Debt is that four letter word a large majority of Singapore’s population dread to hear or admit to be plagued with. It drives off our little joys and renders many a soul devoid of any form of joy with the realization that one’s bank balance is always on the negative, thanks to payments of bills backlogs, credit card refunds and repayments to money lenders within Singapore and international. Yet, time and time again many of us still find ourselves in that perilous situation called “debt”. It thus appears that no matter how much we don’t want to see it, it always finds its way back to us like a Shakespearean lover seeking a pocket-hole shaped prince charming, who in turns leaks out our joyful pennies to our utter chagrin.

World economies are technically run on credit; governments make yearly budgets and use money instruments to borrow from banks, international fund managers, local money lenders and even its own citizens in order to fund the budgets and these cuts across even the most prosperous economies such as in Singapore. This concept only but goes to point out the true concept of debt, not all debts are as bad as may seem.

Debts are either good or bad, depending on the context on which such classifications are made. Debts are useful for safe and structured investing; as it allows governments and organizations to make long term investments which may or may not be risky doing so with their liquidity. Debts are major indicators to the health of one’s finances, where bad debts which are unrecoverable could be of disastrous consequences and good debts showing a credit history could help an individual borrow more thus improving credit ratings.

Singaporeans all over are pushed to neck crunching debt simply due to poor financial education and discipline. An understanding of this concept is an overt analysis of the credit card system, whose abuse has led to a debt ridden populace struggling to keep head above water in these trying times. It is not uncommon to see people neck deep in debt they ordinarily shouldn’t have been involved in because they have become lost to the overt consumerism which plagues millennials.

Good debt is not so bad when debt instruments are used for low risk investment, higher education funding and technically any and all debts that could result in an increase in income, earning power and skills to the debtor, and allowing such accrued debts to offset themselves in the long run due to equitable benefits gained is surely a great idea.

The long lost savings culture has eroded the financial buffer Singaporeans of years past once had; this alone is a major threat to the financial stability of many individuals especially in a consumer-centric economy where the focus is on buying and not savings. An understanding of how to get into the right type of debt is crucial for any individual and would be the difference between financial freedom and bankruptcy.

The Greece situation is a bad example of how not to get into debt as a nation, the failings of third world countries in not achieving their potentials despite the bountiful resources at their disposal and yet being heavily debt ridden is a perfect example of how also not to get into debt. Good debts must be structured, purposeful and targeted at long term benefits and not short term satisfaction of greed and gluttony.

The very survival of many sectors in a fledging economy is heavily tied down to the existence of debts. Take for the instance the money lenders in Singapore. The core focus of lending money is to make profit through accrued interest over time, with ever rising borrowing the industry has been experiencing a two faced effect; the first a boost in short term earnings which is thanks to increase borrowing by Singaporeans to satisfy their consumer-centric wants of the 21st century and second is the increase in risk on having lots of bad debts to be written off, which when scaled by the rising number of cases of these situation could lead to long term marginal losses to these businesses. It does call to question once again the financial discipline of Singaporeans in general.

Singaporeans must aim to pursue good debts such as housing loans which could be taken out against personal property at attractive rates for other low risk investments or simply to pay off other high interest loans, housing in upscale locations which were financed by loans could be recouped in a span of time if one so desires via renting or outright sales when prices appreciate.

Housing loans are not the only good debts Singaporeans could get involved in, business loans especially at micro, small and medium scale level have long been identified as a major driver to any economy. Businesses need money at start-up and also running costs. Major investments in infrastructure which yield long term benefits are best options for financing using low interest business loans. Many lenders in Singapore such as banks, investment houses all readily finance such endeavours due to the benefits they have to the public as well as government intervention in those sectors. debt could be an asset or a liability to an individual depending on how he or she manages it, sound financial education which encourages prudence in spending , encouragement of a savings culture, adoption of good debt for development would always go a long way to improve the financial standing of many individuals in that stead.

The business of lending money, which is debt based would always be a win-win solution when good debts are concerned both for Singaporeans as well as the money lenders in Singapore.

Debt will no longer be a problem to a person of sound financial knowledge who looks beyond the current consumer-centric lifestyle which pervades the world. Homes could be built, business could be started, and education at any level could be attained all with good debt. These and many more are proofs of the positives to be gained from being financially free from soul sucking bad debts which not only affects the sanity of the bearer but also his propensity for growth and financial freedom. The poor in summary could learn a thing or two from the rich. They are always in debt, albeit good debts to many institutions at great credit rates. Wise governments, companies, organizations take advantage of the positives to be gain via good debt to improve on the world. If that is the case, then why cant you do same. Be a good debtor today.

Published On: January 16th, 2018

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