5 Mistakes You Make When Managing Your Debt

Good afternoon. Today, since we're all on holiday, and the typhoon Maring is bringing a lot of rain in Metro Manila, I thought of surfing the net. And I found this article from FoxBusiness by Allison Martin (Credit.com) on managing our debt. I would like to post it here for us to study and hopefully apply some of it's recommendations so that debts can be erased soon.

Not all debt is created equal. With that being said, there is no one-size-fits-all approach to managing your debt and avoiding excessive interest, fees and other penalties that could result if not handled properly.

Here are five mistakes consumers commonly make with their debt (and ways to avoid them).

1. Depleting Your Emergency Fund

If you have a substantial amount of cash in your savings account, allocating a vast majority of it to get out of debt may seem like the wise thing to do. However, the problem with this approach is that it fails to get to the root of the problem. The ultimate goal should be to get out of debt and stay out of debt, and not simply write a fat check to serve as a temporary patch. It is more sensible to jump-start your management efforts and cut costs elsewhere in your spending plan because emptying out your emergency fund can mean even greater debt if an emergency arises and you do not have an adequate amount of cash on-hand to cover the costs.

2. Having No Plan of Action

Taking a lax approach to your debt is a recipe for disaster. You may eventually achieve your goal, but the process may be lengthy and tedious. Just imagine a college student who randomly takes courses that appeal to them without ever looking at their transcript to see what’s needed to graduate.

Save yourself the headache and devise a detailed debt repayment plan that incorporates your financial goals.

3. Getting Caught in the Minimum-Payment Trap

Making the minimum payment each month may give you more flexibility in your budget, but you more than likely will never get out of debt. In most instances, particularly if the outstanding balance is high, the minimum payment may only cover interest (or not much more), leaving you with an untouched principal balance.

Instead of making this mistake, allocate as much money as possible toward your monthly payment, even if the amount is way more than the minimum, to ensure that your payment efforts are not in vain.

4. Robbing Peter to Pay Paul

Advancing cash from one debt source to another solely for the purpose of making your monthly payments may cause you to end up in a bigger financial crunch than you initially bargained for. If your financial situation is dire and you‘re robbing Peter to pay Paul just to make timely payments, reach out to the creditors and request that they grant you some sort of temporary relief until you are able to sort things out.

In addition, refrain from using any sort of financing to pay for purchases unless it is absolutely necessary.

5. Ignoring Statements and Credit Reports

Both your statements and credit reports paint a picture of where you stand in terms of your debt obligations. Ignoring these documents can be very costly and time-consuming down the road if inaccuracies exist because errors that are not promptly reported may be more difficult to dispute.

To avoid these issues, immediately review your statements each month when they arrive to verify their accuracy. If discrepancies exist, report them as soon as possible to the creditor so that the issue can be resolved before the inaccurate information is reported to the three credit bureaus. Also, review your credit report at least once every four months for mistakes – you can get them for free once a year through AnnualCreditReport.com. You can also monitor your credit once a month for free using the Credit Report Card.

Personally, I have applied Item # 2 and # 3 in dealing with my credit card debt. So far, I am now almost out of the rut and setting myself debt-free.

What's your plan?

To your debt-free life,
Jimmy

Read more: http://www.foxbusiness.com/personal-finance/2013/08/20/5-mistakes-make-when-managing-your-debt/#ixzz2caIWfRCz
Photo credit: http://money.howstuffworks.com/personal-finance/debt-management/debt3.htm

5 Things to Never Keep In Your Wallet

I used to think that I need to keep all stuffs in my wallet. Credit cards, ATM cards or Debit Cards, Driver's License, SSS card, etc. I am now of the opinion that it is better to have them all in my wallet just in case I need them, I have access to them right away. Right? Wrong!

Yes, I have realized that if I lost my wallet containing all these important stuff, I am in big trouble. Imagine calling all the credit card companies and canceling the cards to protect it from the thieves? That's just one problem. What about my SSS number? If thieves can access it, they can apply for a credit card in your name and make costly purchases in your name! Whoaaa!!!

