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SAGE Talk: Overspending due to unexpected events

Reminiscences of CCS first Chairman. This is the eleventh of a series of articles by Mr Kuo How Nam (founding member and former Chairman of Credit Counselling Singapore). How Nam’s articles are scheduled to be published on first Fridays of the month.

In this article, CCS first Chairman and founding member Kuo How Nam talks about a major cause of credit card debt - overspending due to unexpected events.

Not all overspending is a result of a conscious choice to maintain a unsustainable lifestyle.  Bad things do happen to people unexpectedly.

The most common event is a hit to income.  Markets change and job requirements and skills are affected.   As can be seen recently, high flying tech people can become retrenched suddenly.  Staid and solid jobs in banks and even at McDonalds’ can disappear suddenly.  

Many people are unprepared for this.  A working couple may have bought their homes, serviced mainly by their joint CPF contributions.  When a spouse’s CPF contributions cease, there can be financial strain as the shortfall must be met with cash at a time when one income has been lost.   If the unemployed spouse cannot find a job at a comparable level over a protracted period of time, cash reserves run out and credit card debt mounts.  Even if a job can be found eventually, the family is faced with a large debt and finds it difficult to pay off the debt with interest at over 24% per annum.

We have seen many cases where the individual has been retrenched but his skills set and experience are no longer relevant due to technological changes or the job as been offshored to a less expensive place.  The family has been enjoying a standard of living which is now in jeopardy.   Old spending habits do die hard and reality has yet to set in.  Eventually even if the family adjusts and downgrades, there are accumulated debts which aggravate their problems. 

The other side of the coin is an unexpected increase in expenses.  A family member may experience a medical problem and expenses mount up rapidly.  The family is torn by the need to provide adequate medical care, especially if the problem proves to be long term such as a mental or mobility impairment.  The patient could be an aged parent or worse if it is a working spouse. 

There are other sad events such as a divorce and breakup of the family.  Single parents, especially mothers with dependent children are especially affected, particularly if the spouse is irresponsible in not paying maintenance.  We have single mothers who have struggled to bring up their children on their own, building up credit card debts along the way but turning up at CCS for assistance to work out a repayment program now that their children have grown up and are working. 

Therefore one can never say that people are irresponsible when they overspend.  There are many situations where people have few options and you yourself will also do the same if placed in their situation. Although we do not encourage this, the credit card facility was a lifeline for many people to get through a rough patch in their lives 

The key is whether debtors can overcome their financial problems, recover and start to pay what they have used.  This is where CCS comes in to assist with a repayable debt management program with their debtors.  The program has been running for almost 20 years (in 2024, CCS will turn 20 years old) and we have assisted over 25,000 distressed borrowers through facilitated debt repayment arrangements thus far. 

If you are facing a debt issue and would like to seek assistance from CCS, attend our weekly Debt Management talks (conducted both over Zoom and in-person at our office), where you will learn more about what to do, when and how to communicate with creditors, what are the common collection actions creditors can take, what are the various debt settlement options are and what is the CCS Debt Management Programme. Click here for schedule.

After attending the talk, you can submit a request for one-to-one credit counselling. Details on the counselling session and instructions on how to arrange for an appointment will be explained during the talk.

CCS also conduct monthly Facebook Live webinars on topics such as prudent financial management and responsible use of credit. Follow CCS Facebook page to stay updated of our webinars and events.

This article was contributed by Kuo How Nam.

Published 5 May 2023.