Clueless Americans when it comes to personal finance? Most of us Malaysians too, actually.

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When it comes to personal finance, I think it’s so personal that most do not read and be more financially aware about the world we live in today. We spend, spend and spend and when the month end comes, we realise we needed to save whatever is left in the wallet until the salary day. In fact, some have spent well above what we earn. 38 percent Malaysian youths have personal loans! (read here) If we read, then we may realise that in order to be a millionaire in the future, it involves reducing our spending and increasing our investing actions.

Here’s one advice from someone who’s made it. Skip luxurious coffee and avocado toast to be rich Anyway, before we feel so bad about ourselves, perhaps we learn from some of the more advanced nations. Reading about them may just warn us to think well ahead. What they are going through today should be something to learn from too.

Article in Yahoo Finance here. 56 percent of Americans have no idea how much income they will need to retire comfortably. Thus, they FEAR to retire from their jobs. It is not because they love their jobs so much. Some of these factors should be what they should think about.

  1. Where you want to live. Housing is the single LARGEST monthly expense and it will eat up more of the retirement income. This is why we need to decide where we are going to live after retirement. This will allow us to calculate how much we really need.
  2. Healthcare. There’s even a good chance that healthcare will be the one taking up most of the retirement income if we have medical issues. This is why we need to ensure we have sufficient coverage when we retire.
  3. How we will spend our days. Let’s understand that if we intend to travel extensively or dine out often the money we have will be depleted faster. However, we only need to socialise with friends or bonding with grandchildren, then the amount we need will be much lower.
  4. Savings Assessment. Once the (1) – (3) is done, then it’s time to assess what we have today and how we are going to have what we will be needing in the future. There are of course other funds from the Social Security (EPF in Malaysia). We may even have some shares from the stock market for example. Please do read that article in Yahoo Finance in full. It’s a long article.

Now, we know people in advanced countries are clueless about how much they need. It will definitely happen to us too. Sit down, open our notebooks and just start writing down what we have currently. From savings to fixed deposits to CDS accounts to Unit trusts and more. All these would be what we have today. Make a guess of how much our salary increments would be for at least the next 10 years. Think how much of that would we be able to save. If we have a house today, perhaps get to know its future value too. (click here for the calculator) Once all these are down, take a 50% cut because inflation would have easily eaten half of it by the time we retire too.

Next think of all the items (1) – (3) above. Staying in Kuala Lumpur will definitely be more expensive than staying in Ipoh after retirement for example. Looking back at our medical and insurancecoverage and perhaps read this concise article: Are we saving, earning, investing and preserving what we have? Last but not least, think of all the things that will make us happier. Travelling around perhaps? Else, just calculate in the price of Astro or Netflix subscription if we intend to watch TV continuously everyday until the day we say bye-bye. Remember, that day will surely come whether or not we are prepared for it. Happy calculting and preparing.

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written on 28 July 2019

<Featured Image is courtesy of Stock Photos from ESB Professional>

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