Get out of debt in 13 steps

By Kathleen A. Martin,

Posted at Nov 24 2012 02:07 PM | Updated as of Nov 24 2012 10:07 PM

MANILA, Philippines – Tired of debt collectors hounding you? Registered financial planner Rowena Suarez on Friday shared easy steps you can take to eliminate financial obligations.

"The first step is to face the problem. If you don't face it and accept it, it's going to be hard for you to do the rest," Suarez told ANC’s “On The Money”.

"The second step is you have to commit to getting out of debt," she added.

Suarez said one should have discipline and presence of mind to avoid temptations such as mall sales if he or she wishes to get out of debt.

The third step is to create a time frame, a "realistic" one, to deal with debt.

"Have a realistic time frame based on your income and expenses," Suarez said.

The next step is making an inventory of all your debt -- from credit cards, to loans from friends and families -- then prioritizing what obligation to settle first.

For the fifth step, Suarez said one has to record expenses to measure how much he or she spends in a month. This, as most people get into debt because they spend more than what they earn.

"Step six is to determine your needs and wants. Needs are basic food, water, clothing, electricity, etc. Wants are gourmet food, designer label clothing, etc.," Suarez said.

After such, the next step would be letting go of your wants and move on to step eight, which is paying for your debt using the money you would've spent for your wants.

"Step nine is to choose which among your debts has the highest interest rate and pay it off," Suarez said.

Next is to work out a payment scheme with your creditors, she added.

"The eleventh step is to let go of your credit card and pay with cash, then step 12 is to find other sources of income," Suarez said.

The final step, she shared, is to learn from your experience while in debt and promise yourself you will not endure a similar situation again.