The 2019 Financial Inclusion Survey by the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) found that 41% of Filipinos had debt in 2019. The main reason why they borrow is to provide for basic needs such as food, housing, rentals, and utilities. They are less likely to use the loans for businesses, education, and medical expenses. 

Edward Dela Cruz, a one-year MDRT member from the Philippines, shared that his prospects and clients’ most common debt causes are impulsive spending behavior and bad financial habits. He added that few people avail of loans for business and other investments.  

“It’s good debt when people incur it to potentially grow their money such as education, business, or real estate. On the other hand, when it’s used to purchase depreciating assets such as cars, gadgets, and other consumables, it’s considered bad debt,” Dela Cruz pointed out.  

Dela Cruz holds a financial management session to tackle how to pay loans and gauge their ability to avail of an insurance product. He first looks at their debt and analyzes how it can be better managed on top of regular expenses such as food, utilities, and transportation. “I’d encountered a prospect who still needed to pay his car mortgage. After our session, we discovered that he couldn’t avail of a policy because it was beyond his monthly income, and he still had other expenses to pay off. Even if he couldn’t avail of a policy, I gave him tips on managing his finances. For me, it’s an investment of my time and knowledge. But when he’s ready to get insurance, I’ll be top of mind.” 

Since building good financial habits does not happen overnight, Dela Cruz regularly checks on his clients and prospects. If they’re still struggling, he will re-evaluate the areas where they can adjust. Sometimes he would tell them to start a side hustle to supplement their earnings. 

“Another client had multiple credit card debts because of impulsive buying. We set a specific amount to be spent based on her monthly income, advised her to downsize and have only one credit card for easy monitoring, and to stick to her monthly budget,” Dela Cruz mentioned. “It took a while, but she paid off her debt.” 

Dela Cruz emphasized that debt management plays a significant role in financial planning. Insurance is essential when one needs it, especially during an emergency. “Financial advisors don’t want insurance to be seen as an additional expense. Ultimately, we want them to leave a legacy for their families. Not debt that still needs to be paid off.” 

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