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Tuesday, 17 January 2017

9 Ways to not be Imbued in Debts

Big money, small money - somehow in today's times, no matter how one saves or earns, it never seems enough. Not unless all you do is stay at home, have no relatives and friends, do not travel, do not invest, do not have hobbies and never meet with illness / catastrophe.

How does one risk over-spending, or having to resort to "borrowing" in order to meet their monetary needs? Well, many things could happen, subject to the following (list is not exhaustive):
  • new hobby or addiction
  • new status which may require extra spending for social requirements
  • sudden illness or dismemberment
  • sudden death of sole breadwinners
  • sudden loss of jobs
  • natural disasters, fire or other perils
  • business failures
  • investment losses
  • upcoming nuptials or newborn
  • victims of monetary scams

The first and easiest step people think of would be to resort to taking loans from the banks, or worse, loan sharks (aka moneylenders). This subjects one to (i) high interest repayment (ii) ease of borrowing means more future loans (iii) implicating family members or jointly-owned assets and may even result in (iv) depression or bankruptcy.

In order not to become imbued in debts, let's look at some steps that may be of assistance:

1. Curb spending
If the expensive lifestyle is beyond your means, cut down on it or change your lifestyle. No point breaking the bank just to impress someone or hang out with people that you cannot currently afford. If they are still around when you choose a lower level of lifestyle enjoyment, then you know they are true friends for keeping.

2. Seek professional help
If the addiction or reason for splurging are not controllable i.e. gambling or alcohol issues, seek professional help to kick the habits.

3. Seek financial help
If your financial situation is in the low, and are eligible for governmental assistance, talk to the town council or relevant organisations.

4. Work harder
If you must sustain your lifestyle or hobby, or are only suffering from financial woes due to loss of job / business failure, you can always work harder (i.e. take up a freelance or part time job) or a sideline that brings in additional income

5. Arrangement with the Banks
If you have credit card and credit line debts that you can no longer afford to repay monthly, but the annual 24% interest is still rolling, speak to the bank for an arrangement. They will cancel your credit facilities, consolidate your total debts, and arrange a repayment scheme for you at a much lower annual interest rate

6. Selling of Items
Get rid of unwanted items or unnecessary luxuries by selling them away on Carousell, Ebay, or bazaars etc. This will get you some extra cash or a lot of cash (if you have lots of branded items to rid).

7. Pawning of Items
If you have valuables such as jewellery or expensive watches you can let go of temporarily, talk to a pawn-broker. They will assess your item and offer you cash for your items, subject to a very low repayment rate. Don't worry, your items won't be auctioned off as long as you continue repaying the loan, and each time you pay the loan tenure is extended by another 6 months.

8. Liquidating Insurance Policies
If you have endowment policies that you have saved up for many years and have now generated a healthy value, see if there is cashback option. If not, you might want to surrender them to help with your financial predicament. After all, if you are unable to sustain it anymore, it will still lapse and you get nothing.

9. Downgrading of Housing If you have parents who own their own houses / flats, you might want to consider moving in with them temporarily (subject to your family's consent / arrangements) so you can rent out your BTO / condo for extra month, until you tide through your crisis.

Hope the above helps!

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