A recent report said personal debts among Malaysians have reached 88 per cent of GDP (Gross Domestic Product). Yet the same report implied that high debts would dampen consumption which in turn would affect GDP growth.
Can we see the irony here? The debt level among Malaysians is high and yet most Malaysians are expected to keep the borrowing going and consumption growing to support the magical growth number so much desired by the government of the day. Have we ever wondered where the “fruits” of economic growth have gone? Why after years of repeated growth, are many people, especially among younger Malaysians, getting nowhere with stagnant income and high personal debt?
It is time to challenge conventional economic wisdom. So here is my take; I am not going to ask Malaysians to borrow more to support their lifestyles or to consume more to support that magical GDP growth number. This is simply unsustainable. If your income is too low, you cut consumption, find a higher paying job or demand better distribution of income (i.e. demand higher wages). Do not borrow more. It is useless to be hoodwinked into the growth mantra when the benefits of growth are so lopsidedly distributed. Instead, I am going to ask Malaysians to “stretch” our ringgit to the fullest extent we can.
We cannot expect change in policies, temporary suspension of the Goods and Services Tax (GST), a reprieve of monopoly power or revival of our economy anytime soon. How then should an average Joe cope with the situations now prevailing in our country? Yes, I am referring to the vast majority of us doing normal jobs and earning normal incomes. I am not referring to those holding sexy jobs, having multiple directorships, and getting windfalls through connections, donations, monopoly power, APs, lucrative contracts or privatisation.
These are simple antidotes of life which I gathered from observations and personal experience over the years. This is not gospel truth and I have no empirical data to back me up. If you dislike what you read, just ignore and move on.
- Do not live like a celebrity if we are earning only a normal income. That means less branded clothes, designer bags, expensive cosmetics, manicures, hairdos and pricey shoes. They take away a big chunk of our income but give us nothing much in return. Yes, they do work in our psyche to make us feel better, but ultimately it is the merchants who will be having the last laugh.
- Quit smoking and try to drink less if we are in the habit of smoking and drinking. Again, these habits benefit us in no way except to drain our income and create more health and medical problems. Change your habits, avoid happy hours and go to a park instead. I know this is easier said than done. But good habits and bad habits are the same – habits. We just need to develop good ones to override the bad.
- Don’t borrow excessively to get married. Marriage is about love and affection for each other. Expensive gifts and lavish spending on ceremonies may impose unnecessary financial burdens before we even start our families.
- Try to get up early, prepare your own breakfast, pack your own lunch and bring along boiled drinking water before going to work. Trust me, all these help us to save and to stay healthier. I know most of us work late and therefore have no time to prepare dinner. However over the weekend and for those with cooking facilities, it is better to cook at home. It is cheaper and healthier.
- Buy what we need, not what is on offer. Do not buy furniture because the new designs are attractive. Do not change handphones, iPads or laptops because there are newer models in the market. If our jobs require the latest gadgets, then by all means go ahead. Otherwise, it can wait.
- Don’t spend our hard earned money on tattoos, putting rings or hooks all over your body or colouring your hair in shades of red, purple, yellow and green. We think others may admire or look at us, but they do not. We can all look good by being simple and going natural.
- When using credit cards, we must have the ability to pay back when due. Otherwise, this is one loan that will keep us in a perpetual cycle of debts, probably as harmful as loans from ah longs (moneylenders).
- Don’t punch above our weight. Buy a car that suits your needs and income, not boosts your perceived image or ego. Cars are depreciating assets, expensive cars depreciate even more.
- Be realistic with holidays. We don’t have to go twice or thrice a year. If money is low or if we have other more urgent priorities, we can always cut down on holidays. Once a year or once every two years is more than sufficient. Don’t ever borrow to go for holidays. It is a lousy idea that will enslave you.
- I know this is difficult, but no matter what, try to save that magical 10 per cent as downpayment for a house or apartment. Once we get our own place to live in, the instalment we pay each month is toward asset acquisition, not expenditure. Be careful though when scouting around for property because the authorities are just too slow and too indifferent to help us if we are conned. So look at the reputation of developers and look at the location of the property. Do not buy based on what the agents tell you, artist impressions or vague promises.
- Assess the talents of your children carefully and concentrate on what they can do best. There is no need for shotgun strategies to ask them to learn everything from ballet, taekwondo, piano, violin or guitar. It is a waste of time and money.
- Walk more and drive less if it is within reasonable walking distance. It lessens parking charges, uses less petrol and causes less congestion, in addition to providing some exercises.
- If you have a small garden, plant chilli, curry-leaves, lemongrass, lime, and papaya. If you have a bigger yard, plant fruit trees. These are healthy hobbies and they help save some money. If you have specialised hobbies, you should try to benefit financially from these. I have seen someone leveraging from her “kueh-mueh” making skill to great effect.
- Whenever possible, try to use electricity and water frugally. Use energy saving bulbs and try to shorten or reduce the use of air-conditioning. It is good for the environment too.
- Plan your shopping and marketing trips. Buy what you need in one trip to save time, travelling and fuel.
- Whatever your religion, please don’t spend too much on 4-D, online gambling or the casino. There is no simple or easy way to wealth creation; on the contrary, all these may cause us more misery. Learn from successful people, look for opportunities, take calculated risks, do business and invest prudently if you want to make money.
If some of us have more effective ways to stretch our ringgit, please add on to this list and share.
TK Chua