2 Level Ups in Cost of Living
This is Part 2 of a 3-Chapter series.
Last week I shared about the cost of living for a single professional in KL Malaysia (Link to post here), which by my calculations will put us at RM4k – RM5k monthly for a reasonably basic lifestyle. Could be less, could be more, depending on the individual’s choices and capabilities.
However, that is just the beginning.
In my view, there are 2 big chapters in life (for most people) that will cause an upgrade to the cost of living – that is, jumping a notch higher. This would, of course, be irrelevant for those who decidedly not take the common route.
Level 1: Marriage
It’s easy to take it for granted when we’re single how things can be easily adjusted to create more savings for our future. However, that could change upon getting married.
Firstly, it is important to agree on how the joint finances would be handled as a couple.
There are 2 major things to pay attention when embarking on this new journey:
- One off marriage costs
- Ongoing living costs
One-Off Marriage Costs
The first thing in a marriage is getting married and this in itself is a costly affair, as most married couples could attest to. I never understood how it became such a societal norm to have a married couple spend a fortune just to get married.
So how much does it cost to get married – aka wedding?
Let’s ignore the fact that it is substantially reduced in this COVID-19 pandemic era where we can just shift the wedding online ($240 / year Zoom package could allow us to host up to 500 participants), if we choose to.
I can’t say for sure about weddings for other races / religions, however a Chinese wedding will probably cost around RM100k for the entire deal. The cost will vary depend on how elaborate the wedding will be & the sheer amount of guests to be invited for the wedding reception.
I reached this conclusion via my own primary research by surveying amongst those who have held their wedding, and further reinforced by the articles that have been posted around the web (thebigday.my, cimb, kaodim, etc). In fact, Kaodim.com has a pretty good infographic on this!
Let’s say we managed to keep the wedding small and simple at RM60k. What would that be as a % of our total net worth?
I hear you, it’s a 2-people affair, and thus the net worth should be combined. I agree with you, only if, as a couple the both of you view it this way. Then, the same question applies. What % of the total combined net worth would that be?
- RM200k net worth – 30%
- RM300k net worth – 20%
- RM600k net worth – 10%
It is quite a big chunk.
Given the high cost of living in KL compared to income, how long will it take to amass RM200k net worth? Then, spend 30% of that in one event that bears no returns (possible return: 10 years down the road maybe it’s good to take back those photos / videos to reminisce). Just saying.
Ongoing Living Costs
A shift of lifestyle happens when two people come together and live under one roof.
There are many variations that go into this. Good thing is that there will be 2 income earners now to share the household expenses. It is therefore important to discuss how the expenses will be dealt with moving forward, especially when both income may differ a lot.
A few considerations when this happens:
- Stay: Perhaps you were living with your parents before this, or renting a cheap room, or living in a 500sqft condo by yourself. As we saw through the breakdown of living expenses, bulk of the expenses came from housing expenses. Will this then change moving forward?
- Transport: This generally would not change at this juncture, unless you’ve been relying on only public transport. Then it is possibly an opportune moment to get a car for couple activities – dates, shopping, etc.
- Food: The food expenditure will be a sum of both persons’ individual consumption (in most cases). Boys, you do remember that you are expected to splurge on date nights, birthdays, anniversaries, “babe, I’m sorry”, random occasions, etc. So yes, the cost will increase.
- Others: Generally no change here, except for those who don’t have insurance. Perhaps it is time to get one.
As can be seen, the cost of living for a married couple generally retains the individuals’ expenses with the exception of housing. This can be a big or minimal change depending on how was it for them pre and post-wedding.
Level 10: Children
Yes, you would have guessed it already.
Yes, it jumped from Level 1 to Level 10.
I am in no position to comment much on this as I have yet to reach this stage in my life, so I will keep this short.
There are a lot of joy that comes with having children, no doubt. However, there is also no denying on the increased expenditure that comes with it.
The existing:
- Stay: Usually you would have taken into account of this in the previous chapter (i.e. post marriage). If not, then this is something that will change. Maybe a landed property, but definitely a bigger unit to accommodate children for the next 20 years.
- Transport: No change
- Food: This will increase exponentially depending on the age of the children (growing kids eat more, right?)
- Others: The items here – insurance, mobile, groceries, shopping – will scale based on the amount of children, gender & how old are they.
New spending:
- Education: Possibly the biggest spending in raising a child – it varies based on the quality of education from pre-school to university. This expenditure will span across some 15 – 20 years and can be mitigated by various support including scholarship. Taking up loan – e.g. PTPTN – is another possible avenue but not recommended as it shifts the repayment to your children.
- Baby clothing: The worst spending for children because it’s expensive and they outgrow this instantly. Hence, recommended to borrow, beg & get 2nd hand (not steal), if possible.
There is also the case of how long will we need to support their life until they are independent enough to go on their own. In the current society, where our cost of living and income has a big mismatch, we may need to support them till the age of 25 – 30 or beyond.
For now, let me put a pin on this and I will update in future posts when I cross this bridge (years later).
After these 2
Comes the late stages of our life and into retirement… which will be the last part of this 3-Chapter series (to be discussed next weekend).
The only way to cope with the increasing cost of living that comes with these 2 level ups are:
- Fight: Strive for higher income and growth of wealth through other means (e.g. investment)
- Flight: Opt out of it
Whichever it is, it is important to plan ahead before jumping into it. It is better to be late but prepared, than to be early and struggling.
Finances hold a central role in this. We owe it to our marriage to increase our quality of life & we owe it to our children to give them the best life and education they can undertake.
