A Higher Salary Does Not Guarantee a Better Future. What You Do With It Matters!

A Higher Salary Does Not Guarantee a Better Future. What You Do With It Matters!

Many years ago, when my daughter was 10 and her brother was 8, she said the following statement. Yes, she said this when she was 10 years old. This was what she said which made me smile.

“Toys are expensive. We cannot just buy them unless we are working and earning money. Okay?”

Her brother replied, “Yeah, it is expensive. We have no money.”

Haha! That was quite a conversation.

It started when they were talking about the toys at a friend’s house. What I found interesting was how naturally both children understood that toys cost money and that we cannot simply buy everything we want. Or buy everything they wanted.

In fact, both of them have been quite disciplined. They have never thrown tantrums when we do not buy them toys at a toy shop. If they did, I don’t think they will even have any toys for the next 1 week… (Asian parent…)

There are also rules at home. They can only use the smartphone to watch YouTube after finishing their meals. When they are at home, their access to handphone really depends on the time allocation and it’s AFTER they have completed house chores such as folding clothes, keep their things properly, pack their bags for school the next day and more.

I think it is good that my wife is the Home Minister. Instead of allowing strangers or social media to teach our children everything, they get to learn from someone who has both a degree and an MBA too. More importantly, she makes sure they understand the value of money and discipline.

Of course, children will be children. They will still want toys, gadgets and other things. But perhaps the important lesson is that wanting something does not mean we must have it immediately.

And that brings me to an article I wrote some time ago.

#1 – A higher salary does not automatically mean a better future

Some time back, I wrote an article titled Higher salary does not equate to better future, immediately.

One part of my conclusion was:

“Do people have a better future when they get a higher pay? Well, as long as their expenses are similar to their peers and they earn incomes which are 30-40 percent higher, of course their lives are going to be way better.”

I still believe this is true.

Imagine two people earning RM5,000 and RM7,000 respectively. If both have similar lifestyles and spend RM4,000 every month, the first person has RM1,000 left while the second has RM3,000.

That is a huge difference!

The person earning RM7,000 has three times the monthly surplus, even though the salary is only 40% higher.

But what happens if the person earning RM7,000 also spends RM6,500 every month? Suddenly, the advantage disappears.

A higher salary is an opportunity. It is not a guarantee.

#2 – Do not allow lifestyle expenses to grow as fast as your salary

This is where many people struggle.

When we earn more, we naturally start thinking about upgrading our lifestyle. A bigger car, a more expensive phone, more holidays, better restaurants and perhaps a more expensive home.

There is nothing wrong with enjoying the fruits of our labour.

However, we should ask ourselves whether every upgrade is necessary.

If our salary increases by RM1,000, must our monthly commitments also increase by RM1,000?

Perhaps the wiser approach is to enjoy some of the increase while keeping the rest for savings and investments.

The difference between earning more and becoming wealthier is often found in this decision.

#3 – Make the extra money work harder

Saving money is important. But keeping all our money in a savings account may not be enough to build long-term wealth, especially when inflation gradually reduces its purchasing power.

This is why investing matters.

It could be EPF, unit trusts, stocks, bonds or property, depending on our financial situation, risk appetite and investment knowledge.

The objective is not to become rich overnight. It is to allow our money to grow over time.

And please remember, investing is not about following what everyone else is buying. Understand the investment first. Know the risks. Do not borrow excessively just because someone tells you that an investment is guaranteed to make money. Usually, that’s a super deep hole which is actually a trap.

#4 – Do not forget the biggest expense: A roof over our heads

For most households, buying a home is probably the largest financial commitment they will ever make.

If we do not own a home, we will need to pay rent every month. Of course, renting can be a sensible choice depending on our circumstances. But we must recognise that housing remains a major expense throughout our lives.

If we eventually own a suitable home and finish paying the mortgage before retirement, we reduce the risk of having to pay rent when our income is no longer as strong.

This is why property ownership deserves consideration as part of long-term financial planning.

But please do not overstretch just to own a property. A home that creates constant financial stress may do more harm than good.

A better future starts with today’s habits

I am glad my children are learning that money does not grow on trees. They may not fully understand investments, inflation or retirement planning yet, but they are beginning to understand something fundamental: money is limited, and we need to make choices.

The same lesson applies to adults.

A higher salary gives us more choices. What we do with those choices determines whether we build a better future.

Spend wisely. Save consistently. Invest carefully. And remember that the objective is not to look wealthy today, but to become financially stronger tomorrow.

Happy building your wealth!

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