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What to do when in debt, stressed out, caught in a vicious cycle and unable to think clearly


Recently Channel News Asia did an episode on how poverty tends to trap people into making poor decisions (link at bottom of article). That, coupled with a recent meetup with someone else in debt prompted this article on how to retain your sanity and tackle debt in a clear-minded way.

Step 1 – Take time to breathe

Taking deep breathes allows for more oxygen into our body and instantly helps us to relax and clear the mind.

When we’re calm, we are able to look at the situation rationally to work on solutions. And it prevents the downward spiral many people inadvertently get into.

One good exercise is to do the 5-5-5- method. Inhale for 5 seconds, hold for 5 seconds and exhale for the last 5 seconds. This can be done wherever you’re at, do it at least twice a day.

Step 2: Rank debts in order of interest rate

List down all the debts you owe and put them in order from highest interest rate to lowest interest rate.

Generally speaking, loans with the lower interest rate are housing loan (mortgage loan), followed by renovation loan, personal loan, with the highest being credit card loans.

For the lower interest rate loans like a mortgage – my suggestion is not to pay off those loans upfront, leverage on those as much as possible. Use refinancing to generate excess cash flow to pay off loans with the higher interest rate. This will help to reduce interest and fees paid to the banks and will help greatly in reducing the principal loan amount.

As situation for each individual differs, please consult the Professionals to find out the best suited solution.

Step 3: Debt consolidation

Work with banks and finance companies on debt consolidation, and pay off the debt in order of highest interest rate first. The objective is to reduce fees and finance charges payable to banks.

Call all the banks! Always take calls from banks and don't be afraid to talk to them and negotiate. Remember that by taking loans from banks, you are paying them interest payments and all banks want your business (i.e. loans).

Step 4: Talk to the Professionals

Talk to Professionals who are familiar with how the finance & banking world works, look for someone supportive to work with and who can help you to think outside the box based on the resources available to you.

Step 5: Work towards a goal

As with everything, it’s important to have a goal in mind. Plan out the timeline for paying off the loan. Be flexible enough to make adjustments along the way, but work towards a target, so that you see light at end of the tunnel.

Step 6: Emergency Funds

A lot of people ask me whether the resources should be targeted towards repaying the debt or setting aside emergency cash.

While we’re taking care of the loans, at the same time, it is important to put aside funds, for emergency funds as well. It does not matter however small the amount is, the main point is to create the habit and start building it up bit by bit. It will give you peace of mind.

Step 7: Cash Flow Projections

Do up cash flow projections, considering fixed, variable, current and forecast expenses. This will give you a good sense of how your cash flow will be.

We understand that not all are detailed and numbers person, do look for a reliable and trustworthy Professional for this if require assistance.

Step 8: Moral Support

Ensure spouse or family members are aware of the situation and kept in the loop. Mutual support is very essential in this. Knowing that you do not have to fight the battle alone is already half the victory won.

Step 9: Accountability Partner

Find a Professional to set up the cash flow plan and perform periodic checks to ensure the plan is progressing on right track. A good Professional has a good understanding of your situation, your risk level, your target goals, helps you to have clarity in your financial goals and is also a good accountability partner and open to making adjustments along the way.

References & Contacts




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