Tag Archives: investment

How to Invest by Paying Credit Card Debt

Do you have credit card debt?

If you have credit card debt, one of the best gifts you can give yourself is to pay your credit card aggressively. Paying high-interest debt is actually a very good investment strategy, sometimes “earning” you more than 50%

It isn’t enough to just pay the “Minimum Amount Due” every month. Create a payment plan, put it in writing, and attack your credit cards, starting with the highest interest credit card first. If the cards have the same interest rate, choose the one with the lowest balance.

Cut up your credit cards!

Aggressively pay your credit cards starting with the card with highest interest rate.

What happens if you just pay minimum? Let’s take a look. Suppose

  • you have credit card debt of P20,000 in one credit card
  • you do not add any more debt to that one credit card
  • your monthly interest rate is 3.5% and
  • you normally pay only the minimum P500 per month for this card
  • you keep your other credit card payments constant
Paying Minimum

Paying only the Minimum Amount Due will often increase your debt

After the first month, your P20,000 debt incurs 3.5% interest or P 700, and you pay P 500 only, so your ending balance is P 200 higher at P20,200. After 12 months, you would have paid P 6,000, but incurred P 8,920.39 in interests! Hence your ending balance after 12 months is higher at P22,920.39. Your debt and P 6,000 payment actually lost you P 2,920.39 or 49% loss!

But what if you decided to save an additional P10 per day or P300 per month to add to your credit card payments. That isn’t much, right? Instead of paying the minimum P500, you pay P800.

Pay more than minimum

Paying more than minimum, at least more than monthly interest, will reduce your credit card balance.

Because you are paying P800, or more than the interest (3.5% of balance), your debt actually shrinks every month. Specifically, your P20,000 debt will shrink to P18,539.80 in 12 months. This means your twelve P800 payments totalling P9,600 earned P20,000 minus P18,539.80 equals P1,460.20 or about 14.6%* !!!

But what if, when you get your 13th month pay, you use part of it to make a large payment on your credit card debt? What if, after deciding to save an extra P10 a day or P300 a month, you paid P7,500 on the first month?

Balloon Payment

Making a balloon payment reduces the interest rate

The balloon payment of P7,500 substantially paid the balance of your P20,000 debt, so after the P700 interest, first month ending balance is P13,200. Hence subsequent interest per month dropped initially to P450 then lower every month.

So your debt shrinks faster every month, up to P8,758 after 12 months! This means your P7,500 plus P800 every month totaling P16,300 earned P20,000 minus P8,758 equals P11,242 or about 69%* !!!

But let us make a real plan. Can you save P33/day instead of P10/day? The P23 difference is about the price of a cup of coffee at the cafeteria, or that modest ‘turon’ after lunch. That translates P1,000 per month. What if, in addition to your P7,500 on the first month, you add the P1,000 to the original P500, and pay P1,500 per month?

Aggressive Payment

Aggressively paying your credit card debt will enable you to quickly retire your debt

Wow! Is this for real? The P7,500 initial payment reduced the balance to P12,500 plus P700 interest increased the first month end-balance to P13,200. But the aggressive repayment at P1,500 per month very quickly reduced the balance to P1,022.81 after the 11th month, enabling you to fully retire the P20,000 debt after only 12 months!

Just think about this. Your P23,558.61 in payments earned you enough to fully retire one credit card with P20,000 beginning balance. That is like earning P20,000 on P23,558.61 in one year or 85%! Where can you find an investment that gives you 85% in a year?

After 12 months, it is time for your 13th month pay again. Time to start retiring your second credit card or next P20,000 debt. It will be easier for the second card. If you were paying minimum of P500 on your second credit card, you can then pay P1,500 more ( what you were paying for the first credit card ).

Pay high-interest debts! It is one of the best investments you can make!

* Strictly speaking, the effective interest rate is the same as the credit card rate, approximately 3.5% per month, or a compounded annual rate of approximately 51%.


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Do You Love Your Family?

Give your Christmas gift to your most important person in the world!

This time of the year is when most employed Filipinos get their 13th month pay, and/or Christmas bonus, when we become generous, and we begin thinking of Christmas gifts for all our loved ones.  Remember to give your Christmas gift to the most important person in the world.  YOU!

Now, why am I identifying you as your most important person in the world? Am I telling you to be selfish?  Nope.  Nothing could be further from my intention.

  • Do you love your family?
  • Do you carry any significant financial responsibility with growing children or aging parent?
  • Are you concerned about lack of savings, or investments for your retirement or kid’s college education?
  • Are you concerned about what would happen to your loved ones in case you pass away early?
  • Are you concerned you would be a burden to your children in your old age?
Do you love your family?

You are your most important person in the world, because you are responsible for your loved ones, because your loved ones need you, because they depend on you. To protect your loved ones, you must protect yourself.

If you answered “Yes” to any of these questions, then You are your most important person in the world, because you are responsible for your loved ones, because your loved ones need you, because they depend on you.  To protect your loved ones, you must protect yourself.

If today, you are earning and financially support your loved ones, you provide financially for their present and future needs.

  • Do you want to have the means to get sufficient medical benefits, to ensure you can continue to be productive?
  • Do you want to have emergency cash and medical protection even if you lose your current job?
  • Do you want your loved ones to receive substantial cash if you pass away early?

And in the future, when you have retired, or when you are no longer able to actively work to earn for your daily basic needs for food and shelter

  • Do you want to free your loved ones from financial burden of supporting you?
  • Do you want to free your loved ones from responsibility for your medical bills?
  • Do you want to enjoy a retired life of comfort with your loved ones?

If you answered “Yes” to any of these, your Christmas gift to your most important person in the world, to YOU, is simply to START.

  • Do you want to start earning additional cash in your spare time, learn how to make money, and learn how to avoid bad debt?
  • Do you want to start investing in short term health protection, long term health protection and life insurance?
  • Do you want to start investing for your children’s education, for your retirement, for your dream home, for your dream vacations?

You can start by attending our Practical Money Management Tips seminar in Makati, or our financial seminars in Quezon City, Calamba and major cities.