CPF Education Scheme

Hmm as I've mentioned before, unlike normal Tuition Fee Loan and Study Loan Schemes from the bank, CPF Education Scheme incurs interest from the moment it's withdrawn as this is to ensure that the person of whom you borrowed that money from will continue to maintain their original retirement savings. Although some felt better as it means borrowing money from their parents but.. If you can afford to repay back majority of your loans after graduation, it's better to take the bank loan after all. But whichever is the case, it's best to secure your loan repayment from the moment you take it using term insurance policy so that it's a lot more affordable and value for money during the schooling term. After all, we want to protect our family from the debt we incur in our sch fees and we do want to protect their retirement funds as well.

Just make sure that your calculations and plans is right. With the right plan to repay the debts and the right policy bought, that's the best thing we can do at this point in time. :)

Get out of Debts Now

This is about how to get out of debts now. Yes, immediately. How? Start from today and you'll be free from the crutches of your debt soon. How soon depends all upon your self discipline and the amount of debts owed.

First of all, take a piece of paper and write down how much debt you have and how much savings you have now. You may wonder why how much savings.. well some people do have savings which are earning the pathetic 0.25 to 0.5% interest from the various banks, at most 2% but their debt are charging interest of 2.6% or even more a year. That's why we need to write them down and see what we can do about it.

Next, calculate how much you spent a month to figure out how much emergency fund you need to keep. The rest will go to debt repayment to gain from the savings in interest rate charged by the debts.

Calculate your monthly expenses to figure out what's wrong:

1. Take a piece of blank paper with lines. Draw a wide left column (Desc) and a narrow right column ($) and label them.
2. Divide the sheet into sections: Food, Transport, Housing, Parents, Utilities Bills, Credit Card Bills, Insurance, Entertainment, Loans, Savings or Investments
3. Put all your Groceries, Dine Out and other food related expenses into Food category.
   Look closely at dine out and see if you can cut this part of the bill.
   
4. Put all your transportation related bills into Transport Category.
   If you have a car and your debt is just the car, consider changing to a smaller car or even sell the car, if it's worth selling.
   If you are taking lots of taxi, try cutting down and take other types of public transports.
   
5. Put your rental / housing installment, and other housing related charges under Housing Category.
6. Put the amount of money you contribute to your parents under the parents category. Add in the average mthly "bonus" or extra money that you give them either in lump sum or 1 time off.
7. Put the phone, internet, tv license, water, electricities etc under Utilities Bill.
8. Put the average monthly credit card bill that you need to pay under Credit Card Bill section. If this is the cause of your problem, pls cancel all your cards immediately. Cut them all up so that you won't use them. Start paying off these bills as soon as possible. You may want to use fund transfer to save on the interest for the time being and start paying them off using that fund transfer installments.
   
9. Put all your insurances payments in monthly average terms under this category. If this amt is > 20% of your monthly pay, you may want to revise all of them and see if you really need them or if you should convert them into something else so as not to spend too much on them.
10. Put all the money to buy presents and treats for others, watch movies, concert, buy CDs, DVDs, VCDs, wedding dinner, birthday party, house warming, KTV, etc under Entertainment.
11. Put all your loans such as study loan, car loan, housing loan, etc well just the mthly amt you spend to pay them off in the Loan section.
12. Put the balance of your monthly pay into the savings section. This amount must be positive if not it indicates that your expenditure is higher than your income. If there's a investment portion of it. See if the investment returns are higher or the debt interest is higher. If the returns are higher, perhaps it's ok to pay off the bills slowly. But please be reminded that not all the time, the investment returns will be this high.

Ok now calculate the amount of expenses incurred every month, don't add in the savings portion unless it's a regular savings plan that you can't stop servicing. Take this figure and multiply by 3 or 6 depending on the type of provision you wish to set. Let's name the result as X.

Ok.. Deduct X from all your current savings and you'll find out if you lack emergency funds (Y).

If that's the case, try cutting down your expenses as much as you possibly can such that you don't compromise your life too much like leading a friguid life, just to scrimp and save that little amount to pay off your debts.

Look at your debts and loans amount now. Ask yourself, which is the loan that you wanted to get out of most. Write the amount down and devise a scheme on how to pay them off using your monthly savings 1st that's not supposed to be part of your emergency fund. If you lack emergency fund but yet u want to pay off your debt, in that case just keep about 1 mth worth of expenses and use the rest to pay off your debts 1st. Clear as much debt as possible so that you can get out of it soon. After which, the emergency fund will follow.

If you have the habit of buying stuff and you just need to buy them to feel satisfied, try transferring the amount of money that you intend to spend in the buying habit into a separate account. Use this money to pay off your debt at the end of every month. You will still get a type of satisfaction from it as it's your freedom from debt that you are buying now. Nothing beats that. Read other chapters as I furbish this site after you cleared your most wanted to clear debts. The whole point is in the desire to be debt free and not a is ok to have some debt type of attitude that you'll need in order for things to work out your way. It's your life. Live it the way you want it to be!

Study Loans

Debts is a common problem in Singapore, especially so for those that didn't get scholarships or bursaries to pay off the majority of their studies and didn't get sponsorship from their company or parents. That's all I can think of now.. But if you are one of them.. This may give you a helping hand. This only applies for local govt schools such as poly and local unis.

Prevention Methods:

1. CPF Loans
   
   This is one loan that is preferred not to be taken unless you can't get a bank loan. Why? 'cos it charges you interest the moment you loan the money out, for every school fees payment term. The interest should be around 2.6% per year compound and the moment you graduate, you are already needs to pay about $320 worth of interest (estimated based on 2K sch fees a year with 3 years of studies and 2.6% interest rate) for poly and $1600 worth of interest (estimated based on 6K sch fees a year with 4 years of studies and 2.6% interest) for uni. And the interest continues to compound while you pay off the loan. Yes, some may argue that it's ur parent's money that you are borrowing and you are not worried. But why borrow from them when.. the same amount of money can sit in CPF and earn a similar amount of interest for free?
   
   
2. Bank Loan
   Well this is the loan that I recommends if and only if you are willing to get yourself debt free within the minimum time possible. Why? 'cos bank loans are the only interest free loans during your period of study. Further more, if you are willing to shop for it. You may get yourself something like another interest free period of 6 mths to 1 yr, depending on the economy and our govt's ruling.
   Yes.. This is the best loan you can get apart from a loan from your parents to pay off the study loans as soon as possible. But.. How to do it?

Yes.. how to do it is the main issue discussed in this article. If you want to do it and is willing to do it for all it takes.. This is what you need to do. But please pay off the debt with all your savings 1st only after u secure a job. To ensure that the bank is not mislead that you have the ability to pay off your loan so they can start charging you interest or bill you for the loan.

There are mainly 2 types of path you may want to take:
Poly
University

I'll talk about the cure part another day.