Millennials are in pretty bad financial shape. According to a study by the Asian Institute of Finance (AIF), 38% of Gen Ys in the report shared that they have personal loans and 47% engaged in expensive credit card borrowings, while only 28% felt confident in their financial literacy.
With this figure, we can’t help but wonder if it’s our culture or (lack of) education that may have led this group of young adults to where they are today. Though we believe that everyone should take responsibility for their decisions and actions, there are financial misconceptions that continue to exist among Malaysians today and it is affecting the whole community.
7 Financial Misconceptions That Are Badly Affecting Malaysians
1. Owing Money Is Bad
Since a young age, we have heard our parents and elders repeatedly tell us that owing people money is the worst state you can put yourself in. The worst part is this keeps many Malaysians away from legit and credible financial institutions or banks.
Here’s the thing, there are so many personal loans, balance transfer plans, zero-interest instalment and cash advance options in the market today that allow consumers to resolve their financial issues or achieve certain goals at low-interest rates.
The misconception that owing money equals a bad situation is still commonly found in the suburban and rural areas, who by default are less aware and have less access to information of ways to handle debt. To be frank, auto loans, mortgage, personal loans and credit cards can be used to our advantage if we understand how to use them in the right ways.
These are the most important questions that Malaysians should be asking when it comes to debt:
2. Owning a Credit Card is Bad
Owning a credit card is often misinterpreted as someone who loves to splurge their money and live on pay check to pay check. Similar to the previous misconception, owning a credit card is considered bad when the user does not know how to optimise the card features and when it is used in an uncontrollable fashion, which leads him/her into piles of debt.
The truth is, a credit card can be extremely useful when you can enjoy a zero interest rate instalment for a high lump sum purchase, save money on your daily expenses through cashback, or even enjoy exclusive promotions offered by the banks.
Another benefit of owning a credit card is you have a higher chance for loan approvals in the future if you own a credit card and pay the outstanding every month.
3. A Bank Is The Best Place To Grow Your Money
While it is somewhat true that the bank is one of the options to manage your cash flow, there are many valid alternatives out there that offer higher returns than the interest rates on fixed deposits or savings accounts offered by the banks.
You can choose to invest your money in unit trust, stocks market, bonds or start a business of your own that may bring a higher return than what banks are offering.
By creating a balanced portfolio, you don’t have to take out all of your money to invest but keeping it all in the bank is not going to grow your money any faster than inflation too. Hence, you should allocate a portion of your monthly income in investment alternatives with the stable return, than others in stocks market or unit trust, depending on your preference.
4. You Should Prioritise Finding Passive Income
While it is important to have passive income (which is income that rolls in every month without you working for it), you should be paying even more attention to your main income, whether you are employed, a business owner or freelancer. Many Malaysians have been focusing a little too much on getting passive income which leads to backfiring results in the country today such as fast income scams or getting fired from their main job due to lack of performance.
If you are smart enough, you should focus more on your main job and find ways to improve your income from your jobs such as getting adequate qualifications or a part-time job for side income. We are not saying that passive income is irrelevant, but prioritising your main income should be the way to protect yourself financially.
While making sure you are doing it right in the main job, it makes sense for you to start looking at ways to grow the money you saved from your income through savings or investment.
5. Higher Spending Equals A Better Quality Life
Millennials are falling for the social and luxurious lifestyle, which can be lethal to themselves in the near future. By falsely believing that higher spending equals to a better quality life is scarily common among Malaysians, especially in the cities.
We are not pointing fingers at anyone, however, we believe that parents play an important role in educating their children about financial literacy and its relation to moral values. For instance, educate your children to compare the market for the best goods or services in terms of value, get the most bang for your buck, instead of spending recklessly based on impulsive shopping behaviours.
There are Malaysians who believe that spending thousands of ringgit on outfits and brands will somehow make them look like high-income net-worth individuals. Yet, this shallow culture has negatively impacted our community by embracing the superficial and materialistic mindset among the younger, and more vulnerable, ones.
Also, this puts you at risk at buying overpriced goods if you believe that a higher price equals better quality. You might fall into the trap and paying too much.
6. You Should Earn RMxx by a Certain Age
While it is generally a good thing to set a target of earning a certain amount by a certain age, many Malaysians are too focused on this and end up judging others including their loved ones based on their income. This behaviour also perpetuates the superficial and materialistic society we are living in today.
(Don’t think necessary to explain, quite repetitive)Apart from age, it is important to know that there are many factors that affect your income such as your education background, experience, skillset, endorsements, and most importantly, your attitude at work. In fact, age plays a small role in determining one’s career enhancement if he/she has got what it takes to be a leader, manager, or a decision maker.
So for those who are insecure about themselves when it comes to age and income, we strongly advise you to be the best at what you are good at and do not let anyone’s negative judgement affect you!
7. Be A Cheapskate
Saving money is a virtue, but that does not mean you have to be the most cheapskate person in town just to save extra pennies. When it comes to money, the only thing that matters is value. There are many things in life that offer great value even if it is not obvious such as a medical insurance or a getaway.
Imagine if you live with a restrained budget over ten years without any form of entertainment or even a slight taste of deluxe pleasures, you are probably not treating yourself or your loved ones right.
We hope this brings a new viewpoint from you towards money. Let us know if you have more misconceptions about money to share!
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