How To Save Money Every Month

I just can't let this article pass us by. So I am re-posting it here. Here's some practical ways we can save on money monthly. I love what Moneymaking's idea to stop bringing your credit card for a month. I feel this is a real challenge to all of us. There's a false security in bringing our credit card with us, in our wallets, isn't it. We often tell and even convince ourselves that we might need it, "just in case". So we end up using it. If there is a supply, we usually create the need.

Well, here's what I want to focus on: what activities should we do. My friend from Fiji, Savenaca, always tells me, "No more theories, theories. Just do it!" So here goes:

1. Stop bringing your credit card. At first, you will feel very restricted but you will slowly realize where you are spending money on. It’s amazing that we remember our purchases so much better when we pay in cash.

Use That Card Wisely

I have two kinds of card:  a credit card and a debit card. Both are from the same bank. I use my debit card for the following:
1, Grocery purchases
2. Shopping (on purpose) like when we bought a new gas stove the other day
3. Medicine purchases
4. Books and school supplies

On the other hand, I use my credit card for the following:
1, Representation Expenses (chargeable to my company)
2. Gasoline, when I have no cash on hand and I need to load
3. Planned eat-out with family and also friends (on purpose to get credit but paid immediately)

From my experience, I get into trouble when I use my credit card on unplanned purchases. Come pay time, I miss it since I have no budget for it.

I came across this article that suggests of 3 ways to use a credit card. A great help indeed.

The best option for me is to plan and budget and really stick to it. Doing so helps you get out of DEBT!

To our debt-free life,
Jimmy

7 Worthy Resolutions To Commit To In 2012

Hi there. I have been away for a while. Japan is now in winter season. Visited our Filipino workers around Takamatsu in Kagawa-ken. It has been a fruitful monitoring. Just by seeing them and being where they work, brings joy and refreshing to these precious people.

Together with the industrious lady welders in Takamatsu

At the highest point in Tsuda, Kagawa-ken

With the lady Chicken Choppers

On my way back home last January 17 on PR 407, I was reading an article on the Philippine Star. This particular article caught my attention because it speaks to retirees, of which I am within its zone!

Took this photo at the Kansai Airport on arrival

But I believe the resolutions mentioned by AP can be applied to younger ones too. The author mentioned Seven (7) resolutions for retirees in 2012.

Although I can go on retirement mode, I made a conscious decision not to retire yet because I feel that my best days are still ahead of me. There's no time to stop doing what I am called to do.

Now, let me give you my take on this article.

First of the resolutions mentioned is the call to get disciplined about money matters. The best way to do this is to set up a formal budget and stick to it. Being thrifty without a plan only goes so far when unexpected expenses arise, especially at an age when health care costs can start to mount. How true this is.

Attack your debt. The top priority is to pay off credit card debt. After the card is zeroed out, use only one card and pay off the balance monthly. If an emergency expense leads to a balance, don't let it linger or it will erode retirement savings. Having only one credit card is a very practical suggestion indeed.

The other resolutions include:
1. Invest in dividends-paying stocks
2. Get your estate plan in order
3. Be more generous
4. Check into long-term care insurance possibilities

The last one is especial to me: Stretch your body and mind. The author says we need to choose daily pursuits that keep you physically, mentally and socially engaged. Physical activity helps us to live longer, feel better, depression free and keeps our mental skills sharp. I take physical exercise as a necessity for my body that's why I play badminton and brisk walk at least three times a week.

I can't help but notice the mental sharpness of Justice Cuevas and Senator Enrile in the current impeachment trial of CJ Corona. They are in their 80s yet they are still sharp as ever. This is also the main reason why I blog!

What about you? Do you feel you can use these resolutions for 2012?

To our debt-free life,
Jimmy

10 Smart Ways to Improve Your Budget

When you're dead serious about managing your money to eliminate debt in your life, you will go out of your way to dig for more insights and precious information that will help you be on top. After all, I don't have all the solutions to my money problems. I need others to support me with my goal of reaching a debt-free life.


I came across this smart article from US News written by Kimberly Palmer, 10 Smart Ways to Improve Your Budget. I am an advocate of using budget as an important tool in managing our financial resources. That's the reason why I highly recommend this very practical and useful article.


Here goes:

10. Share your budgeting goals with others.

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Whether you want to stop wasting money on unnecessary shopping trips or pay off your credit card debt, share those goals with friends and perhaps even strangers. Websites such as 43things.com and MyLifeList.org makes it easy to share goals with similarly-minded people.

