How to get out of debt, and stay out of debt


debtLife in Singapore is expensive. Most people who live in Singapore who want to own a home or vehicle will have to take a loan and be in debt for a period of time in their lives. Debt, in general, isn’t a scary thing. But what happens when you take on too much debt, and just how much is too much anyway?

While some might say that there’s nothing to worry about so long as you can service debts without too much struggle, we can also say that a dollar of debt is a dollar away from true financial freedom.

So whether you’ve just wet your toes or are up to your neck in debt, here are steps that can help you get on your path towards a life of financial freedom.


Manage your debts

1.    Find out exactly how much you own, and how much it costs

Get all your statements together, and know precisely how much debt you have in total, how much you have to pay every month, and the interest rates on each individual loan.

Rank them according to interest rates to see which loan is the most expensive to service. Most probably, you will find that credit card debt is the most expensive, with interest rates at about 24% per annum.


2.    Monthly expenditure

Make an honest and well-categorised list (e.g. groceries, bills, shopping) of what you are spending on, besides your loan repayments. Go through the list and pick out expenses that

I.         Can be eliminated or reduced without making you a miserable person

You don’t have to stop loving food and having a good meal with friends, but you can resist the urge to check out a new restaurant every week and save S$200 a month.

Similarly, you know that shopping and buying things really don’t make you happy. But still, you do enjoy a little bit of fashion. How about cutting back another S$100 by shopping at flea markets, or simply buy less?

You may be surprised at how little you miss excessiveness.

II.         Can be eliminated or reduced because there are good substitutes

For example, exercise for free instead of splurging on that expensive gym membership that you may not even be using fully. Or, head to the libraries for a good selection of books instead of buying them.

Better still, if you own a car, consider giving it up and using the public transport instead. The cost difference on this one is way, way bigger than the difference in travelling time.  As for comfort, well, let’s just say that the burden of debt can get you even more uncomfortable in the long run.

III.         Can be reduced by using the right credit card

Credit cards can be helpful if you use them with discipline. If you don’t fancy the idea of earning reward points for redemption, you can always choose the cashback option, which automatically offsets your credit card bills by the amount of cash rebates you’ve earned.This is technically a discount on your monthly spend. Here are some cashback credit cards that will come handy.

Tips: Choose cashback cards that do not have spending requirement that you cannot achieve.

3.    Channel all your newfound savings into debt repayment

Whether you’ve found an additional S$100 or S$1000 hiding somewhere in your expenditures list, congratulations! But, this is not a time to feel happy because you can now use it to buy something else. If you are serious about being a debt-free, then channel all your newfound savings into paying off your loans.


4.    Follow a debt strategy

One good debt payment strategy is to pay the minimum amount on all your debt, except for your target debt, which you aim to pay a higher amount every month.

Refer back to step one, and you will see which debt is the most expensive to service (e.g. credit card debts with high interest rate). Aim to pay this off first.

Also, know that you can actually do a balance transfer on your credit card debt, and pay them interest-free in a year with a particular bank, if one year is a reasonable timeframe for you.

Alternatively, if none of the debts have a significantly higher interest rate, you can also go for the lowest-hanging fruit, which is the payment that you are the closest to paying off completely. Striking one debt off your list can be incredibly motivating and spur you on a great deal.

When you have cancelled out the first target debt, channel all the money that you’ve been using to pay off that debt to pay off the next target debt.

The idea is to use every available dollar that is not saved or used on regular expenses to pay off a debt.

Also, automate your debt payments so that you don’t waver easily.

5.    Review your interest rates

Whenever possible, reduce your interest rates. In the case of home loans, be sure to review current interest rates and compare it to what you are paying.  Refinancing your home loan can potentially save you a significant chunk and reduce your monthly repayment. Keep yourself updated on the latest loan packages available.  For example, with interest rates rising, it would be prudent to consider switching from SIBOR-pegged loans to Fixed Deposit Home loans or even fixed rates.

And what do you do with the amount that you save every month? Channel that to pay off your target debt, of course!

6.    Too deep in debt? Seek professional help

If your debt is simply too massive and overwhelming, seek professional help. Credit Counselling Singapore can offer you advice about how to handle your debt, identify resources that are available to you, and help you draw up a repayment plan that is within your means.

In addition, as debt can sometimes send you on a spiral towards emotional and mental stress, they are also able to refer you to other agencies that can help you cope with your distress.

7.    Finding the root causes of debt

To truly be debt free requires a lot of discipline. Again, some debts are simply unavoidable due to the high costs of living (e.g. study loan, housing loan). But, if you find yourself in debt because of an irrepressible urge to buy things and over-indulge in experiences, then it’s necessary to find out the root causes of these impulses and address them.

Earning more money will not make you debt free if these habits aren’t addressed, as you may simply purchase even more expensive things and experiences that are beyond your means, and the cycle simply continues with greater stakes involved.

May the force be with you, and debt be gone.


For more financial tips and tricks to optimise your financial lifestyle, visit and learn all the best moves to make with your money.


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