How to get out of debt trouble and problems? Not all debts give problems. They can even help us save taxes when there is interest expense, aid us in generating more profit by utilizing loan proceeds, and help our business grow more by using the funds for business expansion. Thus, we don’t need to escape from all debts; we only need to overcome the liabilities that give us troubles and those financial obligations that will cause us potential problems in the future. I don’t claim myself as a financial expert, but I do understand financial accounting as an accountant. I also believe that the keys to overcoming debt problems and achieving financial freedom are not found on numbers; they are found in the unseen things inside us. The following are ways and steps to help us increase our chances to get out of debt problems.
1. Have a strategic financial plan
Have the SMARTEST (specific, measurable, achievable, relevant, time-bound, enthusiastic, scrutinized and tested) financial plan. Consider the following goals:
a. Specific and measurable and achievable– be able to reduce your total debt by 40% through your weekly savings from the excess of your salary over your budgeted expenses.
b. Relevant – you need to reach that goal for the sake of your reputation and your loved ones.
c. Time-bound or trackable – you need to at least save P1,000 or $20 per week from the excess of your salary over your budgeted expenses and accomplish that goal within six months.
d. Enthusiastic – Monitor the progress of your plan or program and reward yourself every time you reach one step closer to your goal.
e. Scrutinized – Evaluate and reevaluate your financial plan.
f. Tested – Ask advices or tips from financial experts (read articles from books, blogs, etc.) or from people who have succeeded in overcoming their financial woes. Align your plan to what is tested.
2. Work hard and maximize you earning potential
You need to increase your revenue to cover expenses and increase your net income. Your additional net income will add up to your net worth and will strengthen your “debt to equity (net worth) ratio”. Your assets will also increase, which can be an increase of cash or receivables. Cash or collectibles will augment your liquidity and will be used to pay off your debts. So how do we maximize our profit? The answer lies on your diligence, patience and continuous learning. Even people who are enjoying the sweet fruits of passive income have invested so much hard work, patience and learning during the stage of building up the assets that are now generating their passive income. The following may also help you make more money and boost your income:
a. Lease your unused warehouse, apartment, house rooms, et cetera to earn rentals
b. Lend your extra cash to earn interest income
c. Invest your money in mutual funds or stocks to earn dividend income
d. Provide services from your unused talents and skills to earn professional revenue
e. Study further and attain additional educational degree to earn promotion and increase your salary
f. Place ads on your blog or website to gain advertising income
g. Utilize your garden for potted plants to sale
h. Try a garage sale
i. and many more…
3. Control yourself and your spending
You don’t need to stop spending your bucks; you just need to control it. And when it comes to controlling your expenses, it begins from having self-control. It doesn’t really matters if you spend or not, what matters is how wise your spending decisions are. You need to understand that some expenses may even help you get out of debt problems. Consider paying your taxes on time, it sounds like losing money, but it will help you avoid tax troubles (penalties, criminal charges, etc.,) in the future. So how can we control our spending? If profit maximization results from the virtues of patience and hard-work, expense optimization is achieved by having the virtues and qualities of self-discipline, humility, honesty and prudence.
4. Keep your receipts and invoices
This will help you save taxes. The more receipts and invoices from deductible expenses you kept, the more allowable deductions you can claim against your taxable income, resulting this to lower income tax dues. This will also help you account and track your expenses for planning, budgeting and monitoring purposes.
5. Build an emergency fund
Most debts occur during emergencies. If you have established an emergency fund, you don’t need to run to creditors to borrow money when unexpected events happen (e.g., sickness, job loss, property repairs, etc.,). Therefore, start raising your emergency fund now. It doesn’t need to be established overnight. You can raise it gradually and make it regularly.
6. Get some help
When you’re already financially broke and drowned in financial liabilities, this is the time to trust and rely to the people who can help you without expecting returns. This is the moment that you need to shallow your pride and become humble to call your real friends, family and other people who truly care for you. However, you need to ensure that the hope these people are giving you will not be wasted. You should not abuse their help; instead, you should be grateful for the financial aids they are providing you. Don’t forget to thankfully repay them when you recover.
7. Find your inner self
Be selfless and spiritual. You must understand that all the virtues (i.e., patience, diligence, self-control, honesty, etc.,) that can help you get out of the debt troubles are the fruits of being a spiritual person. By being spiritual, you will also learn how to avoid gluttony, drunkenness, deceit, fraud, envy, pride and other vices and evils that will cause you to become poor and trapped under the hands of debt.
8. Stick to your financial plan
Don’t be tempted by anything that can ruin your financial plan, whether it’s a destructive distraction or an attractive distraction. Be consistent and stick to your game plan.
I hope those debt management tips will help you succeed in getting out of debt trouble. Always remember that paying debts is a matter of paying attention and executing actions. Finally, take note that this article is only for educational and informational use only, and the success of your financial objectives will still depend on your consistent actions.
Victorino Q. Abrugar is a marketing strategist and business consultant from Tacloban City, Philippines. Vic has been in the online marketing industry for more than 7 years, practicing problogging, web development, content marketing, SEO, social media marketing, and consulting.
There is a new law on insolvency where financially distressed may make use of. Maybe is a good way out also. It is called FRIA or Financial Recovery & Insolvency Act under R.A. No. 10142. You may secure copy in the net and go through it to see some features that may be applicable to you. Thanks.
Hi, thanks for the additional information. Can you share to us what’s the content of the law. Thanks.
Thanks for sharing this. I agree with what you said. Not all depts give headache. I believe it helps to have a better cashflow.
I agree with what you said . I think that is important that we know ho wto control ourself in spending money. I think that it can also help in saving. Thanks for sharing your ideas. I learn a lot from this article.