You will be able to list your debts in a way that shows where your money is going.
Mei Ling is 31 and a nurse at a hospital in Novena. If you asked her how much she owes, she would say "around fifteen thousand" and change the subject. She knows there is a credit card balance, a personal loan she took when she moved out of her parents' flat, and something on another card for a sofa. She pays every bill on time. What she has never done is put all of it in one place, so she has no idea which debt is costing her the most, or how long any of it will take to clear.
This module is about getting out of debt faster with a plan you will keep. Every repayment method starts in the same place: a single page with every debt on it.
For each debt, write one row with five things: the lender, the balance you owe today, the interest rate, the minimum monthly payment and the due date.
The balance and minimum come from your latest statement or the lender's app. The rate needs more care. For a credit card, use the rate on your statement from lesson 2.1, How the interest-free period works and how you lose it. For any loan quoted on a flat rate, use the EIR, as you learned in module 3, so that every rate on your page measures the same thing. If you can't find a rate, ask the lender, or work it out with the RATE function from your instalment, term and amount borrowed.
Here is Mei Ling's page, with every figure made up for the example. Her credit card has a balance of S$9,000 at 26% a year. Its minimum is 3% of the statement balance or S$50, whichever is higher, so about S$276 this month. Her personal loan has S$6,000 left at an EIR of 8%, with a monthly instalment of S$200. And the sofa is S$1,500 left on a bank card instalment plan at an EIR of about 6%, at S$60 a month.
The sofa plan nearly didn't make it onto Mei Ling's page. She thought of it as a purchase, not a debt, because it came through her card as a monthly instalment rather than as a loan.
This is an easy gap to leave on a debt list. Bank card instalment plans and BNPL plans from module 4 are debts. They have balances, due dates and, if you miss them, fees. Go back to the audit sheet from lesson 4.4, Audit every instalment plan you have, and copy every active plan onto this page. Money owed to family belongs here too, even at a zero rate, because it is still a monthly commitment.
Leave off a credit card that you pay in full every month. You owe that balance for a few weeks, but it costs nothing and needs no plan. Only balances you carry from month to month belong on the list.
Add up the minimum payments. This is what you must pay every month to keep every account in good standing.
Mei Ling's minimums are about S$276 on the card, S$200 on the loan and S$60 on the sofa plan, about S$536 in total this month. Her total debt is S$16,500, rather more than "around fifteen thousand".
Now compare that total with what you can actually afford to put towards debt each month. You set that figure yourself, from your budget. Work out what is left after essentials, your emergency fund contribution and the other fixed costs in your cash flow statement from The Singapore personal finance system, lesson 1.4, Build your cash flow statement.
If the minimums are more than you can afford, you are in a different situation from the one this module covers. Module 7 deals with it, starting with lesson 7.1, Signs your debt has moved past a budgeting fix.
If you can afford more than the minimums, the difference is your extra repayment money: the amount each month that goes beyond what the lenders require. This figure is what makes a repayment plan work, because the minimums alone, as lesson 2.2, Why the minimum payment keeps you in debt for years, showed, can take a very long time.
Mei Ling looked at her cash flow and decided she can put S$800 a month towards debt. Her minimums this month are about S$536, so her extra repayment money is about S$264. As the card balance falls, its minimum falls too, so the extra money grows a little each month even though her S$800 stays the same.
What to do with that extra money is the subject of the next two lessons. The avalanche method sends it to the debt with the highest rate, and the snowball method to the smallest balance. Both depend on having this page first.
Gather your statements, apps and the audit sheet from module 4. Your own page needs every debt with its balance, rate and minimum, the total of the minimums, and the figure you can afford each month, with the difference between them written at the bottom.
List every debt with its balance, rate and minimum, and work out your extra repayment money each month.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).