Are you debt-free?

Most of the people get stressed when they look at their overdue bills and debts. They don't like the feeling of owing debts. They feel like they are working their asses off just to meet the bills every end of the month. They couldn't achieve their financial freedom with this mountain of debts.

Question is, are debts always a bad thing?

Taking our Malaysian PTPTN loan for tertiary education as example, the cost of getting a degree in public universities is around RM30K ~ RM40k (which is definitely a huge difference with private universities which can cost up to RM300K)  and you only get to start paying off the loan 6 months after you graduate from your university. And you know what, the payment is only RM100-300 per month for maybe 20years and with an interest rate of only 1% !!

Do you know what that means? If you put the amount of money in fixed deposit (which gives around 3.5% interest rate), you earn the excess 2.5% rate even you had to pay for the 1% interest rate. Assuming you had to pay it off in 20years, you could have accumulated a total of ~RM60K by just putting in fixed deposit bank account while the 1% interest is only ~RM7K extra , you can earn ~RM23K by just paying off your loan on time slowly instead of in one shot !

If you opt to pay off RM30K in one go, you can skip paying the 1% interest but what for the hassle? You could've earn the excess 2.5% while paying your loan on time! ( which mean you are not blacklisted, just in debts, you still can go for travel overseas.)

Not to mention that if you opt to pay off one shot after you graduate, I am quite sure that you would have used up your emergency fund or any savings that you kept for years. Although you are now debt-free, but you are actually exposed to more risk of financial crisis. You could be unable to pay for your unforeseen car maintenance or a leaking house because you do not have any savings left.
Of course those can wait until you earn some money, but what if the circumstances is that you got into an accident *touchwood* and you need a large sum of money to go for operation? Will your debt-free status save your life now?

Everyone loves to be debt-free including myself. But we will need to gauge our own ability well before we make any decisions that could ultimately expose ourselves to a higher risk of unforeseen circumstances.

That being said, if you have achieved your debt-free status while being able to comfortably cope with your life, congratulations! You are definitely few steps ahead than most of your peers.

W.