Know your expenses before owning

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by Nicholas Leong

 

BUYING a property is a huge commitment but many overlook this fact, according to Credit Counselling and Debt Management Agency (AKPK) chief executive officer Mohamed Akwal Sultan.

Greed, lifestyle and circumstances, or GLC, as Akwal summarised, are the leading factors of debt risks.

According to him, it is not about how much money one has and doesn't spend at all, but about what one spends on and living with manageable debts.

Thus, having financial education in its management can help reduce debt risks.

"Only buy a home when you can really afford it. This means full commitment to an individual's entire loan repayment that does not exceed 40 per cent of your total income.

"There are times when financial difficulties are caused by unforeseeable factors such as sudden medical expenses or unfortunate circumstances that may befall the breadwinner of a household," he said.

On the other hand, he said a large majority of individuals bring this situation upon themselves when they start spending beyond their capabilities through investment or attaining a certain level of social status by force.

An AKPK report shows 25 per cent of defaulters or those having difficulty in servicing their debts have poor financial planning and 15 per cent lose control of their credit card usage.

Another AKPK report shows that 69.5 per cent of those enrolled with the agency's Debt Management Programme (DMP) from 2006 to February this year have an annual income below RM36,000, or an average monthly income of RM3,000.

Of the participants, 43.7 per cent are between the ages of 30 and 40, and 40.8 per cent above the age of 40.

A total of 79,037 out of the 144,720 counselled individuals are from the Klang Valley.

And of the 55,225 individuals under the DMP, 30,604 are from the Klang Valley.

"Individuals become more inclined to commit to their home repayments when it is the only home they have," Akwal said.

His advice: Never rely purely on financial backing from others without having your own personal stable income. Also, never be too generous with your money because you never know when you'll need it.

AKPK - a wholly-owned subsidiary of Bank Negara Malaysia - was established in 2006 to provide financial counselling and debt management to individuals as well as educate them on financial control.

It recently launched its POWER! programme to educate Malaysians on financial control and making sound financial decisions.

Open to all age groups, the programme is held at AKPK's offices around the country from 9.30am to 1.30pm every Wednesday.

* For more information, surf to www.akpk.org.my or www.speaksens.com.my or call 1 800 88 2575.

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