Our Habits to Stay Debt-free

13 May

My only debt right now is Php125 which is due next week. It’s the monthly service charge of one of my two credit cards. These are our current spending and saving habits which helped us avoid getting into debt:

1. Pay in cash

We bought a lot of stuff since moving in to our own place last month. Instead of charging our purchases to credit cards, we decided to pay for everything in cash. We opted to buy a washing machine in cash even though it can be paid in over a 6-month period at zero interest. Paying in cash helped us stay within our budget and lead us to buy only what is necessary.

2. Save for expected expenses

We have two insurance premiums due every year, one in October and one in February. Every month, we set aside money equal to 1/12 of the amounts due.

3. Keep a daily money log

We record every income and expense since October of last year. This makes us more conscious of our spending.

4. Save unexpected income

Instead of spending unexpected income on unnecessary stuff, we put them into what we’re currently saving for, which is a house.

5. Avoid housing and auto loans

We bought our used car in cash two years ago. It’s very old and although we spent a significant amount of money on repairs, the expenses were scattered over a period of time and small enough to cover with our regular income. Next year, we will start the construction of our own house. Instead of getting a housing loan, we are saving for it. It won’t cost much since it’s small and we’re not planning to get everything done at once.

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