9. Reward yourself.

DAVID GUNN—ISTOCKPHOTO

Diets that force people to expunge almost everything tasty from their meals never seem to have much success. That principle applies to money, too. Denying ourselves every material pleasure turns money into a sad subject, instead of an empowering one. After all, you work hard for your money, so it should bring you some pleasure.

8. Avoid temptation.

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If you were on a diet, would you stare at chocolate chip cookies all day? Of course not. So why do we torture ourselves by allowing catalogues full of shiny, new kitchen gadgets or tempting electronics to come through our mails slot every day? Cancel them.

7. Take the spending diary challenge.

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Write down every single thing you spend money on for two weeks, along with notes on why and how it made you feel. You might be surprised to discover the real leaks in your budget. Instead of lunches out and cab rides, you might be wasting money on coffee and happy hours. After the two weeks is up, review the list and see what jumps out at you.

6. Consider your high and low points.

(Angelo Cavalli/Getty Images)

A quick review of where you went wrong—and right—over the past few months will help pinpoint your weaknesses. Did you end up spending twice as much as usual on plane tickets because you waited too long to buy them? Or did you buy overly expensive gifts? Don’t just beat yourself up; consider the good decisions you made, too, whether it was comparing prices before buying a new television or cooking more homemade meals.

5. Set money aside for leisure.

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Research shows that people get the most pleasure out of spending on leisure activities, such as vacations, movie theater tickets, and hobbies, partly because these things usually involve spending time with other people. Don’t forget to reserve some cash for such happiness-inducing pleasures.

4. Consider the year, not just the month.

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Budgeting for the year is better largely because we feel less confident in our monthly estimates, so add more of a buffer for unexpected expenses, according to research by University of Southern California’s Gulden Ulkumen, Cornell’s Manoj Thomas, and New York University’s Vicki Morwitz.

3. Time yourself.

SLOBO MITIC—ISTOCKPHOTO

Once you decide you need to buy a specific item—a new computer, for example, or a backpack—give yourself a specific time limit to make the purchase, such as a half-hour. “You don’t want to lose precious time sifting through options when your instinctive reaction will probably end up being the best decision,” says AnnaMaria Turano, co-author of Stopwatch Marketing: Take Charge of the Time When Your Customer Decides to Buy.

2. Harness the power of a Web tool.

(iStockPhoto)

On Mint.com,you can upload your account information and get immediate insight into where your money is going. You can then use that information to start saving more money, just in time for back-to-school season. Other online options include Wesabe.com,Pennyminder, and You Need a Budget.

1. Decide on your priorities.

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Most people’s budgets revolve around three costs: food, housing, and transportation. After you budget for those expenses, which probably account for between half to two-thirds of your take-home pay, and factor in any debt payments, decide how to prioritize savings, household expenses, professional expenses, and entertainment.

My wife and I went on tour to HongKong this week. The first thing we did was to decide on our priorities when it came to spending. We had a budget and it helped us control our expenses and came out of this tour fully satisfied and rewarded. In the end, we enjoyed HongKong, Macau and Shenzhen a lot.

Here's to your debt-free life,

Jimmy

4 Things You Should Never Do With Your Credit Cards

I can identify with Susan McCarthy in all four areas when it comes to using my credit cards. I have experienced the worst that can happen to me like overblown balance due defaults on payments and sometimes paying only the "minimum payments", letters from the credit card company's lawyers demanding immediate payments in lieu of a court case, worries and nightmares. I am thankful for Susan for this article and I know it will help a lot when you do what she suggest. I did, and I am almost out of my credit card debt.


Susan McCarthy, a financial adviser in Oklahoma City and author of The Value of Money, lists her top four credit card don'ts:

1. Don't make only the minimum payments. This stretches out your payment and, thanks to the interest, significantly increases your overall cost.

2. Don't carry too many cards. Multiple cards make it easier to rack up debt because it's harder to keep track of your spending. Having lots of cards isn't necessarily bad for your credit, but misusing them is. So limit your plastic to two national cards (store cards often carry higher interest rates) that you manage carefully.

3. Don't miss payment due dates. Not only will you be hit with a late fee-as high as $39 on some cards-but your interest rate could also jump. Sign up for online banking or pay over the phone if you're up against the deadline. (You may pay a processing fee, but it will probably be less than the late fee and the possible interest-rate hike.)

