3 Credit card debt

With hard times coming, consumers should be wary about credit card spending and unsecured debts such as credit lines.

'The good times experienced by Singapore over the last few years have lulled individuals into complacency and some bad habits have been built up, such as not paying your credit card bills in full,' says Mr Kuo How Nam, president of Credit Counselling Singapore (CCS), a non-profit group that advises debtors.

'This is a good time to tighten their belts, pay off the unsecured consumer debts as fast as possible and build up a buffer fund as a cushion if something bad happens to their jobs and incomes.'

One way is to curb spending on non-essentials.

Ms Chenise Lim, vice-president at ipac financial planning Singapore, warns consumers that credit card debt is one of the most expensive loans available.

'Don't be taken in by the minimum payment option on your statement, as outstanding balances can attract an annual interest cost of up to 24 per cent. If you're unable to pay your debt in full, try to pay as much as possible and then set aside your credit card and avoid using it until your debt is fully cleared,' she says.

4 Consolidate your debts

As a guide, your monthly long-term debt commitments should not exceed 35 per cent of your monthly gross income.

Consider debt consolidation if you have outstanding balances with different credit card companies and have difficulty paying. CCS can negotiate with these banks and help restructure the repayment of these debts on your behalf.

Ms Poon suggests taking advantage of balance-transfer promotions offered with a lower interest rate to refinance your higher-cost debt.

5 Review insurance policies

Mr Chong urges people to ensure that their hospitalisation policies are in force.

'Remember, you cannot rely on your company's insurance coverage, especially in a downturn, as the company may not always be there,' he says.

An exception is if you have a portable medical plan that follows you even when you leave your employer.

Check if your policies still meet your financial objectives. You may want to discontinue them if they are no longer necessary. Otherwise, it is prudent to take a policy loan, says Mr Lim.

This means you maintain your protection while you take a premium holiday.

During this period, premiums will be deducted against the policy's cash value so you still enjoy your cover.