It has been about a decade or more since I first published my article titled LIFE – GOAL IS TO BE DEBT FREE.
The above article was first published at my now defunct blogspot and subsequently republished here at GenX GenY GenZ dotcom.
So first thing first, click here and read my article titled LIFE – GOAL IS TO BE DEBT FREE
if you are new to this blog, please be informed that the “Facebook.com/GenXGenYGenZ” shown in the image above is no longer in existence….. but there is a new one for my Long Time Die Hard Followers (TnC applies)
This article is written for my Long Time Die Hard Followers who reads all my articles, not only in regards to Credit Cards but Life and Love & Gratitude.
INTRODUCTION – DEBTS
Back then, 10 years ago, credit cards’ debts were massive and many people went into bankruptcy because they could not repay their monthly credit cards’ bills in full prior to the Due Date and therefore have fallen into the spiraling bottomless shit hole of debt.
. Below table shows the number of people who were declared bankrupt from 2016 to 2020 and you can observe that the number of people declared bankrupt had reduced since 2016. But you also need to know that the limit to be considered a bankrupt was also increase to RM50K in 2017.
What is different today? Well many people are still in debt because they spent beyond their means BUT the difference is that – since 2020, for one to be be considered a bankrupt, he/she needs to have at least RM100,000 in debt and can’t repay it. Therefore if you look at the table below, you will note that in 2023 there were only 92 people who were declared bankrupt versus 2K+ in 2016 due to credit cards!
Soon, there will be less than 10 people who will be declared bankrupt due to credit cards, click here to the Malay Mail to read Budget 2024: Putrajaya ups automatic bankruptcy discharge limit to RM200,000.
So in the coming years we will see a significant drop in people declared bankrupt related to car loans and credit cards. But the less bankruptcy rate is meaningless as more and more people are in debt!!!
Below are several charts and you can see that credit cards debt has been hovering around RM3B to RM4B for years except for covid-era where many had no income. As for car loans and housing loans the amount owning has been increasing over the years.
What is more interesting, but then again not unexpected, is that Personal Use (most probably from Personal Loans which is the main bulk of bankruptcy) has been increasing (once again there was a sudden surge during covid). And take note it mentioned weddings and renovations!!! So if one is in debt when they start their marriage, imaging the debt they will further incur from their honeymoon and then comes the children!
Click here to read an article in the NST titled Malaysian household debt at RM1.53 trillion in 2023. In this said article, it was stated – “In aggregate, the total household debt for 2022 was RM1.45 trillion, followed by 2021 (RM1.38 trillion), 2020 (RM1.32 trillion), 2019 (RM1.25 trillion), and 2018 (RM1.19 trillion), said the ministry”.
Bros & Sis….. household debts runs into the Trillions!
Well, it is not surprising that the household debt has been increasing…. all of you know how weak our Ringgit is today (if you do not know, just go have breakfast at a McD in Singapore) and the standard of living has increased tremendously not commemorating with wages/salaries. Now, now I am not saying that most Malaysians are underpaid (compared to others with the same jobs or skills overseas) but maybe, a BIG maybe, the salary we get in Malaysia is due to our productivity rate.
Let me give you an example why I mentioned above that our productivity maybe low besides having breakfast and tea breaks outside the office.
There are 365 days or 52 weeks in a year.
We work 5 days week, so technically that means we only work 52×5 = 260 days a year.
Then I googled countries with most holidays….. guess what? We are damn lucky as Malaysia is ranked No.7 together with India and Cambodia. Well at least we are ranked Top 10 for something, hahaha.
So with the above, we only actually work about 249 days. Deduct annual leave of 20 days, we only work 229 days which means we only work about 63% in a year (in terms of days).
Now, all of us have lunch break so that’s 229 hours (on working days) = 9.54 days.
Say most people sleep minimum 6 hours per day x 229 working days = 1374 hours or 57.25 days.
Then assuming you need 1 hour in the morning or night to shit and shower plus another 1 hour for dinner, that’s equivalent to another 19 days.
