One of the goals for many borrowers is to be finally financially independent and loan-free. That means never relying on a legal money lender ever again. However, in a place like Singapore, it might be hard. That is why it is extremely important that instead of insisting on achieving this, it’s better off to just accept the facts why living loan-free is difficult. From there, you can decide wisely whether living loan-free is for you or not.
Competitive Job Market
Singapore’s job market is very competitive, and one needs to invest in education and skills development. Access to affordable education and opportunities for skills acquisition is rare and case-specific. Some of these investments also require student loans.
Alternatives to loans are scholarships and grants, as well as part-time work opportunities that can help you fund these costs. Although these could be great options that would keep you from borrowing money, it does not guarantee full coverage of what you will need in terms of costs and you might still need to apply for a loan.
Housing Costs
Getting a house, whether renting or buying, is very expensive these days. This is especially true with the latter, to the point that many can’t afford one without a loan. You can lower these costs by saving for a down payment as early as possible and considering government housing options like the HDB flats in Singapore.
Lifestyle Expectations
In today’s society, meeting the expectations of keeping up with the Joneses can lead to overspending. Like, social environments coupled with peer pressure can cause people to overspend on dining, entertainment, and shopping. That is true, and at the same time, you have to identify what you want and need. Make sure you experience what you truly enjoy and give you satisfaction, as well as seek affordable alternatives so that you can budget your money well. Having clear financial goals, and tracking your expenses will keep you disciplined.
Unexpected Expenses
Have you ever had an emergency in which you felt overwhelmed because you were worried about your finances? After all, life is uncertain, and with any untoward expenditure, financial plans can go haywire. For instance, any medical emergency, an immediate house repair, or maybe just some family obligation may lead to taking loans. That’s where making an emergency fund becomes important. Strive for at least three to six months of expenses set aside in a separate, easily accessed account. Even if it won’t cover all of your emergency expenses, it will at least reduce the amount you have to borrow.
Slipping Into Having Multiple Loans/Debt Cycle
Once you take out a loan, it is very easy to slip into a cycle of debt. This is because you will feel like you need a bit of extra money. To prevent this from happening, it’s important to have the right mindset and thinki critically before taking out another loan just to compensate for the previous one. On the other hand, if you already have multiple loans set aside prioritize paying off high-interest debts or consolidating all your debts into one with a lower interest rate to make repayment easier and reduce the overall interest paid.
Poor Social Safety Nets
Singapore has relatively limited social safety nets compared to some countries. This means that with unemployment or not having a high-paying job, you will not have a ready form of substantial support. And when you find yourself short on funds for necessities despite having regular income, you will have no choice but to borrow money and apply for a loan. Thus, it would help to have good to develop various sources of income, like freelance work and part-time gigs to ensure your financial stability.
Rising Cost of Basic Necessities
Indeed inflation is one of the main reasons why we are all struggling to afford what we need, such as groceries, transportation, and utilities as it is continuously rising. This makes it harder for us to save and manage without resorting to loans. To cope, you can cut costs. Use public transportation or if you have an active lifestyle, you may consider cycling instead of driving. Buy in bulk during sales, and utilize energy-saving measures at home to lower utility bills. You can even practice minimalism.
Conclusion: Avoiding Debts Can Be Equally Stressful
Staying or becoming loan-free is undoubtedly quite challenging, given the cost of living, a fiercely competitive job market, and other financial pressures. That is why it shouldn’t be a priority. Borrowers are better off focusing on budgeting, saving, and finding ways to earn more. With determination and careful planning, achieving financial stability and minimizing loans taken is possible.
