How To Get Out Of Debt

We all have a fair idea on how our debt started.

Our circumstances changed – we got married, had a new baby or children went to college.
It could be due to emergency – medical expenses or the car broke down.
Or it could be as simple as having bad choices in spending.

Everyone started with one credit card with a manageable credit limit.
After few months, all these banks were offering all sorts of credit cards with added perks.
Being naive, we just accepted them all. Your one card became 2 then 4 and before you know it you had several and maxed-out them all.
That’s aside from the multiple loans you had taken.

I still remember how it started for me and my husband. I gave birth to my son in the Philippines and had to leave him after 45 days (like a chicken) to go back to Dubai. Our salary won’t afford us to raise a kid in an expensive city like Dubai so he needed to stay behind. That decision made me crazy and I was constantly unhappy. To take my mind off from the loneliness, I took driving lessons which is expensive in Dubai and then bought a car after I got my license. I indulged in retail therapy. We would eat out a lot and just spend.  After a few months, I can’t bear my homesickness so I told hubby that I cannot continue like that anymore so we planned for my son to join us.

Although I don’t regret the decision of bringing my son with us since family will always be non-negotiable and my top priority, bringing him to Dubai started our debt accumulation.

First major expense we did is renting our own apartment. We were just sharing our flat with my sisters prior to that.
We bought all our appliances and furniture, shopped for baby cot and baby clothes.
Although shopping was fun, everything was charged to our credit card.
We also had to hire a child-taker and we  spent a lot for her employment visa.

As our salary increased, our life style also changed.
Over a couple of years we had accumulated around Php 70,000 of credit card debt.
To be fair to me, not all was spent on items or luxuries. Family members need financial assistance and we cannot just say no. The unavoidable medical and car breakdown expenses added up to our debt.

My intention to get out of debt was always there.
And that time, I know that I will be able to manage it.
Just like you, I started with reading articles that can help me. And the fact that you are here and reading this only mean your intention is there.

You are doing an action and not just praying for the money to land on your lap. I know that you can do it. You want it, you are taking steps to get out of your debt so there is no doubt you can achieve that goal.

To help you, I am listing here the practical steps that you can take to manage your expenses and get out of debt faster than your debt tenure.


  1. Pay more than the minimum. Use the snow-ball strategy.

There are many variations of this rule. Some recommends paying your most expensive debt first since it accumulate the highest interest. But I personally did paying my smallest debt and then continued with the bigger one. For me it’s the most gratifying. I can still feel the satisfaction after closing my first card.

The idea is simple, list down all your credit card balances from lowest to highest. Pay the minimum amount to all your card except the smallest one wherein you will  throw-in all your extra cash. Continue doing this until you pay-off the first card. Once it’s fully paid, put the amount you were using for the first card to the next credit card with the next smallest balance. Instead of paying just the minimum on the second card, throw-in the extra cash. Continue doing this until you finishes all your credit card debt.

I suggest finish all you credit card debts first and then once done, focus on how you can pay off your bank loans.


  1. Spend less than you plan to spend.

You went to the grocery and have a grocery list. You went out of the grocery store with so much extra items which were not listed on your list. Sounds familiar? Yeah! We’ve been through this before. And it’s not good especially if you are trying to reduce your debt.

Put extra effort on finding the right dress or baby crib or whatever necessary item you are currently shopping for and don’t just buy the first cute one you see. Be a wise consumer.


  1. Stop borrowing money

While you are in the process of wiping out your debt, don’t use your credit card.


All your efforts will just go down the drain if you don’t discipline yourself on using money that is not yours. Also when you are in debt, your tendency is to apply for new credit cards or take a new loan. The only time I will advise  you to take a loan is only to pay-off all your credit cards. I will discuss this later on my second to the last point.

Getting new credit cards or applying for new loans will reprieve you from the stress of where to find the money to pay for the monthly dues. But this is just temporary! Soon, these banks will plague you with calls once you default even one payment. And you will learn the hard way that it is better not to have that additional card or loan.


  1. Start an emergency fund.

Why should we even think of an emergency fund if our goal is to quickly get out of debt? Why can’t we just throw that extra money to our snow-ball plan? It’s because an emergency is something unavoidable and we don’t have any other choice but to spend. If you don’t have an emergency fund, you will be forced to use your credit card and borrow money again.


