Curbing out-of-control spending

Youths have to exercise self-control when it comes to credit card usage to avoid overspending. — AP Photo

HAVING self-control and ability to keep one’s lifestyle in check helps when it comes to credit card usage and dealing with the issue of overspending, especially among the youths.

MetroPerak spoke to several people to get their views on why more consumers were facing serious financial problems.

Many acknowledged that it was tempting to swipe their credit card to fulfil their whims and fancies, and said little could be done if one did not learn to control their impulses.

Some felt that families should step in to play a bigger role in reducing the seriousness of the problem.

Registered and licensed counsellor Aldrich Low Guo Nan said the basic rule was to save first before spending and not just save the balance.

He said it was important to save at least 10% of the monthly income first before spending any money.

Aldrich said people must be aware that swiping their credit card was equal to using their income in advance.

“Thus credit cards must be used wisely and also when it is necessary. But a lot of youngsters fall into this trap.

“Although some of them may have high credit card debt, they still continue to use their cards to buy items, instead of using cash,” he said.

Aldrich added that to avoid overusing credit cards, it would be good for banks to consider sending out an SMS to inform users of their latest statement balance and due date for payment each time the card was swiped.

This, he said, would raise awareness and could probably prevent them from overspending.

“I have come across a few clients who sought counselling service from me on their huge debts because they misused their credit card’s cash advance service.

“They used the service to get cash for gambling and because of their addiction, are unable to even pay the monthly minimum payment.

“Finally, I had to refer them to the Credit Counselling and Debt Management Agency (AKPK) to restructure their debts,” he added.

It was reported recently that more Malaysian consumers were getting into serious financial problems because of poor financial knowledge, wrong attitude and poor financial habits leading to irresponsible financial behaviour.

The number of consumers being declared bankrupt and those seeking assistance from AKPK was also increasing.

It was reported that a total of 294,000 consumers were declared bankrupt because of their failure to settle credit card, car, hire-purchase, personal, housing and social guarantor debts.

About 70% of those declared bankrupt were individuals between the age of 35 and 45, and according to AKPK’s statistics, the major reason was poor financial planning.

Advertising executive T. Avineshwaran, 27, said he learnt about financial management from his parents.

He said everyday, they reminded him to live within his means and never to overspend.

“I always keep a budget and track my finances.

“Usually, I jot them down in my mobile phone or diary.

“Youths these days do not have the discipline of noting down their budget, but they must know that budgeting is essential and helps avert any crisis,” he added.

Avineshwaran said it was important for youth to learn how to spend modestly.

“Using a credit card must be a last resort, as cash and debit card is much safer.

“Youths tend to get excited when they use credit cards and parents can play a role in reminding them to be cautious,” he added.

Health consultant Low Leong Sin, 58, said those with credit cards must be prudent.

Leong Sin said because of poor financial knowledge, there was a tendency to overuse the credit card.

“I think owning a card on a need basis is important, because youngsters have high purchasing power these days.

“If not controlled, their debts can pile up, especially for first-time cardholders,” he added.

Leong Sin said they might not understand the compounded interest incurred by the bank.

Therefore, he said it was important to teach children the importance of saving and earning interest.

“Saving from a young age is very important and a credit card must not be easy to get.

“Limitation of usage on a daily basis will reduce spending temptation,” he added.

Self-employed Christina Fam, 42, does not use a credit card.

“I feel that the rising cost of online games, shopping and gambling are among factors leading to overspending.

“Parents must always instil in their children the importance of money management to avoid high debt,” she added.

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