You Can Get Out of Debt
Part of our call to help fellow Filipinos gain financial literacy and avoid bad debt problem is to write articles that gives tips on how to do it. Today, after almost 1 year of not writing in this blog, we decided to come up with an update. Over 6 years ago, we have written an article about 3 effective ways on how to get out of debt. One of our tips actually worked for a client today.
The Story of a Loan Borrower
For legal and his privacy reasons, we will call him Ryan. Ryan took a loan with one of our providers for car loan without taking your car. He lives in Cebu and is currently under lockdown due to Covid-19 pandemic protocols. In short, he had a 700k loan using his fully owned car thru our ORCR Loan program. Here, the company does not take the physical car but instead takes the original ORCR of the vehicle and will subject it to an annotation of encumbrance. This will serve as proof that the particular vehicle used as collateral will take no more mortgage transactions as it is already mortgaged to our lending company provider.
Going further, he is currently having problems with paying on time and updating his checking account to pay for the monthly amortization of the said loan. Just like other Filipinos, he is burdened with less working hours and therefore, less salary. This is the same reason he cannot pay for the loan anymore at its contracted monthly amortization amount. In efforts to have the loan restructured to his capability to pay, Ryan tried contacting our lender provider. The problem with his efforts is that due to lack of employees of the company, Ryan did not get his desired results to restructure his loan. Luckily, my assistant even if she doesn’t have work due to Covid-19, reached out to me. In no time, we were able to help Ryan get a clearer support from the company.
Realizing Your Options to Get Out of Bad Debt or Avoid Paying High Interest Loans
The story above is just one of the many stories on how to prevent getting stuck in bad debt for any reason. Never ever forget to reach out to your agent or people or companies you have done transactions with. In the end, you will find it easier this way than finding other sources of income which usually takes so much time to accomplish especially during crisis. Now moving forward, we would like to give you new tips on how you can move away from bad debt and avoid getting into bad credit.
First and foremost, did you know that the right financial literacy education can actually help you realize how easy it is to avoid bad debt? Yes, that is right, with the right knowledge in building a solid financial foundation, you can not just avoid bad debt but you can also help build you wealth, save and retire as early as you can. Of course this will all depend on how much passive income you have, how willing you are to learn financial literacy and what financial vehicles can actually help you find the right investments for your future. Here, we are talking about long term investing thru mutual funds in the stock market. Well, of course apart from that, you need to build your solid financial foundation first. And what are these components in order to do that?
Keys to Building A Solid Financial Foundation
- 5 Levels of Investing – Why Do We Need to Invest (beat inflation and achieve goals thru Goal Setting Before Investing)
- Realize the Wrong Way of Saving – Why Income – Expenses = Savings is WRONG!
- Right Way of Saving – The Prosperity Formula (Pay God and Yourself First)
- How To Make Your Money Work for You – Law of Compounding Interest Using Investment Vehicles
- Types of Financial Vehicles You Can Use to Invest
- Where to Invest for Mutual Funds and Grow Your Money
- What You Need to Attain Before You Invest – Free Financial Check Up
- The Importance of Health Insurance and Having An Emergency Fund
- Estate Planning and Protection
- Who Can Help Us Start Saving, Investing, Get the Best Health Insurance and Grow Our Money
- Secret Passive Income Generator for Filipino Entrepreneurs and Millennials
5 Different Levels of Investing
Getting the Right Healthcare Program – The question of why healthcare is a priority among all levels of investing in financial literacy might be too obvious but neglected. The fact that many Filipinos still believe that when they get sick, that is the only time they will go to a doctor and buy prescription medicine. But the problem is getting sick is the most expensive situation we cannot afford if we do not have any savings. This is the most common cause of being broke. In the end, it will deplete you of all your savings, assets + passive income and leave you with nothing the next time you get sick again. If this alone is not enough to make you realize how important it is to get the right healthcare program, then good luck. Now what are the 4 pillars of a good healthcare program? How do you know and what will be your basis of choosing which one fits Juan Dela Cruz? Remember this and use your common sense plus facts and figures. 1.) Short Term Healthcare 2.) Long Term Healthcare 3.) Death Benefit 4.) Money Growth on Investment Income- Protection or Life Insurance – Technically all of us needs insurance as long as we have responsibilities and we are still on our way to saving and investing for our future.
- Debt Management for those who still have bad debt to pay
- Emergency Fund – everybody needs to have an emergency fund like what has happened in this Covid-19 pandemic
- Investment – thru mutual fund equity fund or time deposit
Wrong Way of Saving Money
So what is the wrong way of saving money? Basically, many of us including me didn’t really know that there is a wrong way of saving money but if we take the time to study financial literacy, that is the time we will know what we came to believe is right is 100% wrong. This is the same reason why whatever we do and even if we have saved enough amount of money as we thought, later on we will find ourselves losing this money later. The reason? We lack the financial education. We didn’t understand the concepts of saving right. The formula that many of us follow is this – Income – expenses = savings.
Right Way of Saving Money
So if there is a wrong way to save money, there must be a right way, right? Indeed! And the right way to do it is stated in a simple formula with the concept of “Paying God and Yourself First”. This is also called as the prosperity formula where Income – Tithes – Savings = Expenses. Here, you have to make sure 1005 that you put a certain amount for investing first before you spend your hard-earned money.
How Law of Compounding Interest Works?
The law of compounding interest is basically how long it takes for your investment to double through earning via capital appreciation. This financial literacy concept only applies to long term investing. Long term investing here points to financial vehicles that works faster when we speak of how speedy your investment can double. Currently, there are 4 examples I can give you that works for compounding interest. 1.) Bank Timed Deposit 2.) Balanced Fund Stock Investment 3.) Mutual Fund Stock Investment 4.) Stock Market Investment
What You Need to Know About Financial Literacy Before You Invest
Financial literacy is indeed a very important factor before anyone invests. If you know your way, you can easily reach that goal. To attain that goal, you must be able to compute your capacity to achieve it. You can use the law of compounding interest in this case. But apart from that, you need to have a solid financial foundation first. This involves having the right healthcare program. As stated above, it must pass the test of having the 4 different pillars of good healthcare program. Secondly, you must have a good life insurance. You will need a life insurance along the way. Third, you have to manage and pay off all your debts.. Fourth, you have to have an emergency fund. This has been proven to work in this lifetime where the whole world went under the mercy of Covid-19.
Author and Financial Educator: Sam Casuncad
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