Mr John Lim (not his real name), 53, knew he had to do something drastic when his outstanding debts with seven banks snowballed to $110,000 early this year.

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He started chalking up the debts, via credit cards and personal loans, in 2006. In August this year, he even had a credit application rejected.

Back then, the engineer, who was drawing a monthly salary of $8,000, was spending freely on his wife and two teenage sons. He thought he could foot the bills easily.

'I thought it wasn't much so I allowed the spending, not thinking that when small things were added up, the problem comes. I also wrongly thought that if I made the minimum payment (for credit cards) it will be all right,' Mr Lim said.

To make matters worse, a business he was running failed and he lost about $20,000.

In May, he approached Credit Counselling Singapore (CCS) which helped him to understand the importance of budgeting and worked out a four-year debt repayment programme with the seven banks.

Through CCS, he learnt to cut his monthly expenses by as much as 60 per cent. This was possible by reducing the usage of air-conditioning in the house, cutting his children's allowances, dispensing with the use of a maid and cutting down on expensive clothes.

He now channels $2,500 of his monthly salary towards paying off his debts.

Lorna Tan

This article was first published in The Straits Times.