Most \u201cadult\u201d people I know still have a surface-level understanding about money. Unfortunately, this\u00a0applies to people of your age too. If you\u2019d like to test your knowledge, try this basic financial literacy\u00a0test<\/a>.<\/p>\n It\u2019s just five\u00a0very short questions, and you get to see if you\u2019re financially smarter than two-thirds of the world (who failed).<\/p>\n Why isn\u2019t personal finance a mandatory subject in schools and universities? I don\u2019t know, but that\u2019s surely one of the biggest failings of our education system. Instead, young people are left to learn finance from websites, guest speakers and gulp, their friends and families.<\/p>\n It\u2019s not that self-learning is a bad thing. It\u2019s that sometimes even your well-meaning friends and parents could be teaching you poor money habits. And let\u2019s not get into \u201cfriends\u201d who \u201cteach\u201d\u00a0but are actually trying to make money off you.<\/p>\n So your biggest problem really is:\u00a0No one taught you personal finance. And even if someone did, was\u00a0he\/she teaching you the right things?<\/p>\n When you were younger, your parents likely told you a version of the same advice they told me: \u201cStudy hard, get good grades \u2014 and you\u2019ll have a secure job.\u201d<\/p>\n But of course, the world has changed since our parents\u2019 times. Today, the world of secure jobs isn\u2019t so secure anymore. There\u2019s no such thing as lifetime employment. And with huge advances in Robots and Artificial Intelligence every day, the world of jobs is going to continue to change rapidly.<\/p>\n It really scares me, but here\u2019s\u00a0the prediction some experts are making: we\u2019re going to have much less\u00a0traditional jobs\u00a0in the near future.<\/p>\n So you\u2019re now living in an uncertain job market with an even more uncertain future. It\u2019s getting harder to have secure income.<\/p>\n \u201cI might be smiling here, but I think robots are going to take away your job.\u201d<\/p>\n \u201cI might be smiling here, but I think robots are going to take away your job.\u201d<\/p><\/div>\n In the 1980s, you could probably buy a double-storey\u00a0house in Kuala Lumpur for about RM60,000.\u00a0And your starting salary<\/a> might have been around\u00a0RM 1,000.<\/p>\n Today, try buying a RM500,000 (US$112,000) apartment\u00a0on your starting salary of\u00a0RM2,100<\/a>.<\/p>\n The oft-quoted guideline from the\u00a0World Bank<\/a><\/em>\u00a0is this: To be considered affordable, the price of your home\u00a0should be less than\u00a0three times\u00a0your annual household income<\/strong>.<\/p>\n In other words, if your\u00a0annual household income is RM54,600 (RM2,100 monthly salary x 13 months x 2 people), an \u201caffordable\u201d home for you costs\u00a0RM163,800 and below.<\/p>\n That RM500,000 apartment is\u00a0nine times\u00a0your annual household income. The World Bank would call it \u201cseverely unaffordable.\u201d<\/em><\/p>\n You and I call it something less savoury.<\/p>\n Here\u2019s some more scary data. Because it\u2019s not just the Malaysian economy that\u2019s screwed up. Let\u2019s take a look at the economic miracle known as the USA.\u00a0Well, our young friends there aren\u2019t doing so well either.\u00a0The Atlantic<\/em><\/a>\u00a0 reports that over the last few years, real (inflated-adjusted) income has fallen for most\u00a0Americans aged between 18 and 34. And here\u2019s some data from the Bureau of Labor Statistics: James Altucher<\/a><\/i><\/blockquote><\/p>\n You\u2019re rightfully angry at the rising cost of living. Things\u00a0have\u00a0gotten more expensive over the years, and salaries (especially for young graduates) have just not kept up.<\/p>\n Most of you have some form of student loans to pay off too. But here\u2019s the\u00a0good news: Malaysia \u2014 for better or for worse \u2014\u00a0is an extremely forgiving country.<\/p>\n I\u2019m not suggesting you don\u2019t repay your PTPTN education loan and beg for forgiveness from the immigration officers at KLIA before your annual vacation. What I am saying is if you have the will to pay your debts, the environment here makes it easier to pay.