1LOANI admit, I am no guru when it comes to credit management. I have gone through the worst in cleaning up my credit cards. It’s a very good lesson but unfortunately I have to learn it the hard way.

So here I am writing, hoping that people might read this and learn a little from my mistakes. Especially those who are just starting to earn the moolah they have worked hard for.

Inflow vs Outflow – One important thing I have learned in order not to drown yourself in debt is to count the money you spend against the money that is coming in. To do that, you need to know how much you are earning daily and spend only that within that range. Better yet, if possible, devour only 80% of what you earn. To make it simple, live within your means.

Know your needs vs your wants - Essentials like food, shelter and clothing are what we need to live everyday. However, we need to discern what we need and what we want. If you happen to love a new style of bag or shoes, check your savings and make sure to purchase it only if you really can. If you can still live without it, might as well shrug off the urge to buy it. Oh, I know it’s not that easy … I can tell from experience but it can be done.

For instance when eating lunch and you crave for coffee, you can settle for a more affordable coffee rather than go for Starbucks. If you compute a cup of Starbucks everyday, that will be approximately P3450 a month (that’s only for a tall size!) Can you imagine the savings you can get? Not that I don’t like Starbucks — I love it! But I only indulge once in a while and when my budget permits it.

Use your credit cards wisely – If possible, make it a habit to purchase on a cash basis. Utilize credit cards for emergency and make sure to pay it in full. If you have the habit of paying only the minimum payment, that surely will land you a lot of trouble. Interest rates will soon catch up with you if you continue to practice this habit. If you are already in this state, work with collections agencies to write off your debts and try to negotiate a reasonable payment arrangement. Although, under the Philippine laws you cannot be imprisoned by unpaid debts but dealing with collectors can be stressful. And if you do not pay your debts, this will surely affect your credit standing.

List down your monthly expenses – Once you have done this list, you can identify the expenses and what budget you can work with. From there, you can discern which you can reduce in order to have a little savings.

Save up for the rainy days – A savings of 20% of your income is ideal. It is important to have money stashed somewhere in cases of emergency. We wouldn’t know when the need arises. Not only does it give us the emergency money it can even be used to avail of  a well deserved vacation.

I hope these tips are helpful. Personally, I still struggle everyday to keep my spending only for the essentials but I do fight the urge. I just look at how much money I earn today and only spend as much. If you make it a habit, you can do it.