Not somebody who knows somebody.
But I know somebody personally.
He has/had a problem with credit cards and spending.
Ok so you know, you watch shows and wonder, seriously, who gets into credit card debt. Like 2% per month? Who in any logical world would get into deep credit card debt. Like I would think that if someone got into debt cos they bought a bag for SGD5k and they were unable to fully pay off at the end of the month, they would work to take down the debt first, before hitting more expense? Or they might be concerned and after taking down the debt they would not even take up more debt again and just spend within their means and pay off their credit cards promptly in full at the end of the month. These folks who go into crazy credit card debt of SGD100k and above MUST only happen in shows right? Why would anyone get themselves into such trouble?
HELL! I was dead WRONG!
People DO get into credit card debt and it is more common than I think/know.
It starts very simply. Hitting the card for small expenses and letting the balance roll. Then they go on a trip and clock up to like SGD10k. Then they pay the minimum sum and don't hit much more expenses. Then the interest builds up to maybe SGD13k, then they go into this denial mode and they just whack even more expenses on the card and don't bother to look at the credit card statement at the end of the month cos they don't want to be aware of the amount of S**T they are in. As the more the denial builds, the more they spend. And the next thing they realize, the total debt across all their cards is like SGD80k and they can't make enough to even finance the monthly minimum sum properly.
The last I checked, that person was paying the minimum sum BUT the interest accrued per month was more than the minimum sum. MEANING!? He was not paying the principle at all. He wasn't even paying the interest for the month.
The next thing I knew, this person recently bought an HDB and moved out on his own with his wife and kids. They took another loan to do up their renovation for the house of about SGD25k. Seriously?! This person has kids and keeps going down this slope. What kind of example is he showing his kids?
I was asking him about his decision to take a loan for his house reno. His response was the typical, "These are necessary expenses." REALLY!? His SGD25k did not even include the fridge and TV and all that. Compared to my SGD18k which I used to reno and furnish my house... errm... well... the world IS full of illogical people.
As I always say. I'm not judging. To each their own. They will have to live with the consequences of their decision. I'm just surprised and stunned by the decisions people make. And the idea of denial in psychology. Cos when I asked how much he owed to the banks, he could not give me a number. He just said the last check was ... and that he was not actively checking his credit card bills. He just pays the minimum every month.
I learned a lot with my interaction with him.
1) He looked so normal, wife and kids. Spending as per normal. Still going on small trips. Drives a car. Spending on reno, etc.
2) I've read about denial in psychology pages. But this is when I saw it for myself. That he did not want to look at or be reminded of his load of debt.
3) It seems that this taking on of consumer debt is very very common
(I receive calls asking if I had any debts which I needed to consolidate and that XYZ bank is willing to lend me money to consolidate my debts. I receive calls where the telemarketer asks if there is any needs for additional funds like a house reno or a holiday... since when were reno and holidays, NEEDS?)
I assume that when telemarketers speak this way, it means that there are people who NEED additional funds to consolidate debt or really NEED to go on that holiday. So I take it that it is common for consumer debt.
As usual. No judging. There is debt some might be needed or not.
Housing debt may/may not be a good thing.
We can fully pay off our housing loan and own our HDB. But I believe the stock market might be provide more opportunity so I choose not to pay off my housing debt at around 2% and hold my funds for further investing elsewhere.
There are some retail shops (eg. COURTS) which may provide zero interest loans for 24 months for you to buy a washing machine. Maybe some readers may take up the offer to even out their cashflow so as to capitalize on the various credit card promotions and spending. Not particularly a bad idea. Not a great idea but also not a bad idea. But why not since there is 0% interest.
Well the point about this post is consumer debt may be/ IS more common than you think. A close friend may be deep in debt and you may not even know it. It does not only happen in shows.