Need an increment??

Receive an email with the title "I need an increment". The above figure is actually the content of the email. It is simple yet it is so true.

A simple question. If you do not have a family to support and you are earning RM3000 monthly, how much can you save per month? RM1500? RM500? or RM0? That is the reason I always encourage people to save partially and invest partially. You have to always prepare for such situation mentioned above from being happened.

Someone might ask if you do not have enough to spend, why bother to buy insurance? If the family doesn't buy insurance, they will have extra RM600 to spend. Well, no doubt about it. However, if we think from another perspective, you'll know why we should buy insurance. For example, if the breadwinner of the family (the father) meet with an accident and admitted into hospital for 3 months. If he does not own an insurance and the company he is working with required him to take unpaid leave, how does the family going to survive? Borrow from relatives and friends, request donation from the public or even the government? Well, I think you have the answer right?

Besides that, the inflation rate DOES NOT grow proportionally with the rate of your salary increment. When the price of petrol increases, does your salary increase? When the price of sugar, does your salary increase? If you are expecting your boss to increase your salary when the prices of other things increase, there are only 3 possibilities.

1. You are the boss.

2. You meet with a very very very good boss.

3. You are dreaming. Please wake up :)

This is the reason why you need to do financial planning. You need to allocate money for your expenses, savings and investment.

Developing good financial planning will help you to reach financial freedom easily and earlier than others.

Early Investment vs Late Investment

I have been encouraged people to do investment in my previous posts. Besides earning some part time income from my clients who invest with me, it is also good for yourself. I always encourage people to do investment at a younger age or early investment. Why? The reason is simple. I’ll use table to illustrate it.

I will use 2 persons as comparison. For example, Person A do an early investment and Person B do a late investment. Both person investment for 30 years. The annual return for the investment is 4%.

Person A do an early investment by investing RM1000 annually for 10 years. After 10 years, he decides to stop investing due to other commitment.

Person B does the same things as what Person A does. The difference is that Person B start investing 10 years later than Person A.

At the end, Person A invests RM 10,000 and he gets RM 27,359.13 while Person B invests RM20,000 and he gets RM 30, 969.20. You can see although their investment period is the same, the amount they invest and the total they return at the end are different. Person B receive around RM 4000 more than Person A but he invests RM10,000 more than Person A. What the conclusion? I believe you know it. No doubt I only assume that both persons keep earning from their investment which is impossible in reality. However, the main message that I wish to convey is we should start investment as earlier as possible. Instead of me nagging here discussing the figures in the table, maybe it will be better if you can look at both the tables and give some thought at it.

Investment is the only way you can make money as your slave instead of you becoming the slave of money.