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| The Burden of Excess Debt |
Since the late 2000s, the actual household debt of the average Malaysian household has been on the uptick.
A recent report this month recorded an average Malaysian's household debt for year 2013 to a shockingly new high of 86.8% of gross domestic product (GDP) from 80.5% for 2012. OMG! This makes it the highest in Asia.
It is conceivable that if such a trend continues, it would affect the general economic state of the country more than merely financially burdening the household of countless Malaysians.
Concrete steps must be taken to combat this rising debt problem.
The dictum of many financial institutions is that you should not have more than 40% household debt. More will be painfully unmanageable. The less of your income that goes towards debt, the better.
However, if it does exceed that 40%; meaning your consolidated debt payments eat up almost half or more of your income, then you owe way too much.
Having that much debt will become a burgeoning burden especially in the future, in the event interest rates start rising.
Another strong sign that your household has way too much debt is the amount of compromises that you make financially.
Even if you do manage to pay your debts on time on a regular basis, examine the rest of your finances.
Does paying your debts lead to you sacrificing some of your other financial commitments?
For instance, if you pay your credit card bill now, would that technically mean a trade-off- the late payment on your car loan?
Or even if you do meet the requirements of all your financial obligations,do examine your type of lifestyle.
Can your lifestyle be considered lower that does not commensurate with your pay?
Financial compromises are often necessary, but when the amount of compromise you make is too great, then that means your debts are taking a toll on your financial health.
Identifying the problem is simply the first step towards a long process of lowering your debt, but it is a very important one.
If you do have that much debt, then it is prudent to start coming up with ways to address that problem.
Taking care of a massive debt means paying off or significantly lowering the debt in as short a time as possible.
This means a great deal of financial adjustment and foresight.
Planning a course of action to fix your household debt problem begins with assessment.
Assessing your household's finances means conducting an audit of every single aspect and financial activity you make.
How much money is being made? How much money comes out, and why?
Examine your spending habits, your regular income, and your financial commitments thoroughly.
Remember that there is no negligible amount here. Even the smallest expenditure needs to be considered.
Once you have a firm grasp of your household's financial activities, then comes the time to make adjustments.
In what specific areas can you spend less money on? Where exactly can you save on? How much money can you add towards debt payment?
What specific debt payment comes first? Always make sure your decisions are in line with the main objective: the elimination of debt.
If you are an average Malaysian, making ends meet do take a lot of doing and personal sacrifice.
This is why it is vital to make financial plans, ones that take the long term into consideration.
Debt is a burden that affects most of us, not just on a financial level but on a personal and mental on too.
The amount of stress that comes with knowing a huge chunk of our hard earned money does not even reach our pockets is staggering; and certainly psychologically defeating!
To be more assured and for a sounder and better financial future, let us start teaching ourselves to aim for much lower than 40% household debt for now.
Written by CompareHero