4. Don't take cash advances. These advances generally come with sky-high interest rates and service fees, making them a far too expensive way to get cash. Avoid at all costs.


To your debt-free life,
Jimmy


Source: http://shine.yahoo.com/channel/life/4-things-you-should-never-do-with-your-credit-cards-530910/

Top 10 Ways How to Save on Credit Cards

In the Philippines, whenever the "ber" months arrive (starts with September) our instinct for spending kicks in. It's like an addiction that never go. We begin to think of ways how we can increase our spending budget and where we can spend it. The worse thing that can happen to anyone is when we can't raise enough money to spnd, we usually resort to using our credit card with a view to paying it after the holiday season.


I have been encouraged by this article by CredAbility, which they posted on Crown Financial Ministries. They offer ten tips on how consumer can save on credit. I hope you will like it too.

How to be a careful consumer

“A careful consumer looks closely at the cost of carrying a credit card,” says Suzanne Boas, president of CredAbility.
Buy! Spend! Lease! Charge! Refinance! Consolidate! Consumers are bombarded with financial messages, in newspapers and magazines, blaring from broadcasts, popping up on computers. And, the most important messages may be in very small type. “But,” Boas says, “it is a very good idea to read that small type, especially in credit card agreements, to save yourself unnecessary costs.”

CredAbility offers these ten tips to save on credit: 

1. Pay your bills on time. Not only will you avoid late fees and high interest rates, but paying on time is the most important factor in determining your credit scores, which determine the availability and cost of future credit. 
2. Always pay more than the minimum due. Optimally, pay off all charges every month. If you can't do that, try to pay off your bills as quickly as possible. The longer you take to pay down the balance, the more money you pay in interest. Paying the minimum could mean taking 10 years or more to pay off your balance.
3. Pay off high interest cards first. This doesn't mean ignoring the other bills. If you have many cards to pay off, pay the minimum on all except the one with the highest interest rate. Pay as much as you possibly can on that one. This “laddering” technique reduces the overall interest you pay. 
4. Transfer balances to lower interest cards. But, beware of low introductory transfer rates—they may skyrocket if not paid off over a short term. 
5. Negotiate with your creditors. If you receive a late fee and have a good payment history, ask the credit issuer to waive the fee. If your interest rate seems high, ask them to match or beat the rate. If they won't work with you, it may be time to look for a better credit card deal.
6. Shop around for the best deal. Don't just accept whatever pre-approved cards arrive in your mailbox. If you have excellent credit, look for the lowest rate as well as for cash-back rebates, frequent-flier miles, free gasoline, or donations to college savings plans. If you have spotty credit, find cards that have the lowest costs. Watch out for monthly and annual fees, application fees, processing fees, and excessively high interest rates. Even secured cards have varying costs. Compare the many offers on websites such as Bankrate.com and Cardweb.com. 
7. Check the fine print. What are the late fees and over-the-limit fees? What is the grace period? Is the interest rate variable or fixed? Most importantly, read the slips that come with your bills. Issuers can usually change the terms with a 15-day notice. 
8. Read your bills thoroughly each month. Watch out for overcharges, phony charges or billing mistakes. You have 60 days to dispute these items, but after that, you're out of luck. 
9. Close zero balance accounts. If you have accounts you don't use, close them. This will improve your credit score. Most people don't need more than 2-3 cards, and extra cards can only help you dig deeper into debt. 
10. Beware of the extras. Credit Insurance may be more expensive than life or disability insurance, and benefits the lender as well as the cardholder. Most people won't need it. Debt suspension and credit protection programs offer no value to consumers. 

To your debt-free life,

Jimmy

Source:

About CredAbility
CredAbility is a nonprofit, community service agency dedicated to empowering people to achieve a lifetime of economic freedom. CredAbility provides free, confidential budget counseling, community and personal money management education, debt management programs, and comprehensive housing counseling. Contact CredAbility by phone at 1-888-771-HOPE (4673), or visit the Web site.


