An article by http://www.GenXGenYGenZ.com

This article is a prelude to my series of articles on credit cards for beginners.

LIFE

What is life all about? That’s the zillion dollar question on every single human’s mind, at least once in their life or for some almost daily (example yours truly whenever I am unhappy). Some will find the answer to this question during their quarter life crisis (yah, now we have quarter life crisis where young people who inherited tons of money don’t know what to do with it OR spending too much and land themselves in the shit hole of debt) or mid life crisis or near their death but most will die in misery without knowing the answer.

And I’ve got good news for you, the zillion dollar answer to life is actually very simple and I have published an article on it. The reason why you and I are on planet earth is to just EAT SHIT and SLEEP. That’s all. All other actions between these 3 essential actions required for living are just for entertainment.

BUT, most humans are greedy and have desires that are not necessary for living.

1. Humans want to eat more than just simple food to survive. Most would want to satisfy their taste buds in a nice environment which is not required for living. For example, instead of eating home cooked plain rice with dishes or pasta with bottled sauce, we would instead want to go to a nice expensive restaurant to experience the ambiance and the same food prepared by assistants to an award winning chef and pay 10 times the cost. But the joke is, whatever food you EAT, prepared in whatever manner by whoever, anywhere, eventually ends up as SHIT.

2. So, many humans desire to SHIT in a nice huge toilet where there is a HIS and HERS washbasin, a Jacuzzi and a shower cubicle with pressurized overhead rain shower.

3. Besides eating and shitting, SLEEP is another very important action (yes, you need to do it or your brain will force your body to shut down) that needs to be adhered too daily as insufficient sleep/rest will cause us to hallucinate (nightmares) and go crazy. So, many humans desire a nice bedroom that is large enough to cater for a TV section, a computer section, a reading section, a walk-in wardrobe, a dressing section besides just a space to place the bed they sleep in.

Since we only need to sleep like 8 hours a day (as we get older we need less and take naps instead), we have ample time to go look for food. If you are not like your cavemen ancestors who rely on food that they hunt and gather, you would most probably work and get paid with money so that you can buy food. But simple food like plain white rice with home cooked dishes are not enough to satisfy our desire for entertainment i.e. temporary happiness i.e. “shiok sendiri”. For those who do not understand the meaning of “shiok sendiri” (also spelled by many as “syok sendiri”), it is a term used by many Malaysians, and when translated to English it means self gratification/satisfaction as no one else in this world really cares what you have or do or think.

We think we will be happy driving a Toyota Vellfire MPV when we’ve only got one child and load it with all kinds of accessories for our entertainment while stuck in a traffic jam – shiok sendiri.

We hate gardening but need a bungalow with massive land area to park our nice looking huge van ( 7/8 seater MPV) or vice-versa, so that we can brag and show off to our friends for our own entertainment – shiok sendiri.

We want the latest smartphone or other electrical gadgets when our current one is still perfectly fine for our entertainment – shiok sendiri.

We use the Apple iPad or Android Tablet with UHD to watch latest movies and KPop videos all over the place and don’t watch TV; but we need the latest 65″ 3D LED UHD TV in the living room as a decorative item to show off to our guests – shiok sendri.

Ladies shop for the latest branded fashion clothing, luxury handbags and shoes for their entertainment and wear them out when they go for entertainment thinking it will impress others – shiok sendiri.

We go to award winning restaurants with chefs wearing high hats and are proud of it and never fail to mention it during conversations with others for our entertainment – shiok sendiri

Bosses scold their workers and get to show they have power or let off their anger on their poor worker(s) because they can’t do it to their loved ones (e.g. tiger wife) or immediate boss above them – shiok sendiri.

Salarymen tell their colleagues and friends that his/her boss is stupid – shiok sendiri. If your boss is really stupid, why are you working under him/her? Don’t say no choice, you decide your own destiny.

Some go for beauty treatment and have botox injections or liposuction and other plastic surgery procedures hoping to look more beautiful – this is really shiok sendiri for old ladies where no one will even take a second look at them, hahaha.

Having power and authority – shiok sendiri because in the next millennium, no one will even care if you are now PM or President of your country.

I can go on and on and on, but by now you get my point on what I mean by entertainment or shiok sendiri which equates to TEMPORARY HAPPINESS.

And once we discover the magical power of money to buy temporary happiness, we become obsessed with wanting more money to buy more temporary happiness to satisfy our addiction to shiok sendiri sensations.

So besides eating, shitting and sleeping, we need happiness, which is never lasting; therefore, we are constantly seeking out happy moments until the day we die.

PAY NOW with CREDIT CARDS EARN LATER

The companies that are out to suck your hard earned money know that everybody wants to have the sensation of shiok sendiri and are constantly seeking temporary happiness. And this include credit card issuers like banks. For example, Citibank advertises “Get the Latest Gadget” or “Get the Latest Handbag” with their Ready Credit Plan. Previously, I’ve even seen ads by Citibank where they encourage the cardholder, who is short of cash, to spend with their credit card to get a smile on their face (happy moments). I have also heard an ad in the radio where BSN encouraged their card holders to go on a holiday when they cannot afford to otherwise, by charging it to their credit cards. However, this advertisements do not emphasize that this happy moments are not FREE and you’ll be imposed interest if you cannot afford to pay back in full when the Due Date arrives.

