Many Singaporeans live in a fast-paced, high-cost environment. Because of the city’s buzzing lifestyle and the constant push for the latest tech, designer goods, and even luxury experiences, many find themselves splurging more than they intend.
If that applies to you, then there’s something you need to be aware of: your spending habits affect your borrowing habits. Here’s how the two are related:
Buying what you can’t afford leads to reliance on credit
It’s a tale as old as time. It starts as an innocent purchase of something you love or feel you need, even if your wallet is not ready for it. Maybe you want that latest iPhone or that cool jacket, but your payday is still two weeks away. So, what do you do? Either you swipe your credit card or take out a loan from a moneylender.
Given how accessible credit is nowadays, people tend to be tempted to swipe now and worry about payments later. Still, if we consistently rely on debt to support our spending, how can we guarantee that it will not become a cycle?
When the credit card bill or the repayment notice eventually arrives, you might feel overwhelmed in paying them off. The worst mistake you can do is to borrow again to cover for the monthly dues, as it can trap you in a cycle of debt.
Impulse spending can lead to bad debt
From online flash sales to spur-of-the-moment coffee shop dates with friends, impulsive spending has become an everyday reality.
It’s unavoidable, but as long as it’s under control, it’s not a problem. However, if you become more impulsive with your spending, you’ll eventually find it harder to manage your finances. If this goes on, you can end up borrowing money or using credit to bridge the gap between what we want and what we can afford at the moment.
The “Buy Now, Pay Later” mentality
In the past few years, the “Buy Now, Pay Later” (BNPL) scheme has become popular in Singapore. Do not get us wrong – this option can be beneficial. For one, they allow us to enjoy our purchases right away. Still, there are risks if you do not use them wisely.
Yes, it might feel less painful when you are splitting your payments over a few months instead of just one drop. However, too many BNPL purchases can stack up quickly and leave you with multiple installments to juggle, and that is when the fun ends. When your budget is strained, you might be forced to borrow even more to cover the shortfalls.
Neglected savings means more borrowing
No one should blame you if ever you get caught up in the here and now, especially when it comes to spending. It happens to the very best of us. But a crucial fact that is often overlooked is how spending causes us to neglect our savings.
Emergencies, such as car breakdowns, medical bills, or sudden job losses, might feel like a tsunami if we do not have savings. In these situations, borrowing becomes a lifeline. And because this kind of borrowing is unplanned, you’ll suddenly find yourself dealing with interest rates. If you had saved money, you wouldn’t have to borrow.
Conclusion
Winning against bad spending habits shouldn’t discourage you, because you can win against bad spending habits. Try to set aside savings and perhaps avoid late-night online shopping, especially when payday is a little too far. We just need to know our limits and make sure that when we borrow, we do it wisely and not out of desperation.
