RESOLVING YOUR FINANCIAL DIFFICULTIES

MANY people are mired in hardcore financial issues due to a variety of reasons, and the journey towards financial stability can be fraught with challenges.

The primary factors are peer pressure and the allure of the “You Only Live Once” mindset, which encourages overspending on luxuries.

Misguided financial decisions stemming from a lack of understanding about loans and financial management further compound the situation.

Moreover, embracing get-richquick schemes ultimately leads to financial ruin, perpetuating the cycle of debt and bankruptcy.

Adverse Outcomes

Unforeseen events such as sudden job loss or a critical illness can disrupt financial stability.

When a young person loses their job, they not only face the challenge of replacing lost income but also the long-term implications of unemployment.

Without a steady income, they may struggle to meet financial obligations, including loan repayments, rent or mortgage payments and daily living expenses. This can quickly deplete savings and push them into debt.

Similarly, a critical illness can have dire financial consequences. Medical expenses associated with diagnosis, treatment and ongoing care can quickly accumulate, especially if the individual does not have adequate health insurance coverage.

Additionally, the inability to work or the need to take unpaid leave can further strain finances.

Signs of Financial Distress

• Tight cash flow and high dependency on credit cards or borrowings to cover expenses.

When individuals experience tight cash flow, their income is insufficient to cover their expenses.

They may constantly struggle to make ends meet and resort to credit cards or loans. This often leads to accumulating debt, as they may not be able to repay the borrowed amount in full each month.

Over time, interest charges and fees associated with credit card usage can exacerbate the financial strain, further worsening their financial situation.

• Arrears in debt repayment and selective payment of debts.

Falling into arrears means failing to make timely payments on debts or bills. When individuals are in financial distress, they may prioritise paying off debts with higher interest rates or debts secured by collateral to avoid repossession or foreclosure.

However, this often means neglecting other debts, resulting in late fees, penalties, and damage to credit scores. This creates a vicious cycle of increasing debt and financial instability.

• Receiving reminders from banks or debt collectors.

When individuals are unable to pay their debts, creditors may contact them via phone calls, letters, or emails to remind them of their outstanding payments.

These reminders serve as a warning sign of financial distress and debt management issues.

In severe cases, debt collectors may get involved, increasing pressure on the individual to repay their debts.

Constant communication from creditors and debt collectors can cause stress and anxiety, further exacerbating the individual’s financial difficulties.

However, it is possible to overcome financial difficulties and build a better financial future by following three practical steps:

Admit

Individuals need to confront the reality of their financial situation. This involves acknowledging the existence of financial distress.

Analyse

Denial or avoidance of financial problems prolongs the issue and prevents effective solutions.

After acknowledging financial distress, individuals should analyse the root causes of their financial difficulties. This may involve examining spending habits, identifying sources of debt, and understanding patterns of financial behaviour.

This analysis will give individuals a clear understanding of their financial situation and lays the groundwork for creating a targeted plan for recovery.

Act

Once individuals have analysed the root causes of their financial difficulties, it’s essential to take proactive steps towards improvement. This may include seeking financial advice, exploring debt restructuring options, or implementing a budgeting strategy.

Action is crucial for moving towards financial stability.

Whether it’s negotiating with creditors or cutting unnecessary expenses, every step taken brings them closer to their financial goals.

AKPK as a Redress Avenue

Agensi Kaunseling dan Pengurusan Kredit (AKPK) is an agency set up by Bank Negara Malaysia in 2006 to help individuals take control of their financial situation.

It offers financial advisory and debt repayment assistance to individuals facing financial difficulties. The services are designed to provide support and guidance to those seeking to improve their financial situation.

There is no need to suffer in silence and sacrifice the mental health of yourself and your loved ones. AKPK may very well be able to offer a solution to your financial woes.