Huge salaries mean bigger commitments, that’s dangerous. 

It’s sad to note that these days many are spending beyond their means. My parents belonged to a generation that believe savings would be the only thing that would provide a better future as well as for rainy days. When I was a young boy, we (my brother, my sister and I) were given ONE glass of iced Milo for sharing. Somehow, that glass of iced Milo seemed bigger then? Well, I belong to a generation who still believe saving is important but is also torn between material wants. Well, these days, looking at the bankruptcy numbers would reveal that savings matters little. It’s all about looking great today. Worrying about tomorrow should be saved for tomorrow. Just look at the sales number for cars here in Malaysia to understand what I meant. Unfortunately, it’s not applicable ONLY to luxury cars. The sales of the more expensive cars are rising and if it’s true that Malaysian professionals are earning low salaries, then it meant that everyone is now stretching themselves to the limit? Here’s the latest numbers for car sales. 
It’s dangerous when we do not earn enough for a living. It’s equally as dangerous to earn MORE but our commitments go up in-tandem. The reason is simple. Once we spend more, it’s harder to rein in the spending while our salary may change suddenly. For example when some economic boom has passed. One example of such a city would be Perth, Western Australia. After the mining boom has passed, the economy is now struggling. Read the full article in news.com.au here.  Within the article was the story of a project engineer who used to earn A$250,000 (RM811k) per year. After the mining boom has passed, he lost his job and is now working as a part-time security guard, struggling to dig himself out of a financial difficulty. He shared that when times were good, his loan applications were approved easily. It’s like ‘buying an ice-cream!’ (I still remember when many people were buying properties like buying vegetables during those booming years. Fortunately, getting a loan even then was not as easy as ABC or buying an ice-cream.)
If I earn A$250,000 per year one day in future (HIGHLY UNLIKELY), I will only spend 10% of it, A$25,000 (RM81k) and save as much as I could. This is because based on the history of economic ups and downs, good times do not last forever. Just look at the oil and gas industry, even when the whole world needs it. Many have lost their high paying jobs which is not likely to come back while other industries are unable to offer such pay. We can also look at the manufacturing sectors in many advanced nations which has become too expensive versus other lower-cost countries. These days, smaller malls start to face closure pressure and many retail organisations have already gone under. Just a reminder. When we earn high salaries but we have huge commitments, we are basically ‘gambling’ away our future. Let’s learn from all those around us and keep ourselves away from the debt hole.
written on 27 April 2017
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