Where does your money go?

I don't know why I writing this this. Maybe just an excuse to not sleep early and sip some of my favourite Andalucian tea which I cannot get more of! Argh! I need to go back to Granada to get more tea! Obviously that's not gonna happen! This packet was actually given to me by a Moroccan shopkeeper I made friends with when I was there. I used to stop by his shop everytime I was in town. He could speak okay english. Not many ppl in Spain spoke english. Unfortunately my arabic was pathetic. =(

mmm... Andalucian tea. I love the big tea leaves. I don't need a strainer for pouring the tea. The teapot's strainer is good enough for the big tea leaves.

Anyways, back to my topic. Yeah, I'm not claiming to be the most prudent with my money, I do spend it on expensive stuff sometimes. When I started working about 5 years ago there was something that my parents always told me. This was to buy property before it gets too expensive. So after I confirmed my position with Petronas I bought a condominium in KL. 4 years plus onwards my parents words turned out to be true as It is almost impossible to buy property in KL for the amount I bought my property for. Property is a very good way of forced saving. I had rented it out for 2 years and throughout that period the property has paid for itself. I was lucky to quickly make use of my company's staff loan which allowed for 100% loan. In other words, I didn't have to fork out my own money to buy the property. Good for some poor person that's just started working...So if your company has a staff loan scheme, make use of it as soon as you can k.

Other than property, it is wise to diversify your investments in instruments like Mutual funds, Tabung Haji or the stock market.  Some even do side business. As long as it doesn't interfere with your day job and the sources of income is halal then why not. I am abit weary of multi level marketing schemes where the income is actually derived from other people's money. I seriously doubt the hallalness of those schemes but hey, that's just me.

Everyone should have some sort of saving. Experience has taught me that the best potential returns come from the stock market, Mutual funds are slow and Tabung Haji is the most care free as they pay the Zakat for you and give back reasonable returns. Though the stock market may have potential for large losses as I have observed with some of my friends but they all say the net is still positive.

On hindsight though, there are a few advice i would give out to those just entering the working world:

1) Don't buy an expensive car or better still don't buy a car until u absolutely need one. Pay as much upfront in cash or better still buy cash.A car is what people call a depreciating asset, or in other words a liability. The value depreciates and you will have to pay for the maintenance, running costs etc. Esp in Malaysia where car prices are very high, this is the single most thing that can erode your quality of life! The longer your loan amount, the more u stand to potentially lose when u decide to sell your car. Unlike property where it's value increases, car prices depreciate and a loan is an additional cost on top of that sticker price so when you want to sell the car, don't b surprised if you have to top up the loan! Beware k...

2) Get up the property ladder as early as you can. It will save you alot of money in the long run. Buy the most expensive that your budget permits. Remember that home loans are protected by MRTA so if the worse happens, you will not leave your spouse with a huge burden, If the property is high value, you might even leaving them with a "sweetener" as the MRTA will pay off the loan for you. Just an important point to remember: Property prices increases at a rate faster than your annual increment, especially in KL.

3) Have a disciplined saving habbit. My choice is Tabung Haji cos the returns are quite good and they pay the Savings Zakat for you. I also save at the company's employees corporation and also have an investment linked takaful as savings. Remember to take Takaful/insurance at a young age as the coverage costs will increase with your age and medical costs can really erode your wealth if not taken care of properly. Remember, that the best option is always to take good care of your health. Do sports. Run around the taman once in a while. Eat healthy... another community service reminder by yours truly =)

4) For muslims: Never forget to pay your Zakat. It's one of the pillars of Islam and one of the most ignored. Zakat cleanses your wealth. Just do it k....

Before I wrap up for the night, let me share the reason why we must invest our money. Well, other than the obvious reason of for future rainy days (or for a future wedding =P), the other reason is to preserve the value of your money. As we all know there's this thing in economics we call inflation. What is inflation? Inflation in economic terms is the increase in the prices goods. In other words, if inflation is 3%, then the price of a select basket of goods has increased by 3%. Remember how when I was joined school in Malaysia in 1990, a pocket money of 60sen was sufficient. A packet of Nasi lemak was back then only 30 sen. 60 sen got you a nice Nasi lemak kerang! hehehe... today, a simple nasi lemak will cost at least 1 ringgit and a kerang one would probably cost 2 ringgits. Therefore if u had 1000 ringgit and kept it under your pillow for 10 years, yes after 10 years you will still have that 1000 ringgit but you will not be able to buy as much stuff with it as you would've now. If you don't grow your money you are actually growing poorer with time - even if you don't spend any of your money! That is why we all need to invest our money in order to just preserve it's value at the very least and make more money from it if you can. So, next time you get your pay check, ask yourself how much of your income have you invested?

p.s: Tomorrow's mother's day. What have you planned for your mother?