This was one of the biggest piece of news on 8th September 2014;

Household Incomes on The Rise
Survey finds average household income surpassing RM 5,900 a month

At first glance, I saw;

AVERAGE household income of RM 5,900 

A few glances later;

Average HOUSEHOLD INCOME of RM 5,900

You see, I highlighted the wrong thing. I got myself wrong. My definition was all screwed up! I thought it meant PER CAPITA income. I screwed myself up until my lecturer and some friends pointed out to me. You see, my financial knowledge isn't so good. I am financially illiterate, albeit not as bad as I was 4 years ago. A perfect reason to launch this blog. Not to say I KNOW IT ALL but just to share my journey through financial literacy....step by step.



Back to the HOUSEHOLD INCOME. What it means is the combined income of EVERYONE in a household. If a husband and wife earns RM 2,950 each, then it makes perfect sense to have a household income of RM 5,900. If there are 4 people with income in that household, just add them all up. If you just live alone, then its just that. This is just a measure of how well off people are. But it does not take into consideration the inflation rate and other factors in the quality of life. According to an article in The Star in July 2014, the consumer price index (CPI) was 3.3%. It sure feels more than that as a plate of mee goreng and teh tarik isn't as cheap as it used to be. This is totally different from buying power.


Will all this facts effect the man on the street? Personally, I don't think so.

A person can earn RM 10,000 per month. Drives a BMW 5 series, maybe services a loan of RM 2,500 a month. Not including the cost of maintenance. He has breakfast at Starbucks everyday which cost in excess of RM 10 per day. Lunch and Dinner would be another RM 20 - RM 30 each. That will be RM 60 per day = RM 1,800. To keep up with the trend, an iPhone 6 is a must and sharing a room in flat is NO, NO...mesti duduk condo! Add gym, jalan-jalan, watch movies, fuel and toll, he might just end up with no money for savings.

Compare that guy to another fella who earns RM 4,000. Rides a kapcai to work. Rents a flat with his mates and just cooks at home. The first thing he does every time he gets his pay check is set aside RM 1000 into his savings. It is possible to live with RM 3,000. At the end of the year he has RM 12,000 savings. He might put the money in a trust fund and get some gains. Continue for 2 - 3 years, he has enough capital to get a decent apartment in the sub sale market....not for him to live in but to rent it out and possibly get some cash flow, RM 400 perhaps.

This is living within one's means. Ukur baju di badan sendiri. Of course, some might still say:

"Mana boleh macam ni! "
"This is absurd, where can live like that!"

Well, if you can't change the world, it might be best to change yourself first. This has been done before...by others of course! I already made the mistake of buying a gas guzzler and spending my first paycheck on a holiday and an LCD TV!

MOfrust

Disclaimer:
This is just the opinion of MOfrust, It is open for MATURE discussion. MOfrust DOES NOT have a degree in finance and IS NOT a certified financial planner.