Can you blame the government for Singaporeans getting into debt?

 I would like to respond to the article in the ST yesterday about Singaporeans falling into debt. It has been shared a lot on social media and whilst my regular readers know that I am vehemently anti-PAP, I do wonder what this issue has got to do with the government? Like seriously, there are so many people who are using any opportunity to lambaste the PAP but this is not really related to the government, rather it has more to do with one's personal behaviour and how one manages one's finances. Let's go through the list of top 5 reasons why Singaporeans get into debt.

1. Splurging/Overspending

Good grief. What the hell were you guys thinking? If you can't afford it, don't buy it. Who do you have to blame? There is this ridiculous sense of entitlement, which allows people somehow to justify their spending patterns. "If my peers have it, then I am entitled to have it as well." It doesn't work like that in the real world! What do you think this is, a primary school birthday party where the teacher is going to make sure each child has the same number of sweets?

Let's look at my A level peers - I studied at VJC from 1993 to 1994 and thanks to Facebook, I have managed to keep in touch with many of my VJC friends today. I have a pretty good idea of how successful they are and how much money they earn today: there are multi-millionaires who own several successful businesses right down to housewives who are struggling to make ends meet. Is this fair? Who gets to decide what is 'fair' in life? The fact that we all made it to VJC means that none of us were by any means stupid - it was really what we did with ourselves in our tertiary education and working lives that determined the kind of future we had. Quite simply, you reap what you so.

What is fair? Is life fair? Where is the justice?

Some people blame the government for the extension of easy credit to people who really cannot afford to borrow the money - but how far do you want to protect people from their own stupidity? Can you imagine making a law at the supermarket which states that cashiers must stop fat people from purchasing products like chocolate and ice cream because they need to be protected from their own propensity to get fat? No, you are all adults and you cannot and will not be treated like a 5 year old kid even if you decide to behave like one and act with no sense of responsibility. If you get into trouble, you will just have to learn the hard way what the consequences are of your actions.

2. Retrenchment/pay cut/job woes

This is a difficult factor but one that we all have to face: we can no longer expect the luxury of having just one job with one company over a very long period of time. There was a time when one worked for a company for decades, even spending one's entire working life with just one employer and one would be rewarded for that sense of loyalty. That is now a thing of the past and in this day and age, you have to constantly keep your skills relevant, think about what else you can expand into, how to apply your expertise in new areas and seek multiple sources of income.

I have been doing this in the last 10 years since I've become self-employed: essentially I don't put all my eggs in one basket and have multiple sources of income. I work in several different industries (which are not related) and have the simple ethos: make hay whilst it shines. This is a far cry from the time I used to work for one company, going one job and I am far happier with the kind of variety I have in my daily routine: boredom was a huge factor for me to leave my full time job in financial sales ten years ago because I hated being stuck in a routine. I am now in a much more stable position financially, given how my eggs are spread out over so many baskets and I have created a professional network of contacts to offer me well paid work from a variety of sources.

3. Business credit problems

Ah yes. Now that's a tough one: I admire businessmen who put themselves on the line, they invest heavily in their own business and when it goes wrong, well, they have to shoulder the responsibility. What can we do about such a situation then? We have to simply go back to basics: never gamble with more than what you can afford to lose. Investing in your new business may be very different from betting during a game of Blackjack at the casino, but the principles are the same: you are rather uncertain of the outcome but you are hoping optimistically that you will win.

I have gambled and loss my own money before on business ventures - but I have always gone in knowing full well what the odds are and was always prepared that I may lose all my money in a worst case scenario. Another option of course, is to try to get an investor - that is not the same as getting a loan from the bank. If things go wrong with the business, that loan is still your responsibility. But if you can get someone (anyone from a venture capitalist to a friend/relative) to invest their money on your business in exchange for part ownership of your business, then you are removing a huge chunk of personal risk from the equation.

4. Medical bills 

I sympathize. We're not just talking about personal medical bills here - but if you have a family member who suddenly falls sick and chalks up a huge medical bill, that can put an enormous stress on the whole family. This is perhaps one area where the government can step in to do more to help citizens who have been struck down with diseases and illnesses that require expensive treatment - the current healthcare system in Singapore is insufficient. 

5. Gambling 

Now I refer you to point 1 (overspending) - yes there are casinos in Singapore along with loads of other gambling options from online gambling sites to more traditional ones like Toto and 4D. The fact is you cannot ask the government to treat anyone and everyone like a 6 year old child - what do you want the government to do, control every aspect of your life the same way a mother would for a 6 year old? A 6 year old is incapable of making informed decisions - the same cannot be said about a 40 year old adult who should know a lot better how to conduct himself and bear the responsibilities for his actions. Get real people.

