You may be born poor, but that should not define you. To be born poor doesn’t mean you’ll always be poor. We live in a world where opportunities are greater than ever, where borders are erased and redefined and where futures are being scripted. Our days ahead are shaped by the habits we adopt today – but, why are there still so many poor people in the world today? Maybe it has something to do with eroding habits that eat into our hard-earned cash.
If you are born poor it’s not your mistake, but if you die poor it’s your mistake.
Bill Gates
Habits are things we do without second-guessing. They form part of our daily routine and shape our value system and future. Awareness of our habits and its causes is the first step to making changes. Here are four bad habits that may have sneaked up on you and disrupted your financial growth leaving you broke all the time.
1. Spending More As Your income Increases
There’s no harm in raising your standard of life when you can. However, if you find yourself constantly looking for the next new thing to buy or constantly looking to upgrade your lifestyle, you will probably find yourself in a difficult situation very soon.
If you constantly raise your expenditure along with an increase in your income, you will find that your savings will remain stagnant. Worse is if your expenditure keeps going up, you may be accumulating more debts than you desire.
Instead, consider your future before you spend. Try to keep your expenditures at a constant level while exploring ways to increase your income and save more. Recognise the urge for instant gratification and buy only what you need.
2. Spending More Than What You Earn
This is a dangerous habit and it will put you in a great financial pit. Do you find yourself in any of the situations below? They are warning signs of overspending. You may be spending more than you can actually afford:
- Do you find yourself accumulating a bigger balance on your credit card every month?
- Do you have to eat into your savings every month?
- Are you living from paycheck to paycheck without any savings?
- Do you find yourself going to a shop to buy one thing but end up with ten things?
Spending more than you actually earn is a problematic financial habit. Impulse buying, the need for instant gratification, effortless online purchasing and easy access to personal loans and credit cards lend to this problem.
A study on Malaysian millennials (25-44 years old) revealed that about 40% of them admitted to spending more than they can afford and 70% of them expressed dissatisfaction with their current income level[1].
Overspending is detrimental and has lasting impacts. A World Bank report recorded that the number of bankruptcy cases involving personal financing and credit card debts has grown by 104% and 43%, respectively, from 2012 to 2018. The highest number of bankruptcies are among the working adult population[2].
One solution is to increase financial knowledge and money management skills among the millennials and the next generation. The Global Finance Literacy Excellence Centre study found that 36% of Malaysians between 15-34 years old were financially literate, compared to 66% in Singapore and 51% in Myanmar[3].
3. You Don’t Have A Monthly Budget Or Any Financial Plans
Having a realistic and well-documented budget is the starting point of your financial planning. Budgeting helps you to know what you’re spending on, how much you’re allocating for different areas of life and where your money goes the minute you receive your paycheck every month.
Make a budget and stick to it! In the absence of a budget, it is very easy to get carried away and commit unnecessary expenditures. And, if you do have money left over each month after paying for the things you really need and essential payments, you can accumulate your savings or invest and grow your finances.
4. You Think You’re Too Young Or It’s Too Early To Start Saving
It is never too early to save a portion of your income or pocket money. No matter how high or low your income is, you should have savings at the end of every month. The amount may not be a lot, but start small and keep at it.
Savings will allow you to invest your money in the future, pay for larger expenditure when the time comes (eg. a house or car) and it will save you the worry when you need to dig into your emergency fund.
37% of households with incomes below RM2,000 said they do not save at all[4]. According to AKPK, about half of Malaysian households do not have sufficient savings to cope with unforeseen financial shocks such as emergencies, medical bills or job loss[5].
People often make the mistake of leaving the leftover money as savings. Instead, savings should be part of your budget. Commit to setting aside a portion of whatever money or income you get. Your future self will thank you for it.
Explore Our Sources:
- Asian Institute of Finance. (2015). Finance Matters: Understanding Gen Y, Kuala Lumpur. Link.
- World Bank. (2019). Making Ends Meet” Malaysia Economic Monitor. World Bank, Washington, DC. Link.
- Khidhir, Sheith. (2019). Malaysia’s millennials need help. The Asean Post. Link.
- Ringgit Plus. (2019). Are Malaysians In Denial Of Their Financial Reality? Link.
- AKPK. (2018). Financial Behaviour and State of Financial Well-Being of Malaysian Working Adults, Kuala Lumpur. Agensi Kaunseling dan Pengurusan Kredit. Link.
