PETALING JAYA: A YOLO (You Only Live Once) mindset, coupled with stagnant wages and a struggle to live within their means, is pushing more young Malaysians toward bankruptcy, according to economists and financial planners.
Prof Dr Yeah Kim Leng, director of the economic studies programme at the Jeffrey Cheah Institute of Sunway University, said that while the central bank has tightened personal financing guidelines, many youths are still finding new ways to rack up debt from alternative sources.
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“On Sept 30 this year, the central bank released new guidelines on personal financing. These require clear reporting by lenders for long-term loans for personal use, prohibit interest or profit charges based on flat rates and/or the Rule of 78 method, mandate full disclosure of the effective interest or profit rate, and make financial education compulsory for personal financing above RM100,000.
“These guidelines have tightened access to large personal loans, but many consumers are still accumulating multiple debts through credit cards, BNPL (Buy Now, Pay Later), and other credit schemes offered by non-financial institutions – avoiding the intended credit restrictions meant to prevent bankruptcies.
“Besides the YOLO culture and attitude amongst the youths, rising urban living costs and below-decent or living wage levels may have caused youths to accumulate debts beyond their repayment capacity.
“This can then lead to bankruptcy when people face unexpected events such as retrenchment, accidents, or family emergencies,” said Prof Yeah.
He said that wage levels that are inadequate to meet a decent living standard are a major contributing factor.
“Equally important, however, is the ability to live within one’s means through proper budgeting and financial planning.
“More refined and targeted policies and guidelines would certainly help to curb irresponsible lending practices by financial service providers.
“Extending responsible lending guidelines to non-financial institutions such as large retail players that offer consumer credit, including BNPL schemes, will also be helpful to curb imprudent lending.
“On the consumer side, strengthening financial literacy is crucial, including incorporating financial education at an early stage in schools and progressing toward more advanced financial education in colleges and universities,” said Prof Yeah.
In support groups for those on the verge of or already bankrupt, the main advice given was to learn financial management and seek help from the Credit Counselling and Debt Management Agency (AKPK).
In the Facebook page “Muflis Bankrupt di Malaysia” which has a following of 156,600 members, financial planner Afyan Mat Rawi said that it is important to be aware of “the downside of debts”.
“If the monthly commitment is still within your means, continue paying as usual. If you have extra budget, top up the monthly payment to reduce the principal balance.
“This must be done properly and confirmed with the bank if necessary. Otherwise, it may only be treated as an advance payment and will not reduce the debt,” said Afyan.
Afyan advised that if individuals are unable to keep up with their payments, they should first discuss the matter with their bank to try to reduce the monthly instalments.
If that does not work, only then should they seek assistance from AKPK.
Another financial planner, Ajian Kamarudin, wrote on his Facebook page – which offers advice to young people – that adults aged 25 to 44 often find themselves on the verge of bankruptcy without even realising it.
“This group now makes up the largest group declared bankrupt in Malaysia.
“According to a World Bank report (December 2019), 60% of them became bankrupt due to mistakes in financial management.
“Here are three major mistakes to avoid if you want to manage your money wisely: Avoid spending beyond your means, misusing credit cards, and taking out unnecessary personal loans.
“Many people feel their salary isn’t enough, but the real problem is often uncontrolled spending.
“Even an RM10,000 salary can feel insufficient if you live lavishly without proper planning. Just look at famous sports stars – once extremely wealthy, but eventually bankrupt because of overspending!
“Credit cards are easy to obtain these days, but if not managed properly, they can become a debt trap. Minimum payments may seem manageable, but high interest rates (18% per year) can cause debt to grow quickly. Use credit cards wisely – make them a financial tool, not a long-term burden.
“As for personal loans, weddings, home renovations, and buying a car are all common reasons people borrow money. But if you can’t afford it, save up instead of borrowing.
“Life is more peaceful without piles of debt. Financial mistakes today can ruin the future and burden your family. So before swiping your card or signing a loan agreement, think carefully – is it truly necessary, or just desire?” wrote Ajian.