So can you blame the government? 

Well, of the five factors here, a lot of it boils down to adults who are unwilling to take responsibility for their actions - in the case of overspending and gambling, these are clearly poor decisions that stem from bad judgement. Even in the case of retrenchment/job woes: there is still an element of personal responsibility to ensure that one is constantly employable and worthy of one's job. There are some Singaporeans who think that they are entitled to a good job just because they are born there and have studied hard - but that's not how the job market works. If you want a good job you have to earn it and as the competition gets more intense, then you have to keep improving yourself.

There are these parents in their 40s who are no doubt busy trying to raise a family and balance the demands of their job - but they then do just enough at work in order to rush home to spend time with their families. It probably makes them a really good parent and spouse but a lousy employee. Think about it - when was the last time you undertook any professional training to improve your skills at work? Young people tend to me more willing to undertake further education and training - older folks in their 40s and 50s get complacent and lazy, they believe that their work experience should put them ahead of the competition but in our high-tech age, they risk becoming obsolete if they refuse to keep their skills current. And when that happens, whose fault is that? Certainly not the government's.

And as for those who experience business credit problems, I suppose some of you could argue that the government can do more to help entrepreneurs get started, that there could be more done to support new businesses - that is always true. But I don't believe that the Singapore business environment is that stifling and if you have an awfully good business proposition, then there will always be a way to succeed. And if you can't get the credit you need to expand, then perhaps it may be a sign to stay small and consolidate your position for now, rather than to take risky credit to expand aggressively. The only area that I can squarely say that the government should do more to help is the point concerning medical bills: but that's just one out of five factors listed. The rest are all about responsible behaviour.

I have mixed feelings about this issue.

How does this compare to the situation in the UK then? 

Well in the UK, we do have a similar problem when it comes to overspending - easy credit is being extended by payday loan companies who target the most vulnerable, lending money to those who can least afford it and enslaving them in debt with high interest loans. It is a serious problem as these companies are preying on the most stupid in our society - some of these loans come with such hideously high annual interest charges like 3000% that no sane normal person would ever take such a loan. So that means you can borrow £100 for a year and have to repay £3100 in a year - that's the original £100 and £3000 in interest. It sounds criminal but some people are actually dumb enough to borrow money at such rates.

There is also a recession in the UK which has affected some people - but again, even in rich countries like Singapore, Japan and Switzerland, some people are rich, some people are poor and some people are just plain average. Some people do better than others in any country and not everyone is badly affected by the recession - I certainly wasn't. The same could be said about the issues of business credit and gambling - the only area where there is a stark difference is that we have the NHS (National Health Service) which is free to access for all residents. So you see, with the sole exception of medical expenses and the NHS, the situation really isn't really that different in the UK.

The situation in the UK isn't that different.

I had a look at some of the statistics on the ST website: crikey, it's frightening. The average debtor is 40 years old and male; they own on average S$78,000 - the equivalent of 28 months salary to an average of 7 creditors. Aiyoh. And these people are mostly married with kids as well - good grief. Why do people allow themselves to get into such a messy situation in the first place? How can they ever get out of debt? And if they are already in debt like that at 40, then what can they retire on? What an utter total mess they are in.

Dare I mention the pink elephant in the room? You know I will. 

It's all about spreading yourself too thin. If you have a low salary, then you cannot afford to start a business. You cannot afford to get married and you certainly cannot afford to have children. If you insist on doing things that you cannot afford, then you will get into debt that will grow deeper and deeper. This is when people start spouting crap like, "oh it's my human right to have married and start a family?" To which I reply, your human rights ain't gonna put food on the table - who's going to pay for your children's education then? Oh is the state going to pick up the tab when you exercise your right to start a family when you have no money? Where is this money is going to come from?

Unfortunately in the UK, that is pretty much the case. The rather generous welfare state does treat children in poorer families very well - so that means that even if their parents are unemployed bums incapable of earning even a penny, the children's basic needs (including education) will be met by the state. Whilst I am glad the children are at least cared for in that way, I hate to see people like that have children and then have no sense of responsibility as parents to provide for their very own children. In Singapore, the state does far less for such parents and thus such parents will tend to get into debt when they can't make ends meet. Thus the only sensible advice is to ask people not to overstretch themselves in the first place by having too many children that they cannot afford to raise.

It boils down to simple mathematics at the end of the day. If you spend less than you earn, then you accumulate wealth. If you spend more than you earn, then you will get into debt. I am in a very comfortable position financially because I have always observed this principle and believe you me, as a self-employed person whose income does vary from month to month, I have to be careful with my money but shouldn't we all? Thank you for reading.