So in actual fact, the total days we work = 229 working days – 9.54 days (lunch breaks) – 57.25 days of sleep – 19 days (shit, bath and dinner) = effective working days 143.2 working days. So basically in a year we work maximum less than 40% in total hours in a year….. so technically your salary per annum you should x2.5, hahaha.
Above calculations are just to amuse you, hahaha.
Recently it was announced that our EPF will have 3 separate accounts as follows:
• Akaun Persaraan to accumulate savings that will serve as income during retirement;
• Akaun Sejahtera to address life cycle needs that contribute to wellbeing during retirement; and
• Akaun Fleksibel as a new account that provides flexibility for short-term financial needs. Savings in this account can be withdrawn at any time according to members’ needs.
EPF was designed for retirement and we all know lah from the many past reports that many have less than RM10K in their EPF. Below was a report only in 2023:
So how is the soon to be implemented 3 accounts assist the Rakyat to save for their retirement? With Account Fleksibel where the member can suka-suka withdraw their money for whatever purpose, how is the government helping the Rakyat to ensure they can survive in their golden years?
I would have thought the government should educate the Rakyat on EPF Compound Interest (where I have showed many times that with just RM300 per month deposit with 5% interest, one will have more than 100K in 20 years time).
Well, for those of you who are new to my blog, below is the calculations showing that one will have more than RM100K in their EPF after 20 years if they continue to deposit RM300 per month (RM3600 per year) with dividend rate of 5% annually.
Bros & Sis, RM300 per month is like RM10 per day! Most of you reading this are educated and should be earning more than RM3K per month if you are a graduate, which means you will contribute more than RM600 per month to EPF. With time, your salary will increase as you climb up the corporate ladder and you would easily have more than RM1m before you retire – that is if you do not withdraw from your EPF!
Now if you have to withdraw from your EPF, it means either you have overspent or we are in a similar situation like covid. Both are shit scenarios! But more importantly if you withdraw from your EPF, it means you have less savings!!! If you do not have a habit to save, whatever money given to you will be burned and that includes money in your EPF Fleksible Account. So a person in this scenario will forever be poor because one becomes rich by savings his/her hard earned money and not how much one earns.
Always remember another 2 of my quotes:
“If you do not have money today, what makes you thing you will have money tomorrow”.
In respect to the above, you have no money today, so you go get a Personal Loan, what will happen is you will spiral quicker into the shit hole of debt. Personal Loans and Car Loans are the worst as interest are charged up-front. Only uneducated people will tell you a Personal Loan or Car Loan at 4% interest is good…. because they do not understand upfront interest which makes them poorer upon signing on the dotted lines and at the same time make the banks richer.
As I shown you earlier, Personal Loans and Car Loans are the top contributors to bankruptcy rates before the government increased the limit to RM100K. But the fact remains that these loans are still freaking high today, which means more people are in debt even with the new limit of RM200K to be declared a bankrupt.
Seriously, the government should put a stop to 9 years car loan (the car will be junk when the loan is fully repaid) and auto deduction from Civil Servants salary for Personal Loan…… but we all know lah nothing change regardless who forms the government and therefore more and more Rakyat will be in the shit hole of debt.
Nothing Last Forever
You may be earning RM20K today and therefore can afford a Semi-D house and BMW…. but the moment you are unemployed for whatever reason, you are @#$@#&! Most of you would have known someone who was in a shit scenario during the Covid shut-down. Wait till a recession hit then only most of you young people less than 40 years old understand how bad it was during the mid 80s and late 90s.
And here is the joke that most educated people do not understand – they bought a house with a loan and they then deposit whatever money they have into the Flexi Homeloan because they argue they save on interest, which is true BUT the facts are (1) that until the loan is fully paid, they don’t 100% own the house and (2) their net-worth may be negative (outstanding loans – assets) which means they are beyond broke but still happily drinking coffee at Starbucks, eating Japanese Food, going overseas for holidays and etc.
Back to EPF……
Click here to EPF Official Website to learn more about the 3 Accounts.
