There’s probably nothing more stressful than knowing you owe somebody money. Whether it’s a bank loan or an overdue credit card bill, being in debt is a source of stress for many. Here are some smart ways to get out of debt quickly. By Vanessa Tai
According to data released by the Credit Bureau Singapore (CBS) in September 2013, more Singaporeans are struggling to pay off their credit card debt. For example, in July 2013, 62,830 people did not make a minimum payment in two months, which is a 12.7 percent jump from the previous year. In addition to consumer debt, Singaporeans are also forking out more to repay bank loans because of the rising cost of living.
Yes, I recognise it may be impossible to be completely debt-free, especially when you have a mortgage or car loan to finance. The debt I’m referring to in this article are consumer debts and debts owed to friends and family members. All these seemingly small amounts add up and can feel overwhelming. However, with smarts and discipline, you can repay these debts quickly.
1. Accept You Need To Make Changes
Before you roll up your sleeves and get to work, you need to recognise that changes need to be made to your spending habits. It’s important to get into the right mindset so you can make a stand against marketers offering “easy financing schemes” or “zero interest rate credit cards.”
Relevant read: 3 Steps To Fix Your Relationship With Money
2. Rank Your Debt
Make a list of all your outstanding debts, be it to banks, credit card companies, telcos, and even individual creditors like your friends and family members. Write down the amount owing and the existing monthly payment amount for each one of them, then rank them according to the interest rate. The creditor with the highest interest rate should be ranked at the top.
3. Take Stock Of Your Resources
Apart from your monthly salary, are there other ways you can supplement your income? Perhaps there’s an extra bedroom in your apartment that you can rent out? Or, perhaps you have a skill that allows you to freelance on the side. It may be tiring, but every dollar counts towards clearing your debts as soon as possible.
4. Create A Strategic Spending Plan
Once you’ve established your monthly income, write down all the expenses you have. These expenses include the minimum payments on all your debts. Take a look at your expenses and rank them in order of importance to you. See if you can get rid of any of the items at the bottom of the list. The objective is to create a spending plan where your expenses are lower than your income.
Of course, you need to be realistic as well. It can be discouraging to live each month just repaying debts, so be sure to allocate a small portion for “Fun” expenses. You should also set aside money for “Emergencies”, for unexpected expenses such as your pet falling ill or your car breaking down. Once you’ve done that, you can set aside funds to make each minimum monthly payment on your list of creditors. Any extra funds should be channelled towards the account with the highest interest rate.
Climbing out of debt is undoubtedly not an easy task, and if you feel in over your head, I encourage you to approach the professionals. Credit Counselling Singapore is a charitable organisation that helps indebted individuals resolve their debt problems and educates the public on financial literacy. CCS offers talks on debt management as well as one-to-one counselling sessions to explore feasible debt repayment solutions such as working out a debt repayment plan with a longer repayment term.
Need help? Contact a CCS counsellor at 1800 2255 227 or visit http://www.ccs.org.sg
About The Author: Vanessa Tai is a founder of Material World who has previously worked on magazines Simply Her and Cosmopolitan Singapore. Now a freelance writer and a full-time contributor to this website, the 27-year-old dreams of attending every single major music festival before she turns 30. Follow her on Twitter @VannTaiTweets.