This email from a reader spoke of desperation:

I’ve seen your blog in Inquirer.net. And I am one of those people who is trying to fix my life. I’m an accountant, but seems like I am terrible in handling my finances. Last year was the worst year of my life. I incurred huge debt, credit cards & personal loans, due to wrong decisions that I made.

I am now haunted by my creditors. I defaulted in payments, but I am starting now to pay them one by one. Since I incurred loans in different banks and credit card companies, they are charging me huge interest and some are already threatening to sue me in court. I’m willing to pay them all, but I can’t give it in one payment. I want to go on with my life. I have a happy family and I don’t want them to be affected with my problem.

The only solution that I know is to get a single loan to repay all of my debt. But how? I already have a bad credit history. No bank would trust me again. – David (not his real name)

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a) Naïve college freshie –- all of 16 years
b) Cool college senior –- all of 20 years
c) When she gets her first job – maybe 21?
d) When she gets the ripe old age of 25 and beyond

I tried, but wasn’t able to find any formal regulation against giving credit cards to young people. (Even at 25, I will still probably think of my daughter as young!). But as some of you who commented in this blog pointed out, the very young can easily burn that credit card and end up with bad credit at a very young age. It wasn’t too long ago when we all felt immortal…

But we all know why misusing credit cards is a nightmare waiting to happen. Thoughts?

Time flies by so fast. MoneySmarts quietly turned one last summer. To make the celebration really special, we are giving loyal readers first crack at limited seats for an interactive personal finance seminar.

Together with Citibank, which is celebrating its 100th Take Charge Of Your Money column for INQUIRER.net, and MoneySense magazine, we hope that this personal finance seminar will bring our discussions to a new level.

The promotions for this seminar is officially going to start Monday next week, but MoneySmarts readers who want to be there can email register (at) iluvlearning (dot) com beginning today.

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If you’re mired in runaway consumer debt and don’t know how to pick yourself up, here’s something that should give some measure of comfort: you’re not alone.

There are more than five million credit cards out there with P116 billion charged to them based on end-December 2007 figures from the Bangko Sentral ng Pilipinas, the Philippine central bank, and P16.5 billion have fallen past due.

Assuming Filipinos are an android population with identical spending habits, we have an average of P23,219.60 charged to our credit cards. Are you below, or higher than the average?

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Runaway debt wearing you down? Don’t know what to do? Having a hard time finding a sympathetic listener?

Pour it all out and pop me an email at lightdream (at) gmail (dot) com with your story or comment on this post. Let’s see if we can get bankers and experts to answer your burning questions.

There, there. Now that’s off your chest, keep watching this space for advice from the experts on how to handle debt. Hope to hear from you soon!

(Photo from Agence France-Presse)

No self-flagellation here in MoneySmarts this Holy Week break! Let’s list down all our favorite painless ways to increase savings. I’ll go first:

1. Take advantage of SM Advantage (and other store cards). They hardly cost any money and carrying them in your wallet won’t give you even a slight kink in your shoulder. The other week, I bought several grocery items and replacement parts for toilet flush and paid for them with my SM Advantage card. Not bad at all.
2. Don’t forget your rebates and freebies. I learned this the hard way. I forgot all about my expiring Mabuhay Miles and found out I was eligible for a free trip to a Visayas destination only when it was too late. Be careful, though. Rebates, rewards and freebies need to be managed carefully. For example, if Casa Armas is giving you 20% discount on a meal, don’t go just for the discount but go because you would have eaten out anyway. If you went out because “hey, we have a discount, cool!” you wouldn’t have enjoyed 20%, you would have spent 80% of the cost of the meal. [Read the rest of this entry »]

People who are in debt are either in denial, overly anxious or somewhere in between. How do you tell if you are in debt trouble?

Financial planner, author and banker Efren Ll. Cruz recommends keeping debt below 36 percent of gross monthly pay. (Watch a video of this interview here.)

This is a rule of thumb of financial planners, he says. We all know there’s good debt and bad debt, but both of them must be kept low to keep us from “debt trouble.”

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Our article from MoneySense today talks about borrowing money from credit cooperatives. Here’s an excerpt:

You join voluntarily. There are five kinds of coops: credit promotes thriftiness and creates funds to grant productivity loans; consumer procures for and distributes commodities to member and non-members; producer undertakes agricultural or industrial joint production; service engages in medical and/or dental care, hospitalization, transportation, insurance, housing, labor, electric and light power, communication, among other services; and multipurpose, combines two or more of the business activities of different coop types.

Your share is limited. As per coop principles reformulated in 1966 in Vienna, by the 23rd Congress of the International Cooperative Alliance, a member’s share is limited to prevent domination of the coop’s affairs by affluent members.

You share in the surplus or savings. The coop is designed to distribute surplus equally, again, so no member will gain at the expense of another. Surplus, upon agreement, are used to develop the coop’s business interest and provide common services to members. This will also help a coop avoid bad debts to stabilize its operations and assure its growth.

You can get training. It trains members to avoid lack of understanding of the principles, aims, and purposes of the coop; improper credit use (borrowers in rural areas are known to spend borrowed money for fiestas or luxuries). It also educates those who are interested in the principles and techniques of a coop.

You can get loans – and help an organization grow. A coop is touted to be founded for a noble purpose – even Jose Rizal, while exiled in Dapitan, established a community school and a coop store. Proponents of cooperatives hope to attract members with loans, as well as the mental and emotional rewards of supporting a helping organization’s existence or preventing its failure.

Let me add two points:

Know the management. The Philippines is a cemetery of many failed cooperatives. Most of the failures were caused by fraud. People running away with other people’s money. But that’s true also of banks and other financial companies, right? And even for banks and investment companies, knowing the management is still recommended.

Participate. If possible, participate in management. If not, be active in decision-making. Stay updated. Joining a cooperative means you want to be part of that community. That’s the only way these things can work.

Good luck guys! Have a great day ahead.

It’s fashionable to mock New Year resolutions because they often end up as 7-day wonders or even less. We’re so used to multi-tasking at the risk of focusing on nothing that I do get why focusing on two or three things that matter most can be met with such pessimism.

But I rather like making a list of goals and checking it twice (a day). In the first page of my 3-year journal (yes, I still keep one and it’s not digital!), it says “the palest ink is better than the brightest memory.” That’s an ancient Chinese proverb that I hope I won’t forget in the next 10 years. We all need every chance we can get to think more deeply about what we want, what we should focus our energies on, and a chance to start all over again. New beginnings…

So here are some ideas for New Year resolutions for money-smart geeks. Do jump in if you have other suggestions, because deepening the discussion can only do us more good!

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You might get a surprise visit this month from someone who will make your eyes pop out, but it’s not gonna be Santa. This article from the Philippine Daily Inquirer entitled As bad loans are cleaned up, small borrowers suffer  tells of an increasing number of small borrowers who are getting visits from companies they have never heard of before, demanding payment for loans they thought were current.

Such was the experience of Alex Maravilla, who bought a small home in Bacoor, Cavite through a 25-year home loan from National Home Mortgage and Finance Corp. His housing loan was sold by NHMFC along with other sour loans to Balikatan Housing Finance Inc., whose portfolio was managed by Bahay Financial Services (BFS).

BFS is in a growing industry that believes it can make money by going after accounts that the banks have already written off. They will charge higher rates, of course, plus a host of other fees. From what I understand of how the industry works, the collection game can turn nasty. If the collection efforts do not succeed, BFS can still make money by selling foreclosed assets.

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