Money Debts in Singapore – Top 10 Reasons Why People Fall into Debt Trap
Lack of Financial Literacy
A lot of people fall into debt because they don’t understand basic financial concepts. For example, many people don’t realize that if they don’t pay off their credit card each month, they’re going to be charged interest.
Or they think that they can keep spending until they reach their credit limit, and then they’ll just pay back what they owe in one go.
Underemployment or Job Insecurity
You may be wondering how people fall into debt in the first place. And while there are many reasons, one of the most common is unemployment or job insecurity.
Think about it—if you’re not sure whether you’ll have a job next month, it’s a lot harder to save up for a rainy day.
So you might be more tempted to borrow money to tide you over. And before you know it, you’ve fallen into a debt trap and it’s a lot harder to get out.
Unexpected Financial Shocks
It can be tough to stay out of debt when you’re constantly hit with unexpected financial shocks.
You might have a great month, only to be blindsided by an expensive car repair bill or a medical emergency.
Before you know it, you’re maxed out on your credit cards and struggling to make ends meet.
There are all sorts of reasons why people fall into debt traps, and unexpected financial shocks is one of them.
So what can you do to avoid this? You need to be prepared for the unexpected by having a solid financial plan in place. That means setting aside money each month for emergencies, and not relying on credit cards to bail you out.
Relying on Credit to Subsidize Income
It’s no secret that Singapore is one of the most expensive countries in the world to live in.
So it’s not surprising that a lot of people end up taking on debt to make ends meet. You may think that relying on credit is no big deal, but what happens is that people start to get used to living beyond their means. And before you know it, they’re neck-deep in debt and struggling to find a way out.
Poor Money Management Skills
It’s not just a lack of income that can cause someone to fall into debt. People often get into trouble because they don’t have good money management skills.
They don’t track their expenses or spend more than they earn monthly. When you’re living paycheck to paycheck, it’s easy to see why people can get overwhelmed and fall into debt.
And if you’re not careful, these debts can spiral out of control very quickly. before you know it, you’re struggling to make ends meet and paying interest on debts that are way out of your reach.
Falling Prey to Scams
You might be wondering why people fall into debt traps despite having a stable job and a regular income.
Often, it’s because they’re not addressing underlying mental health issues, or they’re trying to keep up with the Joneses.
Take a look at this list and see if any of these reasons apply to you: you’re not managing your expenses well, you’re not getting the right financial advice, you’re not budgeting correctly, you’re falling prey to scams, you have too many credit cards, you’re spending more than you earn, you’re not investing your money properly, you don’t have an emergency fund, or you’re trying to keep up with the Joneses.
If any of these resonate with you, it’s time to take a step back and figure out how to get your finances back on track.