Most people start accumulating debt when they get that first credit card for emergencies only. Over time, they get into more and more debt acquiring consumer items, some of which are important, while others aren’t. Other debt includes mortgages that most Singaporeans take to purchase their homes, student loans, car loans and so much more.
Singaporeans do not suffer from a scarcity of lenders. With plenty of traditional banks, credit unions, and licensed moneylenders, borrowing has never been easier. Whereas being able to get credit is important, the debt load that some people end up carrying is tremendous. If you find yourself feeling overwhelmed by all the bills and debts, here are 7 habits that anyone can develop to get out of debt.
1. Live the current reality –
This calls for taking a long hard look at one’s finances and particularly how much in debt he or she is. One must know just how much money they owe in total and then calculate their debt to income ratio. Doing this gives the person a good idea of how much of their monthly income is used to pay off debts. The higher the number, the more likely it is that the person is overburdened by debt. The Singaporean government has put in place guidelines to ensure that their citizens are not paying more than 60% of their income to debtors.
2. No more debt –
To reduce debt, one must spend below what they are making and set aside a fixed sum per month to pay off their debt. The calculated debt to income ratio will inform the person of how much they are paying in debt every month, and the person much then shrink their budget to fit within the remaining amount of money.
3. Track expenses –
5. Work with a budget –
6. Separate wants from needs –
7. Have an emergency fund –
Getting out of debt actually takes time. It should be approached as a marathon and not as a sprint. Trying to sprint out will only leave one feeling fatigued by the whole exercise. The debtor must classify their debt so that they begin by paying off high-interest debt and then work their way to debt with the lowest rate.
If one is confused by all the debts and bills, they can opt to take up a debt consolidation plan. Debt consolidation plans help to simplify finance by combining all of one’s personal loans and credit card debts into one fixed monthly repayment. Most banks and financial institutions offer these financial packages so it is better to understand the rates for each in order to find the best debt consolidation plan. Click here to view the best debt consolidation plans in Singapore.
Remember that the best way to eat an elephant is one bite at a time. The person got into the debt gradually one day at a time and will have to get out the same way.
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Money Kinetics is Singapore’s definitive guide to financial literacy. Money Kinetics helps Singaporeans compare and evaluate loans, deals, cards and guide them to make their money work for them.