Nowadays, you are very fortunate if borrowing isn’t something you regularly do. Taking on a debt, after all, is no longer a topic that people sweep under the rug. It has become an inevitable part of our financial life, whether for education, for housing, or unexpected expenses.
But even though borrowing has become commonplace, you still need to reflect on your habits related to it. So, when was the last time you did that? Asking tough questions about ourselves and our relationship with debt is something that we need to do from time to time.
What’s driving your borrowing?
It is a pretty known fact that Singapore is an expensive city-state. Living here has many perks, but that privilege often comes with a significant cost. For those with a not-so-stable source of income, borrowing becomes their only option to keep up with the pace.
But ask yourself: why do you take out a loan from a money lender Singapore? Is it to fund a lifestyle, even one you cannot afford on your own? Maybe you are doing it to build a launchpad for your future. The key is to be honest with yourself. If the reason is somewhere along the line of maintaining a luxurious life, it may be time to let go of the short-term thrill that may not be worth the long-term financial burden.
The interest rate reality check
We promise ourselves we will do it, but honestly, when was the last time you checked the interest rates on your loans? How much are you really paying over the life of the loan? Sure, getting approval for a loan application can be a blissful moment that you just have to soak in. Still, you may find yourself wincing in pain if you neglect to examine the terms and conditions of your loan.
The debt snowball effect
Do you have multiple loans with different interest rates and repayment terms? Are you juggling multiple debt payments each month? If so, you’re not alone. Many Singaporeans struggle to manage their debt, and it’s easy to get overwhelmed. But what if you could focus on one loan at a time? By prioritizing your debts and tackling the one with the highest interest rate first, you can create a snowball effect that helps you pay off your loans faster. It’s a strategy that requires discipline, but the payoff can be significant.
The credit score conundrum
Your credit score is like your financial report card. It’s a reflection of your borrowing habits and repayment history. But do you know what your credit score is, or how it’s impacting your ability to borrow? A high score unlocks competitive interest rates and borrower-friendly terms, while a low score means paying more and having fewer borrowing choices. Take the time to check your credit score and understand what it means for your financial future.
The budget breakdown
Let’s talk about budgets. Are you tracking your income and expenses, or are you winging it each month? When was the last time you reviewed your budget and made adjustments? If you’re borrowing to cover daily expenses, it may be time to take a hard look at your budget and identify areas for improvement. The 50/30/20 budget splits your monthly income into three parts: half covers essential expenses, a third goes to wants and lifestyle choices, and the remaining fifth is for savings and clearing debts.
The long-term view
Borrowing is not a long-term solution; it’s a short-term fix. When evaluating your borrowing habits, ask yourself what you’re working towards. Are you borrowing to invest in your education or business, or to fund a lifestyle that may not be sustainable in the long run? Consider the long-term implications of your borrowing habits and whether they align with your financial goals.
Conclusion
Evaluating your borrowing habits isn’t always easy, but it’s a necessary step in taking control of your finances. By asking yourself these tough questions, you can identify areas for improvement, create a plan to tackle your debt, and build a stronger financial future. Remember, borrowing is a tool, not a crutch. Use it wisely, and you’ll be singing a happy tune all the way to financial freedom.
