I just came across your article about financial freedom. I can say ‘been there done that’ by reading it. Between the two, I should say that paying off the debt first is foremost important. In the last three years since my father suffered a heart attack and underwent pacemaker operation, my debt ballooned to almost 300t coming from credits cards, personal loan, hospitalization loan etc. My debt ballooned to such amount because of the credit card’s interest. What I did was payoff the 4 credit cards first by loaning from an association offering lower interest and the payment of capital was done through salary deduction. I talked to credit card companies (collecting agencies) that I’ll pay off my entire credit in 2 payments provided that the financial charges and other penalties be waived/slashed. My move really paid off. With one credit card, I owed 52t, I paid 30t, 15t every payday. Imagine the 22t slashed from my credit which I can use to pay off other credit cards. Right now, i only have 12t credit with my remaining card. In few month times. I can say that I’ve really achieved financial freedom. I hope my experience will inspire other people that through determination and proper planning (and lots of prayers!), we can all be debt-free.

Moral of the story: Live within your means and only consider “good debt.”

If compound interest isn’t working for you…then its probably working against you……For me? all debts are bad…. debt is only good if something else is paying it for you….

car payments to be treated as renting a car? wow thats a huge rental, taking into consideration maintenance + the high cost of gasoline….

this is a very timely topic.

my husband and i just got a mortgage loan to add a little more money for a townhouse we just purchased. however, we did not foresee that there are a lot of repairs/renovation to be done and it will cost a sizeable amount.

we were mulling whether we would owe additional money for renovation (incl new appliances, new furniture, etc) or if we should sell our stocks.

if we owe, it will have to be from some personal financier (5-6 ?) and that would mean additional monthly payments aside from our mortgage payments. if we would use our credit cards to purchase additional stuff (for self esteem :-() needed for renovation, we are sure we would not be able to pay in full at bill’s due, so there’ll be added interest on payments.

your article showed us that it is wiser to avoid bad debt, in the first place. we will thus sell our stocks (we already have big gains) for said renovation. after all, we have been saving and investing to be able to have our own place so we would not have to be paying P30T monthly rent. this way, we would have no debt, except for the mortgage payments. we’ll start next month again saving for stock investments

thank you so much for the help!

thanks for an enligthening article… one way to achieve peace of mind is to settle all debts…

i have recently retired from BPI and these are my observations. Yes, there are good borrowings and bad borrowings. For ordinary salaried workers like me (15-30 or 10-25) payroll, getting a long-term mortgage to have your own home is better than paying monthly rent. If your salary can suffice, getting a car is considered good borrowing if you really need it. Unless you are an Ayala or a Gokongwei (they can pay cash anytime they want), getting a car loan/facility is good. My advice: wait for an opportuned time during the year since banks offer low interest rates (promos) two times in a year. It is also good to save at the same time. One formula is: save 10% of whatever income you receive and hold it. If you are a good Christian, save another 10% for tithes. You have the balance of 80% for your basic needs. Mind you, these are the NEEDS. Your “wants” can come very much later, i.e., if you have more than enough already.

jojo, mon and traderpinoy, thanks for dropping by. appreciate the comments

hi edgard, thats a useful advice especially coming from an ex-banker. really appreciate it.

about cars, another good tip is to look for almost brand-new but second-hand cars. you really save a lot. we bought ours from a bank and they also provided the financing, so everything went smoothly. thanks again!

hi femaad, good decision :-). you know what I find most inspiring? people who listen well and make things happen. there are a lot of good advice out there, but they only work if people are willing to listen and follow through with actions. talk to you soon!

hi hazell, you deserve a great, big, whopping congratulations! what a great thing it is — freedom from the mind-numbing fear of several loans or credit card payables falling due. Thank you for sharing and it is also my hope that your experience will wake up people who are in the same situation.

What I also wanted to add is that although debt is terrible, it CAN be solved whether it is a few thousands or really big amounts. Your experience proved that.

I don’t know how it works in the Philippines, but in the US where I live, real estate taxes and interest on a mortgage are tax-deductible. A mortgage is therefore considered “good debt” because it reduces your taxable income (ie you pay less taxes). A mortgage can also be used to leverage your stock investments. If you get a 6% 30-year fixed mortgage on one hand and also invest in stocks, that is the same as getting a margin loan from a broker to buy stocks. You have to live somewhere, and the mortgage allows you to have a place of shelter without you having to buy a house outright with cash. You can instead use the cash to invest in stocks. If your stocks gain 10% in one year and you owe 6% on your mortgage, you made a 4% profit.

debt servicing is taking a lot on the philippine national budget. so i think most filipinos are also in a debt trap. they say inflation is low yet cost of borrowing is still high. it’s hard to get a home loan if you have no equity or down payment. and interest expense is not tax deductible either. it takes a lot to save and when you think you have save enough the price of your dream house has gone further up.

i don’t know if you have read Rich Dad, Poor Dad (by Robert Kiyosaki) and/or Rich Woman (by Kim Kiyosaki). Both espouse to “pay yourself first” i.e. set aside 30% of your income first before you spend the rest of it for say, paying your debt. The 30% will go into 3 different accounts: investment account (10%), savings account (10%) and charity or tithing account (10%). the 30% actually goes to building your financial future which eventually will pay off your debts.

Pay debt first. That’s true for most people because the cost of debt is almost always higher than the savings/investment rate. But for me, the reverse is true. I invest first. I even borrow to invest. Even at 32% interest p.a., I still borrow because I can invest it at a higher rate and still make money.

Lots of people have money in the bank but don’t know where to put it to get high return. For me, it’s the reverse. I know where to get high returns but there’s just not enough money to invest. I borrowed a little and made some money. Sayang! I should have borrowed 2 million more and made more money. That one got away.

By the way, I’m not talking about the stock market. I don’t play stocks, that’s gambling. I only invest if the return is guaranteed and of course legal.

I would prefer to pay off all my debt first before saving money because that way I can save money in the form of interest rates.

OHMYGOSH!

i have not been in your site for centuries now! sori hu! eto! pa check nang attendance!!!

peru kahit wa me sa site mu, me think of you all da time. me lav you long time.

OK, here’s my sensilyo:

I would agree with the statement that some of you guys said “PAY DEBT FIRST” for as long as that DEBT is with YOU.

Meaning, before you pay your debts to other parties, third or what not, PAY YOURSELF FIRST.

How do you do it?

Simple. Kausapin nyo HR or PR department nyo and do an automatic savings. Di nyo yan mape-feel.

Dots ol.

(Nga pala, is there a way for tita to put a SUBSCRIBE TO COMMENTS para di ako nawawala sa klase nyo? Else, maglalamierda ako!!! hehehe)

sorry, didn’t notice that box above!

gatsby, i will have to check if this is also true for the philippines.

don2x, i agree with your sentiments. that is why the money that’s really causing the housing boom is coming from OFWs.

tonette, im not a die-hard fan by robert kiyosaki but some of what he is saying is also true for the philippines.

hi pinoy investor, it took me quite some time to reply to this comment from you. You are a “carry-trade guy” then :-). As I said in a previous reaction to one of your comments, your knack for good investment instruments is amazing.

bizwiz, thanks for your comment. Some experts say do both at the same time, some say pay debt first. The literature is divided on this one. For me, categorize the good and bad debt and by all means, pay bad debt first.

reyna elena, flunk na ba kita? hehehe. kidding. we are happy to have you any time you’re free.