How to Accumulate Wealth as a Malaysian

Before we proceed, I need to clarify that this is, in no way a “get rich quick” scheme for you to be the next Robert Kuok. With that out of the way, I am pretty sure everybody has felt the impact of MCO. You might’ve lost your job, been in huge debts, or are barely able to feed your family due to the lack of income and savings. 

For once, you may feel financially vulnerable whether you are an average salaryman or a successful entrepreneur. 

Hence, I urge my fellow Malaysians to start accumulating your wealth and be financially secure so you won’t be in that situation ever again – even if, God forbids, another pandemic happens.

Where to Start?

Even if you’re not earning a whole lot currently, don’t worry, wealth accumulation is not all about how much you earn but more about how you use what you are currently earning.

Set Up Your Foundation

No matter how many methods you practice to build wealth, it won’t work unless you build yourself a solid foundation to wealth accumulation. Like building a house, you don’t start with buying yourself fancy furniture before laying the bricks.

1. Stop Spending So Much

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That man is the richest whose pleasures are the cheapest. – Henry David Thoreau

As Henry David Thoreau once said, “That man is the richest whose pleasures are the cheapest.” This quote defines building wealth so great that it sends shivers down my spine.

What Henry is implying though is that the wealthy would not splurge on their pleasures without contemplating the future. The lower your current expenses, the more wealth you can accumulate through time.

You won’t have money to save and invest if you’ve already spent it all now. No money to work for you equals no wealth; equals no good.

2. Save on Your Car

Almost everyone has a car in Malaysia, even some 17-year olds in secondary school. What if I told you that buying a car can be one of your biggest financial blunders, even if it’s cheap as rag?

You may ask “Yeah, but how am I going to go anywhere or do anything in Malaysia?” I agree, unfortunately, a car might be a necessity, but you can still be smart with your vehicle purchase.

For starters, make sure you do proper research into car loans, car specifications and other expenses before opting for a loan. Car loans can be very expensive and your money won’t be worth it as cars are depreciating assets – meaning you lose money as soon as you drive out of the dealership.

Hence, save on your car, better yet, use public transport if you live near a train station or bus station. You’ll be surprised to find out that public transport in Malaysia has gotten a lot better.

3. Save on Your House

If you’re Asian, your parents probably told you to buy a house, don’t rent. Why rent when you can own a house and have an appreciating asset? Perhaps it may not be how things work in this generation.

Buying a house when you are trying to accumulate wealth can be a bad decision as it ties you up in terms of finance. On top of that, the oversupply of residential properties in Malaysia currently means that your house might not appreciate in value as you might’ve expected it to in the short term. Finally, it is very likely you won’t live in the house for the duration of the mortgage’s term.

Unless you plan to rent it out, both your new house and your old house are going to cost you a ton of money – house maintenance, contract fees, appraisal fees, you name it. If you prefer flexibility, consider renting a house instead, even if it means that the rental may be more expensive than a mortgage payment for similar houses.

For those who already own a house, don’t worry, it doesn’t automatically disqualify you from accumulating wealth. You can set up a stable financial plan which aims to pay off your mortgage as soon as possible.

4. Save Your Income

As a rule of thumb, you should always save between 10% to 50% of your income monthly. It’s even better if you directly debit your income into your savings account so you won’t “accidentally” spend them. It can be a necessary sacrifice in the short term.

By saving your income, you’re safeguarding yourself from halting your wealth accumulation process due to unexpected causes such as job loss, accidents, and health concerns. Hence, you should always have 3 to 6 months’ worth of salary saved up to prepare for a rainy day.

As an added advantage, your extra savings can be a catalyst to your wealth accumulation process when you start investing.

5. Get Out of Debt

Have debts? Pay it off first, primarily those with higher interest rates such as credit card debts and personal loans. You won’t have money left to invest for yourself if it’s constantly leaking towards installments and interest payments.

Try the debt snowball method to pay off your debt.

Alternatively, you can try enrolling yourself in a debt management program if you find your debts unmanageable, but only use this as your last resort.

6. Your Mindset

“I’m Possible!”

If you constantly tell yourself that you’re poor, you will be poor and you will stay that way. Wealth does not come without a proper mindset. This is especially important as people always say your mindset determines your wealth – and 99% of the time it’s true.

What’s the first step of developing a wealthy mindset? First, you gotta work hard. If you think you can achieve wealth by slacking, then I have some bad news for you. You should always put in 110% effort into whatever you do, even if your job is boring. Doing so sets you up for a correct mindset as you’ll find that other qualities of a wealthy mindset will come to you naturally.

Don’t forget to take some time off to enrich yourself by doing things you love such as reading a book, have a night out with your friends or staying home for a gaming session.

Working around the clock not only drains you of your energy but also dulls your senses which can negatively affect your mindset. Stay sharp and focused on your goal of achieving wealth and you will get there in no time.

What to Do?

