Debt-freedom, Finances

How to Get Out of Debt

Being in debt is very common in most of the Filipino families today. It becomes so normal in the Philippines that some are even buried up to their eyeballs just to keep up with their friends, co-workers and whatever is trending in the social media. They already lost the hope of getting out of debt in the future. 

I remember the time when my husband and I decided to break the norm and get out of debt. We were sick and tired of the stress of too many bills and the burden of debt piling up,  pushed us to our breaking point. We were so angry in debt because we worked so hard but at the end of each month, our hard-earned money will just go directly to paying off our debts, the money that could have been used to build our future if only we were smarter back then. My husband and I jokingly told ourselves, “ at least may pambayad!”.

But the lesson well learned when we did our budget one day. We saw that there is so much amount of money that is going towards our debt. What if all this money will go to our savings? How much money can we save in 1, 3 or 5 years? We will be millionaires by then! It was really an eye-opening for both of us. By the grace of God, we decided that it is time to make a fresh new start when it comes to our finances.

Now that we are near to finishing our goal, I will show you the things that worked for us in our journey to getting out of debt.


8 Steps to Get Out of Debt

Step 1. Assess your situation

Financial health is the current status of your finances. So before you jump in with all the other steps of getting out of debt,  you need to assess first your income vs. expenses (try not to scream when doing this), your cash flows, asset vs. liabilities, financial management and goals. Conducting a regular financial checkup is very important because, through this, you will have a clear picture where your money is going. Just like a regular health check-up, you need to know the root cause so that you can treat the symptom properly.

Step 2. Stop borrowing money

Borrowing money can be very stressful especially if you cannot keep up with the payments. It can also affect your reputation and relationships with those people from whom you borrowed money from. If you don’t have discipline, control and of course funds to pay, stop using your credit card every time you will make a purchase. It can grow into a very dangerous habit of borrowing money. The interests you pay when you borrow can be detrimental to building your future and your children’s future over time.

Just as the rich rule the poor, so the borrower is servant to the lender. – Proverbs 22:7

Step 3. Make a budget

A budget is a plan on how you will allocate your income towards your expenses for a specific period of time. It can be done monthly or bi-weekly depending on how often you receive your income. It ensures that you will always have enough money for the things that you need and for the things that are important to you. I understand that sticking to a budget is not an easy task. But following it will keep you out of debt, help you get out of debt and is very significant in building your family’s future.  

But don’t begin until you count the cost. For who would begin construction of a building without first calculating the cost to see if there is enough money to finish it. – Luke 14:28

Step 4. Start an Emergency Fund

An emergency fund is not an investment. It is more of insurance, an amount of money set aside to cover unexpected expenses. It is there to keep you from stopping debt payments or borrowing money in case of emergencies. You can save a starter emergency fund worth P 50,000 first and once all debts are paid, you can build it up to 6  months of your income.

The ants are not a strong people, but they prepare their food in the summer; – Proverbs 30:25

Step 5. Pay off all debts

Although most people will pay debt with the highest interest rate first, the method that worked for us when it comes to paying off our debt is through the debt snowball method. In this method, we list all our debts from smallest to largest balances. After that, we attack with intensity the debts with the smallest balance first while paying the minimum on larger debts.

“Under this method, extra cash is dedicated to paying debts with the smallest amount owed. Once the smallest debt is paid off, one proceeds to the next slightly larger small debt above that, so on and so forth, gradually proceeding to the larger ones later. The primary benefit of the smallest-balance plan is the psychological benefit of seeing results sooner.” – Undebtit

Paying off debt is more of an attitude issue than a mathematical issue. That is why we pay the smallest balance first instead of the one with the highest interest rate. If we can see that we are winning against our smallest debt, we become addicted to the feeling of winning. We want to do it again and again until such time that we already pay for everything.         

Free yourself, like a gazelle from the hand of the hunter, like a bird from the snare of the fowler. – Proverbs 6: 5   

Step 6. Live below your means

In order for you to pay extra amount of money towards your debt, you need to live below your means. You don’t need to be flashy and keep up with other people. The goal is to be rich and not to look rich.

Living below your means is spending money less than what you earn but with your needs and priorities are taken into consideration. So it means that it’s either you cut up on other expenses or increase your cash flow by increasing your income.

One pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth. – Proverbs 13:7

Step 7. Celebrate every win

Every time that you paid off an amount of debt, make sure that you celebrate this win as a family. This can build your momentum and motivation to pay off more debts. It is like a reward after a job well done. You feel good every time your efforts are well appreciated. As a family, you don’t need to have a luxurious celebration. You can just eat in your favorite restaurant, have a barbecue party or watch your favorite movie together. The important thing is that the family’s efforts in helping to pay off the debts are recognized.

Delight yourself in the Lord; And He will give you the desires of your heart.  – Psalm 37:4

Step 8. Trust God

As you work your way out of debt, you need to trust God. He will be with you and that He will not abandon you. This will take out a lot of stress from you because you know that you are not alone. Always think positive. Think that you will win this battle because God is faithful to all of His promises and being debt-free is one of them.  

For the LORD your God will bless you as He has promised you, and you will lend to many nations, but you will not borrow; and you will rule over many nations, but they will not rule over you.  – Deuteronomy 15:6

If you have more questions on how to get out of debt, just leave me a comment and I will be happy to help you. 

Love lots, 

You may also like...


  1. Very good article. I absolutely love this site. Continue the good work!

    1. Thanks, Pat.

  2. We are on our debt free journey and it’s amazing what you can do if you really stick to a plan!

    1. Wow, we are on the same page, dear! Godbless you in your journey to debt freedom!

  3. Barbara Alfeo says:

    Seems like some nice advice!

    1. Thanks Barbara!

  4. Such great advice! Living in debt creates such a strain on the family. I have a friend who has been struggling for some time now. We have helped her as have others. I plan on sharing this with her.

    1. Thanks, dear. 🙂

  5. We are struggling with this. It’s like $7k braces that come up that makes it hard to budget. It’s nice to have an emergency fund, but with so much debt and never any help with things like college tuition, we are so behind.

Leave a Reply

Your email address will not be published. Required fields are marked *