2014 to Mar 2016

A Debt-Free Life

My husband and I spent the entire night discussing about our intentions of living a debt-free life. Business-folk like to tell me there is good debt and bad debt.  A university education for example, is a good debt.  Buying a house is another example of a good debt.  Truth be told, I’ve been there.  I was indebted for 5 whole years for my local university education (very rare among my crop of Singaporean friends whose education was entirely paid for by their parents), and I’ve seen my parents struggle through their housing debt.  I honestly cannot say there is such a thing as a good debt because when you have no income coming in, whatever debt you have, good or bad, is a debt. And if you can’t make payment, everything starts going into a downward spiral.

I’ve been in such a situation before.  I needed to repay my university education loan immediately upon graduation.  Having zero in my bank account and no job offers yet, I chose the lowest repayment amount the banks would allow which was a measly $250 every month (over 5 years) until the entire loan was cleared.  And still I could not repay.  I did some part-time work to tide me over while I looked for a permanent job and still there were some months I came up short.

Now in an Asian culture it is oftentimes taken for granted that your parents will help you out when you are in a difficult situation. Not my parents though.  My father cut me off from allowance the moment I graduated.  He also never gave me allowances during school holidays and my actual allowance during the university term was contingent of giving free tuition to my younger siblings. My mother lost her job during her recession and was dipping into her savings because she was in-charge of the mortgage and she had car payments.   So it was hard to ask my mother for money, though there were times I had to ask because I was so desperate.  I sometimes allowed my debt to accrue without making repayment but the bank will start harassing my parents.

Then you would think I would learn my lesson.  Not really.

I got into a prestigious PhD programme overseas on full-funded scholarship provided by the university itself.  Except resettling to USA cost money.  So I took another loan.  This time it was easier to pay back and I paid back on my dime because the loan was paltry.  But still this loan plus my previous university loan, it was not fun.

My husband is completely opposite of me.  He never had debt and because of his personal situation, he worked since young and he qualified for welfare schemes and grants all his life, which effectively paid for schooling. He is also frugal to a fault (except when it comes to me and his children), he is good with Math and numbers, and he is able to live within his means.  Not everyone, including me, is very good with living within our means.  Social media, especially makes it hard to live within our means because it makes transparent what our friends are spending on and we feel like we need to keep up with the trends.  I don’t even mean like buying a car.  Even doing a staycation is expensive (hotels in Singapore are not cheap).  In my 20s, I did spend a bit on traveling.  Had I not travelled, I would certainly have cleared my debt quicker.  If I were to choose again, I would not travel, sought more part-time work, and paid back my debt with whatever money I had.  But I was not financially savvy and told myself, oh the debt will slowly pay itself, not realising that interest rates was accumulating through the years.

Just before I got married and had children, my husband and I put together whatever savings we had and he helped me clear the remaining of my university loan. Yes, I needed my husband to help me buckle down and pay my longstanding debt.  We wanted to start our life fresh and we wanted to have a family immediately.  We are extremely fortunate that our flat has also been fully paid for by my late in-laws.  Those memories where I accrued debt and compound interest over the years was so painful that I never applied for credit cards and never ever took out a loan in my life ever again.

Although my parents are in a better financial situation today, they are still paying for their flat and they are now thinking of downgrading so they will also be clear of loans.  They have spent their entire 20s, 30s, 40s and now 50s paying debt.  I only spent 5 years and I couldn’t take it.  If they had not shifted to a larger flat, they would have stopped paying in their 40s.

This is the reason my husband and I are willing to make do with a small flat.  Everyone has been urging us to get a bigger flat for our newly expanded family.  I totally understand what they mean but we just do not want to accrue debt.  I just cannot bear to think about all the money going into interest rates.  Would I rather live in a small flat and therefore, not worry about making my mortgage payments every month, or would I rather live in a big flat, and constantly worry?  Something’s gotta give, and we decided a small flat it is.  I know it will be difficult for the girls growing up in a small space, but when they are grown up and we have enough money saved for their future, whatever it is they want to embark on – university, whatever trade school, getting married, having kids – we can help them to get started, and they will understand then.

My husband is the real reason for my financial maturity.  I am one of those people who cannot see numbers, spending, interest rates and what-not in a clear way.  I don’t know what I am losing or trading off half the time.  I know I make certain losses but I am never clear to the extent.  My poor husband often have to break it down for me.  When we were both still in school, he had to make a simple Excel chart for me to keep track of my personal expenses.  Its basically a table from January through December and keeps track of how much I’ve saved in a year after all my necessary expenses like paying bills.  The table is so easy to use that I still use it today for our family budgetary concerns.  I continue to have blindspots in spending so my husband is in charge of our entire financial life.  Whenever I want to make big purchases, I have to consult him. He also consults me but he rarely ever has a big purchase.  I think over time I am a lot better in understanding finances, accounting and stuff like that.  I don’t understand why schools do not teach this.  Our school curriculum is so out-dated its unbelievable, but that’s for another long post for another time.

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