The Joys and Woes of a Middle Income Salaryman in Malaysia
I’m going to be sharing purely based upon my own experiences, opinions and observations as a middle income salaryman who is working at the heart of KL city, Malaysia.
I stumbled upon a widely shared post by a columnist in Malay Mail about the poor needing more income (we all do, don’t we?) and not financial literacy. Ringgit oh Ringgit also had an article about the negativity about financial advice, which I shared on my BTM FB.
That (and a whole lot of things I’ve been seeing in the news including the debate about EPF withdrawal) got me thinking… There is just so much complaints about how the poor should get more aids, how the middle income group is getting hit a lot, how the government should tax more from the rich to give to the poor.
The real question that we should ask is… Is the government really the ones responsible for how our lives play out? At least financially?
B40, M40 and T20 Grouping
This grouping has always come up and is a popular topic of discussion in Malaysia. This is especially true when discussing about reliefs and aids that is catered to specific groups.
For those who are not familiar with this term, this basically measures the household income in Malaysia and group them into 3:
- Low income earners – Bottom 40%
- Average income earners – Medium 40%
- Top income earners – Top 20%
This is done by the Department of Statistics of Malaysia and they have a detailed report (updated on 10 July 2020) that you can refer to here.
I’ve been in the M40 group for most of my career.
The start of my story – B40
Akin to where most fresh graduates would start off, I started in the B40 grouping when I entered the workforce. I confess: it was at the upper range of the B40 group.
How did I manage to do that? As it turns out, being someone who graduated from a foreign university (Melbourne, Australia for me) will place you on a better position to hunt for jobs in companies with big names. And they can pay better. Of course, it also takes competence and luck… afterwards.
As a B40 fresh graduate salaryman, I was set to work on 2 things:
- Perform at work to get promoted and bonus to increase my income; and
- Skimp and save where I can to start the wealth accumulation.
To that (no. 2) end, I stay with my parents, had meals at home whenever I can, only used my family car until my dad forced me to get my own, local travels mostly, pick my outings with friends.
Getting into M40
I quickly made it into the M40 group – 2 years.
This is when I was officially “categorised” as the middle income earner. In terms of lifestyle, there isn’t much of a difference from before for me.
My focus was still on the same 2 things:
- Perform at work to get promoted and bonus to increase my income; and
- Skimp and save where I can to start the wealth accumulation.
However, I now have more choices and options. Some of which are:
- I can afford to eat in a nice restaurant that costs 10 times more than my normal meals
- I can afford to get a car
- I can afford to buy more things (e.g. iPhone, branded clothing, gaming computer, etc)
- I can afford to go for holidays in more countries
Those are the joys that I can indulge in if I wanted to and a lot of my fellow M40-ers actually do. And quite often at that.
Comfort Zone
Here’s where the comfort zone lies.
When we have just enough to meet both our needs and smaller wants. The biggest hurdle, I believe, for a middle income salaryman is to breakthrough the comfort zone and strive for something more. Or we’d get stuck in the biggest trap ever.
Being in the middle income group is just that – No where. Not poor, not rich. Not good, not bad. We get a taste of the rich although we can’t get all of it. On the other hand, we are constantly pressured by the increasing cost of living too.
The increment and promotion and bonus will come, to elevate the lifestyle bit by bit. Or just to keep up with the inflationary pressure.
Except… in reality, it’s an illusionary bubble that could burst at any moment. Just like a certain pandemic that appeared out of nowhere that took away jobs. And income.
One misstep and it can spiral downwards
For me it was a few missteps, but good life lessons to learn. I’ll just highlight 2 main ones.
Investment Property
The biggest bad boy here is property.
You can win big… or you can get tied down with a financial burden. Being in the middle income group, it opens up a lot of options in terms of properties that we can buy. This includes those that we can’t afford, realistically speaking. But in the eyes of the property seller & mortgage loan banker, they will help you to afford it by using a lot of creative ways.
The issue with this is that when times are bad, like now, it is tough to sell / rent out property at a desirable price. Hence, we carry the burden to finance the loan. This eats up a big chunk of the disposable income, and worse if there is any loss of income later.
I think a lot of people who bought new developer properties around the time I bought (in year 2014 / 2015) would find that the properties could only be sold at a lower price and rented out at a very cheap rate. Hence, a lot of people are actually staying in their investment properties instead… Or, it goes to auction.
The issue with this is that only those who lived below their means can sustain the full mortgage and hold till the storm goes away. Some call it the holding power. I call it the burning power – burning money just like a startup’s burn rate.
Assess to funds (aka loans)
The amount of loans that are out there is astonishing. We could get a loan from a small purchase to big items like properties or even taking out a loan on a loan. Easy payment plans, credit cards, personal loans, mortgage loans, etc.
These “traps” that bankers set up are targeted to middle income earners because we can spend, we want to spend, and we want to afford those things that we can’t afford. And these bankers will happily give you loans up to the maximum, which is in most cases over and beyond what we should take. I get calls from bankers all day long asking to take up loans (whom I rejected all of them and then blocked their calls).
This is dangerous again as middle income earners start to rake up those debt. Then when sh*t hits the fan, all hell breaks loose – default / bankrupt.
That’s why…
Having ready an emergency fund could save anybody’s life. I had built a good 6-month emergency fund as a safety net that allowed me to weather through the storm. I cannot stress the importance of this especially during this pandemic era where the loss of income could happen so suddenly.
On top of that, financial literacy is important to ensure that we don’t step into these traps. We are all one big bad decision away from losing it all.
The rich getting richer
I’ve had the privilege to meet a lot of people from all walks of life.
There are those who are very rich and have created generational income. A lot of them come from poor background who struggled to put a roof over the head.
There are also those who are earning a decent upper M40 or T20 income but stuck in the hamster wheel of living from paycheck to paycheck because they have a lifestyle that they *technically* can’t afford.
I’ve heard a mentor of mine saying this once.
If God were to reset the world one day, the same rich people will still figure out how to achieve the wealth they once had, and the same poor people will also find a way into poverty. This is because being rich is a mindset.
Now… let that sink in. And stop whining about the rich getting richer.
Check out this link to Nixon Siow’s Crazy Rich Guy comic illustration that perfectly shows how this would play out.
A story to end this post
So yes, financial literacy is important in our society. It encompasses both income and expense. It is only when someone takes charge of their life and stop depending on handouts can one achieve a breakthrough.
People move from each category everyday, be it upwards B40 to T20… or downwards T20 to B40. It all boils down to the mindset and the determination to achieve more.
I’d like to end this post with an inspirational short story that I heard before:
A farmer and his friend once sat outside the farmer’s house just chatting and catching up. The farmer’s dog came next to the farmer and sat down.
Not too long after, the friend heard a whining sound and was looking for the source of the sound. He noticed that the whining was coming from the dog.
“What’s wrong with the dog?”, the friend asked.
The farmer took a glance at the dog and then looked back at his friend. He informed his friend, “Well, he’s sitting on a nail.”
The friend was perplexed. He asked the farmer, “Why won’t it just get up and sit somewhere else then?”
The farmer grinned and replied his friend, “I guess it just don’t hurt him enough.”
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