And the banks in Malaysia are very good, they are willing to assist you in your search for happy moments by awarding you unsecured credit with credit cards. It is very easy for a graduate to get a credit card because in accordance to Bank Negara Malaysia guidelines, all you need is a salary of RM2K per month and you’ll be eligible for credit cards from 2 different banks with credit limit of 2 times your monthly salary from each bank, i.e. in total RM8K where each issuer can assign you up to RM4K.

Initially, most of us want a credit card for convenience sake, where a credit card is more secured that carrying cash around to pay for our purchases. But some, well most of us, do not have discipline when it comes to spending with a credit card whereby we will just swipe the card to pay for our purchases and worry later on where our earnings are coming from (if any) to repay back.

Below are parts of what I have posted in my previous articles at My Credit Cards blogspot.

I also want to highlight an article in The Star published on 22nd September 2011 titled Shocking Reasons Why Malaysians Living Beyond Their Means:

In the above mentioned article, it was quoted:

On average, 41 are declared bankrupt every day, mostly due to credit card debts, while every weekend, about five million throng the 300-odd shopping complexes in the country.

In my article titled RM103 Billion Credit and Balance Transfer I posted the following quote:

MAAKL Mutual Bhd licensed financial planner Rajen Devadason points out that of the over 10 million credit cards issued to Malaysians, only 30% pay their balance in full every month. He says that studies reveal that a consumer with a credit card is likely to spend 17% more than someone using cash.

Now what does the above mean?

1. Shopping is the main reason why most Malaysians are in debt. Not surprising, considering that many people are willing to buy smart phones and gadgets that cost more than half their monthly salary and people are into branded goods.

2. Everytime we go to the shopping malls, those of us with credit cards will tend to spend unnecessarily. So easy, just swipe our cards and then worry later. If no money, either go with installment plans or do balance transfer. I tell you, both the installment plans and balance transfer plans are traps to make us spend more than we can afford. BNM should ban all Installment Plans and Balance Transfer plans immediately.

3. According to The Star report, there are 41 people going bankrupt every day which works out to be 14,965 people every year. In 2010 there were 3,200,000 people in Malaysia with Principal credit cards. So assuming those 14,965 people a year going bankrupt has a credit card, it works out to be about 0.467% of card holders going bankrupt every year. Or put it this way, close to 1% or 1 in 100 people with credit card will go bankrupt every 2 years.

However, there is another report in The Star back in August 2010 where it was said that 500 people go bankrupt every month due to car hire purchase loans. Well, those people who can qualify for a car loan would most probably hold a credit card too, because prior to March 2011, to be eligible for a credit card, one only needs to earn RM1,500/month. Then again to qualify for a credit card now also isn’t that hard as one only needs to earn RM2,000/month gross income.

All of us will have some kind of loans in our lives – education, car or house. And while having these commitments, we go get a credit card (and easily qualify for it since the banks don’t “really” take into consideration that we are already up to our necks in debt) and some even issue us pre-approved credit card with our loans. Having a credit card (easy credit) when we’re already trying to stay afloat with all the bank loans may be the tipping point that will decide if we will become poorer or richer.

The article in The Star mentioned that at the end of 2010 the total outstanding credit cards debt in Malaysia is RM30.8 billion! Once again, the outstanding credit cards debt is RM30,800,000,000.00 (look at the zeros) that’s a lot of money owed. The article mentioned that 50% of the 3.2 million card holders are earning less than RM36k per annum and 30% of them own more than 2 cards.

The population of Malaysia is about 28 million and with 3.2 million card holders, that works out to about only 15% of our population having credit cards. My estimate was pretty good when I mentioned in my article titled “RM103 Billion Credit and Balance Transfer” back in June 2009 that 10%-20% of the population of Malaysia have a total of RM103 billion in credit. In the same article, it was mentioned that the credit card debt in 2009 was RM22.13 billion in 2009, now it is RM30.8 billion, that’s an increase of 39.18% in less than 2 years or RM8,670,000,000.00! This increase is alarming and BNM should have taken steps years ago  to address the credit card debt situation instead of letting it increase by another 39.18%.

Well, Bank Negara Malaysia did take some action in March 2011 and introduced new guidelines for credit cards effective 1st January 2012.

Most of you who read the above would think that you are in control and would not end up in the bottomless shit hole of debt. However, we are constantly bombarded with advertisements showing happy moments with material stuff. Sooner or later our brain cells will absorb the subliminal messages incorporated into the ads and make us think we can be happy with the material stuff. No cash in hand, not a problem, our brains will instruct our hands to take out the credit card and sign for the purchase. The moment our hands hold the material stuff, it will sent a signal to our brain cells and this neurological signals will cause an instant rush of happy sensations to the brain and redistribute it to our entire body.