  1. Create a budget and stick to it.

Creating a budget is boring and tasking. If I can avoid it, I will. But if you are drowning in debt, it is mandatory.
Listing down all your expenses from the big ones like mortgage, school fees, car loan to least amount like parking tickets, coffee, grocery visits – will give you an idea on how much you are really spending per month and what are things you spent your money for.

Check all your credit cards and see what you were spending. You can list all items down on a good old paper or log-it on your phone. Make it a habit to keep all your receipts and log all costs to your list either daily or weekly.
You will be surprised on how much you had spent on coffee that you can just prepare at home (invest in a cute to-go coffee mug) or subscriptions that you never actually use (tv, magazines, online newspapers).

Once you have identified those items that you can live without, use that knowledge to make better choices. You can make your own vinaigrette dressing, or your old towels work well as floor map. You can unsubscribe to the cable tv which is rarely used. You can now watch everything online actually. Whenever you are doing the grocery, stick to your list. Make it a goal to get in and out of the grocery store without the extra items. Try to have family activities that don’t include eating-out or expensive trips. You will be surprised how a baking or painting session excite the kids.

Unless you become aware of how you are spending your money, we will not really be able to lower your expenses. You will always think everything is a necessity which might not be the case. Being frugal doesn’t mean being cheap. You can still feel abundant by changing your mind set. Letting go of things doesn’t mean you’re giving up on good life. It means just letting go of things that actually doesn’t matter so you can focus on things that will really make you rich.

Disclaimer: I actually was using this budget listing technique for a few months until I realized it doesn’t work for me because I never analyzed the expenses after every end of the month. And because I realized that I want a life with no budget! Ok now, that’s entirely a different subject. But if you have debt now, you have to have a budget. Non-negotiable.

  1. Put any excess cash at your debt

You might get a salary increase, or a company bonus. Someone might have gifted money to you. Or you might won something that you had sold.

It’s called a windfall. Money that actually never expected.

As not to deprive yourself, depending on the amount, I suggest take 10% from that windfall money and spend it however you want. Buy a new dress, have a hotel staycation with the family, buy a new phone.
But stick to 10% only.
The remaining 90% should be thrown to your snowball plan.

As much as you think you deserve to use the money, hold that thought. Just imagine how you would feel once you close that 2nd or 3rd credit card. Do you like what you are feeling? You know what to do.


  1. Negotiate to your banks to lower your interest rate

Most people don’t do this. They think that bank is structured (and heartless!) and won’t just lower your interest rate or waive annual fees just by requesting for it. You will be surprised actually. Banks would rather do these things for you rather than letting you default on payments.

This is the time where you will need to lower you ego, be honest that you financial difficulty and them tell that you are determined to pay your loan and to default on payment. You are then requesting them to lower your interest rate or at least waive your annual fee.

Remember, the worst thing that can happen is they will say no. And you won’t die if you receive a negative response. You can call your banks and try. There is nothing to lose my friend. Just do it!


  1. Take a loan that can cover all your credit cards debt and pay them all

This is one action that I am so glad I did. I never thought of this and I thank God that one of my previous boss suggested it a group of people (including me) during one of our meetings. That time we are doing the snow-ball strategy to pay our credit card debts and it’s actually working. But then when I heard this advice, It actually made sense to me and our circumstances allowed us to take a personal bank loan.

So I applied for loan, paid-off all our credit cards and just closed them. I only have 1 monthly loan payment which was set for 2 years. And you know that the accumulated interest rates of credit cards are way higher than taking a loan.

If you can and its possible, I highly recommend that you do this option.


  1. You will be tested, but don’t give up

In life, there are challenges. But you can raise above these challenges. I always say this repeatedly but the way to abundance is actually easy if we set the right mind set.

– Set your goal

– Believe you can achieve it

– Take action

Your mind is so powerful that it will guide you to do the correct action because you are so set on achieving the goal. Never doubt that you can do it.

As I said, I know that you can get out of debt sooner than later. The fact that you are reading this post means you are taking action. You just need a little push so I am pushing you now 🙂

Start now, it’s never too late to take control of your life. Have a good day!

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