Source of pic: www.tradingeconomics.com/malaysia/inflation-cpi

People are complaining the cost of living getting higher nowadays. Inflation becomes a hot topic during lunch or dinner time among peoples. Can we avoid the cycle of inflation or can it be stopped? Sad to say, we need inflation to boost our economy.

We either live in 1932 Great Depression or 1923 Weimar German hyperinflation. Based on the current trend it shows we are living n 1923 Weimar German hyperinflation.

The value of money is depreciated. Have you taken any action to live under 1923 Weimar German hyperinflation period? I have born in middle class family. I save every single cent to buy asset such as gold or shares.

In fact, I use half of my salary to buy asset. I cultivate the habit of spending to buy assets when I read the book written by Donald Trump. I know only asset can make me rich. The question is am I buying the right asset? Can I have a normal lifestyle when buying asset?

To tell you the truth I live on shoestring budget every month. My friends categorized me as stingy person. I wouldn’t spend on luxurious items. I will spend if the item worth the value. So, I would say I spend for the value. While I observe the scenario is most of the peoples spend on liability.

Some of them chase for branded Zegna suits or Omega watches. Thought to ponder. Do you think you love to live in the rat race by having liability or financial freedom?

Many peoples live in rat race because they spend their money on buying liability. I used to be one of them due to I spend for the value. I will buy branded handbag and clothes to fulfill my desire.

Until I quit my job to travel to India I realize I couldn’t rely on job to fund my living expenses. This is a huge turning point that makes me realize I should spend my money on assets instead of liability.

Assets can create passive income for me while I have to pay for liability. Many peoples don’t understand the difference between asset and liability. We can’t blame them.

Our society lacks of school that teaches financial knowledge. Most of us been educated study hard, get a job, get a mortgage and get married. Is it the life you want? I had to pay RM600 credit card bill every month while I earned RM1200 working as a waitress. It was the time I realized my financial position is upside down.

I attended Millionaire Mindset Intensive in Kuala Lumpur last year. I learn to manage my money by using 6 Jars Money Management system. Basically, we divide our income to six portions which are:

  1. Financial Freedom Account(10%)
  2. Long Term Saving(10%)
  3. Play(10%)
  4. Necessities(55%)
  5. Donation(10%)
  6. Education(10%)

It was hard to practice at first. I sold my investment to pay for the credit card outstanding balance in order to divide my income into six portion in new month.

After applying the method I realize I spend future money last time. Now, I pay myself first. In order to be rich we must learn how to pay ourselves first. I have a balance lifestyle now due to I know the amount I have for entertainment every month.

I also know how much should I put for investment each month. The method might not work for the first time. You need to go through the trial and error by yourself. It indirectly teaches you to spend wisely.

Last but not least, start the 6 Jars Money Management today. If you continue spending for liability you are far from financial freedom. Spend within your limit and concentrate on building your assets. When your assets give you cash flow you can live above your mean. You are holding a pen to write your own life story.

All the best to you.

This article is contributed by Catherine Ow, owner of Rich Life

 

 

 

 


KCLau
KCLau

Personal finance author and trainer

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