Wednesday, June 18, 2014

Financial (Mis)Management

I spent 2 years during secondary school in Petaling Jaya (PJ) in West Malaysia. I wasn't there on a scholarship or a special arrangement arising from doing very well in school before that. It was just an idea of dad. You see, as a little boy I was a timid kid—the nerdy type, if you like, and dad thought it would do me good to be away from home on my own; sort of to learn to do things on my own. I ended up renting a room with a relative.

Dad allocated a more or less fixed amount of pocket money each month, but he wasn't very good in keeping up with the timing of the remittances. I had to plan my expenses carefully, as I could be in big trouble when dad failed to send my pocket money on time.

The first few months in PJ, I walked about 4km to school each morning, and then walked home the same distance after school. Then I learned to take the bus. About half a year later, I had saved enough money to buy a secondhand bicycle for the price of RM90, which became my main transport for the rest of the two years of my life in PJ. I used to envy my classmates, many of whom were mostly riding motorbikes to school. I eventually sold that bike for RM40 to an Indian grass cutter about 2 weeks before I came home to Sabah for good.

After I left school, I got a job as a teacher in a private school. The first year working, I took the bus to and from school. Then an uncle helped me out with the down payment for a motorbike, and I paid the RM175 installment every month. That bike was a big asset to me, as I was able to move around to give tuition after school, and was therefore able to earn a small side income that way. The extra RM200 that I earned from giving tuition was a big deal considering that I was only earning RM490 per month from my teaching job.

Years later, a few weeks after I got married, Mia relocated to Brunei to live with me. I was renting a self-contained outbuilding accommodating a bedroom, a tiny kitchen which was also the dining and living room, and a bathroom. That building was actually intended for a maid's unit, but the detached house that occupied the main portion of the land was big enough to accommodate the maid, and the owner reckoned that it's a good idea to let out the outbuilding to me at BND500 per month.

I can still remember that I had some savings, but spent a long time thinking whether or not we would buy a washing machine. After much considerations and discussion with Mia, we decided to wait for a few more months before we buy one. Back then a BND380 washing machine was a luxury item for us.

I had a humble beginning and had no formal training in financial management, but managing my resources is a common sense thing to me. The simple formula of living within one's means is made up of simple mathematics. From the amount that I earn, I set aside whatever fixed obligations such as electricity and phone bills, housing loans, savings etc, and then spend whatever's left of that amount. There is actually nothing too complicated about it, really.

Seeing some of my family members and so many people out there, I fail to understand why is it so impossible for them to figure out the simple mathematics on how to manage their resources. It doesn't really matter how much they're earning—whether they have RM100 or RM100,000, they always end up spending more than what they have. It's like their appetites are growing way too fast than their earning powers. They're in fact constantly in deficit. A family member had a windfall when she inherited about RM1.5 million, but she burnt it all within 3 years, and now has practically nothing to her name.

I read about this widow who blew about RM2.5 million in just a year. It's really beyond me how that can happen. I don't claim to be an expert in financial management, but although RM2.5 million can be intoxicating, I'm thinking that even if I'm gonna burn that money, it'd take me much longer than just a year.

Financial mismanagement is almost a disease suffered by so many people. It makes me think that although it is basically a common sense thing, financial management is actually a skill that very few possess. It's one of those strange mysteries of the world.


Juin Yi Ng said...

Personally I'm lucky enough that I've yet to endure any form of financial hardship, and I haven't officially started working yet so I'll try to refrain from commenting too much.

But I think one of the possible factor is that we fail to see how much we're spending until it's too late. I wasn't able to get a good control on my monthly spending previously, not until I started forcing myself to use an app to jot down every single expenditure that I've made. That's when I started seeing green again.

I think especially since most of our transactions nowadays doesn't involve physical cash, keeping track of one's expenditures is especially important.

Cornelius said...

Juin Yi Ng,

Thanks for you comment.

That is a good idea. I suppose it's good to keep track on every single Sen that you spend, but I don't think that is where the problem lies. I'm guessing that most people are quite well aware of how much money they have, even if not the exact amount in Ringgit and Sen.

The real problem lies in human nature, i.e. the unending hunger for more of everything. Most people would love to have more money, a bigger and beautiful house and several more condominiums, a powerful and fashionable car, perhaps a huge powerful bike too for an occasional ride in the evenings, the latest smart phone, and the list goes on and on. But alas, the stumbling block is always the lack of resources to have all of those. So in the end, it becomes a game of choosing which one(s) to get first with whatever limited resources that one possesses.

After a while, it becomes increasingly difficult to tell the difference between luxury and necessity. A Kancil may be a necessity; a Perdana may be a luxury. A plate of nasi campur and Teh-C ping may be a necessity; a pack of Dunhill or Benson may be a luxury.

In the end, it seems like many of the unnecessary items may be considered as necessary. So one stretches whatever little one's resources to buy them. And then some more. And very soon it goes out of control!

I'm not sure if that's indeed the explanation, but from what I can see, that seems to be it.