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Road to debt-free living


“Today, there are three kinds of people: the haves, the have-nots, and the have-not-paid-for-what-they-haves.” - Earl Wilson


Although debt is the homophone of death, we should not be afraid to talk about debt and should not consider it a taboo topic. Unlike the latter, people can avoid debt if they manage their finances well.


What is debt and why do people get into debt?

Debt is borrowed money by one party from another - under conditions that it is paid, usually with interest, at a certain date. Parties to these arrangements may either be individuals or organizations. Debts are secured when there is a collateral involved as when taking out loans to buy a house or a car. In contrast, unsecured debt does not require collateral. In both types of debt, the credibility profile of the borrower determines whether the loan is denied, approved, or approved with conditions. The interest is a payment for the lender taking the risk of the loan.


In general, there exists an imbalance between money flowing in and money flowing out of our accounts. The scale is tipped even more when wants (above necessities and essentials) are factored in. And when there are large purchases or emergency expenses that arise, a person may be compelled to borrow money and get into debt. Depending on the amount and urgency, people may borrow from a friend/family or from banks and financial institutions via credit cards or loans.


Impacts of debt on well-being

A 2020 study reviewing available literature on debt in Asian countries confirmed that there is evidence to support that being in debt is related to Asian participants experiencing depression, anxiety, stress, or suicide ideation (Amit et al 2020). It has to be highlighted however that depression is not predicted solely by debt and that there needs to be more studies on the topic in the Asian region and no study in the Philippines was included in the review.


The mental anguish is not limited to the person in debt but may also extend to family members. Even in the death of the borrower, unsettled debts can cause the family restless nights thinking of solutions on how to save the reputation of the deceased.


In the Philippines where medical care is expensive and often out-of-pocket, people with debt tend to put-off medical checks and are forced to seek care only when their illness is in late stages and health has deteriorated.


Debts may affect relationships including your lovelife

Debts may in fact be a relationship deal-breaker as some people get turned off getting serious with someone who has significant death especially credit card debt. Unlike student loans or debt incurred due to medical reasons, credit card debt is considered by some people as an accumulation or consequence of day-to-day decisions.


In other countries, financial infidelity (including hiding existing debts and lying about use of money) can even be grounds for divorce. This is unfortunate as debt itself can be a considerable burden, and dealing with debt alone is worse.

Debt may delay life milestones

Having debts may prevent a couple from getting married and having a wedding that would push them even further to debt. It may also hinder couples from starting a family and raising children fearing the costs of daycare, children’s medical care and education.


Debt may affect your credit score and approval rate for loans

Credit scores look at your borrowing behavior and payment history. Along with work history, income, equity, credit scores and debt-to-income ratios may be taken into account when borrowing money for business or home loans.


How to start the journey to debt-free living

Debts will never go away on their own no matter how hard you ignore it or pretend it does not exist. The road to debt- free living starts with being accountable for your debts and taking the first step of acknowledging and recognizing that you are in debt.


The reasons why you fell into debt are important but they will be irrelevant if you use them merely as excuses and not as opportunities for learning. You are in debt because you either are aware and chose it anyway or you did not actively choose to not be in debt.


Take an inventory. Write down all your debts both to institutions (like credit cards, and government and bank loans) and to people (family and friends). Include information on the amount, what was this used for, include remarks whether these were wants or needs, when the debt was taken out, and when you originally promised to pay them back.


Loans may not be something you can pay off easily and have to stick to an existing schedule. Create a new schedule on when you can realistically pay off your debts. Start by paying one of them fully, starting with the smaller amounts, especially those that earn interests. If you have many credit cards, choose to pay off one of them in full and move on to the next. Make it a habit to pay debts you owe family and friends. Crossing out debts off your list one by one will make you feel good and motivate you to completely clear the list. Avoid adding new debt to your list and aim to keep the list shorter.


Ask for help

Call the debt collectors or your credit card issuer if there are amnesty programs available to help you pay off your debt quicker. If you owe money to friends and family, communicate your situation and discuss a plan on how you can repay them. Let your trusted friends and family know of your situation as they may be able to provide you tips and strategies or possibly provide you with other income opportunities.


Patience is a virtue

Be patient with yourself. Getting out of debt takes time. You are not going to pay debts overnight unless you win the lottery. Also be patient with your financial goals and material wants. You do not need to own the latest trends - fashion goes out of style quicker and gadgets get obsolete.


Earl Wilson (1907–1987) is an American Newspaper Columnist, book author, TV and radio show host.


Noh Amit et al 2020. Relationship Between Debt and Depression, Anxiety, Stress, or Suicide Ideation in Asia: A Systematic Review. Frontiers in Psychology. July 2020.


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