After you read the above, click here to read at The Star – M’sians have split views over possible new EPF account
In The Star article, one of the many things I read was – “A business manager who wanted to be known only as Kamarul, said he would look into the possibility of using withdrawals from Account 3 to renovate his newly purchased house“.
Remember earlier I showed a chart where it was mentioned Personal Debts due to Weddings and Renovations? Sometime I am also very perplexed, if one has no extra money to burn on renovations, why they want to go into debt and perform something that will not make their lives any better but making it worse by having constant financial stress? And if one does spend say RM150K on renovation… fast forward 18 years in the future, he don’t have enough money to pay for his child’s education overseas in a top 100 university, who is to be blamed?
If you noted, I purposely use “he”, yes, it is the father who is responsible to send his child to a good university, so he needs to start saving before even the child is born…… so if the father do not have money to send the child to a Top 100 University, it is the father’s fault.
On the other hand, the mother just need to give love to the child and condition the child child to have the right attitude….. therefore if the father has the funds to send the child to a Top 100 university overseas, he can then blame the mother if the child is not smart enough or have the right attitude, hahaha.
Then again, it is a fact more than 10 years ago that there are more females in universities compared to males!!! So nowadays it is not surprising that the wife earns more than the husband! And because women are now financially independent as men today, the women can then demand this and that and when their request or needs are not met, instead of suffering in a relationship they can leave their “old man” and go look for younger man, hahaha. Yes, the tide has turned where many women now are the bread winner in the family and can divorce their husband if they are not happy!
In respect to the above if the women is “suffering” and not willing to leave her “useless old man”, who is to be blamed? I will just say the useless old man is damn lucky, hahahaha.
Then again, maybe the men are also stressed financially as their wife’s demands are self-interest and they do not plan for the future – this I can confirm from the many chats I have with females, they are only concerned of the immediate future and never plan ahead for the future, i.e. 10, 20, 30 and 40 years in the future….. all they need is love from their lover…. and to them love equates material stuff, example diamond, we have been conditioned by the Diamond Industry that diamond symbolizes love so the bigger the better, hahaha.
So maybe the man who wants to renovate (I am speculating for his case but many can relate) his home is because his wife is demanding him to extend their kitchen and equip it with the latest kitchen gadgets (and maybe the wife don’t even cook most days as she may be working too)! For example, when I was renovating a condo recently, my wife wanted an Electrolux Induction stovetop whereas to me a cheap gas stovetop can do the job equally well; she wanted a dryer in addition to a washing machine whereas to me the natural sunlight can do the job even better; she wanted a Dyson vacuum cleaner which I refused to buy because a broom stick can do the job; she wanted an Electrolux Built-In Oven and a separate Electrolux Built-In Microwave when there are so many other cheaper brands that are 2 in 1; she wanted Built-In Kitchen Cabinets top and bottom where to me bottom will do…… and the joke, neither we or our children are staying there!!!
In respect to the above, I do not need to take any loan to renovate the above said condo and therefore no debt and therefore not stressed as it does not make any difference to my life if anyone stays there or not!
Back to EPF Account 3
So the person mentioning he will take money from EPF Account 3 for renovation works, I do not know how much he has in his EPF but one thing I know for sure is he doesn’t have RM1M in his EPF where he can withdraw money from his current Account 2 anytime. So basically this guy if he withdraws from his EPF, which was designed for our survival in our retirement years, will have much less in the future.
Then another person said he will use to pay of his debts (to his friends!!!) due to overspending, which is understandable as he is under financial stress; but what shocked me is that he mentioned that – “and maybe use some of it to treat my family to dinner“! WTF, he is 33 years old and got no money to buy dinner for his family? And now he wants to withdraw money from his EPF to buy his family dinner? What logic is that? If you read more you will then learn he only earns RM3K per month! Soon he will be 40 years old and health issues will be cropping up…….. Basically he has wasted about 10 years to accumulate wealth and if he stays on the same path earning RM3K per month (which is less than USD1K), he will still have no savings when he is 40 years old!
