MoneySENSE 2: Credit Management

Inability to manage credit properly can lead to serious repercussions. Imagine that your friend is in heavy debt, like one of those mentioned below. The following scenarios are taken from The Straits Times article, ‘Take cautious line on credit cards’:

Scenario 1:  A 27-year-old I met recently at CCS had amassed credit card debts of $58,000 within a year, including $8,000 in interest. He had a dozen different credit facilities.

Scenario 2: An administrative assistant with a predilection for Prada purses turned to a voluntary welfare organisation to seek help with childcare fees when her husband divorced her and refused to pay her credit card bills.

Scenario 3: Another 36-year-old mother of two continued to spend the usual $500 a month on beauty treatments even after losing her job in April this year. She now has debts of $52,000, some of which stretch back to 2002.

How can you help him/her get out of debt?

Also, do you think we should save before we start spending, or save after we have spent? Why?

                                                                                                                                              
Suggested Readings:
- ‘Take cautious line on credit cards’. The Straits Times. 3 December 2008. <http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid=%7B699377036-1139-1477891206%7D>.
- ‘MoneySENSE Worksheet on Borrowing Money’. MoneySENSE. March 2006. <http://www.moneysense.gov.sg/resource/publications/guides_publications/Borrowing%20Money.pdf>.
- ‘Dealing with Debt’. MoneySENSE.  December 2003. <http://www.moneysense.gov.sg/resource/publications/guides_publications/Consumer_Portal_Dealing_With_Debt.pdf>.