HOW TO MANAGE YOUR DEBTS

If you have sufficient funds set aside for your retirement, you can look forward to your golden years with some peace of mind. However, the majority of us are probably still struggling to pay off housing loans and car loans. There is also the credit card debt to settle each month. The adult children have their own financial commitments to deal with as well, so we can’t expect much monetary assistance from them. There’re also medical expenses to cover, and expensive health supplements to purchase. Meanwhile, we watch the price of our shares on the KLSE nosedive, and wonder how much longer we can keep our heads above water. Circumstances like these can drive the hapless and helpless to consider taking desperate measures like seeking out Ah Longs – or worse.

So where can one turn to for some professional financial counselling? Try Agensi Kaunseling Dan Pengurusan Kredit (AKPK). It is an agency set up in April 2006 by Bank Negara Malaysia to provide financial education, credit counselling and debt restructuring services to individuals. All services offered by AKPK are FREE. Now that’s what I call public service.

I checked out the website and came away quite pleasantly surprised at the services offered. You can even download for free the e-book "Money $ense - Getting Smart With Your Money" to acquire the skills to manage your money wisely.

According to AKPK, if the following list applies to you, you are in need of financial counselling.

If you are not in control of your money;
If you have more debts than you can manage;
If you are living from paycheck to paycheck;
If you are only able to pay the minimum 5% on your credit card bills;
If you are taking cash advances from your credit card to meet your expenses;
If you do not have any savings to meet personal or family emergencies;
If you have debt collectors calling you regularly;
If you are being served legal notice of demand.

Here are some tips from AKPK on how to manage your debts:

· Calculate your total debt to income ratio – if your repayment exceeds 30% of your gross income, then you might want to start clearing some of your liabilities.

· Split your debts into “good” and “bad” categories. “Good” debts are considered necessary investments or debts that create value like home mortgages, business loans and education loans. “Bad” debts or consumer debts are for credit purchases that decrease in value with no potential to increase like buying a plasma TV set.

· List your debts from the highest to the lowest interest rate charged. Set a realistic repayment structure and a time frame within which to pay off your bad debts, starting with those with the highest interest rate charged.

· Limit yourself to one or two credit cards. Settle your credit card bills on time and in full.

· Restructure your debts. Look around for the most competitive interest rates and loan packages.

· Set a monthly budget and stick to it

· Curb your spending habits. Turn over a new leaf to avoid getting into debt again.

There are many sources of funds other than your pension or EPF. Perhaps your life insurance would have now matured. Consider selling your big family home, especially if its value has doubled or trebled; since your children would have left home by now. You could comfortably live in a smaller home with lower maintenance and the surplus from the house sale is yours.

To find out more about the Debt Management Programme (DMP) before you register for it, just attend the daily briefing at the AKPK office in Kuala Lumpur, Penang or Johor Bharu. Call their toll-free number at 1-800 88 2575 for more information.