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7 Simple Personal Debt Management Tips

What do you think about debt? Is it good or bad?

Some people think that debt is bad. Do you think so? I think Yes and No.
  • Yes, debt is bad if you're not paying and total payment with interest and penalties are going up.
  • No, debt is not bad if you're able to pay and manage all your debts. Another instance of using debt for good is if you use it to earn. For example, you borrow P10,000 then you earn P15,000. Of course, it is still the best not to have debt at all avoiding interest charges and you keep all the profits.
Most people, if not all, cannot avoid debt because it is simply necessary for getting things -- both needs and wants. Every month, service providers send us bills for our usage of electricity, water, phone, cable, etc. So, every month, we owe them money and if we don't pay, the debt will pile up. If we pay our child's tuition in installment, that is another debt added to our list of monthly dues. There are many other sources of potential debt listed on my last post Do You Know How Much You Owe?

It is important to know how much you owe because if you're not careful in paying, it can spiral out of control and take over your life. You need to stay on top of your debts and practice good debt management. If you do, you're less likely to get into big trouble. If you see a problem, like not being able to pay promptly, taking action quickly can keep the situation from getting worse.

So, how do you keep your debt under control? Here are some things you can do for good debt management:

1. Use credit cards with no or waived annual fees

Before most banks offer credit cards with the annual fee waived for the first year. But now there are banks in the Philippines that offer credit cards with the annual fee waived for life. You can inquire these banks about their credit cards with no annual fee:
  • Bank of Philippine Islands
  • HSBC
  • Metrobank
  • EastWest bank
  • PS Bank
Do let me know if I missed a bank that offers credit cards without annual fee and I will add it to the list.

I also know from friends that it is possible to waive the annual fee by making a phone call to the bank. If your account is in good standing, it is likely that your annual fee will be waived. Otherwise, tell the bank that you're cancelling your account and choose one of the banks that offer credit cards with no annual fee.

2. Pay your balance in full each month

If you pay your credit card balance in full, you avoid paying for interest. If an emergency comes up and you are not able to pay the entire balance, do your best to pay it off quickly -- within two or three months at the most. If you allow your account to have a high balance, it will be more difficult to pay.

3. Avoid high-interest debt

If you're applying for loans, choose those with low-interest rates. If you're a member of SSS or Pag-ibig Fund, these institutions offer low interest rates. Avoid loan sharks, 5-6, pawn shop loans or payday loans because these usually charge high interest rates.

4. Save money for emergencies

Do what you can to save for an emergency fund equal to at least three months' income. In case of job loss or other financial crisis, you have cash to spend for essentials. If you use credit in such situations, you're setting yourself up for more trouble.

5. Save money to buy the things you want

Most "wants" can wait until you have cash to pay for them. Getting the habit of using your credit card to buy non-essentials (unless you pay the balance in full right away) can be very dangerous.

6. Take advantage of 0% interest sales.

If you can't pay cash for high-priced items, take advantage of 0% interest sales or offers by banks. It is possible now to buy an item, for example a computer, in 12-24 months installments with zero interest. But take note that you should not default on payment, even once, or you will be charged the interest.

7. Talk to your creditor if you're unable to make a payment

There are creditors that will allow you to skip a payment with no penalty if you're into a temporary setback and you've been faithful in paying. Don't make it a habit not to pay your dues though, because interest will still accumulate as usual.

It is important to be responsible in managing your debts to be sure that your debts will not overwhelm you. If you follow the 7 simple steps discussed, you can keep your finances under control and manage your debt smartly.


These are some incredible money saving tips! I got rid of my credit card because I found it a bit too tempting. Not having one forces me to actually have the money for the stuff I purchase. It allows me to take a second to really think 'do I need this?'
AiringMyLaundry said…
These are the best tips! I hate being in debt, so I do all of that I can to stay out of it. I will never have credit card debt! I'll use them for rewards and then pay them off the following month.
TessaG said…
These are fabulous tips! It's SO important to talk to your creditor if you can't make payments, as they can help you out by allowing you to only pay the balance, and not the interest on your card or bill, and can also lower the monthly payments.
Monidipa said…
Though I don't keep anyone's debts because I don't like it but it was informative for me. Because u never know.
I have no debt nor credit cards and I will be trying to keep it that way as long as I can. I always make my best to save a bit of money each month just in case something happens. Should I get a credit card, i'll remember your tips!
Rebecca Bailey said…
This is a good article to bring the issue of debt to light. It' something many people struggle with. Paying your bills on time accounts for approximately 30% of a person's credit score, so paying those bills by the due date is imperative for maintaining or improving a credit score. Another great point you make is having an emergency fund. If you have one, you don't have to acquire as much debt by using credit cards for emergencies. And finally, not all debt is bad if a person knows how to use it to their advantage. You've made some good points. Thanks for sharing!
Wendy said…
So Filipinos have this thing where borrowing money is so common. A lot of times, it turns bad because the one who owes money ends up being the one who'll get mad for being chased/nagged to pay up. For this reason, my family never associates with debt. We've made sure we don't borrow money from anyone. The debt we have is with bigger companies for purchases like appliances or vehicles. And we always stay updated with our balance.
Unknown said…
Great advice!! It is so important to do your best to stay debt free and you offer great tips on how to do that. Having a credit card has huge benefits, but you have to use it wisely!
Yes! Dispelling the myth that debt is bad is SO important. I just listened to one of Kathrin Zenkina's podcast episodes and she talked about the exact same thing!
vaishali said…
Great tips. I think I am pretty judicious about most of these. Thanks
Chin chin said…
I don't think it's just Filipinos. Buying stuff in installments is categorized as debt. Paying for services (water, power, telephone, cable) after the service has been provided is also categorized as debt. So, it's important to pay promptly to avoid long-standing debt.
This is such great advice. It's important to keep focused on finances and not let it get out of control with unnecessary debt. Having credit card is necessary but you should be responsible about usage.
Unknown said…
I do not have credit card or debit card but these tips are really good and helpful. I would try to keep these tips in mind whenever I go for credit or debit card in future.
Katie said…
Great tips. We use our cards intentionally and to build our credit. It's not helpful to use a credit card to buy things you can't afford. You could help alot of people make smart choices.
Nina said…
This topic is very relevant to my life. I have accumulated more than I can pay in just a month. However I'm working through it and am confident that I will get it paid off. These are great tips!
KimGlad said…
Great financial tips! Kids in high school or at least college should be taught about budgeting and managing money. So often people get in over their heads and it's very hard to get out of debt.
Chin chin said…
I hope you'll have everything settled soon, Nina.
Josephine said…
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Rafi said…
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