Photo: http://www.flickr.com/photos/bzaharie/2601729610/sizes/m/in/photostream/

Getting serious in swimming out of debt

If you really want to get out of debt, you have to be serious, really serious about swimming out of it.
I paid my credit card debt today. While on my way to the bank to pay, I was flip-flopping whether to pay it full or just pay enough and use the rest of the money for my upcoming company-sponsored vacation in Boracay.

My idea of a vacation in Boracay next week

I tell you, it was tempting to settle for the less. But because I am determined to wipe out my debt, I went in that bank resolved to pay the balance in full.

If you notice in my statement, there are many charges with the plus (+) sign on it. The Finance Charge, Fees/Other Debits, and Late Charges. the only Negative (-) is the Payments/Other Credits. I want to be in the negative more often.

The figures with red circles are the plus (+) entries

The Plus (+) signs adds to my debts. I used to pay only the  minimal amount called "Minimum Payment", which the company normally suggest you do. With that act, I had and accumulated "entries" in the plus (+) boxes. Adding all the plus (+) amounts since I started using my card, I'd say it cost me a lot, lots of money.

There is really wisdom in paying the full amount and on time. It is a source of additional money that will help you swim out of debt. Be serious and stay focus.

To your debt-free life,
Jimmy

One way to control spending: Discipline - DELAYED GRATIFICATION

My coach, Al Hollingsworth, defined DISCIPLINE as DELAYED GRATIFICATION. In the area of finances, this means that you postpone any plan to satisfy your desire to buy for the sake of the future. Example, you want to buy a brand new TV but your existing TV set is still working well. Because you want to discipline yourself, you delay the plan to buy a brand new one and save the money for better use.


Discipline works
I admire one of my staff in the office. She likes to buy a brand new Blackberry. Mind you, she has a Nokia touch screen cellphone now. Her dream is to replace it with a Blackberry, latest model. Today she told me she has decided that she will buy the Blackberry in CASH by saving for it. She can get the Blackberry now by just one swipe of her credit card. But she is wise and will stick with her plan to save first and buy later. Isn't that discipline?

Keeping Track of your money
Another way to enforce discipline in your finances is by keeping track of how you spend your money on a daily basis. This is hard work mind you. I did this for a month with the help of my wife. Everyday, I list down our expenses on a small notebook that I always carry with me. Every centavo that I spent was recorded. The simple exercise is enough to make me reconsider any expense I make. It made me think twice before I decide to buy anything. Remember, it is a matter of discipline-delayed gratification.

This exercise gave me an idea and I saw a pattern of where my money went. It gave me control over my expenses. One example was my phone bill. I found out that my cellphone bill way too high from my budget. You know what I did? I saved money by cutting my non-essential calls. It worked for me.


The tracking report also gave me valuable information, which I used to prepare my monthly budget.


Why not try it? I promise you, it will be an eye opener. You'll be surprise where your money goes.


To your debt-free life,
Jimmy


P.S. If you want a sample of an expense tracking notebook, I would love to give you one. write me a comment and your email addy and I will send you one.

Photo credits:
http://www.flickr.com/photos/teegardin/5913014568/sizes/m/in/photostream/
http://www.flickr.com/photos/30691679@N07/3252506530

10 Reasons Why He is Cancelling His Credit Card

I came across this very good article, "10 Reasons I'm cancelling My Credit Card" by Brett Arends in Finance.Yahoo.com. I can't help but post it here. I made it a point to post only my own experience on being debt-free. However, I would like to give way to Brett's experience because I am sure we can all benefit from it.
Here are 10 reasons why:
1. I'll spend less. A variety of scientific studies, such as this one at the Massachusetts Institute of Technology, have found that people are simply willing to spend more when they use credit cards than they do when they use cash. It's common sense. No wonder our national obsession with shopping really took off when credit cards came on the scene. And I've found it personally. Last fall and winter, when I went for an extended period without carrying any plastic at all, my day-to-day spending rate absolutely collapsed.

2. The card bonuses aren't worth it. A lot of people use their credit cards for the frequent flyer miles or other bonuses. But many of these deals are getting less valuable. Airlines are cutting back on flyer programs. And how good were these programs anyway? Schwark Satyavolu, co-founder of BillShrink, says that if you are really smart, dedicated and targeted about getting and using your bonuses, you can sometimes get very good deals. But overall, he says, deals are getting less valuable, and are increasingly focused on cards with annual fees. Most of us are doing very well if we manage to get back 2% on our cards. Compared to the extra amount you spend, that's chicken feed.

