A nice articel from smartconsumerbanking.com
How much your are earning now? Compare that with what your parents used to earn some 30 to 50 years ago. What do you get? I bet you are earning much more than your parents used to. But are you broke at the end of the month, while your parents, with that little pay, have no problem raising you and the whole family?
It is because your parents are smarter in managing their money? Or it is because things are much ‘cheaper’ some 50 years ago as compare with now? Or may be because life back then are much more simple that we are now?
The answer is no.
Our parents, just like us, have many ‘wants’ and they have their fair share of facing the ever-increasing cost of living and others life struggling! But why then they seem just doing fine while we struggle along?
The answer is simple – they can’t spend more than what they earned, even they wanted to, they simply can’t. If they saw something nice on the shop, they can only buy it when they have the cash on hand – there is no hire purchase available. And if they want to buy a car or a house more than what they could afford, banks simply won’t lend them the money. In those days, it is really, really hard too spend too much money because it simply impossible to do so.
But that was some 30 to 50 years ago. Things are much different now, consumer credit, hire purchase and loan facilities are everywhere. Run out of cash to see a movie, no problem, use the credit card. Can’t get your eye off that plasma TV, no problem, sign up the installment plan. Want to have that perfect wedding, get a personal loan. Fall in love with that sexy wheel, no problem, take a 9-years long car loan. Found your dream house, no problem, get a big housing loan.
The problem is, with such an easy access to credit and loan facilities, we easily went over the top and over stretched our money – buying more and more extravagant things that we really can’t afford and rack up too much of debts. Soon, we find ourselves perpetually paying yesterday’s purchases, and that is why we always broke at the end of the month.
No, I am not against credit or loan facilities, without them, I can’t afford to buy my car and my house. And yes, spending is fun. If we can’t have fun, what is the purpose of life then?
But the fine line here is keeping our money in balance between what we needs and what we wants, and still have some left for saving. A plate of mixed rice is a need but a plate of steak is a wants; a decent car is a need but a 4-wheeler is a wants and so on. Also like it or not, today we do not enjoy the lifetime job security like our parents do, restructuring, right-sizing you named it! We have to be smart enough to protect ourselves from the ever-accommodating lenders, car dealers than willing to do whatever it take to get us the credit facilities. And on top of that, we have to protect ourselves from our bosses to have that job. All these mean we have to start getting our money into balance now. Financial experts advice that we should keep the overall debts below 30% of our gross income
To sum it up, you are broke while your mom and dad just doing fine with their small pay is because your money is out of balance. Your know your money is out of balance when you paycheck comes, you pay your creditors first, and left nothing for you.
If you find yourself in that situation, it is time to really think hard to work out a plan to rebalance your money. First thing first, tackle the debts one at a time. It takes times for sure, buy hey, it only Malaysia 50 years to became where we are now. And if you really serious, you don’t have to take such a long time. You can’t afford to!
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