Sunday, October 30, 2005

The new Poor?

I attended a wedding dinner yesterday at Clarke Quay. It was my ex colleauge's from StarHub and it had been about 5 years since I left StarHub. Wow....

We left the place pretty late and I realised that the groom's car has changed(yet again). This time it's a *gasp* Mini Cooper!

The couple also just moved in an EC at Pasir Ris.

Maybe my math is bad but I just can't seemed to make sense of how they can support these two big ticket items simultaneously. The Cooper itself does cost about the same as another EC.

In any case, this started our discussion and my friend who worked in a local bank saw the credit card record of a one TCS actor. Those bordering between 1st and 2nd line actor. His income declared was like $100,000 per annum and he maxed out his $5000 credit card. Limit left? $13.

Another case was a doctor who holds a $10,000 credit card. Also maxed out.

Both are so called revolver. I.e. they pay only the minimum per month to payoff the bank. And both are definitely capable of paying off in full but I reckon they have other committments that deter them from doing so.

Personally I would see this as very bad practise. I've read about an article on this and these people are termed as the new poor. People who are asset rich but cash poor.

My friend is someone who also could not tolerate himself being in such situation. Thus I was quite surprised that he also feels it is not entirely wrong for them to do so.

We feel that it is wrong as it is against our mindset. But these group of people just want to enjoy what they reaped and some wants to enjoy it in advance via credit.

You can't really say these kind of people are wrong.

The only "wrong" here is the credit amount gets out of control, banks begin to sue and you become bankrupt. Even then, they had already enjoyed material items that most people with my mindset won't even had the chance to.(I'm sure I won't get to own a Cooper in this lifetime)

So in living a life that I've always preached that we only lived once, is it entirely wrong that we MUST be financially prudent and have savings? Should we not let our urge take over once a while and make ourselves really really happy by getting, say a, EC?

Life is about happiness after all.

Post note: How to screw up your life.

Title : Credit counselling organisation helps Singaporeans restructure debts
By :
Date : 27 October 2005 1748 hrs (SST)

SINGAPORE : Not-for-profit organisation Credit Counselling Singapore has helped 471 Singaporeans restructure their debts amounting to some S$34 million.

But it said this could just be the tip of the iceberg, as rollover credit in Singapore has nearly doubled in five years to S$2.7 billion this year.

Forty-three-year-old "David" found himself drowning in debts amounting to S$200,000 five years ago, after his credit card bills snowballed.

He said, "My work involved a lot of traveling, so I spent it outside. My company does reimburse me, but my mistake was that I sometimes didn't pay promptly."

Not wanting to be declared bankrupt, he started driving a taxi part-time and with the help of credit counselling, restructured his debt with seven banks.

He now has some S$40,000 to repay and no longer carries a credit card.

David represents a typical debtor in Singapore -- male, between 35 and 45 years, with a family, and an average debt of S$72,500.

His average take-home pay is S$2,600, which means he would need 28 months to pay off his debt, at S$1,500, or nearly 60 percent of his income, monthly.

Besides ease of credit, car loans are an increasing problem, as they are cheaper to buy upfront but not cheap to maintain.

Credit counsellors call this group of debtors the "new poor" -- they earn more than the bottom 20 percent but after deducting their loan repayments, their little remaining disposable income sometimes puts them in dire situations.

Some can't downgrade their flats as they can't get another housing loan due to poor payment records.

Others have even pleaded with their banks not to deduct their loans directly from their salaries credited as they would not have enough to feed the family.

But while they acknowledge individuals are responsible for their debt, they say creditors should also go by an ethical code of conduct, and not make incessant calls.

Said Kuo How Nam of Credit Counselling Singapore, "The other practice we would like to see stopped would be letters from lawyers to the debtors' employers asking about particulars. This actually forces the debtor to reveal the state of his indebtedness to the company, and in many instances, companies are rather unhappy over that, and some people have been threatened with termination of employment."

A total of 940 people have been counselled since 2003, but some walk away with debts too huge to be restructured. - CNA /ct


iemuhs said...

Talking about materialism and stretching the limits... I have some thoughts on this lately, due to how the wives here seems to be spending!! Will be blogging on this real soon...prob tomr. :) sometimes I really wonder if people know what financial prudence is... of course, it is right to spend what you work so hard to earn... but, I think there's a limit to wat's right and wrong amount to spend...

mihuatang said...

everybody has their own limits and tolerance levels on loans,mortgages and such.

to each his own (destiny!)

Anonymous said...

Better to be prudent