Financial management in the current environment

 

Learn new ways to budget, save and invest

“Avoid free/paid courses given by ‘investment guru’ who are not professionally qualified. The public must be aware and know how to differentiate them.’’- Kimberly Law

LOSING money is the hardest misfortune if you have just enough income for survival.

Many people have fallen victims to scams and have lost money in a bad investment.

Some have lent money to others but the loan was not repaid.

There are many reasons why people lose money and in the current times, every ringgit counts.

The costs of buying groceries, clothes, medical supplies and even essential body care items have risen so much that at the end of the month your salary may not be enough.

It is no surprise that a survey by Capital Market Research Malaysia (ICMR) showed that 64% of Malaysians respondents, feel that they are either financially unstable or are living from salary to salary.

Even Deloitte’s recent survey has indicated that 65% and 70% of the local Gen Z and millennials are living from hand to mouth. The global numbers are 51% and 52 respectively.

The majority of those within these categories report suffering from mental stress with regard to their finances.

It said there are still gaps between awareness and application when it comes to good savings behaviour.

There are gaps in financial literacy in the country and the rising rate of people falling to scams is also a concern.

Financial literacy is about how you budget, save, build credit, borrow, repay debt and invest to grow money.

If you want shortcuts by hoping your money will double or triple in the shortest amount of time then you ought to ask yourself if that is really possible or if it is part of a scam.

Everyone knows how to manage money, but the question is how effectively is it managed and whether you are making your money work for you.

There are many management and personal finance courses available to improve your financial literacy skills.

Some are offered free and some charge a fee. It is not wrong to learn and improve one’s skills even though you may be an expert in money management.

Several websites offer personal finance, money management courses available. Some are free, others charge less than RM100.

Some of the sites that offer courses include Udemy, Coursera, LinkedIn.

Often in a few hours of online learning, you will be able to create a format and update your budget or even create a plan using the tools they provide to help you reach your financial goals, according to a report.

However, Uno Advisers Sdn Bhd licensed financial planner Kimberly Law said she would avoid the free courses offered by people who are not from the industry.

“Avoid free/paid courses given by ‘investment guru’ who are not professionally qualified. The public must be aware and know how to differentiate them.’’ she said.

She recommends those interested to attend reliable courses from institutions such as the Financial Planning Association of Malaysia (FPAM) and the Malaysian Financial Planning Council (MFPC)

She says they offer some paid programmes while others are offered free to the public for financial literacy enhancement.

For her, the best way to get free financial education is to attend/listen to events/programmes organised by FPAM/MFPC and that are offered together or with the blessings of the industry regulators such as the Securities Commission and Bank Negara.

These organisations will get professionals to volunteer to offer/teach the programmes.

Some people felt that basic money management courses should be offered in schools to help children prepare for their future. This will surely benefit the larger school going population.

Even if it is not part of the syllabus, it can be a supplementary programme offered for a limited period of time every year at schools.

Law believes the syllabus for the young should include basic money management skills such as basic training or exercise on budgeting, managing expenses and planning that will be useful in their management of money and investments.

This will certainly raise the financial literacy rates over time in the country.

Even if you are doing well in your money management skills, it doesn’t hurt to enhance and learn new ways to budget, save and invest.

But don’t fall for courses that will make you invest even before you can learn something from it.

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THE FIGHT AGAINST CYBERCRIME IN FINANCIAL SERVICES

Living life by finding fulfilment without landing in debt

ARE you driven by a desire for instant gratification? Today, it has become a norm to splash the cash on ourselves, and it seems to be getting harder to keep in check the urge to spend and spend.

Unfortunately, current gain may mean future pain unless we are in control of our expenses. The good news is that it is possible to stay in charge if we know how to change our behaviour and what tools we need to do the job.



Falling prey

When the latest gadget or fad is in town, our lives seem to turn unbearably dull until we go out and get a piece of the action for ourselves.

