A: One Bite At A Time.
1. Never Borrow Again
2. List Your Debts
|Name of Debt||Loan Amount||Monthly Payment||Interest Rate||Factoring Number*|
* How do you get the Factoring Number?
Take the Loan Amount and divide by the minimum monthly payment required.
For example, if you have a loan of Php100,000 and the minimum payment is Php5,000, your factoring number is 20.
3. Create an "Advance Payment Order" List
Arrange your debts from Lowest to Highest Factoring Number.
|Order of Payments||Name of Debt||Factoring Number||Monthly Payment|
Total Debt Payment: PHP/KWD __________________
Note: This strategy applies only if interest rates are more or less the same. This strategy doesn't apply if you have borrowed from loan sharks with extreme high interests. Obviously, this should be on top of the list.
4. Create a Monthly "Freedom Fund" and give Advance Payments according to the Order of this List
Set aside a specific amount each month called "Freedom Fund".
Save 20% of your income, and invest 1/3 of this amount as your Freedom Fund.
(Note: Bud if debt situation is desperate, invest 100% to debts.)
Add your "Freedom Fund" to the monthly payments of the first debt on the list.
For example, if your "Freedom Fund" each month is Php1,000 and the monthly payment of the first debt listed above is Php2,000, pay Php3,000 each month. You'll be surprised how fast you can pay this first debt. Once completed, add your "Freedom Fund" to the second debt, and then the third debt, and so on, until you reach Freedom Day. It'll come sooner than you think.
5. Other Tips
a. Negotiate for lower interest rates
b. Transfer debts from high interest to lower interest rates
c. Consolidate debt by getting low-interest loan from bank
d. Some personal debts may be transferred as business debts in your business - and interest are tax-deductible.
Warning: After using these tips, some are tempted to borrow again. Don't.
"Bad" Debts In Business:
- Check numbers - are you really earning? Change or dump.
- Solve Cashflow problem (Focus on collection!)
- Get Investors/Partners who will share in the risk and reward
- Ask payment terms from suppliers
- Focus on marketing