It’s a new year and a new time for big opportunities. But for some, there’s something from last year that’s holding back from growing financially: debt.
Having debt or “utang” is a usual thing for many Filipinos after big festivities like Christmas and New Year. And sometimes, the debt is too big to pay off that they must get another debt from someone else just to pay it off.
Is having debt bad? Of course not. But you need to be responsible enough not to fall into a cycle of debt.
Disadvantage of Having Debt
Having debt can help you momentarily boost your cashflow. Having an extra 5k or 10k can really help you for a few months if you know how to manage your finances. But there’s a downside to having debt. Here are some of them:
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Interest over time
The biggest disadvantage of having debt is that it grows interest over time. That means the longer you have debt, the bigger you must pay. Credit cards and other bank loans calculate how much interest they put on your loan depending on how long you will pay it back. And the interest can even go up or down while you’re paying for the loan.
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No control over your money
When you have debt, it’s difficult to have control over your money. You’ll have to set aside a portion of your salary to pay off your debt instead of putting it into places where it can grow for you instead of growing for someone else.
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Distorts your spending habit
When you take a loan, you get extra cash to spend. And if you’re a compulsive shopper, having that extra cash on your pockets is never a good thing. Having that cash will make you feel like it’s yours and you’ll always have that much to spend. Remember: loan is borrowed money. It’s yours now, but you’ll have to pay it back.
Pay Your Debts Before You Save
Now that you know the disadvantages of having utang, what can you do to prevent your debts from harming you financially in the long run?
Pay it off as early as possible.
When you pay off your loans early, you take back control of your money and prevent interests from growing. Having no debts also helps you grow your savings since you won’t have any reason to touch the money once you put it away.
How to Pay Off Your Debts Early
Pay in full – paying off your debt in full can be difficult because it will take a large chunk of your monthly income, but it’s the best way to be debtless as early as possible.
Pay as frequently as possible – if paying in one go isn’t possible, another tactic is to pay as frequently as possible. the more frequently you pay, the faster you can reduce the amount you owe and reduce the impact of interest.
Avoid getting more debt – lastly, the most solid way of getting out of debt early is to avoid getting more debt. the more utang you have, the more you will lose money. so only get utang when necessary.
Being debtless can help you manage your finances properly and consistently. when you finally go debtless, you’ll see how easy it is to grow your savings and start your road to financial independence.
