Spending unnecessarily is the real concern

I have forgotten how long have Malaysians been in a negative mood. From high household debts vs GDP for the past many years, to the GST beginnign last year and even the never ending retrenchment news with the latest being that of a giant MNC in Malaysia, Intel Technologies. Well, slightly earlier, there were many reports about Malaysian households facing a tough time nowadays. Household debts have hit nearly 90 percent of GDP and is a cause for concern. Read here: Since household debt vs GDP so high, should we stop buying properties?  Well, negative news seldom stop at just a few.

Reported in a local media recently. According to financial comparison website iMoney in their survey together with credit reporting agency CTOS on “How Well Do Malaysians Know Their Credit”, it has been revealed that 40 percent of the 3,000 respondents have high debt-to-income ratio of 51 percent and above. Let’s not focus too much on the number on the “40 percent”. Let’s focus on the “51 percent” instead. Seriously, have we done some simple calculations to understand where we stand currently? Solid ground or quick sand? iMoney said that the survey showed that Malaysians lack knowledge on credit reports. While I do not disagree but I think the fundamental issue would be lacking in financial awareness / knowledge instead. Perhaps we know but somehow lacking in discipline to do something about it?

First of all, not many people I know prioritises “Emergency Fund” over that new RM5,800 handbag or that RM4,400 smartphone. No one could see how big their Emergency Fund is but everyone could see what they carry and what model they were using. This is why they say peer pressure is the major reason for overspending. Yet, my best friends have never laughed at me for the car I drive or the smartphone in my hand.

30 year savingsSecondly, not many people understood that future wealth depends on what we started doing today. Age is an advantage many would not use until they realised later in their lives. A very simple calculation. If we save just RM100 per month, with an interest rate of 4 percent per annum for 30 years, this seemingly tiny RM100 would turn into over RM70,000! Oh yeah, there’s no way you can ONLY save RM100 per month after a few working years. Get my meaning?

Third and more importantly, we take for granted that nothing would ever happen to us. Yes, protecting our wealth so that we do not suddenly lose a huge chunk of it or worst still, all of it. Insurance is a must, do talk to a good agent who can advise you professionally, not that friend who had just started selling it and may be tempted to quickly earn fast money.

Oh yeah, within that same survey, the biggest financial concern for Malaysians is retirement savings. 32 percent of respondents are concerned that they would have insufficient funds for retirement while 22 percent said they are worried because of the ever rising cost of living. 34 percent indicated however that they were working to achieve their long-term goals by saving enough for a comfortable retirement.

The survey has revealed that what we fear is going to happen. Many would not have enough. Sometimes, the best defence is to attack first. We already know what may potentially happen. Are we going to let it happen anyway? Well, many Malaysians would. Do our best not to be on the wrong side of all these statistics. Happy thinking about starting.

written on 1 May 2016 (YES, I am writing this on Labour Day).

next suggested article: Starting may be similar. Progress up to us really

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