Posted on 2013-12-04
There is nothing more stressful than getting plagued with monthly payments. The age-old adage “live below your means” seems like the best remedy from going into debt’s tentacles. But how is it possible when you live in a city that’s bombarded with all the luxury brands constantly taunts the average consumer.
It’s all in the numbers: Credit Bureau Singapore reported that the average debt per borrower in comparison to five years ago increased by 27%. And given the amount of debt spending, the cost of borrowing will eventually go up – a scenario that will leave the average borrower in quite a stretch.
So before heading straight to debt’s trap, it’s best to insulate yourself with some practical measures that steers you out of doom’s way.
Use Cash When You Shop
A stroll in Orchard Road could provoke that shopping diva in you. Before you know it, you’d be eyeing that latest gadget, or that irresistible new Rolex, or the latest luxury handbag. But you know deep in your heart you just don’t have the budget for it. A good rule that keeps you out of harm’s way is this: if you don’t have the cash for it, don’t buy it. There are many justified reasons to take out a loan, but buying the latest luxury item just doesn’t cut it.
Consider the Real Cost
Before spending on big ticket items, you have to really count the cost. Chances are, the price tag of those items isn’t exactly the cost you have to pay. For example, cars are quite dandy to have. But even if you have the budget to buy a new car, you need to consider the recurring payments you’ll incur just to maintain it. Parking fees in Singapore aren’t exactly loose change and those ERP charges sure do mount up, not to mention the gasoline-guzzling machine you’ve just purchased.
Don’t Dig a Deeper Pit
Don’t pay debt with debt. Shuffling loans makes you incur transaction costs that could get you buried in a pit you’ve dug yourself. The only acceptable reason to use debt to pay off another loan is when you’re transferring debt from higher to lower interest rates. But if you’re merely transferring debts to dodge payments, grave repercussions will eventually catch up on you.
These may be easier said than done. But considering the angst and pressure you’ll be free of once you’re free from debt, exercising extra self-control sure is a small price to pay.