When you first started working and got your first pay cheque, you were probably excited and wanted to start ticking off items from your wish list. It could be taking your parents out for a treat, splurging on shoes and handbags, or getting the latest electronics. The list goes on. You want to reward yourself, which is fine, as long as you are not spending beyond your means.
Living within your means is important because you will have more financial commitments over time. Here’s why – If you have a study loan, you need to start planning to pay it back; your next big ticket item is probably buying a car because you need to commute to work; after working for a few years, you may feel that it’s time to move out from your parents’ house or stop renting and buy your own place; but before that, you’d also want to travel, see new places, experience other cultures and do all the things that you want to do in your youth, because you are only young once.
But hey, let’s get real. All this requires having enough money! It is observed that Malaysians tend to save without clear goals and live for today1. In fact, 84 percent of those surveyed said they save regularly, but withdraw their savings by the end of the month to pay for daily expenses. Financial literacy is needed to manage money well and accumulate wealth. A study by S&P Global Literacy Financial reported that the financial literacy rate in Malaysia is only at 36%, compared to 59% in developed countries.
Now you may be wondering how all these relate to your future retirement.
Having the basic money management skills is essential to prioritise your financial goals, which includes saving for retirement. After all, you would want to enjoy everything you’ve worked for in your life during retirement. Typically, we would work for 35-40 years before retiring. How much we earn in those working years will determine our retirement lifestyle, which will only get longer as life expectancy increases, and more expensive as cost of living rises.
Ultimately, you only live once and, now that it will be longer, it is vital to start saving for your future while you’re young (it’s ok to start small) so you have enough when the time comes.