Fresh graduates should not have a credit card?!

Fresh graduates should not have a credit card?!

Do fresh graduates live within their means?

Actually, my long time friend told me many years ago that when we graduate, it is highly likely that we would not be able to save much for the first few years. He is partially right. If we are in a low paying job, chances are we would not be able to save much and worse thing is, the banks will approve a credit card to us and this helped to push us even deeper into debt. How to have savings, right?

I had my first credit card (Maybank) as soon as I have completed 6 months in my first job after my bachelor’s degree. That’s when I was just 21 years old! To top it off, I did a supplementary card for my girl friend and sent it to her in Sandakan Sabah via normal post! Haha. I reminded her, please do not spend too much, I may not be able to pay it back. My credit card limit then was RM7,000. Haha. These days, I am a CIMB credit card holder. I think it’s better.

Some do earn higher pay than others

Well, as a fresh graduate, some may earn a higher salary than others. Maybe they have a better degree and thus are entitled to a better pay. Maybe they just got lucky and joined a company which pays handsome salaries. Maybe they joined the sales profession and did extremely well very quickly. Top sales people usually have loyal customers. In other words, they will have repeated sales. Thus every year as they add more new customers, they also have higher sales from existing customers too. Now you know…

Earn, Save, Invest and Repeat

So, some would have the capacity to earn enough in order to save and then to invest. Some will not. There is however one big group who will spend everything they have and more. For example, instead of a typical Proton Saga or Perodua Asia, they will STRETCH themselves to get a Toyota Vios or a City. It’s a real stretch because they would have just enough for accommodation, for food and then the car plus miscellaneous. This is why someone is recommending that perhaps fresh graduates should be barred from having a credit card.

Article in nst.com.my. The head of the Malaysian Insolvency Department (MDI) has proposed barring fresh graduates entering the workforce from owning credit cards.

He argued that younger workers had no real need for credit cards, especially if they were using them to sustain lifestyles they could not afford.

“They want to go to Korea… to Japan. Traveling should only be done when we have extra money, not by borrowing or using someone else’s money.”

“For example, some can only afford a car that costs RM40,000, but they buy one that costs RM80,000.

“Why don’t they cut their coat according to their cloth? If they can only afford a ‘P’ brand car, why do they insist on buying an ‘H’ brand car? Is it just to appear wealthy?” Article in nst.com.my.

RM40,000 is a lot of money, really. Saving on petrol cannot save you!

Sometimes, being financial savvy is very important because some friends I know said they bought a Vios because it saves on petrol. I am like… Erm…

That typical RM40,000 car may have a fuel consumption of maybe 15 sen per km (based on current petrol price) and that typical RM80,000 car, the sales person would tell you saves a LOT MORE for petrol versus that RM40,000 car. Haha. We assume the RM40,000 car has a 20 sen per km consumption. (very high indeed). That RM80,000 car has a 10 sen per km consumption. (very low indeed, something like a hybrid).

If one drives 20,000km per year (this is a very high mileage by the way), then total savings is 10 sen x 20,000km. = RM2,000 per year. Wow… A lot of money? Ten years later it is RM20,000. Wow, really can save a lot of money! Maybe the sales person of the RM80,000 car is right.

Well… it’s RM40,000 versus RM80,000. Buy the RM40,000 car and we save RM40,000 immediately. Not RM20,000 after 10 years based on some crazy calculations.

Yes, I use my credit card very often, that eWallet thingy is just an option for me

Every time I travel, I go to the Premium Lounge even if I could not afford a business class plane ticket. I have been to the Premium lounges in KL, Penang, Kota Kinabalu and even countries such as Hong Kong, Singapore, Thailand, Indonesia and more. Cost of all these? Nothing. Simply because of credit cards. I will not get all these if I use just an eWallet yeah.

I think it’s better to make these fresh graduates understand that going to some countries and showing off in social media or even driving a RM80,000 car is not really showing off to the right group of people. At best they look good to just their similarly ‘poor’ peers who are struggling even more than them financially. Then, they go home to their tiny little room versus owning an apartment to call their own… Plus they have to eat bread towards the last few days of the month… All these, everyone knows lah. This is why it’s better to invest in ourselves and not keep spending to make people see us. That does not help our future at all. Happy understanding.

Happy knowing and deciding.

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