There are many reasons we get into debt, like paying for unforeseen emergencies or unemployment.
Most often, debt is a result of bad spending habits. One of the biggest culprits are credit cards. A credit card is like the genie from that magic lamp who grants you a favor to buy something you with “future money”.
Most credit cards offer a 30-day interest free period, which is usually enough time to clear any debts incurred. But the reality is, you may end up owing more and owning less.
If you fail to clear your debt within 30 days, you will incur interest. In Singapore, credit card interest can amount to 25%, which is an exorbitant cost.
Beware of Holiday or Impulse Purchases
During the festive seasons, many of us will use our credit card to pay for dining and shopping. You should always make sure you can pay off these credit card debts you incur.
What Should You Do If You Have Unmanageable Debt?
If you have difficulty controlling debts like credit card or a personal loan, you should contact your credit provider.
They may extend your payments over longer periods of time, because it’s in their best interest to recover their money, even if it takes longer than expected. However, you need to change the behavior that got you into debt in the first place. Otherwise credit restructuring is meaningless.
Therefore, it’s important that you get help from a qualified financial adviser. With the right advice and a workable budget in place, you may regain control of your finances in a matter of time.
Beware of Offers That Are Too Good to Be True
Many people who are heavily in debt try to seek quick fixes. Some even borrow from loan sharks who charge even higher interests and give unfavorable terms.
Seek Professional Advice
Many of us will seek financial advice in growing our assets, but not about debt management. Successful creation of wealth is dependent on proper management of both assets and liabilities; as well as good cash budgeting plans to achieve your financial goals.
When you get into unmanageable debt, often the best person to consult is your financial adviser. A qualified adviser will be able to provide you with a strategy to manage runaway debt, and hopefully also give insight into how to safeguard your behavior and avoid getting into such debts in the future.
