Some individuals find themselves trapped in debt under the misconception that certain loans, often labeled as “good debt,” can help grow their wealth by leveraging borrowed money. Common examples of such debts include home mortgages, study loans, and corporate loans, which are typically viewed as investments in appreciating property, education, or business expansion. However, financial experts caution that borrowing to invest carries significant risks, particularly if the investment incurs losses and the borrower is unable to meet repayment obligations. Regardless of the type, all debt must eventually be repaid.

Financial difficulties resulting from debt can have profound personal consequences, notably within couples. Money-related stress is a frequent factor in relationship breakdowns. In some cases, concerns about a partner's financial standing arise even before marriage, especially if debt issues—such as poor credit histories—threaten joint financial undertakings like obtaining a home loan. A 2022 High Court ruling highlighted a case where a woman was granted a divorce due to her husband’s financial recklessness. The husband had repeatedly borrowed money to pursue speculative investments that failed, accumulating debts of approximately $250,000. Despite the wife covering household expenses and loan repayments from her income, the husband continued borrowing, resulting in unpaid debts and his eventual bankruptcy. While spouses are not legally accountable for each other’s personal debts, obligations linked to jointly owned assets, such as unpaid mortgages and utility bills, may complicate settlements. In divorce proceedings, substantial debt can significantly reduce the assets available for division, directly affecting the financial outcomes for both parties.

Debt can also have severe implications for homeownership. Although government-built housing flats under the Housing and Development Board (HDB) are protected from creditor seizure, failure to service the mortgage can lead to repossession. Private property owners face greater risks: properties may be sold to cover outstanding debts arising from investment losses or business failures. In such situations, when one spouse alone incurs financial trouble, the other co-owner may still only be entitled to half the proceeds if the property is auctioned off by creditors. This underscores the importance for couples to carefully consider property ownership structures to mitigate potential losses and tax liabilities.

Overspending remains a primary driver of personal debt across all income levels. There are cases of high-earning individuals with minimal savings and substantial unpaid debt due to monthly expenditures exceeding their income. For instance, the High Court recently handled a matter involving a bank executive earning over $88,000 monthly who had just around $10,000 in cash savings, alongside credit card debts nearing $100,000. His monthly expenses, encompassing his personal costs and those for his former wife and two children, totaled more than his income. The case illustrates that financial prudence, including disciplined debt repayment, is critical for long-term financial stability, regardless of income or the nature of the debt.

Financial advisors emphasize that distinguishing between “good” and “bad” debt should not overshadow the fundamental responsibility to manage and reduce overall indebtedness to avoid adverse personal and financial consequences.