kheru2006 (kheru2006) wrote,

Paying the price for being young and reckless

CLOSE to 25,000 Malaysians from Gen Y – defined as those below the age of 35 – have officially been declared bankrupts in the past five years.

It used to be that bankrupts only came from the ranks of business people when major deals went awry. Today the primary force that drives so many people to bankruptcy is their desire to live way beyond their means.

Many default on their car, housing and personal loans simply because they want to live a lavish lifestyle.

But what we see in the official statistics is only a fraction of how serious the real problem is. There are many young people who do not become bankrupts because they are bailed out by family and friends.

Stories abound of how these people, with multiple credit cards, are given a lifeline when their debts rise to astronomical amounts. But in addressing just the symptoms, these same people are then allowed to carry on their usual way of living until the next financial crisis comes along.

They are the ones who, even without being fully established in their careers, choose to buy an expensive car when a simple entry-level car that can take them from point A to point B will suffice.

And it is the same kind of thinking that makes them go for high-end property instead of affordable ones.

The basic principle that an individual’s overall debt commitment should not go beyond one-third of his income seems to be honoured more in its breach than in observance as creative ways are used to get the banks to facilitate the loans.

Today, we can see that even the Credit Counselling and Debt Management Agency has its hands full as many have no choice but to come forward and seek professional advice for the mess they got themselves into.

Getting into debt at a young age is not a recent phenomenon if you look at the number of defaulters under the PTPTN and Mara schemes. Various measures have been tried to get these defaulters to pay, but without much success.

In a sense, we seem to be sending out a message that it is all right not to comply because eventually the problem will get so big that it will be impossible to bring everyone to book.

Just look at the simple issue of traffic summonses and how we have to launch operation after operation to get the recalcitrants to pay up.

For a young person setting out in the workforce, the message has already been drummed in that he can afford to buy a car without worrying about maintenance costs and the extra expenses that come with ownership. And that he should not just get one, but as many credit cards as the banks will give him.

The duty of care on the part of the loan providers to make sure of his credit-worthiness is often sacrificed for the sake of adding more customers to their lists.

The number of 25,000 over five years may seem small. But it will grow unless both the borrower and the lender do their part.

The young and the reckless sometimes need to be given proper advice from the old and the wise. The STAR Columnist The STAR Says June 24, 2015

Tags: bankcruptcy, gen y

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