3. Cash makes budgeting easy. Personal financial planners encourage clients to draw up budgets. It's great advice, in theory anyway. But I have a confession: I'm just not that organized. Nor, I suspect, are lots of people. But if I go to the bank once a week and draw out a certain amount of cash, it makes the budgeting automatic. Easy.

4. Less worry about identity theft. Do you worry about handing out your card or details every time you make a purchase? I do. The banks and online merchants work hard to maintain security, but the crooks are just as inventive. And there are plenty of them. People suffer identity theft all the time. Using cash cuts down on the risk.

5. Fewer impulse purchases. One way credit cards let us spend more is that they make it easier to buy things that we don't need, and may not even want, on the spur of the moment. And the stores are set up to encourage it they rely on sophisticated marketing science to manipulate you into reaching into your wallet. If you don't have the money on you, you can't splurge. If you really want the item in question, you can come back and buy it tomorrow. Chances are you won't.

6. I can still shop online. Just because I'm using cash doesn't bar me completely from getting online deals. Yes, I'll have to bend a principle, but I won't have to break it: I can buy a prepaid card in a store and charge it up with cash. Okay, so it's plastic, but I have to pay for it in advance, with cash, and it will have a limit. (On the same principle, I can also use a prepaid card as an emergency backup if I travel).

7. Say goodbye to debt. I pay my cards off in full every month, but a lot of people don't. They use their cards to borrow, and it's a financial disaster. We've seen what the overuse of debt has done to our economy. According to Bankrate.com, the average card charges you 14% interest. Many charge a lot more. And you're paying with after-tax dollars. As an illustration, you'd have to earn at least 16.5% on the stock market (before long-term capital gains tax of 15%) just to keep up. Good luck with that. Says New York University's Stern School of Business, since 1928, U.S. stocks have produced an average compound return of just 9.7%. And Bankrate calculates that someone who buys a $1,000 item on a credit card charging 14% interest, and merely pays 2% of the balance each month, will end up paying $1,750 for that item. It will take 110 months to pay off the bill.

8. Privacy. Credit cards are great for tracking people. They tell you exactly what you bought, where and when. (Throw in all the data tracked by your smartphone, your iPad and so on, and we're basically rats scurrying around in a Perspex cage while marketing strategists study our every move). I have to confess I hate it. And I love the privacy and anonymity of cash. Last week I meet my wife for lunch. But I stopped by my bank first to take out cash. It's none of American Express' business.

9. Cash rebuilds the link between what I earn and what I spend. I remember back when I got my first job: I started calculating how much everything I spent cost in terms of hours worked. That new CD cost two hours of my time, and so on. It was a good discipline. Credit cards weaken the link. It's no wonder that the rise in plastic has resulted in an explosion in the numbers living beyond their means. (Is it also a coincidence that the rise of the credit card has also coincided with the collapse in unions? Before VISA, if you wanted a fancier car or vacation next year, you needed a pay raise).

10. Cash helps people I want to help. The money goes to the merchant and his suppliers. When I go into my local credit union to cash a check, I'm keeping a couple of local tellers in work. Credit cards? I'm helping finance bank executives, marketing teams and call centers in India. I am sure they are all fine people, and I wish them well. But if I had to choose, and I do, I would rather help my local merchants and credit union staff.

I agree with Brett specially about his view that the banks and merchants are going towards accepting credit card payments ONLY and not cash. This makes the banking system mighty by having the ability to pore into every transaction we make using our credit card and therefore our personal lives are at stake too.

As for me, I will go the way that Brett is going... only cash!

To your debt-free life,

Jimmy

Source:http://finance.yahoo.com/banking-budgeting/article/113093/reasons-cancel-credit-cards-smartmoney?mod=bb-budgeting

You Spend more when You're Emotionally Empty

Manila has a lot of Shopping Malls, big malls. The biggest so far is SM's Mall of Asia located in Pasay City. In Quezon City, where I live, we have many big and newer malls: the expanded SM City North, the new Trinoma Mall, and the Gateway Mall at the Araneta Center in Cubao, Quezon City (shown below) among others.

