The local broadsheet, The Straits Times (ST), has a piece of shoddy financial reporting.

1-in-3 Singapore investors in debt, excluding mortgages – and they mainly blame daily living expenses” the headlines read. Despite the link-bait, doomsday-sounding headline, the article is really about a survey commissioned by a financial planning (read: insurance) company.

You would think that the ST, being the mainstay newspaper of a developed economy aiming to be a financial centre, would have better financial reporters.

Barely a few paras into the article, it becomes apparent why the headline is both accurate and alarmist at the same time.

Close to 46 per cent of indebted Singapore investors owe S$10,000 or more in the form of personal loans, credit card debts or student loans.

Daily living expenses such as food, utilities and transportation were the top contributor to their debt, they said, followed by discretionary expenses such as clothes, entertainment and travel.

Forty-four per cent expect to take longer than one-and-a-half years to clear their debt, the Manulife Investor Sentiment Index found. More male investors were in debt than female

More male investors were in debt than female investors, and carried nearly double the average debt of S$40,985, compared with female investors who carried the average debt of S$25,502.

By looking at the numbers quoted and thinking a little, it becomes obvious that the main reason for numbers quoted is because of car loans. Of course, someone might argue that a loan is a loan. If you owe money, that is debt. And debt is bad.

Now, that is a completely silly way of thinking because first of all, if one is were to default on a loan, the lender can repossess the car and sell it off. That’s the same way a mortgage works. Banks are usually willing to lend larger sums of money to a borrower if there is collateral (the car or the house in our example) because that mitigates the damage in the event the loan doesn’t get repaid.

Now, even if the main reason for those statistics weren’t true (i.e. the huge proportion of people carrying debt isn’t because of car loans), then why should anyone else be worried if the banks and regulators aren’t? Typically, loans are made based on the criteria that determine the serviceability of the loan (i.e. the chance that the borrower is able to repay the loan and interest payments) so quoting figures of how much the average debtholder owes without regards to the average income is like saying that I’m poor without examining any other criteria. Sure, next to Bill Gates I look pretty poor but put me next to the average African or even Singaporean and poor is hardly the most accurate word to describe my circumstances.

By the way, this applies to the economy as well. Every time you hear someone referring to the absolute amount of debt a government owes, please show them this.

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