Like I mentioned, we are constantly searching for temporary happy moments and many people use their credit cards to make purchases they otherwise cannot afford. And like I mentioned, many of us are trying to stay afloat and survive on a tight budget because of our car and housing loans and have no savings but rely on our EFP for our old age. However, the need for constant happy moments cause many people to fail to take this into consideration when they swipe their credit cards or withdraw cash from ATMs, utilizing the unsecured credit offered by the banks. This is because they think they can repay their credit card Outstanding Balance with their future earnings. Once the card issuers start to impose daily interest charges on  Outstanding Balances because the card holder cannot pay in full by the Due Date, worst off only pay the minimum amount, it’s the start of their hell journey into the shit hole.

Now, I must make one thing clear, it is not the banks’ fault if you are in debt; because you chose to be in the shit hole based on your own actions. The banks do not force you at gun point to swipe your credit cards when you don’t have the cash in hand to repay back later.

SAVINGS WITH FIXED DEPOSITS FOR YOUR RETIREMENT YEARS

First the good news, EPF on 19 February 2012 has declared a dividend of 6% (election coming lah). This is great for those who use their EPF funds to pay off their housing loans since they will have more money in their EPF account.

But, here is the bad news, with inflation, your EPF may not be sufficient to cover your living expenses after you retire. More so if you are from the Generation Y where you will need at least RM1,000,000 after you retire from a salaried job at age 60 to live up to age 80 in order to continue experiencing happy moments.

That’s why you need to start saving today for your future expenses. And the least risky method of saving up is with Fixed Deposit with banks that are insured by PIDM. Most investment books will tell you allocate enough funds for an emergency ( like when you are out of a job because you are pissed off with your boss and fired him (resign) before you are fired to save your face, hahaha) before diving into riskier investments like unit trust, mutual funds, share market and many more human finance engineered investment schemes.

I have posted an article titled Investment Wealth Retirement at Ringgit Wise Fool and republished a shorter version (not much diff, still ended up with a freaking long article) at GenerationsXYZ Blogspot with the title Investing For Your Retirement Year 3rd Edition – click here now if you have yet to read the article before proceeding any further.

I hope with my above mentioned article you have managed to get an insight of the benefits of compound interest by investing your money in Fixed Deposit or Time Deposit. Start saving money today if you have not and sacrifice your urge for temporary happiness on unnecessary material stuff. Your actions today will determine if you will have a prosperous retirement and not needing to rely on others nor be looked down by your kids.

So, whatever money you don’t use to pay off your credit card bills can be deposited into Fixed Deposit for your retirement years. Actually, better if you don’t even swipe your credit card so you will have more money to deposit into FD or Time Deposit. And to assist you to be richer, click here and check out my Fixed Deposit Page for latest and highest Fixed Deposit/Term Deposit interest rates.

CONCLUSION

Credit cards do offer convenience to the card holder where it provides security instead of carrying cash around and nowadays many of us pay online for bills and purchases. However, if you have no cash in hand and no discipline in controlling your spending to satisfy your addiction to happy moments (where you may end up drowning in the shit hole), get a debit card instead where it offers the same convenience as a credit card; and more importantly, with a debit card there isn’t a chance of you accidentally falling into the shit hole by using it.

And if you got lots of money/assets after you retire, never ever transfer your assets or company shares to your kids or loved ones (you must maintain control of the company by having 51% shares at all cost so that your kids won’t kick you out, this is not a joke) until just before your last breath to ensure you continue to receive their love and many happy moments together with them and your grandchildren.

Back to the zillion dollar question on life. What we all (young or old, male or female, rich or poor, healthy or sick) seek is never ending happiness so that we can die happy.

So your future life is entirely in your hands today. If you decide to practice Pay Now Earn Later where you do not have the cash in hand to pay off your credit card Outstanding Balance in full prior to the Due Date, then you will get poorer by the day as interest is imposed daily on Outstanding Balances.

For those who practice Save Now For Retirement, hopefully when we retire we would have built up enough funds (like what we Hokkien people always say about the rich – “chiak bui liow” – translated as Eat Cannot Finish, which means you cannot finish your wealth simply by eating) to experience continuous happy moments until we die (or like what we Hokkien people also say – “chiak pa tan si” – translated as Eat Full Wait Die which means you have nothing do worry about except to eat and eat and eat while waiting to die).

And for those who practice neither of the above nor need happy moments, they may have found the ultimate inner peace and the true meaning of life – they only practice meditation between eating, shitting and sleeping. But hey, I can do better with my short life on planet earth ( I wonder after I die, besides the helluva hot happening underworld where all the fun people go to, will I be assigned to another galaxy? ), I can experience both inner peace and happy moments concurrently by entering into my sick imaginary fantasy world anytime even when I am eating, shitting or sleeping, hahahahahaha.

An article by GenX

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Spending Children Future Inheritance (Republished)