<\/p>\n We have all kinds of\u00a0discount schemes<\/a>; plus when was the last time you heard of someone getting hauled to jail\u00a0because they\u00a0missed an education loan payment?<\/p>\n Of course, student debt is still\u00a0a problem. And I understand how hard it is to plan for your future when you have a big sum of money hanging over your head. I\u2019ve been there too and it did not feel good at all.<\/p>\n But with that in mind, let\u2019s take a look at the other side. It can\u2019t be all doom and gloom; so what are some advantages that young people have instead?<\/p>\n When I was a fresh graduate, I had to call the TM Streamyx guys to come to my home every few months \u2014 because my copper wire DSL modem would periodically get fried by lightning. Not only was my\u00a0wired<\/em>\u00a0Internet connection\u00a0slow, it was unreliable.<\/p>\n Today, the\u00a0cheapest<\/em>\u00a0data plan on your mobile phone is five times faster than my lightning-rod DSL connection of\u00a02007. And as you\u2019re probably aware, the amount of knowledge available for free on the Internet continues to grow exponentially.<\/p>\n What I\u2019m getting at is this: you\u2019re privileged to live in an era of cheap devices and free information. Access to knowledge\u00a0is not a problem anymore. It\u2019s so common that you and I don\u2019t even appreciate\u00a0how wonderful it is; that with a few clicks of your mouse\u00a0\u2014 you can check how cheap\u00a0Malaysian car prices\u00a0were in 1985. You don\u2019t even have to open your mouth to ask anyone anymore.<\/p>\n With technology, you can learn from the world\u2019s greatest minds for (you guessed it) free.<\/p>\n If you know what this is, you\u2019re old.<\/p>\n If you know what this is, you\u2019re old.<\/p><\/div>\n Growing up, I wasn\u2019t street smart. I did pretty well in school, but I was never the entrepreneurial kind. Maybe the whole \u201cestablished path\u201d of school >> university >> corporate job was too well-drilled into my head.<\/p>\n So the only way I knew how to make money was to work for a company and have a boss. Silly me.<\/p>\n Of course, you\u2019re smarter and braver than me. So you\u2019ve likely done some kind of work in your free time during your college days. You probably already know how to leverage your skills and connections to make money.<\/p>\n Which is a great thing. Did you know that freelancers now represent\u00a035%\u00a0of the US\u00a0workforce<\/a>? I couldn\u2019t find detailed statistics from Malaysia, but it\u2019s a growing trend worldwide. And it especially suits people like you and me who like to work from home in our underwear.<\/p>\n Your ability to use access and technology makes freelancing an easy option for you. You know how the Internet and social media work.\u00a0Plus with globalisation, you can\u00a0earn some high-value\u00a0USD\u00a0if you\u00a0sell internationally.<\/p>\n All of us are entrepreneurs. I wish I\u2019d learned that earlier in life; but for you young\u00a0Padawan<\/em>\u00a0\u2014 the world is yours to conquer.<\/p>\n Time is your greatest advantage of all.\u00a0And here\u2019s an example from history\u2019s most storied\u00a0investor: Warren Buffett, who\u2019s now worth about US$73.9 billion.<\/p>\n Did you know that 99% of\u00a0Warren Buffett\u2019s\u00a0wealth<\/a> was made after his 50th birthday? Read that again. Even the greatest investor we\u2019ve\u00a0known made the majority of his fortune after he was 50.<\/p>\n He started when he was 11, but\u00a0it took him 45 years to become a billionaire.<\/p>\n Of course, that\u2019s not what people want to hear. Everyone wants to become the next Mark Zuckerberg\u00a0\u2014 billionaire at 23\u00a0years old. \u00a0But it\u2019s not going to happen for most people.<\/p>\n Most people need time to achieve significant things in their\u00a0careers. And most people need the magic of compound\u00a0interest<\/a> over long periods of time \u2014 to really let their money grow.