When spending gets out of hand, what can we do to overcome debt. The original version of this article was published on HelloGold.com. 

Crazy shopping culture

The rise of e-commerce industries, e-wallet offerings and faster online payment options has made online shopping and spending much easier.

In 2019, Malaysia has seen a major rise in the number of online shoppers. Boasting 16.53 million online shoppers (that’s almost half the population of Malaysia), millennials aged 25-30 make up more than 50% of these online shoppers.

The e-commerce market is growing rapidly and Malaysians’ compulsion to shop is now in full force. To put things in perspective, e-commerce titans such as Shopee and Lazada saw over 1 million orders during its first hour in the recent biggest singles day sale, 11.11.

With huge spending comes huge debt

As online shopping becomes more convenient and available, there is little doubt more millennials will join a booming spending culture; which isn’t surprising, when you find out millennial online shoppers are already spending at least 1.4 times more than other age groups.

The major concern is that many millennials have extremely poor money management and are shopping with a debt-to-income ratio higher than 50%.

Put simply, millennials are spending more than they earn while incurring debt at an extremely alarming rate. To offset these debts, many are relying on high-interest borrowing options such as personal loans and credit cards. Even worse, 70% tend to pay only the bare minimum monthly payment for their credit cards and at least 45% have missed a monthly payment once.

This doesn’t necessarily point to all millennials as being financially irresponsible, however, as 64% of working millennials actually do save a portion of their income every month.

So what’s the big issue?

Many make the mistake of saving instead of paying back debt first.

Due to the lack of financial literacy, many millennials are losing value in their savings over time due to inflation (2-4% a month) and hefty credit card interest rates (15% average p.a).

What you can do to clear debt and save money

The current lifestyle and spending habits of millennials are not sustainable if they wish to come out of debt and grow wealth.

The good news is that it’s not too late for millennials to manage their finances well and start saving money for those necessary big-purchases in the future (home, car, children).

1. Seek advice on debt management

Many banks and institutions can help with debt management. Millennials can start by visiting a local branch to discuss their financial situation.

If you are struggling with debt yourself, here’s a step-by-step guide on how to get out of debt.

2. Live frugally to save money

Managing finances is important, but in order to make the most out of their money, millennials can benefit from actively managing their wants.

Living frugally doesn’t have to mean living poorly. You can still enjoy within your means while saving consistently every month in 3 simple steps.

3. Ignore discounts, sales and promotions

Malaysians have many ridiculous habits that stop that from saving money effectively, such as buying things just because they are on discount.

Millennials should avoid falling into this trap, especially when they have debt.

Always remember: If you didn’t need that new power vacuum cleaner at full price, you don’t need it at half price. Cancel that shopping cart order.

4. Be patient

Many are probably not going to be able to clear debt overnight. But by staying consistent with debt repayments, millennials can start saving money sooner than never.

Practising patience pays off:

  • Compounding interest. The earlier you start saving and the more consistent you are, the more your money stands to grow in the long-term.
  • Seizing better opportunities. By simply not spending compulsively, you can have better choices when better opportunities present themselves.

Conclusion

It’s easy to get sucked into a culture of instant gratification, but with clear goals, proper financial knowledge and a little bit of patience, anyone can move from being in debt to being financially secure.

 

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What other tips do you have for tackling debt incurred from overspending?