Saturday, May 04, 2013

Debt and Bankruptcy...

Imagine that you earn only RM3,000 a month and your expenditure is RM4,500 a month. So, you go out and use your credit card to do your purchase every month. But at the end of the year, your debt is only 50% of your annual earning. When do you think the credit card company will sue you for bankruptcy?

On the other hand, you earned only RM3,000 a month and you saved RM1,000 a month. However, you wanted to start a business, got a loan for RM72K and earned money. That means that your debt is now 200% of your earning. Will you go bankrupt?

If you have not seen my analogy, I am comparing the debt of Malaysia against Singapore whose debt stand at 50+% and 100+% respectively. M'sia borrow money to hand out but S'pore borrow money for capital investment. That is the major different.

The above is my simplistic comparison. It is of course a little more complicated than this.

So, don't be mislead into thinking that at 50+% debt is safe for Malaysia. It all depend on how the money is used. At the end of the day, you and me and future generations are responsible to pay back!!!

... and don't ever think that getting all the free money from the BR1M, etc is a good thing! WE, people of Malaysia, must eventually pay back!

1 comment:

Leong said...

Hi William,
It is absolutely understand that there is nothing free in this world. Look for the hook!