<\/p>\n I\u2019ll give you a\u00a0typical example here: Let\u2019s say you earn RM2,200 and contribute\u00a0the bare minimum into your EPF retirement fund. Keep contributing as normal\u00a0for 41 years (till you retire), and you\u2019ll have a cool RM1\u00a0million by the end of it:<\/p>\n Assuming 6% returns<\/p><\/div>\n And that\u2019s even\u00a0before<\/em>\u00a0you factor in any promotions and salary raises.<\/p>\n You\u2019re young; you have time. But do you have patience?<\/p>\n 1. Budget and automate <\/strong><\/p>\n If I could sum up personal finance in one sentence, it\u2019d be this: spend less than you earn, and invest the rest.<\/p>\n Sounds great, but of course then you start getting tempted by how great the latest iPhone looks, and that unbelievable holiday deal from AirAsia. Which is precisely why you need a budget. Because if you spend your money freely without planning \u2014 you\u2019ll be bankrupt one day. And that day would come sooner than you think.<\/p>\n You can read further details on how to create a budget<\/a>, but the most important thing about budgeting is that it helps build\u00a0discipline<\/a>. Without which you will never achieve financial success.<\/p>\n Here\u2019s a final tip on budgeting:\u00a0Because most of us are so horrible at controlling our impulse to buy things, automate your savings and investments. Set your bank to automatically deduct your salary and invest\u00a0that money immediately every pay day \u2014 so you can\u2019t easily touch it.<\/p>\n Because if you can easily get to that money, I suspect\u00a0you\u2019ll have a new iPhone soon.<\/p>\n If you were a company, there are\u00a0two ways to become more\u00a0profitable: make more money, or reduce your costs.<\/p>\n Both are important, but which one do you have more immediate control over?<\/p>\n Assuming you\u2019re not extremely poor, and your family isn\u2019t totally dependent on you \u2014 most young graduates\u00a0have room to reduce their expenses.<\/p>\n \u201cBut I need trendy\u00a0clothes and hipster cafes to\u00a0maintain my\u00a0image,\u201d you say. \u201cAnd I need vacations overseas to be happy.\u201d<\/p>\n I\u2019m never going to be the guy who says you should give up your overpriced Starbucks lattes or stop traveling. To each his\u00a0own. But if you\u2019re really going to control your expenses\u00a0in today\u2019s economic environment, I guarantee\u00a0you\u2019d need to make some tough decisions.<\/p>\n You\u2019re not going to get everything your heart desires. Life is about trade-offs. In time and in money. So spend on those\u00a0things which\u00a0are really important to you. Spend\u00a0more\u00a0<\/em>on them and cut out everything else. Ruthlessly.<\/p>\n Hint: When you get to my age, you\u2019ll probably realise a lot of things you thought were important aren\u2019t. So choose wisely.<\/p>\n Living pay cheque to pay cheque is no fun at all. <\/p>\n","protected":false},"author":41,"featured_media":29132,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[218,308],"tags":[],"class_list":["post-29126","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-management","category-saving-tips"],"acf":[],"yoast_head":"\n<\/span>2. The changing world of jobs <\/strong><\/span><\/h2>\n
![\"\"](\"https:\/\/static.imoney.my\/articles\/wp-content\/uploads\/2017\/04\/elon.jpg\")
<\/a><\/span>3. Cost of living and inflation<\/strong><\/span><\/h2>\n
\n\u201cAverage income for Americans\u00a0aged 18-35 has gone from US$36,000 (in 1992) to US$33,000\u00a0(today).\u201d<\/p>\n
<\/span>4. Student debt<\/strong><\/span><\/h2>\n
<\/span>1. Access and technology<\/strong><\/span><\/h2>\n
![\"\"](\"https:\/\/static.imoney.my\/articles\/wp-content\/uploads\/2017\/04\/cable.jpg\")
<\/a><\/span>2. The freelance economy<\/strong><\/span><\/h2>\n
<\/span>3. Time<\/strong><\/span><\/h2>\n
![\"\"](\"https:\/\/static.imoney.my\/articles\/wp-content\/uploads\/2017\/04\/calculator.jpg\")
<\/a><\/span>So, what should young people do with their money?\u00a0<\/strong><\/span><\/h2>\n
<\/span>2. Be ruthless about expenses <\/strong><\/span><\/h2>\n
First published on mr-stingy<\/a>.\u00a0<\/em><\/h6>\n","protected":false},"excerpt":{"rendered":"