How to Defeat Debt For Good

I was in Quezon City for a meeting yesterday and my husband went with me since he also had some business to attend to in the area. My meeting ended at about 3pm, but with the almost 3 hour travel time that we endured just to get to Quezon City from Paranaque, I thought twice about going back to my office in Pasay, because what would most probably happen is that I would arrive with an hour to spare before the office closed. I knew that there was nothing important pending in the office that couldn't wait until next week, but we were scheduled to receive our salary and a bonus yesterday and I have to pay a credit card bill tomorrow. However, when I checked my active account, I realized that I had just about enough to pay off my credit card bill and even if I didn't, I could tap into my emergency funds and then simply replenish those accounts next week when I receive my money. And so we didn't go back to Pasay, instead we spent quality time at the grocery (parents can relate to this I'm sure) and went home early to our son.

While driving home, I mentioned to my husband how I never want to put myself in a situation where my need for money would be so great that I can't even delay receiving my salary for a few days. He replied that of course that's what everyone wants, to which I responded that yes it seems obvious, so why don't people do anything about it? Why indeed. Why do people wallow in debt when being debt-free was clearly the better option?

I grew up thinking debt was normal. My parents mortgaged our house twice just to have it renovated. My mom had a monthly habit of rushing to the bank in order to fund checks that were due that same day. They kept on buying and financing new cars, changing cars every two years in order to avoid the tedious act of car maintenance. My dad took out the maximum GSIS loan that he could in order to finance his businesses in the province, the same businesses that eventually failed because he was directing it remotely from the city. Right now, they took out a mortgage on the house again to finance the construction of a pool in our resort in the province. I'm scared to ask how constructions are going because the last time I asked, expenses had ballooned tremendously.

I paid off my car loan about 5 years ago and there's a constant pressure to upgrade it, to buy a new car since it's not what a person of my so-called stature should be driving. It's the same with our condo units. It's not in a posh neighborhood and it's still quite bare, post-construction. But you know what's better than a new car? A car that's totally paid for. And why would I choose to trade our condo units for a bigger house that I honestly cannot afford? As it is now, I'm making extra payments toward our condo mortgage and can finish paying off one mortgage in 3 years and the other one in 4-5 years. Mortgage free in less than 5 years! How awesome is that right?!

The thing I realized with debt is that it's so pervasive that we have come to accept it as the norm. Wouldn't it be great if being debt-free was the status quo and everyone worked to bring down their debts as quickly as they could? Imagine if people drove their cars to the ground instead of upgrading every few years just because the banks say they could.

When it comes to decimating debt, you can't be wishy-washy at all, instead, you must decide once and for all to do away with it. Treat it like the disease that it is and rid it from your life for good. Anything after that are just details, but let me list those details just the same for good measure. When it comes to getting rid of debt, you must:

  1. Make a firm decision to kick debt in the face and stand by this decision until the end. This means aligning your values towards whittling down debt. You don't have to totally morph into a hermit and say adieu to your social life, but if your friends really care for you, they'll understand that you won't be able to spend as much time with them because you're paying off debt and let's face it, dinner and coffee dates add up to a pretty penny.

  2. Analyze your spending. I personally like writing down my daily expenses in a small notebook, but some people prefer using apps. Whatever works, as long as you become intimately familiar with your spending habits and see the numbers in black and white so that you can no longer deny what your coffee, shopping or restaurant habit is doing to your budget.

  3. Focus on the essentials and throw everything else towards debt payment. Remember my earlier statement about not being a hermit? I take it back. If it means being able to pay off your debt sooner rather than later, then feel free to hibernate. The trick here though is being honest with yourself on needs and wants. Food is definitely a need, but eating out 2-3 times a week is not. Clothing is also a need, but buying new threads and shoes every month just because you were already photographed wearing your old clothes isn't (true story from a blogger who felt the need to buy new clothes often because she attended events and was often photographed in those events. Talk about incurring additional expenses!)

  4. Start with the debt with the highest interest. This is usually credit card debt or those from personal lenders. These debts have a tendency to balloon because of the high monthly interest rates, so deal with those first. In paying off my credit card debts, I used the snowball method where I funneled more money towards the card with the highest balance and paid the minimum for the others. Then once I paid off the first card, I focused my attention on the second card and so on. By using this method, I paid off 4 credit card bills amounting to about Php150,000 in half a year. I also ended up cutting 2 out of those 4 credit cards to prevent further charges.

  5. Hustle. If your paycheck isn't enough then look for other sources of income. Sure it's going to be an added workload and it might mean less time towards your hobbies, but your debt is just getting bigger with every passing day so hustle and work it.

  6. Keep the good habits you developed from paying off debt. When you put heart and soul into becoming debt-free, it's inevitable that you develop habits such as frugality, mindful spending and self-reliance, habits that you should still hold on to even after overcoming debt. When my husband and I were paying off our credit card debts, we stayed home a lot and had to make do with what we had (no more shoe splurges for me and no more buying of bike parts for him) and we discovered that staying home and enjoying each other's company wasn't so bad after all. These days, I no longer succumb to cheap shopping thrills and think about purchases twice or thrice before taking the plunge. It's funny because now that I can actually afford to treat myself to something new regularly, I would rather set aside that cash towards extra mortgage payments or put it towards our emergency funds.

