Christmas is just days away, so now seems as good a time as any to splurge with a vengeance.
After all, the pandemic has resulted in many of us saving quite a bit of money that would otherwise have been used for overseas holidays at this time of the year.
So supporting local businesses by shopping with that extra cash is certainly a good way to feel festive as the year draws to an end.
But before you log in to put even more items into your online shopping cart, ask yourself this important question first – do you have any outstanding debt on your credit cards that you have not cleared for the past few months?
If your answer is “yes”, do yourself a favour by emptying the shopping cart and putting an immediate lockdown on all non-essential purchases until you have cleared every cent of the old debt first.
“Non-essential” means you should not spend on anything unless your survival is dependent on it, such as basic food items and utility bills for you and your family. Your urgent priority is therefore to pay off this debt first before you incur more expenses.
Yes, this seems drastic, but you will thank us later for this advice as it can save you from possibly falling into a debt trap that is hard to get out of.
The clearest sign that you are at risk of such a trap is that you have a credit card debt that you cannot pay off immediately. If you allow this debt to grow and fester, it will ruin you slowly and surely.
Many do not realise that the No. 1 cause for people falling into serious financial trouble here is not gambling or bad investments but the seemingly harmless act of overspending to indulge themselves.
When you gamble or invest, you usually know you are in trouble when you lose all your money. Things won’t become worse if you do not borrow and continue with the losing streak.
Overspending, on the other hand, is far more insidious because it can happen to seemingly responsible people.
What makes it worse is that those who overspend usually do not realise they are in trouble until the debt is big enough to choke the life out of their financial well-being.
By then, it will usually be too late for them to do anything to help themselves.
Over the past decade, Credit Counselling Singapore (CCS) has seen more than 10,000 people who have fallen into financial trouble due to overspending.
The number represents almost half of all cases that the guardian angel for debtors has helped.
Many of these folks are still working to pay off their debt, which range from about $50,000 to a few hundred thousand each.
This figure does not include many others who struggle on their own because they do not agree with the CCS’ non-negotiable condition, which is to terminate all their credit cards.
An OCBC Bank survey found that close to 30 per cent of credit card holders here pay only the minimum sum, which means they are accumulating more debt every month.