In Singapore, a growing number of people are finding themselves in a tough financial situation because of the expensive cost of basic needs and commodities in the country. Their income may not suffice when it comes to covering their expenses on a day to day basis. In fact, some people may feel as though they are only working to pay for their daily needs, without any spare money to save for their retirement. There are even those who can no longer afford to do things they want because of a lack of funds for entertainment or to pursue their hobby.

According to HSBC’s report, the household debt in Singapore as a share of the GDP has gone up to 73 percent back in 2013. This was only at 48 percent prior to the global financial issue, and this showed a significant hike up to UK’s 72 percent as its current standing. Thus, this has led to more demands to take out a loan whether it is to cover their housing or car loan payments, or to their children’s tuition fee, as well as to meet their rather extravagant lifestyles.

Debt Issues – What are the Reasons?

If there is a total disconnect between an individual’s salary and budget for his or her basic needs, then that is where the problem starts. It is the reason why a number of Singaporeans get into debts, and they find themselves being buried further down eventually. Aside from making less money each month and having more wants than needs – and attempting to meet all of this regardless of their fund source – there are several other reasons why people suffer from debts.

The following are the common concerns people undergo why they get into debts.

1. Splurging on Unnecessary Items

It is completely normal to spend on your basic needs such as your rental fee, food, clothing, utilities, and education. However, there are some people who move towards wanting more and more – and never getting enough of anything. This is why they tend to borrow money even if they are aware it would be difficult to pay it off afterwards.

Instead of living within their means, there are people who try to compete with others in terms of what they own. They feel that bigger and more “stuff” are always better than having just enough. So, they take out loans just to accumulate more material items. In the end, at least 49 percent of these individuals who borrow money tend to blame their desire to overspend and splurge on unnecessary items as the reason for having debts.

2. Employment Concern

Sometimes, people just get laid off from their job unexpectedly. Perhaps the company is streamlining its workforce and budget, and this leads to their decision to get rid of some of their employees. If you are the breadwinner of your family, you cannot afford to suddenly not have a job. But at the same time, what choice have you got if your company has decided to let you go?This is why those who lose their jobs decide to approach a financial institution to apply for a loan. They want to make sure that they can still pay off their basic needs by taking a short term loan out from a bank or a moneylender.

3. Big Issues with your Business

If you are a startup, or you have a steady business that suddenly ends up going downhill, then you are up for some major problem in terms of your finances. Your cashflow will surely be impacted heavily, largely due to the fact that you have employees to pay and inventory to maintain. At least 22 percent of borrowers in Singapore blame the downfall of their business as the reason behind their increasing debts. If you are in need of business loan, you can always approach licensed money lender in Singapore.

4. Unexpected Medical Expenses

You can never tell when a serious illness, injury, or accident will occur. This is the reason why for those who have no medical insurance, they tend to worry about their hospital bills that must be settled in cash or credit card since there is no insurance to back them up. About 22 percent of debtors put the blame on unforeseen medical expenses – which are often expensive – as the reason behind their debt.

5. Gambling Problems

An addiction or obsession with something can be a big problem, as this can impact someone’s finances. This is the case behind those who tend to gamble a lot, as it can lead them towards the desire to borrow money just to keep up with their addiction. At least 2 percent of borrowers back in 2004 claims to be hooked on gambling, that it drove them towards getting into debt. The percentage of individuals who blame gambling for their debts, however, has gone down this year.

6. Insufficient Savings in the Bank

Unfortunately, there are individuals who tend to overspend their money instead of saving some for the rainy days. They fail to grow their savings, so once financial crisis hits them, there is not much money in the bank to support their needs. So, their solution is to take a loan out because they cannot get anything from their savings, anyway. But this issue only gets worse since now, you worry about having to repay the loan each time you receive your paycheck. If you keep overspending on your daily needs, then you will have a much harder time with growing your savings. Then, the cycle just keeps going and going.

7. Inability to Increase Wealth because of Minimal Investment

At this point, you should start looking for ways to grow your wealth through investment. This is the reason why it makes sense to consider smarter investments that enable you to make money regularly but with minimal risks. When you have an investment, you may qualify for tax savings and grow your wealth at the same time.

Be Debt-Free: Ways to Do It

Now that you are aware of the common reasons why people suffer from debts, it may help to consider solutions to these issues. The following are among the different techniques you may implement to slowly get yourself out of debt:

1. Live within your means

Forget about trying to be someone you are not or accumulating useless “stuff” without any logical reason at all. Since your debts tend to arise from splurging, then it is time to set a limit and budget each time you go out to eat or shop and just prevent yourself from going overboard with your spending. Paying in cash is even better since you no longer will be tempted to pull out your credit card and buy an item unless you are certain you can afford it without compromising your basic needs.

2. Determine your expenditure

There are instances when people are not even aware of where their money goes. The next thing they know, they have nothing in their wallet and not much left in the bank. This is why it is wise to write down what you spend on each day, week, and month, and compare this with how much you make. Never let it happen that you are spending more than what you are making, since you will only have a negative cashflow.

3. Correct any faulty spending habit

If you are a big spender, then it is time to put an end to it. In anything, an awareness of the problem is the first step to solving it. Unless you know a problem exists, you can never get to the bottom of it. Thus, never leave home without a list of essential things to buy – and stick to it. Even if you are tempted to buy one thing, always think of the consequences if you act to your inclination and desire to splurge. This should help curb bad spending habits and lead you to saving more money.

You see, it is ultimately possible to be out of debt. By knowing the reasons why you are in debt and slowly addressing these in effective and practical ways, you will begin living a debt-free life to finally grow your wealth and secure your future.