However, it's not a goal that cannot be realised. Here are some tips to follow to become debt-free.
Evaluate your position
CTLA Financial Planners Sdn Bhd managing director Mike Lee says being debt-free comes down to one factor discipline.
“It's a matter of discipline. One should cultivate good spending habits and stick to them,” he tells StarBizWeek.
Whitman Independent Advisors Sdn Bhd managing director Yap Ming Hui says a person should “draw up a table” and list down his or her ongoing debt obligations.
“A person needs to take stock of the loan that they have. Make a table, list down the financial institution, type of loan, the loan amount and the interest rate.
“After that, you need to rank it and work out a savings plan to settle it every month. You should of course put more emphasis on the debt with the highest interest rate,” he says.
Pay off your existing debts
Standard Financial Planner Sdn Bhd's Jeremy Tan concurs: “With the cash you have, work towards cancelling debts with the highest interest rates.”
Tan says interest on credit card debt is the highest, followed by personal loans and then vehicle loans.
“Interest rates of personal loans are comparable to those of credit cards. As for vehicle loans, these can stretch up to nine years.
The next debt in line that needs to be settled is the housing loan, he says.
MyFP Services Sdn Bhd managing director Robert Foo, however, points out that not all debts are bad.
He says one should distinguish between consumption debt (such as credit cards), and productive debts which one gets when running a business or buying a property.
“If one has a lot of consumption debt, it should be paid off as soon as possible. Productive debt meanwhile is okay to build your assets.”
Yap says not all debts need to be settled immediately.
“If you have debts that have an interest rate of about 4% per annum, but you are investment-savvy and generating between 8% and 10% in returns annually, then you don't need to settle your debts so soon.
“Instead of repaying a loan, you should be investing the money. If you end up paying the loan, then you may not have money to invest and generate more income.”
Yap, however, says that only if interest rates increase should a person consider settling their debt as soon as possible.
Apart from trying to avoid future debts, Success Concepts Life Planners chief executive officer Joyce Chuah says people should be smart in their repaying habits.
“Debt-trappers to be avoided include instalments plans, which are essentially easy payment plans for a particular product. You should only opt for these if they are interest free.”
Foo says people need to be more forward-looking when taking on debts.
“It is a question of discipline. Many people are not forward-looking. Most people believe that they will be able to pay off their debts eventually. A lot of times, that's not the case.”
Chuah adds that individuals just need to be more cautious and avoid taking on financial obligations if possible.
“Never agree to act as a guarantor. One should also know what he or she is spending on. A lot of us tend to spend mindlessly.”
Tan concurs: “Avoid buying on impulse. Work out what you need and don't need. Using a debit card is also a good alternative instead of a credit card.”
Have a good plan
Of course, it helps to have a good financial plan from the start.
“Look at your financial situation. A lot of things can go against you. For instance, your business may fail or interest rates can go up - which can end up being a problem,” Foo points out.
Lee says someone that does not have a financial plan will eventually be heading for disaster.
“If you have no plan, than you are directionless. If you don't have a plan of your own, consult an expert, such as a financial planner,” he says.