Tons of our email readers thanked me for sharing them the article, “Owe no man anything,” which was included on my post, “Live with debt, Die with Debt.

By the way, just want to remind you that I’m not the writer of that article. I embedded the article on my post just to share you the Biblical thoughts contained with it that might help you on your daily financial management.

Here’s another email sent to me by you or by one of our email readers:

Sir:

Thank you so much for the inspiring article you shared to me. Ang totoo, the advices contained on that article is very much opposite to what they advised me. Marami po kasi ang pumupunta sa aming bahay convincing us to get the items na dala nila and they offer us to pay the items for 12 months. I told my mother na wag nang kumuha pa dahil wala kaming pambayad, but she insist na mabuti daw ang umutang kaysa bumili ng cash dahil sa cash daw ay biglaan ang pagbayad while in utang we will pay it in several months.

…

My sister is actually thinking the way your mother thinks.

Last November 5, 2007, my sister and I were talking about getting her own Honda XRM 125 motorcycle. I told her to get the MC in cash. But she argued that it’s better to get it in 1 year loan than buying it in cash.

Is it really good to have the motorcycle by taking a loan than paying it in cash?

Let’s do some little calculation on this.

The Honda XRM 125 motorcycle in one of the stores in Tandag City has this info:

• Cash = PhP59,000.00
• Downpayment = PhP10,000.00
• 12 monthly payment= more or less PhP5,500.00 or let say PhP5,300.00
• In 12 months the Honda XRM 125 motorcycle costs PhP 73,600. If you’ll get PhP200 rebates per months, so the Honda XRM 125 motorcycles actually costs PhP71,200.00

In other words, you’ll spend PhP12,200.00 more if you’ll take the motorcycle in loan for 1 year.
What if she’ll buy it in cash after 12 months of saving?

My sister is working as Professional Midwife in our town (San Agustin, Surigao del sur) and is assigned in a barangay health center that will cost her PhP10.00 per day for fare.

Now, let’s include the Saturdays and Sundays in computing the number of working days that she needs to spend for her travel. In other words, the total (maximum) working days is 365 days. So, she will spend PhP3,650.00 in one year.

In order to avoid getting into debt, my advice to her was to deposit the PhP10,000.00 that should be paid for the down payment into her bank account. And then for 12 months, she should deposit monthly the PhP5,300.00 into her account.

So, if she’ll follow what I advised her, in one year she already has PhP73,600.00 plus a little interest gain. And after getting her new Honda XRM 125 motorcycle for PhP59,000.00 (in cash) she still has PhP14,600.00 saving.

However, we need to subtract her expenses from this savings. For one year, she need to spend PhP3650.00 and subtract it from PhP14,600.00, she still has PhP10,950.00.

What’s better, getting into debt or paying the item with cash?

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