Start with Investment, Not Debt

Many financial problems start from our failure to manage our income wisely, as we spend more than we should and continue living in debt.

We inadvertently built up debt beyond our means to buy things we don't even need.

We gradually build it up through our spending, forgetting that the debt will continue haunting us if we fail to manage it wisely.

Many overlook the fact that the mismanagement, which begins from our very first salary, will become part of our lifestyle and later negatively impact our finances.

Ideally, what we should do when we start working is to invest and build an emergency fund and try our best to avoid accumulating any debts, especially bad debt such as credit cards and personal loans.

Sadly, many forget to invest but are never shy to borrow as they feel the need to impress others and succumb to peer pressure.

They often tell themselves that they will start investing when they have extra money.

The question is, how is it possible to have any excess when you are more interested in spending rather than investing?

After many years, when more and more of their income is channeled to pay off debt, they will start to feel the pressure as they do not have extra money for themselves or their family.

They will feel that their income will never be enough, and they continue accumulating debt, especially when the unfortunate happens.

They are forgetting that all the debt is the result of their reckless spending.

Financial Problem

The financial problem starts and becomes part of our lives because we start our journey by focusing on spending rather than investing.

When we start spending beyond our means, we inadvertently build a debt trap via, among others, personal loans, credit cards, and hire purchase loans.

Among the mistakes repeatedly made by young people are lavishly spending on designer goods, eating out, and buying imported cars. Some even took personal loans for a vacation and to buy gadgets.

There is a simple way to manage money, and the most important first step is that you need to know how to differentiate between needs and wants. The eagerness to satisfy your wants will unconsciously lead you to a debt trap.

Build Fund vs Build Debt

To have a financially stable life, you must remember that the money invested has the potential to grow while the money spent is forever gone.

As such, choose to start investing from your very first salary. Most financial planners will advise young people to set aside at least 10 percent of their salary for investment.

It is easier to develop a good investment habit when you are still young as you do not have too much commitment and obligation, such as family and kids.

The money invested will grow if you invest consistently and refrain from withdrawing capital and dividends for a long time.

For example, if you invest RM100 monthly and receive an average of 5 percent yearly dividends, you will have at least RM6,800 in 5 years if you do not withdraw any money.

Imagine if you invest more? Of course, the bigger you invest, the bigger the fund you can build.

You can use the automatic investment facility offered by companies such as Amanah Saham Nasional Berhad (ASNB) to regulate your monthly investment.

Where to Invest?

When you are young and have no experience in investment, you are advised to choose a low-risk investment with a stable return.

Focused on building an emergency fund, equal to 6 months of your current salary, as a buffer if the unfortunate happens.

Among the options are fixed-price unit trusts such as ASB and ASM or fixed-deposit.

Manage your money well by investing first and spending within your means. Minimize your commitment by living a simple life and not trying to impress others.

Investments might not give you immediate satisfaction as when you spend on things you love, but in the long run, it will be your second source of income, give you a lending hand when you are in need, and, most importantly, help you to achieve your dreams.

Investments will give you peace of mind and financial freedom; as such, start your working life with investment, not by building a debt with reckless spending.

Simple investment tips:

1. Spend according to your means.
2. Don't create unnecessary debt.
3. Set aside money for investments before you start spending.
4. Take your time because a long period gives flexibility in investments and allows you to build more significant savings.