If there was but one takeaway from this post that I wish my readers would internalize it's that debt isn't normal. Don't treat it as a familiar presence in your life, rather, see it as the annoyance that it is and do everything in your power to kick it out of your life for good.


simplelivingpinoy said…
Way to go, Jill. You can say I am abnormal like you, hating on debt with a vengeance. Pressure to conform to "normal" is huge though. Neighbors, workmates, family and friends will all comment at one time why I haven't upgraded cars, homes or phones. I also eat out only once or twice a week and bring a reusable water bottle all the time. However, I now find perverse delight in being called "kuripot" and "matipid". I know I am not as I still spend on the things i value, but the delight comes in not being normal and in the knowledge that I am doing the right thing. Keep it up and know that stature doesn't equate to wealth or FI. (I am a senior exec and I drive a 9 year old car and plan to keep it for at least 5 more, at least. Just to emphasize the point). I am on my way to FI though! Very nice blogpost, Ma'am.
Talia said…
We are also on the road to clearing our mortgage and our target is this year, God-willing, less than five years after we applied from the banl for the housing loan. How do you swallow your pride? Sometimes, I can't help but hate our compact car because our colleagues have big SUVs. But, yeah, a fully-paid car is better than a new one. And when I hear friends buying properties left and right and here we are making do with our small condo unit, it makes me think twice of our financial goal this year. But, haaay... we have to stay focused. We don't want to stay in-debt for long kaya kakayanin 'to!
Cherrie said…
My workmates laughed at me when I told them I only spend 7 pesos everyday when I go to work because I bring packed lunch. They stopped laughing when I showed them my savings account. Sometimes it's really hard not to follow the "norm". They would even tease me as "kuripot". But it wouldn't matter anyway. As long as I am focused on my personal goals, the opinion of others will not matter. I can definitely relate to this post. Thanks much Jill.
edelweiza said…
I think one of the reasons many people are burdened with debts is that they see it more as a quick relief to their problems than for what it really is, a burden. Borrowing should be our last resort and done only if we have the capacity to pay. The sooner we defeat debts for good, the better for our financial future. About your so-called stature and how your lifestyle choices are somehow not aligned to it, just don't mind what others think. People with the same financial mindset like yours fully understand where you're coming from. :)
Didi said…
We just finished paying off our home loan towards our condo investment in the PH late last year. It was a big relief off our shoulders.

It's tough. Somehow nowadays I feel that the pressure to "Keep up with the Joneses" and "Have it all" - look good, eat great, travel often, live in a beautiful home, etc - is stronger. Maybe because of social media and media in general it is more visible.

There are times that I want us to buy a house here in the US. But the big jump in OPEX (increase in home size = increase in utilities), the laman pa of the house (appliances, furniture, decor, etc) and the sheer responsibility of it, is so daunting. I make a quick computation and just say that I'm happy to be renting and saving more instead.

But yes, knowing your priorities and focusing your efforts towards those does help a LOT.

Debt is so not normal. I hope that being debt-free can maybe so cool that everybody jumps in on the bandwagon.
Jillsabs said…
I still have a long way to go before FI, but I know that all my actions now are taking me either closer or farther away from it, so keber lang what people say :)

Weirdos unite!
Jillsabs said…
Hi Talia,

You'll be mortgage free only five years after taking out your housing loan? You are a rockstar in my book!

And go right ahead and compare yourself with your peers. Compare your fully paid compact car and almost-paid for condo unit to their fancy cars and houses that will tie them financially for years, and know deep in your heart that you did the right thing in living well within your means :)
Jillsabs said…
Hi Cherrie,

Nasa iyo pala ang huling halakhak :)

But seriously, it is difficult to be different, to be saving money when the norm is to spend. However, I can tell you with certainty that ignoring others and focusing on your goal get easier with time. And if kuripot is the worst they can throw at you, then so be it. As you said, they always shut up when they see your savings account.
Jillsabs said…
Thank goodness for like-minded people! Kelangan talaga ng support group if consumerism isn't your primary goal.
Jillsabs said…
Hi Didi,

It took me a while to get that into my head, that debt doesn't have to be my normal. So now that I've internalized it, no way am I going to incur any more debt. If that means staying in our condo and not upgrading to a house, or driving our car until it sputters and dies, then so be it. Ayoko na talaga ng utang.
Jam said…

This post is informative. Thank you!

I've been starting to document my first baby steps towards financial freedom through a blog as well. Hopefully it can spring into something as helpful as yours one day.

Keep it up!
This is really a nice read. I agree. Being debt free is the way to go. Honestly, wala pa ko dun. But I claim a #Wiser2016 and so I am working really hard to be debt free by the end of the year. Kaya yan! Ikaw nga 150K in half a year. Push to!
Jillsabs said…
Hi Jam,

Congratulations on starting your own personal finance blog and welcome to the PF world :)
Jillsabs said…
Push mo yan teh! I'm claiming your debt free year for you too :)
Maricor Bunal said…
A lender must pay off their debt on time, or else the benefits of having a loan will be gone from time to time. Monthly pay of debt is necessary, unless the lender has enough money to pay. God bless to those who haven't paid off their debts.
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