Seriously, Bros & Sis, if you need more income, you have to work for it! I am not talking about being a Forex or Share Market Trader as this does not guarantee that you will be making money but may lose more money and deeper into the Shit Hole of Debt! One method that will guarantee you income now (before driver-less taxis arrive in Malaysia) is to be a Grab Driver. The person who wants to buy dinner for his family can just work on weekends for a month as a Grab Driver and he will have more than enough to buy his family dinner and me too! Like I mentioned earlier…. productivity…. so if you do nothing on weekends or Public Holidays but wasting time and burning money on entertainment or makan or whatever, then your productivity is ZERO, get it?
I have met many hardworking part-time Grab Drivers including government officers, Bomba officers, Businessmen, Grandmother (no joke where she told me she used to work in a factory in her younger days and saved money to buy not only her current home but also for his son) and etc. But best of all, one late night a Grab Driver told me that better he be a Grab Driver and earn pocket money instead of staying at home and hear his wife’s nagging, hahahahaha.
But towards the end of The Star article, you will read that a smart lady mentioned:
“she would similarly refrain withdrawing from Account 3 no matter the circumstance.
“I don’t want to develop a mindset that there is additional cash I can draw from anytime, which could cause me to develop bad spending habits“.
Well from above, what did you learn? Answer – women are smarter, hahahaha.
I cannot 100% blame the 2 men for having no money (first person no money to renovate house and second person no money to buy dinner for family) but I blame the people in power for not educating the Rakyat on how to manage their finance.
I tell you, from the chats I have with young people, 90% of them do not understand compound interest (example FD and EPF) but thinks that Personal Loan or even Car Loan (where both interest are imposed upfront) having 4% interest rate is good.
You see, the reason why so many people are financially clueless is because of our education system where we are not taught about compound interest (FD & EPF), hire-purchase (car loans) which are upfront interest, reducing interest (housing loan), Pros and Cons of credit cards, stocks (about dividends and more importantly can lose money), bonds (investing in a debt!?), Unit Trust/Insurance Policies which are linked to Funds (we may lose money in bad times and we need to pay annual fees!), Forex Trading (as good as gambling where some people actually makes money every time they go to casinos but most will “su ka lau sai”), scams, privacy (do not pose your children face in the internet unless you want them to be famous where scammers/blackmailers can superimpose their face, with AI we can age a child to look like above 18, onto a naked body and performing acts!
And because many are uneducated on personal finance, many single people were conned by Insurance Sales Agents! Single lah, no dependents, why the heck the Insurance Agent want to con them when the person will have more money if they just deposit their money in FD where the interest is compounded. I tell you, do not believe whatever an Insurance Agent tell you! Most Insurance Agents and Bank Relationship Managers only have one objective – to sell you products so that they get commission – it is their work! So if you are conned by an Insurance Agent or Bank Relationship Manager most likely it is your fault for being greedy where you stupidly believed someone else!
In Australia, students in Year 10 are taught a subject on Personal Finance. Well the government here in Malaysia should have a Personal Finance subject in Form 4 or 5 to educate the younger generations….. and in the same time many teachers will also be educated as they need to learn the material to teach the students. But it will be a miracle that a Personal Finance subject will be taught in Malaysia…..
Click here to read Predicting debt burden status among Malaysia civil servants. This paper was in 2019 before covid and it mentioned inflation which has increase the cost of living and it is even worst today. From the paper it stated that (1) borrowing from civil servants are substantially higher than that of the national average (Bank Negara Malaysia, 2018); (2) borrowings are for consumption purposes (weddings and renovations also falls into this category); (3) In general, civil servants spend more than half of their monthly income on repaying debts incurred and thus leaving them with little usable income for emergency purposes; and (4) it has been documented that more than 49,000 Malaysian civil servants are facing bankruptcy due to debt problems (Bank Negara Malaysia, 2018).
In respect to the above, not many people report what is the cause of so many civil servants are in debt! The reason is because the government actually in a way encourages them to get Personal Loans!!!! You see many banks (you know lah,most Malaysia Banks are GLC) do offer Personal Loans to Civil Servants because they are guaranteed repayments from the Government of Malaysia where the repayments are deducted straight away from the civil servant’s monthly gaji.
