Money Reality

Since the day I was born till the day I finished my secondary studies, my family took care of the finance and everyday expenses. I didn’t have to worry at all about money.

After finishing secondary school, about 10 years ago, I left home to other places for studies. That’s the time I needed to spend my own money to survive. It was time for me to take charge of my expenses in everyday life.

Money Reality

I was naive and didn’t know anything about financial planning. I knew no limit. I spent a lot on textbooks when I was in Labuan doing the Matrikulasi knowing that I would receive allowances from government. But after staying for a few months, I stopped and left the island. Those textbooks, which I no longer need, were given to my friend who was studying Form 6. Those allowances that I was waiting for were never banked into my account because I left too soon.

I moved to Shah Alam for a short class that lasted for three months. This time, I spent a lot on mobile phone fees. My prepaid credit was gone every few days. My friend, who was my secondary school classmate, was with me at that time and I was surprised when comparing his phone usage to mine. He seemed like never have to top-up his phone. I was puzzled.

Later, I flew to the west to complete my studies. I changed phone almost every year. Sony Ericsson T610 and K750, Nokia N95, i-Mate and iPhone 3GS. I rented a studio and lived alone although my friends, all were Malaysians, were also living in the neighborhood. I bought a lot of stuff, electronics gadgets and etc. Soon my room was filled with stuff.


At that time, I said to myself I should start tracking my expenses. Being influenced by my father, a frugal farmer, who kept track of his incomes and expenses neatly in a notebook after selling rambutans and guavas. I had always wanted to do the similar thing because it looked fun and cool. Since I lived independently, I thought I need to be responsible with my spending. I started to keep track of every expense that I made in a notebook. Every shopping and spending were tracked. And I did a summary at the end of every month to see how much I spent for that month and compare.


At first, after I settled in the west, my expenses sky-rocketed and almost all my allowances were spent by the end of the month. But after some time, I started to have a realization that one day I would leave this place and the more things I possessed the more troublesome it would be when I need to move back to my home country. Being a lazy person and a person who hated hassles, this fact struck me as nonsense. Moving these old and rarely used stuff and shipping them back to home country cost effort, time and a lot of money. Spending money just to keep those useless stuff just didn’t make any sense to me therefore I was determined to maintain my room as empty as possible by avoiding adding new stuff. It was quite hard actually.

After filling half of my notebook with expenses’ detail, I started to get lazy with it. It was just too troublesome to keep track of every thing. And the bad thing with a notebook was that it was hard to manipulate the data and also hard to keep the data. Besides it was not easy to access the data when I needed it. So I stopped. I needed a new way to do the job.

Simple Solution

There was a “breakthrough” after a while because I felt the need to know my financial status at all time. I needed to know what was my net worth by including all my saving in bank account. By doing it this way, I only need to update the data every once in a while, for example once per week, this greatly reduced the amount of work. During that time, I also found a way to store the data easily and to make it accessible everywhere by using the technology available at that time: Google Spreadsheet. That was in the mid of 2008, about 6 and a half years ago.

This simple act of recording my net worth consistently over time had huge impact on my spending in everyday life. It helped me to be aware of my financial situation and with its help, I could literally “see” the impact of my spending to the growth of my future net worth. It limited my expenses because I know I had a limited resource. It was fun to see the net worth grew over time. Because of this, I continue this practice till this day.

Recently, I did some analysis on the data the I collected through these years. I gained some insights from the analysis.

The chart above shows my net worth growth rate over the years. It is shown in two currencies: Ringgit and Euro (why Euro? because I started my data collection in Euro). If I compare both growth together side by side, I see there is a big difference between them. The Euro fluctuates a lot during this period.

The growth rate in 2013 should be about the same as the one in 2014 if I didn’t commit a serious and stupid mistake in Forex which cost me a permanent loss (may write more about it sometime later).

To summarize, that is a 37.19% annualized growth rate (40.23% annualized growth rate in Euro. I am still wondering about the 3% difference between Ringgit and Euro annualized growth rates. Is it because of the interest rate? I need to find this out. Update: It was due to the currency rate fluctuation – depreciation of Euro during this period 2009-2014 from MYR/EUR of 0.20713 on 1 Jan 2009 to MYR/EUR of 0.23501 on 30 Dec 2014 which is a change of 13% over 6 years or around 2.1% per annum).

To put things into perspective, a 37.19% annualized growth rate will make RM 1 becomes RM 6.67 over 6 years. No big deal, because in my early years I didn’t have much saving. But if I could continue with this kind of growth rate for another ten years, I could retire in pretty good shape. Again, a 37.19% annualized growth rate will make RM 1 becomes RM 157.46 over 16 years.

Keeping records of my (expenses and) net worth is really very important to keep my financial situation in shape.


Having keep those net worth records for last six and a half years ago and comparing it with the experience of stock investment one and a half year ago, I see that the biggest return of capital is from the income that I earn and the saving that I do but not from the investment return.

The return from investment in stocks is negligible comparing the return from earning a salary and saving most of it in absolute term. Then I start to realize that investment is just a way to preserve capital by protecting it from inflation rather than a way to gain huge return in a short period of time. That is not realistic I can tell because I tried.

The Highest Return

A person who just comes out of school and starts working will earn a return of infinity % (anything divided by zero is infinity) in his first year! Of course, assuming he has zero saving and no student loan to start with. How many people can achieve that kind of return from investment? It is too hard.

Human capital is the most important asset and it has the highest return by converting his skill and knowledge into money. A person who starts working at 22 years old earning a monthly income of RM 3000 will earn a total of RM 1 440 000 (RM 3000 x 12 months x 40 years) over his life time (assuming he has no salary increment at all during those years). If he could maintain a saving rate of 50% throughout these 40 years, he could retire at 62 with RM 720 000 saving with no investment at all! He could easily generate a RM 3000 passive income monthly with a investment vehicle that gives 5% return.

That is One-Thousand-Buck monthly income from RM 240 000 with a 5% return. This figure I get it from this book You Can Retire Sooner Than You Think. Remember that, it is useful. So when I build my net worth, I keep that figure in mind to estimate when I could retire. It is just fun thinking about it no matter how hard and suffering the job I am working in. It relieves me from the miserable reality. Haha, just kidding.

Money Work for You

Money Work for You

So in early stage of one’s career, income and saving are important to grow one’s net worth. Only after he has accumulated sufficient amount of net worth, the return from investment whether in stocks or other assets could exceed his income. At that time, he basically creates a double of him to work for him and he could stop working indefinitely.