Getting into the vicious cycle of bad debt is hard.
Most financially experts say to avoid bad debt but what if irrational decisions and lifestyle inflation get the best of us? How does one get back to his feet in order to avoid making the same mistake?
Don Soriano did just that. After passing Certified Public Accountant (CPA) Board Exam as Top 7 last May 2011, he went on to live the high life. After eating at high-end restaurants and even buying a sports car despite a failing business and unemployment, he went bankrupt with a Php500,000 debt to pay off.
Today, he owns two food businesses which are an international sandwich company and a local ice cream food cart franchise. He also manages investment advisors under a financial services company to help Filipinos start passive income through investments.
He recently released a book entitled Break Free which you can read in an hour and gives eight steps on how you can get more income and how to improve your mindset about handling your money.
In an exclusive interview with MoneyMax.ph, Don shares some of his tips on how to overcome bad financial habits and pay off debt to turn your life around for the better.
OPEK and OPR are acronyms he coined in line with maximizing leverage.
It has been common practice in the personal development arena to leverage on other people’s experiences instead of one’s own because it is a cheaper alternative to learning.
Most people know that gaining personal experience is important in one’s progress to success. But why not learn from other people’s mistakes first? That way, one can learn what not to do anymore. It’s more cost-efficient since we don’t need to experience it firsthand.
Some of the experts that Don emulated were Robert Kiyosaki and T. Harv Eker which led him to be driven to get out of bad debt.
Don recommends 2 things when faced with fear on investments, which was a big factor on how he paid off his Php500,000 debt.
Never invest in anything you don’t understand. That’s a surefire way to get into a scam and lose your money. He had one incident a few years ago where a friend him to invest a large sum of money in an investment product. He knew that his friend was smart and careful with his investments because he did it for a living. Without asking for more information, he invested his money. The scammer told a really good story and he bought it immediately. A few weeks later, he realized that he was scammed.
If you feel that it’s a great investment, then go for it. The fear will always be there. His advice:
Feel the fear and do it anyway. There will always be risks, but the biggest risk of all is not taking any.
The money jars system is a system he learned from T. Harv Eker where you just need to handle your money once or twice a month.
It implements the Name Every Peso (NEP) Rule where each peso has a specific allocation or purpose. Once money comes in, it is usually allocated to 6 jars:
This system eliminates the need to list down expenses. Every single aspect of life has a budget or jar and the only goal is to not exceed that amount.
He highlighted two jars among the six. The Financial Freedom Jar should only be used in investing in assets that give you passive income. The Play Jar allows us to have fun and buy the luxuries we want in life. The reason why this is important is because it pushes us to work more. This way, the more we earn means the more we can enjoy.
Take note that it doesn’t have to be actual jars at home. Don has bank accounts that serve as jars. This way, once money comes to his main bank account, he just spends 3 minutes to split them up to the jars.
One thing I really believe is that everyone should get into sales as a career part-time. Going into sales by selling insurance, real estate or network marketing are just a few that you try. The income derived from a sales career is just a bonus. Money is just the result of the kind of person you need to become to succeed in a sales career.
For those thinking that a sales job is not for them, Don reiterates that sales and business are learnable areas of expertise. If you’re willing to learn, you will be able to do it regardless of your circumstances.
A good example would be when he entered the sales industry. He was a CPA by profession so it was a new career field for him. The week he entered, no one was there to assist him because the person assigned to teach him was on leave for vacation. He took accountability for his situation and found a way to make sales which lead to his expertise in sales today.
You can pay it off using these tactics from Don Soriano no matter how much bad debt you have. Just follow through on the action steps you need to take to reach your goal of financial freedom.
Photo Sources: Reading Graphics, Don Soriano