AS you all know, Personal Loans contributes to the highest bankruptcy rate and the paper above mentioned 49K Civil Servants are facing bankruptcy in 2018. Now you all know part of the reason why the government keeps increasing the bankruptcy limits…… of course politicians also benefit as the can owe up to RM200K soon and still be a MP.
From the above article – “The total number of civil servants that make salary deductions through Angkasa is around 800,000 with a monthly sum of around RM1.2 billion, and around RM14.4 billion a year“.
So what is BNM doing about the Personal Loans arrangement between Civil Servants and Banks? To me they should put a stop to this so called automatic repayment by deducting the salaries of the civil servants to make the banks richer and the civil servants poorer as they are living beyond their means. On the other hand, if BNM does put a stop to this said practice and the civil servants’ Personal Loans are not guaranteed by the government, one may think the banks in Malaysia would end up with Non-Performing Loans and maybe go bankrupt …. Remember earlier that it was reported Rm14.4 Billion a year is paid by civil servants for their Personal Loans!!! And no the banks cannot go bankrupt as many are GLC and also owned by EPF!
So much for civil servants, I shall now return back to the Rakyat’s case, the government knows the Rakyat are suffering with the high cost of living and are in debt but they are at a lost on what to do; and because they also need more revenue they will impose new taxes. For example the new SST rate is now 8% and you can definitely see and feel the this increase at Shopee for Shipping fees, haha. They have cut subsidies for electric bills an soon for petrol. The thing is 99% of the Rakyat are suffering because of inflation and many in the T20 are trying to stay afloat. Earning RM12K a month is nothing! RM12K is less than USD3K per month! Nowadays, a person earning RM10K per month will have trouble surviving if they have housing loan + car loan + children!!! So those in the T20 in order to survive and maintain their lifestyle will then think they are super smart and opt for 0% Installment Plans or 0% Balance Transfer Plans which they don’t realize that these are debts and thus spiraling down deeper into the shit hole of debt. You think the banks are so generous and want to help you by giving you 0% loans? The banks know that most people have money issues and these so called 0% loans are traps by them to suck you in so that you remain a slave to the banks. So regardless if one is in the M40 or T20, all are also financially stressed because they are in debt and their Net-worth is negative.
Which ever parties form the government we still have the same old same old policies where nothing is about making the Rakyat smarter but what can be done now to get votes – and sadly the citizens’ also only care about what is happening to them today and not about their children’s future which will be even worst where they can never repay back the national debts which are increasing by the day.
Now, personal debt is a worldwide problem and sooner or later there will be a reset…….
Insurance
I shall now give you another example, an educated person who does not have a child or has grown up working children “buys” an endowment insurance plan where he/she will end up having less money than putting the same amount of money periodically in FD in say in 10 or 20 years time!!!
Bros & Sis, when you buy an endowment plan, the Insurance agent will say it is better than Bank’s interest rate but they never tell you compared to which bank’s product. If you talking about Savings Account that pays 0.01% then maybe yes the agent may be correct but if you compared to Promo FD interest rates, then the agent is bullshitting you! But the most important thing is they never tell you that money in FD is compounded AND the insurance premiums you paid will be used to pay their commission, the Insurance Company’s staff salaries, the Insurance Company CEO’s bonus, the company’s operating cost for their branches and HQ, dividends to the company’s shareholders and etc!!! In other words you working to make others richer!
I have shown many examples of compound interest in my previous articles on FD and EPF and those who learned it will then understand why Insurance Plans cannot beat FD (in terms of your money growing but not necessarily in terms of security with Insurance Plans where no one except the nominee can touch the money if the policy holder dies) – but like I said, if one does not have a young child, for what one needs an endowment plan? For your parents… well, if your parents got no money today and you give them a lump sum of money it will also disappear very fast as they don’t know how to save money! It is all about habits – I mentioned before the quote below:
One becomes rich by saving money and not how much they earn.
Another quote of mine:
You earning RM10K or RM20K today does not mean you will be earning the same amount or more tomorrow!
