Among the top worries of Malaysians is the high cost of living. Therefore, it came as no surprise when this issue topped the list submitted by Malaysians to be addressed during the Budget tabling.
In order to compare both, let’s first understand what is cost of living and cost of lifestyle. Cost of living includes cost incurred for basic necessities to survive such as shelter (home), food, and medicine among others.
Cost of Lifestyle
Cost of lifestyle can be better understood as essentially lifestyle requirements, and the cost incurred are then referred to as the cost of lifestyle as it is not a requirement. For example, items such as the latest mobile phone models, tablets, entertainment and more. Now that we’ve differentiated between the two, do Malaysians spend too much? Or are we not earning enough?
Try doing this exercise to see if your salary increment over the years has been equivalent to the inflation rate. Calculate your salary increment and then the inflation rate over the previous 5 years. Then compare the increase between the two, you will then get to see your real wage growth. If your wage growth is on the positive, even if the number is minuscule, consider yourself lucky. Apparently, most Malaysian’s wage growth is actually in the negative.
If you are working and residing in the city, you will most likely feel the pinch even more so. The median wage in 2016 was RM2,200, which is the same in 2014. While there was no change in the median wage for 2 years, the inflation rate was constantly increasing, meaning Malaysians were getting less for the same amount of salary.
Therefore, when it comes to cost of living, it is fair to say that most Malaysians are indeed struggling. As mentioned above, the salary growth of most Malaysians is negative. Even if it is not, the growth may not even match the inflation rate. Therefore, Malaysians worry about the rising cost of living is justified.
As for the cost of lifestyle, living standards were simpler and the cost of living was also much more affordable in the past. But at that time, say about 30 years back, the major desires of many Malaysians were housing, food, clothing and medical care. However, with technological advances, we then must consider additions to the accepted standard of living which now includes mobile telephones, Internet, entertainment and vacations among others. Maintaining the current higher living standard will then naturally cost more.
Cost Of Living vs Cost Of Lifestyle
While we have no control over the movement of the price of items, which is ultimately incremental as a result of inflation, we can control how we spend. Therefore what Malaysians can do on their part is to prioritise needs over wants. Malaysians should also practise delayed gratification when it comes to items of luxury. Here are the main take-away lessons:
- Learning to differentiate and separate cost of living and cost of lifestyle.
- Increase financial literacy by understanding financial concepts such as compound interest and inflation.
- Learn the financial mistakes you should not be making.
This article is contributed by guestblogger at Comparehero. For more ways to save money and a complete overview of comparisons for credit cards, personal loans and broadband plans, visit CompareHero.my today!