Debts do not usually come because we earn too little. It usually comes when we spend more than what we earn and we start borrowing in order to cover the shortfall in income versus spending. As for debts, there are good and bad debts. Bad debts would be those which does not provide us any returns. Three usual examples? Car (which you had to stretch to afford), Smartphone (somehow just need the latest the best one), Handbag (which if you don’t have, you feel ashamed among peers) and there’s no ending usually. Good debts? Well, it could be for the purchase of a property which yields us positive rental income on a monthly basis. However, we will need to save that 10% for downpayment first. Now, what happens when we have a stable monthly income but we spend a little too much every month?
Article in thestar.com.my here. Bank Negara Malaysia’s Financial Stability Review released in September 2018 showed that civil servants spent more than half of their monthly salaries on repaying debts. In fact, for those earning less than RM5,000 per month, this ‘debt issue’ becomes even more apparent. The review showed that after their monthly expenditure on basic necessities and debt obligations, they are left with only 15% or RM360 to RM586 to spend on discretionary items. Nearly half of the borrowings are for consumption purposes including PERSONAL FINANCING, motor vehicles, credit cards and others. In fact this is higher than the national average of 35%. As at end-February 2019, total outstanding civil servant debt stood at RM236bil, equivalent to 20% of total household debt or 17% of the gross domestic product (GDP). This is higher than levels observed in 2012 at 18% of total household debt or 15% of the GDP. An image showing profile of indebted civil servants.
Do refer to the article in thestar.com.my for more profiling and images too.
We could look at our current income versus our current expenses. Most of the time, as soon as we do a checklist, we suddenly realise that perhaps we could have saved RM500 per month by buying a cheaper car (and stop being fooled by fuel savings yeah…) . Perhaps we could have just continue using that smartphone which is fully functioning and saved RM1,500 instead. Perhaps we could have saved RM1,000 on rental per month if we chose to stay further away in a cheaper apartment instead of a luxury condo nearby office. Of course, we may need to wake up earlier to take the MRT instead… Let’s remember that relying on any external parties to help us after we are totally in debt is totally unnecessary. Save whatever we could and start investing those instead. Happy understanding.
Article written and edited by Charles. News article summarised by Dina Batrisyia.
<Featured Image is courtesy of Stock Photos from Doucefleur >
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