In respect to the above quote, i.e. nothing last forever, time is of the essence, you need minimum 6 months equivalent cash for survival in case shit happens…………… and many who lost their income during covid then only realized that what I said repeatedly are facts!
Now, now, I am not saying that Insurance products are not good but you must know the purpose of you buying Insurance Policies. For example, (1) if you want to go to Private Hospitals then you need Medical/Hospitalization Insurance; (2) if you have a child you may take up an Education related Insurance Policy so that in the event you die there will be some money for your child and (3) if you know you have a useless child that spends whatever money you give to him/her, then you may have to get an Estate Planning Policy where you can specify how much the child gets periodically and no one lump sum payment.
You must know what is Insurance – it is all about calculating risk and making sure the Insurance Company makes money else it will go bankrupt too. So if you die at age 101 and you never claimed a sen throughout the years from your Medical Card…. be grateful and thank God/Universe that you were blessed with good health! What is the point of having RM5,000,000 Medical Insurance Policy where you are in and out of the hospitals never enjoying life and die in pain at 70 years old on the hospital bed? Well, the Medical Insurance is not necessarily to prolong your life but to ensure that you (if you come out alive from the hospital) and your loved ones are not in debt. That’s all.
Now, if you cannot afford to pay the medical/hospitalization insurance premiums, we Malaysians are very lucky because we can go to government hospitals. Yes I am sure you heard one or 2 horror stories about government hospitals but generally they are FREE or maybe I should say almost FREE, Health Care in Malaysia is pretty good. So if you do not have money, don’t lah be a fool and use your credit card and admit your loved one into a Private Hospital but instead go to the Government Hospitals so that you are not stressed financially and therefore can be more loving to your loved one when he/she is discharged from the hospital. And if your loved one dies at a Government Hospital, at least your only financial stress in from the funeral cost and not having to worry about the hospital bills. The point here is live within your means!
Oh I am drafting this article as thoughts enter my mind which are random and based on the thoughts I create a story…… which come to my next point….. we create our own story and you may agree or disagree with me based on your own conditioning (example Rich Dad Poor Dad) and experiences up to now in your life. However, if you are still reading this, it shows you want to learn more and from the information disclosed in this article. You will then create a narrative for your future BASED on your passed conditioning (brainwashing by the people in power).
BUT I know everyone is stressed out regardless how much they have or don’t have. For examples, (1) rich people are stressed daily because they don’t trust anyone and assume everyone is out to con them, (2) bosses with lots of money are stressed out because they can’t find “good” workers to control and work long overtime hours for FREE (today GenZ, you raise your voice next thing you get a resignation letter, hahaha), (3) greedy people after easy money without working and want profit higher than FD interest rate will be conned by scammers and (4) those in debt and no money have no alternative but to shoplift Milo/Milk for their children. Everyone is stressed out!
Nowadays most insurance policies are tied to a fund. You know why? Basically they throw all the risk to you! If the fund goes to zero it does not affect the insurance company but you. AND MORE IMPORTANTLY, the insurance company is guaranteed to make money because they impose fees managing your funds!
Once again I am not saying you should not buy insurance but you must be realistic that you must have money to pay in the future or else your insurance policy will lapse if you do not pay the premiums. Having said this, if you do have financial issues and can’t pay the premiums, go talk to the Insurance company customer service and they can tell you what you can do so that your policy stays effective so that in the event shit happens you are covered.
Last but not least, I have a message for you young people, do not waste your early working years on material stuff but suffer a bit and start saving to have a habit to accumulate wealth. When you reach 40 years and at your peak of your career and have money in the bank to splurge, then you can go enjoy life. Another thing, once you have a child, you have 18 years to get the money to send you child to the best university. So if you did not plan the moment the child is born, you have only yourself to be blamed. And for this case, planning can also mean brainwashing your child that he/she needs to score in their exams so that they get scholarships and study for FREE or going to certain developed countries where tertiary education is FREE!i But then again the new generations don’t really need much as long as they have a gadget in their hands they are connected to the world.
GenX GenY GenZ 