Did you know Malaysia’s household debt is one of the highest in the ASEAN region?
As of the end of 2023, the country’s aggregate household debt has soared to a staggering RM1.53 trillion.
But what did Bank Negara Malaysia response to this? Rising household debt of RM1.53trillion is ‘still manageable’, says BNM. While Bank Negara Malaysia (BNM) has deemed this rising debt as “still manageable,” there is no denying the concern it raises from both microeconomic and macroeconomic perspectives.
If a household is highly in debt, it is likely to suffer during a moment of difficulty, whether it is a general economic downturn or a personal situation. From a macro perspective, a financially fragile private sector will suffer more because it does not possess the resources to face such hardships.
Let’s delve into more details and see the breakdown. Housing loans made up the largest portion of the country’s aggregate household debt at 60.5%, followed by vehicle loans (13.2%) and personal financing (12.6%). The remaining are loans for other purposes, including non-residential property purchases, credit card debt, securities and others. Households with a high level of indebtedness will be led to an increase in your financial vulnerability. Exposing you to more financial risks.
Proactive Steps to Manage and Reduce Household Debt
Given the potential risks associated with high household debt, it is crucial for individuals to take proactive steps to manage and reduce their debt levels. Here are some practical tips to help you regain control of your finances:
1. Assess your current debt levels-
Begin by evaluating how much you owe and to whom. This will give you a clear picture of your financial situation.
2. Create a budget
Develop a realistic budget that accounts for all your income and expenses. This will help you identify areas where you can cut back and allocate more funds towards debt repayment.
3. Prioritize debt repayment
Focus on paying off high-interest debt first, such as credit card debt, while making minimum payments on other debts.
4. Reduce expenses
Look for ways to reduce discretionary spending, such as dining out less or cutting back on non-essential purchases.
5. Build emergency fund
Set aside a portion of your income to build an emergency fund. This can provide a financial cushion in case of unexpected expenses.
6. Avoid taking new debt
Resist the temptation to take on new debt, especially if you are already struggling to manage your current debt load.
7. Monitor your credit score from time to time
Regularly check your credit score to ensure that it accurately reflects your financial situation and to catch any errors or signs of identity theft.
8. Learn more on financial literacy
Educate yourself about personal finance, budgeting, and debt management. The more you know, the better equipped you’ll be to make informed financial decisions.
9. Seek advice from experts
If you’re feeling overwhelmed, consider consulting a financial advisor who can provide tailored advice and help you develop a debt management plan.
While Bank Negara Malaysia maintains that the country’s rising household debt is “still manageable,” the situation is a wake-up call for both policymakers and individuals. By taking proactive steps to manage and reduce debt, Malaysians can protect themselves from financial risks and contribute to the overall stability of the national economy.
It’s essential to recognize that household debt is not just a number—it reflects the financial health of the nation’s citizens. Therefore, addressing this issue is not only a matter of personal responsibility but also of national interest.
What are your thoughts on the current state of household debt in Malaysia? Share your thoughts and let’s discuss how we can collectively work towards a more financially secure future.