Sucked in by easy credit, more young people are getting into financial trouble
He is well-educated and only 29 years old, but Mr Tan has already racked up $85,000 in debt.
Every month, $1,000 of his salary - which makes up about 40 per cent of his pay cheque - goes towards repaying the amount he owes to banks.
The IT manager, who agreed to speak to The New Paper on Sunday only on condition of anonymity, has been making these monthly payments for the past two years.
With the help of a plan drawn up by Credit Counselling Singapore, he will be debt-free in another five years.
His credit woes began when he started a small business with a friend in late 2010.
The university graduate, who studied management, explains that it was the lure of easy credit that made it possible at the time.
"I had been working before starting that venture, and pumped my savings into it. On top of that, I also applied for cash advances, so it became possible to start the whole thing."
But the business failed just a year later.
When things went south for the aspiring entrepreneur, he spiralled into depression, which manifested in compulsive shopping and spending.
"I would go on many trips to destinations like Hong Kong, Macau, and Bangkok, which made me feel better.
"I would go into shops and just spend. I felt like it was not something I could control.
"A trip to Hong Kong alone set me back $7,000 to $8,000," he reveals in a phone interview with TNPS.
At the time, he had credit cards from six different banks.
"Signing is so easy, especially for those of us who have multiple cards. I signed practically everything on them.
"I got a shock only at the end of the month when the bills came," he says.
Reality sank in when creditors started hounding him for monthly payments.
"The banks started sending me writ of summons letters, and I realised I could not afford to make the minimum payments they were demanding, which at the time amounted to $4,000 to $5,000 a month.
"It was scary, as I had not handled such a situation before. It was also when the letters came that I stopped the compulsive shopping habit," he says.
Repeated calls from creditors stressed him out further.
"When I did not pick up the calls, they began to call my home number, and my parents later found out about the situation," says Mr Tan, who lives with his parents.
"They were not very happy with the situation, obviously," he says, declining to go into further detail.
Other than a few close friends and his parents, those in his social circle, including his bosses and colleagues, did not know about the debt.
Feeling helpless and desperate, he turned to Credit Counselling Singapore, which specialises in helping people with unsecured consumer debt problems.
"They helped to consolidate my debt, and to liaise with the banks to lower the minimum amount I had to repay per month," Mr Tan says.
While the debt repayment plan brought some assurance and reprieve from incessant worry, keeping to it was a challenge, especially at the start.
"The debt repayment specialist looks at what you earn and tries to maximise the amount you can pay.
"So I was left with an amount which was barely enough for food and necessities like transport and insurance," he explains.
He maintains that he has been faithfully paying the monthly repayments, slipping up only when there were events like wedding dinners he had to attend.
He does not carry any credit cards now.
"Getting a credit card is easy, and signing even easier. People tend to use 'future money' without worrying about it," says Mr Tan.
He is looking forward to the day he will be debt-free.
"I will be about 35, and then I can start thinking of saving to buy a flat."
"Signing is so easy, especially for those of us who have multiple cards. I signed practically everything on them. I got a shock only at the end of the month when the bills came."
- Mr Tan
Easy credit Lured in, can't get out
Easy credit is sending more young people in over their heads.
Last year, non-profit company Credit Counselling Singapore (CCS) counselled 595 people under the age of 35 struggling with consumer debt.
The number is more than four times the 140 people - in the same age range - recorded in 2004.
Younger Singaporeans are typically ignorant and unsure about how a credit company works in terms of charging interest, points out a spokesman from commercial debt advising company SG Debtbuster.
Financial consultant Alex Wong, who has been in the line for the past six years, says: "People don't see that the 2 per cent stated is actually on top of another 2 per cent, and at the end you get 24 per cent per annum."
Their comments resonate with other statistics from the credit bureau which show that a larger number of younger Singaporeans are spending more, and struggling to pay their credit card bills on time.
And the problems seem to be hitting those aged 30 to 34 the hardest.
- Last year, they spent an average of $4,523 on credit cards. This was just $3,787 in 2009.
- They also had the highest increase in delinquency rates (meaning they owed money for 30 or more days on their cards) among the age groups. Last year, 17.5 per cent of Singaporeans in this age group were delinquent.
This was 15.7 per cent in 2009.
The biggest reason people get into debt is lifestyle spending, says CCS general manager Tan Huey Min.
Says Ms Tan: "Over time, people get used to a certain standard of living that makes it difficult for them to scale back on their spending (and resolve the debt)."
For young people, peer pressure can be the greatest stumbling block.
"They normally hang out with those who share the same lifestyle and interests as them," she says.
Adds Mr Wong: "It is typically due to overspending on areas such as dining, travel and entertainment."
Mr Wong's clients are mostly under the age of 35.
Debt may compound if they cannot cut out the activities or spending habits which in the first place, led to the problem, Ms Tan says.
The financial picture is not pretty when it comes to young people and their savings either.
An informal survey of 100 people conducted by The New Paper on Sunday showed that fewer than half of the respondents have six months of their salaries saved up.
Many cited poor spending habits and living expenses as reasons for their inability to save.
In addition, a whopping 81 per cent indicated that they were worried about saving enough for their future.
Says financial consultant Edwin Siew, who advises his clients to have three to six months worth of their expenses saved: "Those who are under 35 may have to spend on big-ticket items such as a wedding, down payment for housing or a car.
"These are reasons why it may be a challenge for them to maintain that amount."
Still Mr Wong points out that it is important for people to maintain a fund that can tide them through hard times.
"Even if you have insurance and are able to make a claim successfully, it takes time for the entire process to be completed.
"Having this buffer fund also gives you ample time to look for a new job, should you lose it," he says.
Credit card debt
Average credit card balance of 30-34 age group
Delinquency among 30-34 year olds
Percentage of consumers with at least one credit card that is 30 or more days past due or closed with an outstanding balance
Source: Credit Bureau (Singapore)
Savings affected too
TNPS survey of 100 people on the state of their nest eggs
Do you have at least six months of salary saved as cash?
2% did not answer
Are you worried about saving enough for your future?
What is the main reason you find it difficult to save at least six months of salary?
Of those that answered
High cost of living