Tuesday, 13 October 2009

Learn how I let my finance commit suicide

Let me share with you my own personal experience that gave me a wake up call to get myself the hack out of debt.

It all started when I was just at my first job, getting $2,000 per month. It felt so good to have $2,000 all to myself. The feeling itself was contributing to the whole problem. Suddenly, I felt that I am richer (thinking that before this, I merely living with $400 per month from my university sponsorship program). Now, I was 5 times richer with my new salary. What that feeling did to me, within just 1 year from starting my new job is:
  1. I thought that I can own a car. So, I buy a 2nd hand Kancil to go work.
  2. I rent a house which was 40 minutes away from my office, so that I can be near to my university friends.
  3. I applied for credit cards from Citibank with $5,000 credit limit.
  4. I started to buy new clothes, new gadgets and things for my well-being.

My 2nd biggest mistake was never track my money flow during this period. My current monthly car payment, house rent and daily spending was actually within my salary budget. But, since I never monitored my luxury spending of shopping, I was actually spending more than I able to cope. Whenever I am out of cash, I started to swipe from my credit card. By end of the month, I only paid back the 5% minimum to my card and continue to use it until it's maxed out its outstanding limit.

My 3rd biggest mistake, was the way I tried to recover from not having enough money. I applied for new debt. I applied for 2nd credit card from MBF with credit limit $4,000. Since my personal finance skill never improved, the new debt soon add up to my problem when the $4,000 limit is maxed out.

After that 1st year, I have been trying to survive monthly trying hard to make it the minimum payment to my cards. It does not stop me from spending, but instead, I kept borrow people money to survive every month to pay for all those loan payment.

3 years after that, my life never got any better. I was transferred from one state to another due to my work, and every change in life was such a drawback since I had no savings at all. I was unable to really say that I managed to enjoy my salary, because every time I got my salary, it was gone to pay for credit cards that seems never actually reduce on its outstanding. This was all because I kept on paying the 5% minimum, then charge again the card every time there was some credit available.

Then, on my 5th years, I happened to stumble across BSN personal loan that offer up to $20,000 loan for tenure of 5 years with interest 6% per annum which was very low compare to the market that time. I applied the loan, in my mind thinking that I want to use the loan to finally get myself out of the credit card problem. To my luck, the loan was approved and suddenly $20,000 flowed to me. That was the first time I saw so many cash in my hands.

Did I manage to get out of my finance problem? No! This is what happened:

  1. I paid $9,000 for the 2 credit cards. It gave me a sudden improvement on my credit rating. All of a sudden, any credit cards or personal loans application was easily approved.
  2. I started to buy things that I wanted from the last 5 years but never can afford to before.
  3. I started to buy expensive gifts for those people who always let me borrow their money when I am in trouble before.
  4. I started to track my cash flow. But, I failed to track my credit card usage.
Within just 6 months, I was drained out of the $20,000 cash. But, it felt good since I managed to track where the cash have gone too and I did not felt that it went to waste. Because of my good credit rating, all banks seem to treat me well and money seems to never ending flow around me. Here what happen during that period:

  1. My Citibank credit card was converted to Gold Card to give me more privilege but do not increase in $5,000 credit limit.
  2. My MBF credit card now have $4,000 credit limit available to me.
  3. I was approved for HSBC Gold credit card with $10,000 credit limit.
  4. EON bank gave me credit card with $8,000 credit limit.
  5. I got RHB credit cards with Plus One privilege so that I got points buying gadget from SenQ with $4,000 credit limit.
  6. Standard Chartered bank gave me credit card with $6,000 credit limit.
  7. Hong Leong bank approved a $8,000 credit limit card.
  8. Maybank also gave me $5,000 credit limit card.
  9. I got Jusco Aeon credit card too with $4,000 credit limit.
All of a sudden, I got $54,000 in credit cards so-called "available" to my use. I was spending like crazy. Never had a moment of window shopping. Anything in display, I will just swipe my card to buy them. I even use my cards online to buy product from Lelong.com or Ebay.com. I kept on tracking my cash flow, but that time, never occur to me to track my credit card flow. Every month, I paid just 5% minimum on the card, but the statement keep on showing that I still have many available credit to spend on.

Another big mistake during this time, I started to feel that it is very convenient for me to apply for personal loan since I was easily approved for one from BSN. So, here I go again:

  1. Applied for personal loan from Alliance Bank of $20,000
  2. Personal loan from Citibank of $10,000
  3. Personal loan from AEON of $2,500
I felt that I was on top of the world. I purchased a 2nd hand Gen2 car during this period. During this period too, I was transferred to another state to follow my work requirement. My company paid me an amount of $15,000 cash for the transferred.

After transferred, I purchased a house at my new location. The purchase supposed to be very light for me, because I got support from my EPF for $18,000 for the down payment and legal fees.

After settled down here, I kept on spending to fill up my house with furniture, gadgets and appliances. Within just 3 years, I maxed out on all my credit cards and used up my entire personal loan. I am now, in total, in debt to bank at $106,500. Monthly, to pay these loans and minimum of my credit cards, it takes me around $7,000. I was stunt by this number since my salary was only $5,000 that time.

After 7 years of working life, now only I felt that my life in trouble. What can I do? How can I manage paying for $106,500 of loans, my hire purchase and my home loan? My salary considers too limited compare to what I owed bank.

Do you had the same financial disaster life story like mine? I will share with readers on my next post of how I finally get out of this problem. If you have you own advice, it would be most appreciated to share them here.


Anonymous said...

I think your story are fake dude..

Izmal Hussein said...

Everyone has the right to think. It is our own brain, anyway.

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