5 Money Lessons I Learned In 2014


New year's resolutions

A lot can happen in a year. I’ve seen insurance premium and Base Lending Rate (BLR) spike. I’ve also seen changes in income tax and capital gain tax — the latter can be good or bad, depending on which group (buyer or seller) you are in.

We are still getting used to the recent change from BLR to Base Rate. The repercussions and impact remain to be seen.

Even amid all these changes, the price of property is still unreachable for most and household debt is not declining anytime soon.

Like most people, I reflect on the events and happenings of the past year, giving thanks to the many blessings that I’ve received, and the narrow escapes I was lucky enough to dodge.

Here are some money lessons I’ve learned in 2014:

1. Eligibility is not affordability

In November 2013, we published an article on housing affordability and we received a lot of feedback from our readers — some positive, others not so.

In the article, we talked about the Debt-service-ratio (DSR) that is use by banks to check a borrower’s eligibility for a loan amount. However, in our attempt to make the article easy to understand, we use the term “housing affordability” which confuses some.

Affordability is in no way synonymous to eligibility. Being eligible to get a RM1 million property doesn’t mean I can afford it.

Housing eligibility often times does not include your lifestyle. If you are the type who likes to dine out every day and loves to shop every weekend, even if you are eligible for a loan, you may find it hard to afford the monthly repayment.

Find out what true affordability really means to an average Malaysian.

2. There are many strategies to reducing debt

Debts should be managed before it becomes insurmountable. That is a lesson that I’m sure everyone agrees on. However, it’s easier said than done. Sometimes it just gets out of hand.

The trick is to tackle it head-on before it can intimidate you. Of course, there are tips and tricks to that.

Identify the type of debt you have (credit card, personal loan or student loan) and use the right debt repayment strategy. If you are not very disciplined in managing your debts, try the snowball technique where you pay off the lowest debt balance first, before tackling the big debts.

However, if you are trying to save some money on interest, practise the snowflake technique where you pay a set amount in your debt pool religiously every month.

Whichever way you choose to face your debts, don’t wait till it’s too late.

3. You’ll never be the next Jack Ma just by saving money

We are guilty of harping about money saving tips for years. While it is a crucial part of money management, it is not the only part that we should focus on.

So what if you cut RM5 spending every day? You will be saving RM150 a month, which you will most probably spend on shoes.

On the road to financial freedom, you need to create wealth. Put the RM150 you saved every month in a high yield investment. Then, watch the money grow.

Sometimes, taking risks is not that bad and can be rewarding at the end of the day. No pain, no gain, after all. Remember, just saving money is not going to make you a millionaire.

4. Property investment may not be the answer anymore

Even after the various cooling measures introduced by the Government, the lower and middle income groups are still struggling to afford their first home. Although property prices are self-correcting throughout 2014, the prices remain to be high for most.

The hike in the Real Property Gains Tax (RPGT) has also hindered many property investors and speculators to step on their property investment. This has significantly reduced the demand for high-end properties, slowing the appreciation of properties overall.

Property investments might be your gateway to creating wealth before, but it has become more and more difficult, with the BLR hike and the new Base Rate. Perhaps other lower entry requirement investments like Real Estate Investment Trusts (REITs), unit trust and stocks can be a better and safer bet to pave the way to your financial freedom.

5. Don’t complain about things that are not within our control

As an average petrol user, world crude oil price is not within our control. And to a certain extent, the petrol subsidy is also outside of our control (let’s not get political here!).

So, why not spend equal amount of time looking for money-saving hacks and tips to cut down on your petrol spending?

There are various financial tools available to help you do that. For example, getting the right petrol credit card can help you save significantly. The right petrol credit card is not just about the cash back, but also the flexibility in earning those cash backs. If you are required to spend thousands on petrol a month just to get RM100 cash back, then it probably is not the right card for you (unless you do spend that much on petrol every month).

There are also petrol loyalty programmes like the Petronas Mesra card, Petron Miles Card and Shell BonusLink to help you earn additional rewards on top of the cash back you are earning from your credit card.
2015 is set to be an uncertain year for us financially. Will the Ringgit continue to slump in tandem with the crude oil price? Will we be able to endure the hit from the Goods and Services Tax come April? How about property prices? Will we finally be able to stop renting and start owning?

Nobody will be able to tell you these answers. Even the greatest crystal ball can fail us at times like these. What we can do is to learn from our past money mistakes, and fortify our finances for all eventualities.

The wise Helen Keller once said, “Life is a succession of lessons which must be lived to be understood.” Don’t dwell on past money mistakes, but rise above them to make better and wiser decisions in 2015.

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