PIN/Password which I know some often than not do. 

2. Check Your SSS/GSIS/PAG-Ibig/PhilHealth, etc. Contributions

Another important thing that we often neglect is checking how much we've been paying and contributing to our government based insurance programs. There are cases where employees find out late that their company is/are not paying for their contributions. You need these government based insurance in case of emergencies so its just important that you keep yourself updated at all times. 

3. Review Your Current Budget

Allow yourself to sit down and review the budget your are using for the past seven months. This will give you an idea on what's working and what's not working for your financial life. You can also identify some ways to tweak your budget so you'll have more money saved rather than impulsively spent. 

How To Do A Budget Review?

A. Review Your Income

Review whether there is a new source of income for you or if ever you've lost a source of income along the way. Maybe you've got a salary increase then you should decide how to allocate. Make sure that you when you do your budget you are only using the net pay or money less taxes and deductions as well as tithes.

B. Review Your Budget Categories

Review whether there are categories that are not applicable in your life anymore. You may also have additional categories that needs proper budgeting. READ: Budget Categories: A Basic Guide for Your Next Spending Plan

4. Take a Serious Look At Your Savings

How much money did you save before 2016 ends? I hope you did save some to look forward next year. If ever you've made some major financial mistakes and got caught on a money trap then don't budge. You still have five months left to work extra hard for your financial life to get in order. 

• Commit on saving a portion of your money every payday. No matter how small or big it would be, save. Once money comes in your payroll reserve a certain amount to your savings account. 

• If it is possible for you to have an extra income before the ends then please do. I have made a post on business ideas you could start immediately and with minimal cost. 

• Remember that no job can secure you forever. It is only through proper savings that you will be spared from getting into debt and other money issues. 

Related Links:

1. 5 Habits That Can Boost Your Savings - New!
2. The Time is Running Out!!! Learn the Importance of Saving Money NOW!
3. Frequently Asked Questions About Saving Money
4. Saving and Investing Tips for 20-somethings

Know Your Current Financial Net Worth

Knowing your current financial net worth is important because it gives you a reference point to how 2016 would end. Your Net Worth is equal to Total Assets and Total Liabilities. In my post Why You Must Know Your Financial Net Worth Now I've mentioned the following reasons why you should learn to calculate.

The importance of knowing your net worth as early as now is to help you in your financial decisions. Once you have an overview of what you own (assets) you can simply examine whether they are giving you any active or passive income. You can deliberate whether to let go of an item or not. You can realize how many funds are being wasted that should have been part of your debt payments. Once your done calculating your personal net worth you can now review your current financial status. You can do this every 3 months or whenever you have a big financial decision to think about. Again your aim is to have a positive net worth, more than positive if possible.

Reflect on your finances

To totally get your finances in order before 2016 ends then you must spend some time reflecting on the past year. Look at your spending habits from the past seven months and identify where your money have gone. Check whether there's a way you could save money on your utility bills. Be honest with yourself and reflect on your financial mistakes and spending habits that refrain you from achieving any progress. 

I hope the ways above help you get your finances in order before 2016 ends. Let me know if you've applied any of the above. Share your experience and your worries as well. 

MORE POSTS TO READ:

1. BDO UITF First impression
2. BPI Investment Funds First Impression
3. How to Invest Your 5,000 Pesos
4. I'm Just 21 Do I Seriously Need a Life Plan?
5. SAVINGSPINAY SERIES | Day 1 : Mutual Fund: Ano, Sino, Saan, Kailan, Bakit at Paano?
6. SAVINGSPINAY SERIES | Day 2: Gabay sa Tamang Pagpili ng Mutual Fund
7. SAVINGSPINAY SERIES | Day 3: 5 Bagay na Dapat Mong Malaman Tungkol Sa Mutual Fund
8. SAVINGSPINAY SERIES | Day 4: Kaya Mong Yumaman sa Mutual Fund
9. Saving and Investing Tips for 20-somethings
10. SavingsPinay Series: Yumaman sa Mutual Fund!

SavingsPinay Series | Day 5 | May Forever sa Pagiging Debt-Free

The SavingsPinay Series | Ayoko sa Utang! 5 Days To Be Debt-Free For Life is created and published first in this blog. Visit this LINK for the past SavingsPinay Series.

PS. Sorry Day 2-5 is one week delayed. Hope you will still learn and enjoy.

Day 5 | May Forever sa Pagiging Debt-Free

SavingsPinay Series | Day 4: Tamang Pag-kausap sa Pinagkaka-utangan

 

The SavingsPinay Series | Ayoko sa Utang! 5 Days To Be Debt-Free For Life is created and published first in this blog. Visit this LINK for the past SavingsPinay Series.

PS. Sorry Day 2-5 is one week delayed. Hope you will still learn and enjoy.

Day 4 | Tamang Pagka-usap sa Pinagkaka-utangan

SavingsPinay Series | Day 3: Organisadong Pagbabayad ng Utang

The SavingsPinay Series | Ayoko sa Utang! 5 Days To Be Debt-Free For Life is created and published first in this blog. Visit this LINK for the past SavingsPinay Series.

PS. Sorry Day 2-5 is one week delayed. Hope you will still learn and enjoy.

