The most important lesson that I learnt from my parents is not to spend more than I earn. This message remained in my mind throughout my working life.
Those who are now retired and in their 60s like me would have parents who had lived during tough times. My parents grew up in Sungai Lalang in Semenyih, Selangor, during the days of British Malaya. They experienced the Japanese occupation between 1942 and 1945, during World War II, which disrupted their education, and they then faced continued hardship at the height of the Communist insurgency between 1948 and 1960.
My father started his working life during the British administration as a clerk at the Postal Department. He worked his way up to retire as assistant superintendent — a post that required a university degree — in the early 1980s. As far as I can recall, his last salary including allowances did not exceed RM3,000 a month.
This meant that for many years of his working life, he earned between a few hundred ringgit and less than RM1,000 a month. Then for many more years, his salary was less than RM2,000 a month. But there was always food on the table and there was enough money for a household of 11, though it was difficult as we lived in Selangor and Kuala Lumpur, where the cost of living was the highest in the country.
Both my parents had to be frugal; they had no choice. On top of the daily expenses and monthly rent, they had to pay for our education — it was not free then. You had to buy your own books and pay monthly school fees even in government schools. When my eldest brother was at Universiti Malaya and he was not on scholarship, our youngest sibling was in primary school. Having nine children at various stages of education must have been costly for my parents.
But neither of them complained much and they did not show that there was not enough money. They never resorted to borrowing — those were the days before credit cards were easily available — and even had a small amount of savings at the end of some months. After deducting his expenses and other fixed household costs, and setting aside his monthly contribution to my grandmother — which he never missed, my mother always reminds me — my father let my mother, a full-time housewife, manage the household budget.
How did they manage the monthly expenditure? The simple formula was that there would be enough if the salary was not spent on what was not needed. Additionally, my mother cooked daily for the family and we hardly ate out. I can’t recall all 11 of us at a restaurant having lunch or dinner.
Having satay was a luxury then, and if there were occasions to celebrate with satay on the menu, it was mostly bought from the satay stall or the satay man who was making his rounds on a bicycle in the neighbourhood. Roti canai for breakfast on the weekends was always packed so one saved money by not having to pay for drinks.
The other formula was always feeling syukur (grateful) to the Almighty for what we had. As a family, we realised that there were a lot of families who faced more difficulties and hardships.
So, I was surprised at the public reaction — some of it offensive, to the point of expressing ridicule — against Minister of Economic Affairs Rafizi Ramli when he asked consumers to opt for cheaper products to force prices down, drink a cheaper coffee or spend less on eating out if it places constraints on your monthly budget. It is simply a financially logical thing to do.
The younger generation certainly, and maybe including some of mine, are not like the generation of our parents. This is the generation of spenders, many of whom live beyond their means and don’t mind being in prolonged debt situations.
The availability of easy but “costly” money via credit cards, personal loan schemes, buying of products in instalments, and through the latest “buy first pay later” schemes, means many can leverage their purchasing power basically just on debt. Things are made easier when everything — approval, borrowing and buying — can be done online.
But the question remains: Does one need to overspend on things that are not essential and on branded products when cheaper options are available? Do you need to have coffee at Starbucks and the like all the time? Do you need to have the latest Samsung or iPhone models and pay for them in instalments? If you can afford them, fine, but if you cannot, then why borrow to buy them?
What our parents had that many of us don’t is financial discipline. They did not have to be taught by a financial planner how to manage their finances. To them, the maths was simple — it’s just about being good at the plus and minus; it is about not spending more than you earn.
Hard decisions have to be made
The problem of overspending is not limited to individuals and households alone but it is a problem that many nations face as well. For a country, although debt and spending can be managed on a longer-term perspective through expansive fiscal and monetary policies and including international financing, the basic ingredients of good financial management and discipline remain the same — don’t overspend for a long period of time and continue to incur more debts. Debts remain debts and have to be paid.
Since 1970, Malaysia has been spending more than it earns — in all but five years. Running a budget deficit for 48 years means it has had to borrow to make ends meet. At the end of 2022, the total government debt had exceeded the trillion ringgit mark — at RM1.08 trillion. And if it included government guarantees provided to various entities, the liabilities reached almost RM1.5 trillion. Divided by a population of 32 million, this debt is equivalent to RM46,875 for each of us.
High debt also means much of what Malaysia earns as government revenue goes to service these debts, which last year amounted to RM41.3 billion. With subsidies amounting to RM67.4 billion in 2022 (and the government has warned that it could reach RM81 billion this year), these two components combined exceed what was spent on education, health, social community services, agriculture and rural development and housing put together.
With revenue not growing as much as spending, all of our development expenditure — for building schools, universities, hospitals and roads — needs to be borrowed. While some of the structural issues that contributed to the problems have been there for years, this situation cannot continue for many more.
It is in this scenario that Prime Minister Datuk Seri Anwar Ibrahim, who is also the finance minister, will present Budget 2024 on Oct 13.
Hard decisions have to be made on managing subsidies more effectively so that they reach the targeted groups that need them. While the revenue base needs to be expanded, likely through new taxes, economic leakages through corruption and poor enforcement need to be addressed stringently.
To help the poor tackle the high cost of living and rising prices, social protection programmes, including subsidies in certain sectors, must continue. Doing all this without causing anger and more hardship for the rakyat who are feeling the pinch of a much “reduced” purchasing power and at the same time ensuring better financial discipline to narrow the budget deficit requires a delicate balancing act indeed.
Source : The Edge