Even if you’ve just entered the job market, it pays to be cautious, patient and financially literate.
However, some use credit cards to cover shortfalls due to excessive spending. If you are in your 20s, you cannot afford this form of debt if you want to be financially solid.Interest rates on credit card debt are 18% to 24%, the highest among all liabilities. If you have credit card debt, prioritise clearing it off quickly.
Are you spending 30% to 50% of your income on your car? If you are, and you feel the car is eating you up financially, it might be timely to reconsider owning one, or you could try to grow your income. A RM50,000 car in the showroom today can be sold second hand for RM25,000 in 10 years’ time. This is a straight-line depreciation of 5% per annum. Not forgetting that your effective interest cost could be about 5% per year, thus costing you a negative 10% in your equity per annum.4. Buying a property you cannot afford
However, the purchase is funded with substantially marked-up loans in order to avoid having to make the 10% down payment.Issues arise after the buyers have collected the keys to their properties. Most would have been unable to sell at a profit for they need buyers willing to make a 10% down payment. If the initial buyers cannot sell their properties, they incur about 4% in interest and other property-related expenses, such as maintenance fees, sinking fund, utility bills, quit rent and assessment.