Fundamental Common $ense.

Borrow only to buy an asset
Assets are good. Once you've paid for them, you have something of value that you could sell if you had to.

There are two kinds of assets – value builders and value losers.

Value builders are assets that are likely to hold their value, grow in value or give you income after you've paid for them. A house is the classic value builder (although houses can lose value). As a rule, if you keep a house for the long term (over ten years) the value will increase or stay about the same. You also save money on rent (although you pay out money on maintenance and rates). And if you needed to, you could sell the house and pay back your debt.

Education which enhances your job prospects (and income earning potential) is a great value builder.

Buying a value building asset is an investment. It's a valid reason to go into debt.

Value losers are assets that lose value after you've paid for them, like a car. Every year you own your car, it is worth less money. Borrowing to buy a car can be a bad move – especially if the car loses value faster than you can pay the debt off.

If you really need to buy a car (or any other value loser) with a loan, think about borrowing only part of the purchase price. Save to pay Expenses
Expenses are things that leave you with nothing after you've paid for them. Living costs, nights out, and holidays are all expenses. Pay for expenses from your income or short-term savings.

It can be painless to pay for a meal in a restaurant on your credit card. But if you take a few months to pay off the credit card, it can be very painful when you realise that interest is making that meal out (which you barely remember by now) more expensive every day the debt isn't paid off.

Remember, saving money to buy things makes the overall cost of those things lower.
[ Extracted from Credit Bureau (Singapore) ]