kheru2006 (kheru2006) wrote,

Youth bankruptcy

I RECEIVED a WhatsApp message recently about two youths. One of them graduated from a university with a RM60,000 student loan and the other graduated from a rehabilitation centre with no debt. It got me thinking.

The number of youth who graduate and find themselves unable to pay their bills is increasing. It is worse if they start working in the capital city where the cost of living is high.

Many resort to personal loans to maintain their standard of living. Financial problems start when they can't control their spending. This could lead to bankruptcy.

According to the Malaysian Department of Insolvency, 243,823 cases of bankruptcy were registered between 2005 and June 2012. The main causes were defaulting on hire purchase agreements (26 per cent) followed by personal loans (21 per cent), housing loans (14 per cent), inability to pay credit card debts and other loans, including business loans.

Statistics further reveal that 51 per cent of bankrupts in Malaysia are people below the age of 45. An average of 41 Malaysians are declared bankrupt daily.

To avoid the bankruptcy trap, we must plan our finances; to have a good understanding of short, medium and long term financial goals.

Start with prioritising and visualising your goals, writing them down and thinking about how to achieve them. You could also seek the advice of a financial adviser.

Money is an important resource in today's society. It gives you the power to be independent, to buy your needs and most of your wants. Money is, however, not easy to come by. We need to be careful with how we use it.

The biggest mistake that people make is overspending. Avoid becoming a shopaholic. Many people use shopping and spending as a way to de-stress or to have fun, only to end up in a mass of debt and bills. As a result, you start getting personal loans or borrowing from family and friends.

Don't make spontaneous purchases when you go out. When thinking about buying something, ask yourself whether you actually need it, or if you're going to use it.

Don't buy something just because it is on sale. Think and give yourself time before making a purchase that you are not sure about. This habit will stop you from impulsive buying and overspending.

Always make sure you carry just enough cash for your necessities, and you will be less likely to spend impulsively. Try to avoid going to the mall if you are bored. Instead, spend time watching a movie or reading a book.

Strive to live below your means. This doesn't mean living a deprived life. You can still lead a fulfilling life without overspending. Don't feel like you have to keep up an image or your reputation.

Some people spend too much money when with their friends or colleagues because they're too insecure to admit they cannot afford it. Surround yourself with friends who will support you toward your financial goals.

You also need to plan your purchases or make a budget. Take note of regular bills and payments you need to make. Plan out even small, daily or weekly purchases, and always keep to your budget.

You should know how much money you have to spend. Then try to keep track of how you spend your money. If you know where your money goes, then you will know what causes your overspending.

Keep a diary of what you are buying and expenses you have paid for. It will help make you more aware of what you're spending. Your diary can raise awareness before making an unneeded purchase.

Whenever you get your money, put it all away. It would be ideal if you could save a third of your salary. If you've lived a certain way for a while, and suddenly face financial hardships, it becomes very difficult to cut back.

Your savings that you have built up will help, as we can never be certain of the future. Expenses and earnings can fluctuate throughout our lives as the economy does.

Obtaining a credit card is easy nowadays but we have to bear in mind that excessive use of credit cards is dangerous. If you want to use it make sure you have enough money in the bank to pay off the purchase when the bill comes. Remember that credit card companies charge high interest rates and exorbitant late payment fees.

Many are not aware of the implication of being a bankrupt. People can become bankrupt for as long as 30 to 40 years. Their existing bank accounts are deactivated. They cannot withdraw money or open a new bank account unless they get permission from the Director-General of Insolvency (DGI).

Their assets are frozen and sold off to pay the debtors. They will be unable to get a new loan or travel overseas. They can only use credit of up to RM1,000 on an existing card. As a result their standing in society is then damaged.

Only after five years of bankruptcy can the person apply to the DGI for a discharge under Section 33A of the Banking Act 1967, which is subjected to DGI's discretion.

Wan Norliza Wan Mustapha  New Straits Times Opinion Columnist 04/02/2014
Tags: bankcruptcy, youth

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