People I know from the US and even in Canada envy our malls. Last week, I was in Guam on a business trip. Their biggest mall is The Micronesia Mall, owned by our very own Lucio Tan. They say that half of Guam is now owned by Mr. Tan. But you know what? Their Micronesia Mall is nothing compared to our malls.

But here's the thing. If you go to the malls, most likely you will spend at least a hundred pesos, on anything your eyes will see. The malls are designed to attract you and your wallet! Every floor area were conceived and designed to catch your attention for you to buy.

My piece of advise: stay away from the mall, specially if you are emotionally empty. Experience tells us that people who are emotionally void or troubled, tends to spend more to fill in that emptiness. I have a friend who goes out to malls or MacDonalds to eat every time he is stressed.

http://www.flickr.com/photos/brymo/412339569/sizes/m/in/photostream/
It is easy to swipe the credit card when you want to buy something you actually don't need, specially if you have no cash, in order to fill in a void in your life.

Just a thought while I was answering an email today.

Hope it helps to make us debt-free,

Jimmy

The Frugality of Filipinos in Guam

Hafa Adai!! (Welcome). I have been away for a while. I was in Guam for the last six days. Guam is a US territory. I was told that 45% of those who live in Gaum are Filipinos. The main stay are of course the Chamoros, a native of Guam. Surprisingly, they have Filipino sounding surnames like Reyes, Bautista, Javier, etc. The reason for this was the influence of the Spaniards, who colonized them earlier. As a matter of fact, Magellan landed first in Guam before landing in Cebu.
Guam is highly dependent of the Japanese economy. Most of the tourist come from Japan and Korea. Tourism is the number one industry of Guam. Of course there is the US Naval Base, also the main source of income for many of the Guamanian.

So what has this got to do with debt-free life?

Well, for one, I personally got over the temptation to spend over my budget. It was so tempting to buy things there, being a tourist-centered state. It was good that for the last three days of our stay, my uncle and auntie took us into their home. Thanks to the wonderful hospitality of the Valencias! We owe you one.


The main reason why we were in Guam was to look into the possibility of doing business there. With the planned transfer of the US Naval base from Okinawa, Japan to Guam, there will be an influx of construction activity to house the more than 8,000 navy personnel which is estimated to be transferred to Guam. This will happen anytime after 2014!

I was able to talk with Filipino immigrants, who gave me an overview of their lives in Guam. They told me that credit rating is very important in Guam, just like in the US mainland. You buy most of things you need using your credit card. The thing that distinguished these Filipinos there was their sense of frugality. They work with a vision to build their own home built by themselves! (Can you believe that?)  The houses have roofs made of concrete, everything was made of concrete! I was amazed to see them prosper. They save money to send their children to school in the mainland.

Frugality. A distinguishing mark of many Filipinos in Guam. Why not?

To your debt-free life,
Jimmy

P.S. Did you know that Guam can be toured in half a day! How true  to their expression: Hafa Adai!!

3 Practical Steps to Getting Out of Credit Card Debt

I like what I saw the other day on Channel 5's  SAPUL SA SINGKO morning show. They have a segment dedicated to FINANCIAL FREEDOM AND MONEY. The hosts were Amy Perez and Chinky Tan, author of "Till Debt Do Us Part".  
Money, to most of us, is a vital commodity. Without money, you'll have a hard time making things happen. Without money, you can't pay your basic bills like electricity, water, telephone and other equally important bills. With money, you can do a lot of things including helping people in their time of need.


So there I was, a bit sleepy coming out of a restful night, when I switched the TV on to SAPUL and saw Chinky Tan reading the letter of a sender who was asking help on how to be financially free and how to eliminate her mounting credit card debt. I really appreciate Sapul sa Singko for including this segment because I believe it will help a lot of people get out of credit card debt.

Here are 3 practical steps they advised the letter sender:
1. Don't pay the MINIMUM AMOUNT  DUE only. TRIVIA: it will take you 36 years to fully pay your credit card debt if you pay the minimum amount due ONLY. Doesn't look good isn't it? Pay more than the minimum amount due!


