Anything you owe — mortgages, car loans, credit card balances, student loans. Bad liabilities fund consumption; arguably-good liabilities fund appreciating assets.
A liability is anything you owe — a financial obligation to another party. Mortgages, car loans, credit card balances, student loans, personal loans, and amounts owed to friends and family all count.
Net worth = total assets minus total liabilities. The liability side of that equation determines how much of your assets are actually yours and how much is owed.
Secured: backed by collateral. Mortgage (collateralised by the property), car loan (collateralised by the vehicle), securities-backed loans (collateralised by your portfolio).
Unsecured: no collateral, higher interest rate. Credit cards, personal loans, student loans, BNPL balances.
Short-term (current): due within 12 months. Credit card balances, short-term personal loans, current portion of long-term debt.
Long-term: due over many years. Mortgages, education loans on long repayment plans.
Good debt: funds appreciating assets or income-generating use. Mortgages on a primary residence (housing utility + capital appreciation), education loans (income uplift), business loans for productive investment.
Bad debt: funds depreciating assets or consumption. Credit card balances, lifestyle personal loans, car loans on cars you can't afford, BNPL on consumables.
Grey zone: car loans for genuine income use (ride-hail driver), education loans for low-return degrees, mortgages on second properties bought late in a price cycle.
Total Debt Servicing Ratio (TDSR): keep total monthly debt payments under 55% of gross income. Singapore regulation enforces this for housing loans; apply it personally to all debt.
Pay off high-interest first: credit cards at 26% are emergencies. Pay them down before chasing 7% investment returns.
Avoid stacking unsecured: MAS caps personal unsecured borrowing at 12× monthly income (above S$120k earners) for good reason. Don't max it out.
Refinance when rates drop: even a 0.5% rate reduction on a mortgage saves tens of thousands over the loan life.
Track liabilities monthly alongside assets. Net worth direction (going up or down) is more important than the absolute level.
Anything you owe — financial obligations to other parties. Mortgages, car loans, credit card balances, student loans, personal loans, BNPL balances, amounts owed to family. Net worth = total assets minus total liabilities.
No. Good debt funds appreciating assets or income-generating uses (mortgages on primary residences, education loans for high-return degrees, business loans). Bad debt funds depreciating purchases or consumption (credit-card balances, lifestyle personal loans, BNPL on consumables).
Avalanche method (highest interest first) is mathematically optimal. Snowball method (smallest balance first) builds psychological momentum. Both work — pick the one you'll actually follow through on. Credit card debt at 26% is always priority 1.
Total unsecured borrowing (credit cards + personal loans) is capped at 12× monthly income for individuals earning above S$120k/year. Below S$120k, the cap is 6×. Exceeding the limit restricts you to lower-rate refinancing only.