How to Stay Out of Debt in Singapore

With the high cost of living in Singapore, it is not surprising that many people find themselves in debt.  However, you can still live in Singapore while retaining total control of your financial position and avoid getting into debt. Just make sure you know how to stay out of debt!

To stay out of debt in, you must first understand why people end up borrowing money when they have a job and a steady income.

Stay Out of Debt: Understanding Why You Are in Debt

Some people find themselves owing others a lot of money without even understanding how they got into debt in the first place.  Here are some of the most common reasons why you may be in debt:

1. Impulse spending.

This is when you suddenly find yourself buying a bag at the mall without even thinking about it.  Impulse spending is one of the common reasons why we end up in debt, even before the month ends.  Sometimes, we do not even give it a second thought and we buy something before we get the chance to pay our bills.

2. Lack of insurance. 

Insurance is very important when it comes to making sure that you have the funds to cover emergencies, health problems, and any other unforeseen, yet expensive, events.  When you get sick and you do not have the right amount of insurance, then you will find yourself borrowing money to cover your hospital bills.

3. Failure to create a budget.

A budget is important in order to make sure that you do not spend more than you earn.  Document your income and allocate money for bills and other non-discrenary expenses for the month.  If you have money left over after accounting for all of your expenses, you can decide how much to save and how much to spend.

4. Misuse of credit cards.

Credit cards should always be used with utmost caution.  Remember that when you swipe, you have to pay for it when your credit card bill comes.  You should always remember that if you pay your credit card bill late, then late fees and finance charges could easily snowball!  Therefore, it is important to pay for your purchases with cash or debit cards as often as possible and restrict credit card usage to situations where it is absolutely necessary or when you can receive discounts, bonuses or awards for paying with a credit card.

5. Poor investments.

When evaluating an investment, be sure that you understand all of its pros and cons.  It would also help to remember that, typically, the higher the return, the greater the risk.  You should also be wary about scams, and remember that if it sounds too good to be true, it probably is.  Lastly, never borrow money in order to fund an investment.

Ideally, investments should augment your savings, rather than deplete them.  You need to determine whether or not you are able to fund the investment with your current income. If you are considering something like an insurance plan where you play a monthly premium, determine if you can afford to pay the premium every month before committing to it.

6. Gambling.

You may think that gambling is easy money, but this could not be any farther from the truth.  Only the house wins in gambling.  You do not only run the risk of losing money, gambling can easily become an addiction.  When you are addicted to gambling, you end up borrowing the funds you need to gamble, or even worse, the money you need to pay off gambling debts you’ve already incurred.

Avoid these activities and you can easily stay out of debt!

Now that you know several of the most reasons people get into debt, you should recognize that if you want to live debt-free, you must spend less than you earn as well as save some of your earnings.  Savings can serve as a buffer against unexpected expenses and help to ensure that you have enough money to enjoy a comfortable life style even when the unexpected occurs.

Stay Out of Debt: Save!

There are a lot of reasons why people love living in Singapore.  There’s the great quality of life, the low crime rate, the people, and the lifestyle among others.  However, there is a trade-off: the cost of living is very high here.  In fact, Singapore is #7 in the list of the 20 most expensive countries, according to slightly less expensive.

We all know that to stay out of debt, you need to have some money set aside for tougher times.  But with such high costs, how can you save?

1. Plan for your children’s education.

The Singaporean government has several tips on how to plan for your child’s college education.  These tips include taking stock of the funds you have already set aside for your child’s education, as well as your current savings, unit trust funds, life insurance and other financial instruments.

You should then compare this amount with the projected cost of a four-year education at some of the top universities in the world, and if you recognize that the money you have saved is lacking, you should try to work out the shortfall. This may mean that you have to save more or to purchase a life insurance plan or equity investments.

If you are having problems saving money for your children’s education now, then consider The Bright Horizons Fund and find out if you qualify.  Usually, the fund provides financial assistance to children in a family that earns $3,500 per month. You should also consider applying for childcare subsidies that the Early Childhood Development Agency offers. You may also have to be enrolled in the My First Skool program.

There may also be grants available to help you pay your child’s way through school such as the Tuition Grant Scheme, as well as others that help with college tuition.

2. Don’t splurge on discretionary spending. 

Be sure to be thrifty when going out in Singapore.  There are several places that allow you to have fun for free or at a minimal cost.  Instead of going to Sentosa, choose to have an afternoon at Gardens by the Bay.  Kids love the Singapore Science Centre Observatory, Marina Barrage, the Jacob Ballas Children’s Garden, and other similar places.

Even eating out does not have to be very expensive.  Street food is clean, filling, delicious, and you do not have to pay through the nose for it.

3. Purchase groceries wisely.

For groceries, you can take advantage of FairPrice discount grocery stores or even shop online.  You can also buy your groceries in bulk to enjoy even larger discounts.

If you want to save money on food, avoid junk food and instead go for “real food.”  Junk food is not only unhealthy for your body but also for your pocketbook. It helps to opt for local products rather than imported products.  If you have a credit card that offers grocery rebates, it can also help you to save.  Some of these cards include NTUC Plus! Visa and UOB Delight.

4. Create a budget and stick to it. 

One of the best ways to curb impulse spending is to make a monthly budget detailing all of your income and expenses for the month.  This way, you will have a better idea of where your salary is spent each month.  You will also become aware of shortfalls so that you can adjust your spending pattern.

For instance, if you are $100 short this month, you could forego an outing with the family.  This will help make sure that you have enough to cover all of your mandatory monthly expenses.  It is also a good habit to include savings as part of your monthly budget.  You can decide whether you want to save a fixed amount every month or a percentage of your total disposable income.

5. Work with your neighbors.

Talk to neighbors to see if you can pool resources to help you save.  For instance, consider sharing a taxi.  Or check if you can carpool together when taking the kids to school or out for a play date.  You could even grocery shop together.

Get Help

If you are currently in debt and you have a problem repaying it, get help!  There are several government agencies, charities, and non-profit organizations that can help you negotiate with lenders so that you can repay your loans more easily.

If you have a gambling problem, do not keep it to yourself; share it with your family and seek help. Because gambling addiction is as much a disease as diabetes or heart problems, you should seek professional help.  Similarly, there are several organizations in the city that can help you to overcome your gambling problem.

It will be difficult at first and you may struggle in following these tips, especially if you have been living a different lifestyle. However, in time, saving, budgeting, and staying debt free will become a part of your every day routine and it will be a piece of cake.

Stay out of debt by knowing the traps that could force you to borrow money, save for a rainy day and get help if you are already drowning in debt!