UNLESS you were born into a super-rich family and have never had to worry about taking out a bank loan to pay for something, most of us, at some point of our lives, have been in debt, at the very least, for the purchase of a vehicle.
Of course, we do not normally refer to taking a bank loan to pay for a house or a vehicle as ‘being in debt’.
We prefer to say that we are paying off a loan. Sounds much nicer that way, rather than say that we have a debt or are in debt.
Generally, in Malaysia, a person will have a minimum of two types of debt in his or her lifetime – a car loan and a house loan, taken up with a licensed bank.
Of course, these are considered manageable debts, because we have committed ourselves to repay the loans through a legal binding agreement.
However, these days, with licensed banks and financial institutions literally giving away credit cards, many Malaysians also find themselves charging away purchases at malls and clicking the add to cart button on online shopping sites, not realising (or choosing to ignore the fact) that they may have gone a tad too far in their spending.
Many Malaysians think that they can delay payment, but they forget, the longer the delay, the larger the debt grows thanks to the interest charged by the banks.
To add to unhealthy spending habits, there are businesses that offer supposedly irresistible instalments or easy payment schemes which encourage customers to buy what they do not really need, without coughing up a large sum of money on the spot.
Let us take furniture for example. Walk into a known furniture chain here in Malaysia and you’ll find a little corner where repossessed furniture is placed – all because someone decided that they had to change furniture every year to impress friends and relatives, but ended up not being able to pay the instalments on time.
Even sadder are cases of those addicted to gambling. Gambling is so much easier these days thanks to the Internet, and it has become prevalent even among students, who are not even earning their own money yet.
We have read too many times about loan sharks terrorising the families of gamblers who resorted to trying to pay off dirty debts (gambling debts) with dirty money (loan shark money). Despite being educated and informed, there are those who still make all the wrong decisions when it comes to financial management.
A few who just cannot handle the debts, banks and loan sharks decide to take their own lives, and sometimes, the lives of their family members as well. Very sad.
Managing debts, or avoiding being in debt, really boils down to our attitudes and how we choose to live.
The bad debt – meaning debts that are actually avoidable – begin when a person outspends his income out of sheer compulsiveness, carelessness and even ego!
Bad debt sets in when a person is not living within his or her means, and resorts to borrowing to maintain a lifestyle, which is totally unnecessary. Essentially, it comes down to wants and needs.
A pair of good quality, affordable and comfortable trousers bought at a humble clothing outlet is a need. A pair of the same quality trousers, with a designer label that jacks up the price 10 times more and is sold at a flashy boutique is a want for the sake of ego.
It is important to know the difference between a need and a want. If it is not a necessity, do not buy it, unless you have a whole lot of extra money to spend. Or only buy the items that you want but do not need as an occasional self-reward.
Living within one’s means is all about developing a relationship with your finances, like how you would develop a relationship with a loved one. In a relationship with a loved one, it is all about caring, giving, being responsible and not being reckless with the person’s heart.
The same can be applied to financial management – care for your finances, develop a sense of responsibility towards it by practising good money management and budgeting, and not be reckless with money.
The Eye is not saying that one must be overzealous and become a miserable Scrooge or a miser.
As it is with relationships, it is also important to give. It is true what they say – give and you shall receive. But do give for the right reasons – tithing, offerings, or donations to charitable causes, and not to dodgy online lovers and scams.
Most importantly in managing finances, as with human relationships, is to be grateful and appreciative towards what one has.
People who have a sense of gratitude and appreciation towards what they own or are blessed with will find it easier to live within their means.
As a friend always says, wouldn’t you rather live a simple but fulfilling life, rather than be “kaya hutang” (neck deep in debt)?
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