Are we rich?

Whoo! It’s been quite hectic for me! Haven’t had the time to produce contents as I’m spending most of my time on the trio of things – Work, Reno, Wedding planning! That’s why I’ve been pretty quiet for the past month+.

Well, I’m back this week (at least) to look into a very specific question that suddenly came to me recently and I decided to dig deeper into.

“Are we (me and/or you) considered rich?”

This question stems from the thought that money is never really enough for the majority of people. The more we earn, the more we spend. This is the result of constantly “upgrading” our lifestyle as we advance in the income race.

And in our “Social Comparison” society (more so now with the explosion of social media and UGC [user generated contents]), there is always someone “rich-er”.

Unfortunately, I don’t think there is a straight answer to that question, but let’s take a look at a few angles.

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Cost of Living in KL Malaysia

Cost of living forms a bulk of what we can comfortably live with in the country that we reside in. The higher it is, the more income we need to “breakeven” before we even talk about being rich.

In my 3-part series, I breakdown the cost of living in KL, Malaysia for 3 different phases of life with a “just ok” living standards.

(Part 1: Single, Part 2: With a family, Part 3: Retirement)

On the one hand I assume without the luxuries of life, and the other hand I assume there is no need to downgrade any part of our lives to make ends meet. Fair?

In a nutshell, Part 1 starts with close to RM4k per month and ends with Part 3 at around RM15k per month. Of course, this number will change depending on when you read this post.

With that said, this marks what we need to just live decently in our country. This is far from being rich and able to afford the luxuries of life.

I’ve shared before about the joys and woes of a middle income salaryman in Malaysia. It was what was true for me in the journey upwards.

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Measurable “Rich” Yardstick: Income Generation

Malaysian Household Income by State

The Department of Statistics Malaysia (DOSM) published the monthly household gross income by state for 2019 and 2020 as such:

What this shows is that to be of average gross household income in KL and Selangor, we are looking at the RM10,000 mark. Although, the average for Malaysians as a country is only at the RM5,000 – RM7,000 range.

B40, M40, T20

To further study this, I think we should also draw reference to the indication which we are all very familiar with in Malaysia – B40, M40 and T20. This basically means the bottom 40%, middle 40% and top 20% as published by DOSM.

As of 2019:

• B40: less than RM4,850
• M40: RM4,850 – RM10,959
• T20: more than RM10,959

This shows that if we’re earning income of RM11k and above, we’re already in the top 20% of Malaysian income earners. Let’s also forget about those “not recorded income” for now.

But if we look at only KL

The distribution becomes:

• B40: less than RM8,650
• M40: RM8,650 – RM16,329
• T20: more than RM16,329

Taking another graphical representation of this from The Edge Malaysia:

46.8% of the total income generated by Malaysians are earned by the top 20% income earners.

Key Observations from both

When we put both together, there are a few obvious observations:

• Being in the border between M40 and T20 is the average income in KL and Selangor
• Anyone earning above RM6k is at the top 50% of Malaysian income earners
• Income earners above RM15k is regarded as the top 10% – aka T2 when compared to the entirety of Malaysia
• But RM15k is only M40 in KL

Not surprising… But still an eye opener when we put down the numbers. For context, we must be at T2 (>RM15k) at retirement age to be able to live a carefree decent lifestyle, but the facts tells us that most aren’t there.

Measurable but unknown “Rich” Yardstick: Net Worth

Whilst income generation is an important measure, the real measure of “rich” falls down to net worth. This is the main thing that puts up a sign telling us, “You have successfully converted your income into worthy assets.” Pun intended.

Income is the tap of water that fills the bucket. Net worth measures how much of that water stays in the bucket.

I would LOVE to have some statistics that can pit Malaysian’s net worth in a pool and measure what really is the B40, M40 and T20 for net worth.

But alas! I could not find such data…

UPDATE!!!

Thanks to my reader NJ Tey for sharing the following article by Business Insider on what it takes to be the top 1% in net wealth around the world!

To be the top 1% in Malaysia, we would need to achieve USD540,000, which roughly translates into RM2.4 million! And we’re at the lower 50% of the chart as shown below.

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Closing Thoughts

In essence, I feel that there are 2 ways to look into wealth as mentioned – income generation and net worth. Whilst we can’t compare net worth to the population, there is a good enough data for the income generation part. Albeit.. outdated data.

At first, we focus on how much we can bring in and get our income as high as possible.
Then from there, we focus on increasing our net worth via our personal finance management.

After going through the numbers and having given some thoughts… My view is that someone can start to be regarded as rich if:

• Our income generation can be 2x of Malaysia’s T2 level = RM30k gross income per month.
• As for net worth, given the lack of comparison data, I’d stick to the target of hitting RM1 million!

Ultimately, if we want to compare, there’s always someone at a better place and someone at a worse place than us. Perhaps, the focus should be on the big picture instead.

How about you? What do you consider as rich in the context of the bigger picture?

Of course, it is also quite apparent that the income vs cost of living in Malaysia has a big gap that needs to be filled. But that is a story for another day.