Lalaine and I went to a fine Chinese restaurant to have an all-you-can-eat dim sum for lunch. We don’t usually eat in this type of place unless someone treats us out, availed a promo, or had a good reason to celebrate.

In this case, we got a promo, and had tremendous reason to celebrate,

We completely killed eight of our credit cards. Plus a few business loans as a bonus!

Having debts is like owning a pet Hydra. A Greek mythological monster with many heads. It’s extremely venomous and spits out acids. But the most potent ability of this creature is the power to regrow its head twice after it’s been cut off. Much like Credit Cards, it continues to grow over time when you don’t have the intention to kill it. Most of us thought we’re making progress by only paying the minimum each month.

Our primary goal after getting married is to be debt free. We’re focused because it will establish our marriage on a better foundation. It will prevent financial conflicts, and enable us to pursue the important things in life. — Like relationships, health, purpose, growth, and contribution.

I invested my time in learning. Read 8 books, attended talks, and listened to hundreds of podcast episodes about Money. If there’s one major take away from those materials, it’s this:

To kill a hydra (debt), you need a system.

Two approaches to dealing with debt stood out, and so we married them to fit in our system. One is from Dave Ramsey’s Total Money Make Over, and the other is from George S. Clason’s Richest Man in Babylon. They stood out because they’re the simplest one to follow. Though simple doesn’t necessarily mean easy, nor fitting to everyone. What’s simple for us may not be simple to another couple, and vice versa. Yet, I hope our system can serve as an encouragement for others to draw up their own.

Where does my money go? is a better question than Where did my money go?. Money is active. It will continue to flow whether we like it or not. Understanding the behavior of the cash flow is the bread and butter of the system. How the money comes in, and how it goes out. The plan is to traffic them to their respective places. Dave Ramsey called this zero-based budgeting. Every peso should have a purpose. Our approach, however, is a simplified version.

In particular order,

First, 10% goes to tithe.

Second, 10% goes to savings.

Third, 50% goes to family necessities.

Fourth, 20% goes to debt payments.

Fifth, 5% goes to charity.

Last, 5% goes to fun.

I’ll explain how these funds work.

TITHE: Our first fruits belong to God. Tithing is sacred to both of us. In our belief, the Lord is the owner of all things. We are only His asset managers. Returning the first 10% of our income serves as our worship and thanksgiving for allowing us to use the 90%.

Honor the LORD from your wealth And from the first of all your produce; So your barns will be filled with plenty And your vats will overflow with new wine. — Proverbs 3:9–10

SAVINGS: George Clason says “Pay yourself first.” But since tithing is our first priority, we are paying ourselves second. Most people save what’s left after spending. But the better way is to be an intentional saver. Save first, then spend what’s left after saving. By this method, we were able to achieve Dave’s baby step one, which is to build a beginner emergency fund of $1,000 or Php 50,000.

Two functions of the savings fund:

1. Emergency.

2. Investments.

After paying off our debt, the intention is to set-up at least P250,000 worth of emergency fund. This will prevent us from loans, and credit cards, in case unforeseen events arise. Once achieved, we’ll use the subsequent cash flow to build an investment fund. Cash allocated here will only be spent on subjects that have future returns. Such as business, stocks, investment funds, and real estate. — But to familiarize myself early to investing, I already put in a small amount to an index fund.

FAMILY NECESSITIES: The function of this fund is self-explanatory. Yet it’s the most challenging to manage since it has the biggest budget allotment. What we did is create a sub-allocation so we can put things in perspective.

50% household expenses. (e.g., food, transportation, bills, etc.)

20% baby expenses. (e.g., medical, consumables, etc.)

30% the most important of all… wife’s allowance. ;-)

For special events such as anniversary and birthdays, the trick is to plan ahead. We determine the budget and save up by slicing a portion from the household expenses each month.

DEBT PAYMENT: If I had a choice, I would spend every peso possible to speed up the process of killing our hydra. But I have a family to take care of, so patience on this area is something I have to cultivate. George’s proposal of 20% allotment works for us thus far. Then we attack the monster using Dave’s debt-snowball method.

First, we organize our debts from smallest to largest. Then we make minimum payments to all liabilities except for the smallest one. We give our best shot to the little one until it’s gone. We move on to the next smallest using the same technique, while we carry over the budget from the previous debt. The paying money grows each time we paid-off a debt.

CHARITY FUND: We use this to contribute. It is where we pull money for gifts and donations. With purposeful apportionment, it is easier to give whenever opportunity knocks. Of course, it is impossible to help everyone, so we focus more on the causes we care about. We’re most active with children, the sick, and mission-related activities. Once debt free, our plan is to increase its budget to at least 10%.

FUN FUND: Financial management is tough. It’s repetitive and boring. Fun may sound unproductive, or unnecessary. But on contrary, fun is essential to the success of the system. This is where we get our reward for sticking with the plan.

I got the idea from another author, T. Harv Eker, Secrets of the Millionaire Mind. We use this budget to celebrate small victories and reinforce our habits toward the goal. My favorite feature of this fund is guilt-free spending. (Like eating french fries with no calories!) We find our movie dates and relaxation at spas a million times more enjoyable. It is because we never have to worry about overspending.

Several months back we decided to use only half of the budget and keep the other half for bigger buys. Last month we bought each other mobile phones without the aid of credit cards. Paid in full. Guilt-free buy!
Confession: this is my first mobile phone purchase without using a credit card.

We’re in this hole because of my selfish ambition, arrogance, and foolishness. Yet God used it for good. He taught us to become better with money through this uncomfortable situation. We learned to live within our means and depend on His provision (which is never lacking).

One more credit card and few business loans left to kill. We’re more than half-way out of debt. We praise God for what we have accomplished as a married couple so far.

I wish can tell you that the system is the only weapon you need to kill a hydra. But there’s a stronger weapon. It might be even the strongest weapon of all against debt. Are you ready for this?

It’s your DECISION.

Not even the perfect financial system would work until you genuinely decide to live a debt free life.

We buy things we don’t need with money we don’t have to impress people we don’t like.

How We Killed Eight Credit Cards was originally published in Jedwardchan on Medium, where people are continuing the conversation by highlighting and responding to this story.