As I try to get back to my goal of financial freedom again, I realized my debts and credits have painfully accumulated over the past year. With all the expenses I paid and borrowed for my UK application plus other miscellaneous expenses, my monthly credit card statements eagerly keep on reminding me of what I owe from the bank.
One other debt I have is my loan from SSS. Last year, I borrowed a calamity loan for 15,000 PHP. Although, sincerely at that time, that money helped me financially. I used 10,000 PHP as a down payment to a lot I bought in my hometown. The other 5,000 PHP was for my extra expenses. It aided me in a huge way during the pandemic.
I also borrowed from a relative for my UK processing (CBT and others) which I thought at the time was a wise decision. However, now that I think of it, I should have used my own money instead. I still had part of my savings unused. I guess I was too scared of touching my savings which shouldn’t be the case. Because now, I always think about this debt and it makes me anxious especially the fact that I borrowed it from a close relative.
All debts give me anxiety in general. Maybe it’s a normal emotion for the borrower. I know it is better to have these worries when you borrow money than not feel anything at all. The latter, for me, could be a big problem because there is s lesser chance that the debtor will pay what he owed.
Book by Robert Kiyosaki
So from reading articles and blogs again about how to get financial success, I came across a mention of one of the books of Robert Kiyosaki. The title is Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom. In this book, people are divided into four categories according to their financial intelligence. They are the employee, self employed, business owner and investor.
It is quite an interesting and enlightening book which I highly recommend to everybody planning to change their financial situation and achieve financial independence. What stuck to me the most was in the last chapters of the book which talks about getting out of debt as it relates to me the most at the moment.
I am going to share exactly how it was written in the book as I find the whole concept an effective way of paying personal debts such as from credit cards.
Luckily for me, I only have one active credit card that I need to pay off at present. Nevertheless, these tips can also be applied when paying for a car or a house payment.
In this way, debts would be paid quicker. And therefore, quicker to start with your journey to financial freedom.
Here it goes.
If you have credit cards with outstanding balances, discipline yourself to use only one or two credit cards. Any new charges must be paid off in full every month. Do not incur any more long-term debt.
Come up with $150–$200 extra per month. Now that you are becoming more and more financially literate, this should be relatively easy to do. If you cannot generate an additional $150– $200 per month, then your chances for financial freedom may only be a pipe dream.
Apply the additional $150–$200 to your monthly payment of ONLY ONE of your credit cards. You will now pay the minimum PLUS the $150–$200 on that one credit card. Pay only the minimum amount due on all other credit cards. Often people try to pay a little extra each month on all their cards, but those cards surprisingly never get paid off.
Once the first card is paid off, apply the total amount you were paying each month on that card to your next credit card. You are now paying the minimum amount due on the second card PLUS the total monthly payment you were paying on your first credit card. Continue this process with all your credit cards and other
consumer-credit debt. With each debt you pay off, apply the full amount you were paying on that debt to the minimum payment of your next debt. As you pay off each debt, the monthly amount you are paying on the next debt will escalate.
Once all your credit cards and other consumer debt is paid off, continue the procedure with your car and house payments. If you follow this procedure, you will be amazed at the shortened amount of time it takes for you to be completely debt-free. Most people can be debt-free within five to seven years.
Now that you are completely debt-free, take the monthly amount you were paying on your last debt, and put that money toward investments. Build your asset column.
That’s how simple it is.”