Inflation is a hot topic these days and many complain about the rising cost of living. Can the cycle of inflation be avoided or stopped? Sad to say, inflation is needed in order to boost the economy.
Historically, there is the 1923 Weimar German hyperinflation and the 1932 Great Depression. Based on the current trend, Malaysia is experiencing the former and the value of money has depreciated.
What actions have you taken to weather this storm?
If you come from a middle-class family, every single cent you have should be spent on buying assets like gold or shares. In fact, use half your salary to buy assets.
Only assets can make you rich but the question is how to buy the right assets. Can you have a normal lifestyle if you spend half of your income on buying assets?
You have to be willing to live on a shoestring budget and putting up with friends who don’t know any better and label you as stingy.
Don’t spend on luxury items, only those with real value. Unfortunately, most people spend on liabilities.
Some chase branded items like Zegna suits or Omega watches. But here’s something to ponder on – do you want to surround yourself with liabilities or enjoy financial freedom?
Many people join the rat race and use their money on buying liabilities that drain them of their financial reserves. Assets however create passive income, yet many people don’t understand the basic difference between assets and liabilities.
Most people follow this cycle of life – they study hard, get a job, get a mortgage and get married. And schools are of no help as they don’t impart financial knowledge to students.
But is this the life you want?
If you are paying RM600 every month to settle your credit card bill when your salary is only RM1,200, then your finances are upside down.
The Millionaire Mindset Intensive seminar is valuable in that it teaches you how to manage your money using the “6 Jars Money Management System”.
Basically, income is divided into six portions:
- Financial Freedom Account (10%)
- Long Term Savings (10%)
- Play (10%)
- Necessities (55%)
- Donations (10%)
- Education (10%)
This financial management system may be hard to put into practice at first but if you stick with it, you’ll realise it can be done. Learn how to pay yourself first. In order to be rich, you must learn how to pay ourself first.
If you practise the 6 Jars Money Management System, you’ll know exactly how much you can spare for entertainment every month and how much should go towards investments.
The method might not work in the beginning. But you can perfect it through trial and error. Just stick with it and eventually you will learn how to spend your money wisely.
Start the 6 Jars Money Management System habit today. If you continue spending on liabilities, you are far from enjoying financial freedom.
Spend within your limit and focus on building your assets. When your assets give you a steady cash flow, you can live as you choose. You are holding a pen to write your own life story so make it a bestseller.
This article was contributed by Catherine Ow, owner of Rich Life and appeared in kclau.com
KC Lau’s first book Top Money Tips for Malaysians has sold thousands of copies. He launched the first online personal finance course specifically designed for Malaysians, entitled the Money Automation System. He also co-founded many other online financial courses including the Bursa Method, Property Method, Founder Method and REIT Method.