Monday, 14 January 2013
Dreaming is free. The dream itself is not.
Just like anyone, I have dreams too, and they ain't too big. A house in a safe and comfortable neighborhood, a reasonable car, memorable holidays, a family, my kids' education, blah blah blah… Normal things that anyone would want.
Some say savings is the way to go. I say no.
As a uni student, I always felt "money not enough", as my allowance and part time income added up to a meager RM1000 per month… Yet, I was able to get by rather comfortably, graduate and have some savings.
Imagine my ecstasy when I got my first employment offer at RM2500.
I still remember my first day of work with my head held high, full of hope, ready to take the world, already planning my weekend, my shopping, my yearend holiday, my career progression plan, my paycheck growth.
"This is LIFE!"
Or so I thought.
Within a few weeks of living in a dreamy state, reality smacked me in the face with big fat bills.
As a working professional, I realized "salary not enough".
I was lucky my parents paid the down-payment for my basic model Proton Saga, but monthly installments still cost me RM450 (9 years term). Thrifty management of my parking, petrol, road tax, maintenance, insurance, and license still amounted to another RM550/month.
Transportation alone was almost HALF my pay!
I got lucky with accommodation – Fully furnished big room plus free use of the rest of the house – and Rent plus Electricity plus Water plus Internet was only RM300/month!
What a bargain!
Who's the big charitable landlord, you ask?
With such support from my family, Life's Basics still cost me about RM1300/month. Oh sorry, I forgot the compulsory tax and EPF, that's about another RM300.
With a meager RM900 left every month, I had a budget of RM30/day for Meals, Entertainment, and Shopping. Well, maybe not Shopping.
I'm a thrifty guy so I saved RM500/month. It's "The Way of Life" I was taught all my life. But Life has proven it wrong.
When I started the job I had about RM6000 in my bank. 6 months later I had RM5800. My savings went down because of rainy days (which was why I saved in the first place), but thanks mostly to the banks' negligible interest rates.
My savings helped me, yes. I was surviving. I was prepared for a "rainy day". But the future didn't seem bright.
Savings IS important. But only for rainy days and the little pleasures in life. Not Life itself.
My first salary increment was RM200. What a joke.
After doing some research, it seemed that the standard annual increment (non-compulsory) in Malaysia is between 5% to 10% (uncommon). It's only when there's a BIG promotion that there might be a salary adjustment, ranging anywhere from 15% to 20%, or up to 30% in very rare cases.
That got me thinking hard.
Property prices have been growing at 10% to 20% per annum for the past 5 years. Can my salary growth match the speed of the property price growth? When I finally save enough for the down-payment in terms of tens of thousands, would my income be enough to pay the installments? Will I save enough to afford my other dreams?
Saving will NOT work.
Savings will not work because your savings growth is almost stagnant. Savings will not work because inflation grows faster than your savings. Savings will not work because we save for rainy days and there are always rainy days!
That's why we need to invest. Start small, let it grow, and let the ball roll itself.
Then, we can lie down on the beach, sip our cocktail, and truly enjoy our holidays with no worries.
"This, is LIFE!"
By the Young Investors Team