A recent report by HSBC has revealed that “Singapore’s household debt as a share of GDP has increased to around 73% in 2013 from 48% before the global financial crisis, a notable increase compared to than UK’s ratio which is pegged at 72%, a more or less stable figure from its ratio 6 years ago.” In the past several years, it has been witnessed that consumer debt has experienced a steep upswing across Asia. Contrary to the general perception, most consumer lending were not limited to housing purposes, the purchases also included flamboyant cars, motorcycles and “everything else the heart desires!”
It has been noted that nearly 3 per cent of borrowers with unsecured loans in Singapore have debts exceeding their annual income. Most borrowers having trouble with debts have incomes higher than the median and have tertiary educational qualifications. Observed by Credit Counselling Singapore (CCS), the following list of most frequently cited reasons for getting obscured under a huge pile of debt certainly makes for a surprise yet grim reading.
– Our national inclination towards big spending has led to a bad habit of bigger borrowing. Over 49 per cent of all debtors have referred to and blamed overspending as the key reason behind borrowing.
– Splurging faces a stiff competition from job woes. The statistics shows that approximately 46 per cent of the debtors are people who have been retrenched or suffered considerable pay cut.
– Next in line are business owners who ran to into a startling trouble with the cash flow. They have employed funds from unsecured credit cards to finance their business and ultimately wound up with increased monetary dilemmas. CCS shared that about 22 per cent of the debtors blame their businesses for the mounting debts.
– Another 22 per cent cited the crucial factor of unforeseen expensive medical expenditure – either for the debtor himself or someone he knows – as the motive behind borrowing.
– A serious issue compounding the debt matrix, gambling is the factor that dragged as much as 22 per cent into borrowing. Gambling is the culprit that hauled in 2 per cent of the debtors in 2004. The figure has seen an upward turn of 17 per cent in the first two quarters this year. However, it has gone down since 31 per cent from last year.
– The sheer deficiency of saving for the future has only added to the trouble of increasing debt. Saving is a compulsory ‘skill’ that needs to be inculcated in our behavior. Regular saving helps one become and remain financially independent, invest in a home or car, provide for unforeseen expenses, emergencies, and most importantly, stay out of debt and lead a stress-free financial life.
– Money management also calls for regular and smart investments to get good payoff with low or minimum risk. Intelligent investment can help one to save on tax and yield considerable wealth out of even a limited income over a period of time.
Leading a debt free life, even with the higher cost of living in Singapore, is possible. It would only require a certain amount of dedication and acumen from you to turn around the finances spiraling downwards. Here is the 10-step plan to help you quit borrowing and commit to a healthy money management habit.
– Perhaps the most important and primary step is to figure out the precise amount of your debt. Write an inclusive list containing the amount you owe, types of credit, lender details, and the rate of interest for every debt. Alternatively, find out your credit record from any credit reference agency. It is a daunting task to face your debts but it is an absolutely necessary step towards your goal to become debt-free.
– If the exorbitant debt brings on a nervous breakdown every time you think about the repayments, it is time to start communicating with your partner about it. Sharing the problem with your family will alleviate the sense and stress of constant panic. If you cannot do that, seek help of a debt counselor and share your problems.
– Now that you are ready to face the challenge head on, you must think about a personal debt repayment plan. However, to understand how much it is realistically feasible for you to pay every month, you must work out the exact amount of inflow and out flow of cash.
Create a budget where you comprehensively list out all of your monthly outgoings against the net income. Do this for an average period of last six months. You can also take help of your partner to incorporate even the minutest of outgoings, so as to get a whole idea about the regular cash flows. Free expense apps on your Android or iOS can also help you do this accounting without any problem.
– Once you know the exact expenditure statistics, it becomes easier to identify the particular areas where you can effectively cut back to open up more income. It is simple to make significant savings without doing any drastic changes to your existing lifestyle. This can be achieved by reviewing your regular and recreational expenses.
– Once you successfully trim regular expenses, give attention to your day-to-day spending. Checking in the urge of overspending or frequent splurging is certainly helpful when you are considering freeing up as much money possible to repay your debts. Budgeting does not necessarily mean stripping away all the joys out of your life, but it calls for an innovative way of thinking and a level of compromise.
– Debts can extensively increased by the high rates of interest causing it surge faster than you can manage to repay. Intelligently rearranging the debts to credit cards and other lower-cost loans will lessen the amount of repayments and help you clear them quicker. This is definitely not the equal to borrowing more money to repay debts – an extremely dangerous method that should be customarily avoided for compounding your stresses and debts at the same time.
– Once your debts are assessed and you have gradually trimmed back the spending habits, it’s time to focus on clearing them. The intelligent and effective method is to repay the most expensive debts first. It will save you from counting and giving away tremendously expensive interest rates.
– If you genuinely want to save without repaying steep monthly charges, employ your existing savings funds like work bonus and other to clear up the debt. Because, a delayed debt will be costing you way more than the meager savings you can accomplish during that same tenure.
– Remaining debt-free asks for a complete transformation in your attitude towards money and spending. The scary experience of debt is often adequate to change the way you approach money. The key lies in living within your means and get back to the basics. Managing your income more prudently and carefully will help you stay away from borrowing.
– Saving more and saving smart is a vital life skill that will stand you in good stead for the years to come. Once you have repaid those debts, it is important that you start saving to avoid relying on credits and refrain from borrowing in future when a big expense is required. Build up a cash fund for easy access before you consider other investment options. An emergency fund is also equally important for you and your family.
Living without debt is possible even if you are leading a busy and expensive life in a costly country like Singapore. It requires a positive mindset and intelligent planning to avoid the painful and horrifying situation of insurmountable debt. Instilling fundamental saving skills and a more guarded approach towards money will help you to do away with the requirement of a debt. Start rationalizing your budget and start saving today.
The complete list of 159 legal money lenders operating in Singapore that's verified by Ministry of Law (1st March 2018).…
The smart way to reduce costs - As a small business owner you understand that it is so important to…
Today, we are sharing about debt consolidation and the pros and cons you need to know. There are plenty of people…