Data from Credit Counselling Singapore (CCS) showed that the top three reasons why people fall into debt are overspending, job-related woes and medical costs.
Last year, 1066 people approached CCS for help compared to 1285 in 2009.
The average amount they owed was about $75,000 and they had an average of about 7 creditors. This means they probably owed about $10,000 to each creditor.
The average monthly income of the debtors was $2000+.
The number one reason for debt is overspending. This makes up almost 50% of the cases seen by CCS.
Some of these people often spend beyond their means and chalk up debts on overseas holidays, fine dining and consumer spending. Paying (high) interests on credit cards can lead one into a vicious cycle. Before these people realize it, they are unable to service even the monthly repayments on their credit card balances and have to default on their payments.
Job related woes is the cause for another 35% of the cases while medical costs resulted in debt for 20% of Singaporeans and about 35% of permanent residents.
The numbers add up to more than 100% as some of these people could have multiple causes like overspending and then losing their jobs.
While we can be responsible for our own spending habits and not fall into debt because of it, losing one’s job and needing a large sum of money for unexpected medical treatment are things that are sometimes beyond our control.
Which is why we should always have some buffer of spare cash stored up somewhere. You never know when you might need it.