Day 3 | Organisadong Pagbabayad ng Utang

SavingsPinay Series | Day 2: 25 na Paraan Para Makapagbayad Ka Sa Utang (25 Ways to Pay Off Your Debt)

The SavingsPinay Series | Ayoko sa Utang! 5 Days To Be Debt-Free For Life is created and published first in this blog. Visit this LINK for the past SavingsPinay Series.

PS. Sorry Day 2-5 is one week delayed. Hope you will still learn and enjoy.

Day 2 | 25 na Paraan Para Makapagbayad Ka Sa Utang

SavingsPinay Series | Day 1: Gaano Kalaki Ang Utang Mo? (Evaluating Your Debt)

The SavingsPinay Series | Ayoko sa Utang! 5 Days To Be Debt-Free For Life is created and published first in this blog. Visit this LINK for the past SavingsPinay Series.

Day 1: Gaano Kalaki Ang Utang Mo? (Evaluating Your Debt)

SavingsPinay Series : Ayoko sa Utang! 5 Days to be Debt-Free At Last

I am so excited to finally announce a blog series. The last one I did was way back May and I know it's time to create another one. To those who are visiting my blog for the first time, the SavingsPinay Series is created for in-depth look/thorough explanation of a particular subject or topic. 

The first series I created was the Metrobank Week where I showed the Metrobank Direct Portal How to Enroll in Metrobank Direct Online Account and How to Pay Your FAMI Account Via Metrobank Direct.

Then I created the 14 Day Productive Living Series which has a summarized version HERE. I also did a Job Interview Series which surprised me with a lot of views from SavingsPinay Readers.

Getting feedback, email and even private messages in Facebook led me to pursue yet another SavingsPinay Series.  

Enter: Ayoko sa Utang! 5 Days to be Debt-Free At Last

What is this series anyway?

Ayoko sa Utang! 5 Days to be Debt-Free At Last is a five day-long series that will tackle the topic of Debt or Utang. Here I will give actionable items and key points on how you can finally manage to payoff your morgage and not be in a financial loop hole.

Who is this SavingsPinay Series for?

This Series is for

• People who are struggling with their debt 
• People who inherited unwanted debt from their parents or siblings 
• People who have just gotten in financial debt

What Will You Learn?

Day 1 (Monday) : "Gaano Kalaki ang Utang Mo?" 

In Day 1 we will Identify How Much Your Debt is. We will evaluate your debt whether it is a "good" debt or a "bad" debt. Just as how I give emphasis on knowing your Financial Net Worth as a primer to building financial freedom, I know exactly how determining how much your real debt is the first step to becoming debt-free. I will also share a concept called Debt-to-income Ratio that I learned through website http://www.clearpointcreditcounselingsolutions.org/ which assess the level of debt that is manageable for the income you have.

Day 2 (Tuesday) : " 25 na Paraan Para Makapagbayad Ka Sa Utang"

I understand people who will tell me that how desperate they are to get out of debt but just don't know where and how to start. I pray that this series will help you. For Day 2 I will give 25 Ways To Pay Off Your Debt. These are sure ways with added tips and tricks that will truly be of aid. 

Day 3 (Wednesday) : "Organisadong Pagbabayad ng Utang"

Almost everyday at work I have a list of To-Do's and I find it hard to work dahil sobrang daming kalat. Just like what I share in IzzaGlino, I am very disorganized. Gusto ko nakikita ko lahat ng dapat kong gawin. However, being disorganized as you pay debt is not good. Dapat well-planned lahat and well-organized even where your bills are and the visual representation of your strategy to be debt-free. I prepared a lot of templates for this day so better check it out. I will give them for FREE para sa lahat ng nasa mailing list ko. So better SIGN-UP!!!

Day 4 (Thursday) : "Tamang Pagkausap sa Pinagkaka-Utangan"

On Day 4 I will give tips and suggestions on how you can communicate to people you are in debt with. From what to say to your bank to what to your family member - lahat yan ituturo ko. Don't be afraid to communicate and negotiate with your creditor. May lakas ka ng loob na mangutang, dapat mas malakas ang loob mo na magbayad.

Day 5 (Friday) : "May Forever sa Pagiging Debt-Free"

Sa last na installment of this weekly series I will give lasting habits that will make you at peace and find financial stability. The goal is be debt-free at last and not just temporarily but forever. Living in "bad" debt is frustrating. You will continue to be "one-step-forward-two-steps-back" situation. 

So let's move forward together. Ok?

JOIN ME!!!

This weekly series will start on Monday, October 19 to Friday, October 23. On Saturday I will have a post-summary and will give links to more informative posts you can read para mas madami ang learning.

I hope you will look forward for this SavingsPinay Series. Comment below if you are excited!

WARNING: This series doesn't guarantee true success unless YOU ACT ON IT.

I hope you liked this post. Don't forget to do any of the following:

• Follow the SavingsPinay FB Group and joing the conversation at : SavingsPinay
• Follow my official Facebook page at : IzzaGlinoFull
• Stalk some behind the scenes in my Instragram: glino_clariza
• Follow me too in my Twitter account: Izza Glino
• Subscribe to my Youtube channel: IzzaInTheUkayCloset
• Email me any question or topic suggestion at izzaglinofull@gmail.com
• Or leave a comment below!!!