2. Don't use your credit card to purchase new items, specially BIG Ticket items like appliances (TV, ref, washing Machine, etc.). USE CASH to buy anything you need. (if I may add, if you want to buy big ticket items, save money for it and buy it only when you have saved for it)

http://www.flickr.com/photos/jmrosenfeld/2903513401/sizes/m/in/photostream/

3. Look for additional INCOME to increase your earnings. Your income should always be greater than your expenses. Chinky Tan says: don't over-spend (cause of debt). It's time to get out of debt by under-spending.


To your debt-free life,
Jimmy


P.S. Be wise! Commit to a budget and stick with it.

HOW TO GET OUT OF CREDIT CARD DEBT

Did you know there is such a thing as the Credit Card Association of the Philippines (CCAP)? I found out about it last May 26 when Maritess and I were having our breakfast at a fastfood chain, they gave us a free newspaper. As I scanned the paper, I saw CCAP’s report on its annual conference that day at Sofitel Philippines Plaza Manila.

The amazing thing that CCAP said was “with a budget, some dedication, and a lot of discipline, your credit card debts can be wiped out.” It looks like they want you out of debt. Uhmmm.

Here are some recommendations they have proposed to wipe out your credit card debts:

1.       First thing, find out exactly how much credit card debt you can afford to pay off.

2.       Make a budget so you can know how much to pay whom.

3.       It is considered wise to put aside thirty (30%) percent of your monthly income as savings. What is left, after paying off your monthly fixed expenses, is how much you can dedicate to eradicating your debt.

4.       There are two preferred methods for paying off your cards: highest interest rate first, or lowest balance first.

5.       Paying off your credit card with highest interest rate will save you money in the long run, especially if the highest rate card happens to be the one with the highest balance.

6.       Paying the lowest balance first is much easier, and the debt is taken care of much quicker. Personally, I prefer this method as it helps you see the evidence that you are actually zeroing out your debt and gives you motivation to move to the next card and the next, until everything has been settled.

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At the end of the article, CCAP admits that it will take some time to get completely debt-free- but once you are, there is nothing stopping you from investing and making your money work for you instead of the other way around.

This week, I am happy to eradicate one of my credit card debts. As I paid the balance, it became clear to me how much money I lost paying off the finance charges and late payment charges this credit card was charging me month after month.

http://www.flickr.com/photos/baptistefranchina/1891376741/sizes/m/in/photostream/
One lesson I learned and I want to pass on to you: always pay your card on time, and you must always pay your full balance in order to escape the interest that will be levied on you!

To your debt-free life,

Jimmy

The War of Debt is On!

The rate of consumer credit defaults in the Philippines is almost triple the average in Asia (Malaya (2008))

• ·         Consumer loans accounting for only about 10% of total bank lending and less than 5% of GDP.
• ·         Philippines is a consumer-driven economy, which creates strong demand for consumer loans, with personal expenditure making up 77% of GDP (Fitch Ratings (2006)
• ·         High delinquency rates have accompanied the growth of retail lending, especially unsecured lending, where overextension of credit to low-income earners has resulted in a non-performing loan (NPL) ratio of almost 20%.
• ·         Credit cards provided by the banking industry are an emerging source of household credit in the Philippines.
• ·         About 3% of the 5,000 sample household respondents have a credit card and around 4% expect that a household member will apply for a credit card within the next 12 months.
• ·         Total credit card receivables (CCRs) outstanding of universal/commercial banks and thrift banks, inclusive of credit card subsidiaries, reached PHP 116.1 billion at end-December 2007
• ·         Of the total CCRs, PHP 16.518 billion, or 14.2%, was past due as of December 2007, compared with 14.3% (PHP 15.199 billion) in the third quarter of 2007
• ·         The trend in past-due CCRs could mean that more credit cardholders are having difficulties making their payments on time.
• ·         The rate of consumer credit defaults in the Philippines is almost triple the average in Asia (Malaya (2008))
• ·         On average, consumers end up paying a 3.5% rate per month, or 42% per annum, including the basic interest rate, fees and charges. 
• 
  
• The way I see it, the Philippines is really a consumer market. We have been programmed to be consumer minded  rather than investor minded people. The way out of debt is to discipline ourselves in managing our finances well. We must be buying on cash basis from the savings made. Avoid using your credit card and free yourself from the 3.5% interest per month.

http://www.flickr.com/photos/niznoz/8402838/sizes/m/in/photostream/

Source: http://www.bis.org/publ/bppdf/bispap46m.pdf