There is excitement in the opportunity to craft a career path for the ambitious, and also the excitement of the first paycheck to satisfy the wants and needs of the individual.
Money, as they say, makes the world go round, and for the newly employed Bruneian graduate, a stable income not only opens new windows of opportunities but also does so with trumpeting fanfare.
While many of our older generation see a monthly income as an opportunity to save for a rainy day and invest for our children, the younger generation — those in the early 20s and mid 30s who may never have experienced anything but the good life, unfortunately see a stable income as a license to spend frivolously.
Many of us will attest to knowing someone in our family and circle of friends, or perhaps ourselves, who are unfortunately caught in the debilitating affliction of spending money that we do not have, raking up enormous debts, sometimes by choice (brand of cars for example), and others by social expectations and norms.
Weddings, for example, are one such norm. For many who are lucky enough to find their life partner, marriage may represent a start of a new life and new family, but it can also come with an expensive price tag costing no less than $30,000 and upwards of $60,000, depending on how lavish one decides their wedding should be.
Raking up a debt that may take years to clear off in order to start a new life and a future family together hardly sounds like sound financial judgment and planning, but thousands will continue to take the plunge into this debt trap as long as social obligations, customs and the pressures to spend as much as our wealthier neighbours or relatives mindset dictate that they do so.
Apart from the cost of getting married, the other significant costs for most people in the 20-30 age group in Brunei is the purchase of a car.
While you are unlikely to find many Bruneians who disagree with the need to own a car in order to become an economically active member of society, many also make the somewhat overindulgent choice of buying a car that is beyond their economic means. Many mistakably view the car as a social asset (great to be seen with a nice car), but financially a car is more a liability than anything else that eats significantly into a person's monthly income and their savings. And when you add all the costs of living the Bruneian life, a wedding and a car (or perhaps two for some people) would set you back anywhere from $50,000 to $70,000 in debt.
With interest payments ranging from six per cent to 10 per cent per annum depending on which sector you work for and which bank you choose, you will be expected to pay from $3,000 to $7,000 a year simply to service the interest alone for every additional year you choose to lengthen your repayment scheme. Once the downward spiralling debt cycle latches on, it can become extremely difficult to break free and become financially stable and independent.
According to statistics provided by a senior member of the Ministry of Finance, in 2006, Bruneians have a total debt of $5 billion, equivalent to every single household in Brunei burdened with a debt of $100,000.
Or as a nation when averaged out by population, every man, woman and child in this country of 383,000 (yes, even your one-year-old child) has a debt of over $13,000. If inflation holds true for debt as they do for living expenses, coupled with the increasing effectiveness of marketing and promotional strategies of the banks for their loans and credit cards, it is inevitable we will see a steady increase in personal debt levels for the whole country.
Is the situation all that bleak for our younger generation who are just about to join the workforce and possibly embark on a journey of debts, loans and credit cards? Not necessarily, according to Lim Kok Shien, a lecturer in financial management at Universiti Brunei Darussalam. Lim advises that as long as they become smart enough to plan their finances from the beginning, prioritising what is first and foremost the most important thing to them is an important and critical foundation to becoming financially stable in the future. Financial planning is all about setting your priorities. If you feel that your wedding is your priority, then you have to save for that. If after that you feel that it is important to get a car, you must also plan ahead and save says Lim. He also advised new graduates when choosing to buy a car to save and buy with cash whenever possible, but if failing that, the buyer should make a sufficiently big deposit to reduce the loan amount and select the right repayment scheme in order to reduce interest repayments. Making the right decision at the start is important, as bad financial decisions can have a snowball effect that may have long term adverse effects on your future financial welfare says Lim. While the Ministry of Finance has done much to lessen the easy access to loans by capping the amount of personal loans available, the credit spending behaviour of Bruneians are still strong. Lim also advises that there is a need to educate the younger generation the value of money and financial planning. We need to have workshops and curriculum on financial planning for the younger generation so that they can be smarter about money issues, what to prioritise, what to buy and what not to buy. We also need to have more opportunities for our youth to know ways in which to invest their savings, says Lim and according to him there may be projects in the pipeline to address these concerns and issues.
It is increasingly critical for Bruneians to become less naive about their financial matters. The young graduates who will walk out of the exam halls in May 2008 into their new careers may be thinking about getting that latest gadget or dream car with their first paycheck, but getting what they want without falling victim to massive amounts of loans will be a difficult tight rope for them to walk and may only be preventable with better financial planning and education on money issues. If planned properly, it is indeed possible to own a car or two, buy the latest tech gadgets and raise a family, all the while never in debt. And before you know it, it'll be time to buy a house. And that is a whole different ball game altogether.
The Brunei Times
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