Now that you’ve learnt how to set up a good foundation for wealth creation, it’s time to put it into practical terms.

1. Retirement Fund

“Why do I even need to think about investing in my retirement fund? I am not even old.” That’s a common misconception for the purpose of having a retirement fund.

You see, retirement funds provide compound interests in your investments and starting early is the key to building wealth. For instance, even if you invest a mere RM200 per month for 10 years, with today’s interest rate for investment schemes you can easily earn up to RM10,000 in profit.  That’s without factoring in your total contributions over the years which is RM24,000, bringing your total savings up to RM34,000.

For Malaysians, as soon as you start working, an EPF account should already be opened for you through KWSP. That way your income will be automatically deducted from you and subsequently put in your EPF account.

Of course, just having an EPF is not enough, you can opt for a private retirement scheme (PRS) to supplement your needs. Most PRS offer higher rates of returns for your investments and you can benefit more if you start early. Speaking of benefits, you should check out what benefits you are entitled to with a good retirement plan!

Do approach a financial advisor or any financial institutions to find out more about PRS if you are unsure how to start.

2. Investments

It’s essential for any individual who wishes to build wealth to invest. There are various instruments to invest such as stock trading, mutual funds, real estate investment trust, fixed deposit, etc. All these methods are collectively known as investment portfolios.

An investment portfolio consists of a collection of financial assets that are owned by an investor. In simpler terms, a portfolio is like a set of houses and businesses in different locations and different sizes that you own and generate your profit over time – only that it’s not just physical properties.

Without diving too deep into financial jargons and technicality, we need to know that investments come with risks – which means potential losses. Many investors opt for a diverse portfolio to minimise said risks but you should conduct thorough research into investments and learn more about it before committing to it.

Although investing is one of the best means of wealth creation, it is not a rocket ship to immediate riches. You should always manage your expectations and invest wisely.

If you want to invest but lack the financial knowledge, once again, you can reach out to a trusted financial advisor that can tailor an investment portfolio for you.

The bottom line is don’t expect yourself to be Warren Buffet’s prodigy the moment you start investing.

3. Educate Yourself

“Wait, what? This has nothing to do with money.” No, it does not, but it has a lot to do with the money-making opportunities you get through education.

A certification in the industry you excel in provides you recognition and credentials to set you apart from your peers. Although you may not see an immediate financial gain, you should always seek to invest in your education to open up more doors of opportunity for yourself.

As a popular Chinese saying goes, “one is never too old to learn”, never stop educating yourself, I guarantee you that you will see the long term benefit.

4. Entrepreneurship

This method is not for the weak-minded. In this day and age, everybody is encouraging each other to be an entrepreneur, be financially free but nobody acknowledges just how hard it is to succeed being an entrepreneur.

Not to discourage you from venturing into entrepreneurship, just be mindful of the effort it takes to succeed. However, with the correct mindset and expectations venturing into entrepreneurship, you can gain a lot from it other than wealth.

But why venture entrepreneurship? Now, when I was still in college, I noticed that my semester breaks were way too long. What should I do during that downtime? I gathered some friends and started venturing into the digital marketing business. Oh boy, it did not go well. It was extremely hard finding our first client, let alone closing a deal over the first couple of months of operation.

Although we managed to find a client at the start of another semester break, (yes, it took us a semester break and a semester to find our first client) the client only worked with us for 2 months until they decided to move onto another agency. Soon after, we decided to halt our operations and split up.

Money was wasted on essential tools and time was wasted on finding clients instead of education. But through those experiences, I realised that I never lost anything, I either win or I learn. Start by learning how to start a business on your own!

5. Insurance

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Some people view insurance as a form of unnecessary expense. Why should you pay for something you can cover with emergency savings? Life is unpredictable, sometimes in a bad way.

We’ll never know if or when a car accident is going to destroy our car beyond repairs, or if a loved one is going to get hospitalised. As much as we hate to admit, we would most likely be unable to cover these situations with emergency savings.

That’s where insurance comes in to protect your wealth… and health. (Hah, puns) Without insurance, the money that you’ve once built up will be gone in an instant to cover for all these unexpected events.

That’s undesirable isn’t it? That’s why you should always include insurance in your financial plans regardless of your financial situation. Picking an insurance plan can be a struggle, here’s a guide for you to figure it out.

My Ultimate Thoughts on Wealth Accumulation?

As Malaysians, we aren’t exactly financially literate as our education system doesn’t emphasise enough on financial education. Most of what we know comes from informal education.

Our ideas of money management are pretty limited to saving, saving and saving. As a writer for a financial advisory firm, I feel obligated to inform you that wealth accumulation should be started early, especially for us Malaysians who’ve been indoctrinated to save perpetually.

If you read up to this point, congratulations, you just took the first step towards accumulating wealth. Now it’s up to you to implement the methods mentioned above in your life to realise your financial dreams!

Looking for a financial advisor to help out? Contact us!