We see others enjoying their iPads or Galaxy Note, and feel so left behind because we don't have one ourselves. A few months ago, we had barely spared a thought on it, but for some strange reason, it suddenly feels like we just cannot function without having one. So, before we can check ourselves, we've gone and bought one too, although we may not really know what we want to use it for, except endlessly checking our Facebook accounts.

That is just one among the many temptations around us that are competing for our hard-earned money. Media messages of dream getaways fuel our desire to go to enchanting overseas locations, and we can't wait to blow a small fortune on a holiday it has to be next month or we could almost burst.

Advertisements sell us the idea that we deserve to live a privileged existence, no matter what our station in life. We indulge in fine dining at the drop of a hat. When the stress of our jobs gets to us, shopping comes to the rescue in the name of retail therapy.

No wonder we find that there's a big hole in our pockets. For those of us who have become used to living life large, it may seem strange that not long ago, that was far from the norm. Just one generation earlier, it was quite usual for people to save patiently towards their financial goals, i.e. to delay gratification until they had the money to spend.

Before and now

If they wanted to buy a car, our folks would not simply look for the latest model, but consider what was on the second-hand market. They would save towards a bigger downpayment, to reduce the interest they have to pay on the hire-purchase loan.

The first step was to save, not seek enjoyment. They kept money aside for education and important financial goals. The habit of accumulating savings was strongly ingrained in them. Sadly, that is virtually non-existent now. If you found yourself in a deep level of debt, this is a habit you have to re-learn in order to regain control of your finances.

For sound money management, delayed gratification is a key behaviour to adopt, while instant gratification can set us on the road to serious financial problems. Worse yet is “advance gratification”, when we spend money before we have earned it. Seeking instant enjoyment is not as bad. It just means that we cannot keep cash and spend it as soon as we have it in our hands.

Today, with the massive use of credit cards to pay for high lifestyles, we are in danger of being buried under consumer debt. This is a growing problem which is being seen particularly among the young.

In the past, a person who had no savings was seen as someone with poor money management skills. Now, it is quite common for people in their 20s and 30s to already be in debt to the tune of RM30,000 to RM50,000. Addressing this problem requires a change in mindsets.

Not so long ago, a person entering the job market would use the bus or get a second-hand motorcycle for about RM2,000 to RM3,000. Purchasing a car would be delayed until after about five years of work. Even then, it would probably be a used car costing between RM10,000 and RM12,000.

Today, many young people expect to drive a car before they work, usually looking to their parents for financing. For better money management, this expectation should be replaced by the habit of delayed gratification. If the young learn to save towards the car they want to drive, they can avoid building up a heavy burden of debt. Taking the LRT or commuter train can be among the options.

Growing materialism

The easy availability of consumer credit can contribute to debt accumulation becoming a larger problem for the economy, as is seen in debt-driven societies like the United States and some European countries. The Malaysian authorities can avoid the mistakes of those countries by taking further action to tighten lending rules.

Personal debt management problems are closely related to another trend in society today growing materialism. The idea that happiness depends on the number of material possessions we have appears to be stronger as time goes by.

More than ever, we now need to rediscover the value of non-material interests such as watching the sunset, jungle trekking or volunteering our time in order to find happiness and fulfilment in our lives. We need to find a balance between material wealth and life-enriching experiences that are not measured in monetary terms but build our self-esteem.

For most of us, the amount of money available is limited. In fact, there is never enough for anyone. If we change the way we look at ourselves, many of the problems associated with excessive spending will be resolved.

Instead of dining out at a fancy restaurant, we can have a fulfilling meal at home with our families and enjoy the warmth of their happiness. Instead of spending on more clothes, we can save the money for a good end. Instead of splurging on an expensive holiday, we can find joy and accomplishment in playing a musical instrument.

These are values that adults can inculcate in the young that will pay dividends all their lives. Perhaps the current debt crisis is a reminder to pay attention to the lifestyle choices we unwittingly teach the young.

MONEY & YOU By YAP MING HUI -Yap Ming Hui (yapmh@whitman.com.my) is an independent financial advisor. He is the managing director of Whitman Independent Advisors

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