5 Extreme Ways For Malaysians To Pay Off Their Debt
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Malaysian investors rank the highest in Asia in terms of indebtedness, with more than two-third of investors with debt, according to the latest Manulife Investor Sentiment Index.
The index found that although Malaysians rank saving for retirement a top financial priority, there was a lack of financial planning, hence jeopardising long-term financial security, particularly when compounded by high debt levels.
Bank Negara Malaysia, a month after the Manulife index, revealed that the country has one of the highest household debts in Southeast Asia, at 89.1%. While the central bank acknowledged that while the ability to service debt was sound, the staggering percentage had to be contained.
The data suggests that Malaysians have problems managing their finances, and debt is a drag not only to the economy but personal freedom. Sometimes, we need to muster our courage and do the unthinkable.
Here are five extreme ways to pay off debt:
Live on a bare-bones budget
Believe it or not, spending a small amount of money every day or week can result in a huge hole in your budget. By cutting down or off some things from your expenses can help a great deal in tackling your debt problem.
First thing that should go is watching movies at the cinema. A movie a week costs RM15 and four a month easily sets the avid cinemagoer RM100. That’s RM1,200 a year, and we could go on and on. In short, forget about catching the latest blockbusters on the big screen, and concentrate of paying off your bills.
Eating out during weekends? Do that at a mall for lunch and dinner cost and you will find yourself saying goodbye to about RM60 a day or RM480 a month.
The average Malaysian is said to consume about two cups or 1.5kg of coffee a day. A Starbucks Grande Caffe Latte is priced at RM11.50 while a cuppa at Room 203 in Publika, Solaris Dutamas, costs RM5. Even if one were to drink only a cup of coffee a day, the cheapest at about RM5, he or she spends RM25 a week, RM100 a month.
Don’t forget the gym. A monthly membership at Anytime Fitness – open 24/7 – costs RM149. Some programmes, such as bootcamp, sets a person back about RM300. A running competition costs anywhere from RM30 to RM60, depending on the distance and pricing package.
In a nutshell, these expenses can be cut significantly or completely. Make a conscious effort to keep spending the minimum even if it means living like a recluse for a while.
Go vegan
It is no secret that dairy and meat are expensive. Spending RM10 on a tray of two chicken breasts may not bother anyone but if meat and milk are bringing your budget down, consider going vegan. Below is a list of average prices of meat and dairy products in capital Kuala Lumpur:
| Milk (regular), (1 litre) | |
| Eggs (12) | |
| Cheese (1kg) | |
| Chicken Breasts (Boneless, Skinless), (1kg) | |
| Beef Round (1kg) (or Equivalent Back Leg Red Meat) |
The typical Malaysian spends 31.2% of their disposable income on food and food away from home. So let’s say John Doe earns RM4,000 a month. That means he spends RM1,248 on food – every month.
Of course one can’t run on an empty stomach. Assuming a person eats out once a day, the meat-and-dairy list for a week would be something like this:
| Milk (regular), (1 litre) | |
| Eggs (12) | |
| Chicken Breasts (Boneless, Skinless), (1kg) x4 | |
| Beef Round (1kg) (or Equivalent Back Leg Red Meat) | |
| Total per week: | |
| Total per month (4 weeks): |
Drop the booze
Malaysia has the third highest alcohol tax in the world, and is touted to be the 10th largest consumer of alcohol globally.
In Kuala Lumpur, the average price of a lager in a bar or restaurant costs RM20. A small can of beer costs between RM6.20 to RM10.38. Wine costs anywhere between RM41 to RM83. Spirits such as gin and vodka are usually sold between RM62 and RM145.
Let’s put a conservative estimate to a person’s alcohol consumption: the weekly after-office-hours sessions on Friday where that Happy Hour promotion of two pints of beer costs RM60. In a month, RM240 would have easily gone to the accounts of said watering hole. While that amount may seem small, that amount can shave off some debt.
Sell (almost) everything
Have shelves of books? Or wardrobes of clothes? Sell them. Whether it is at a flea market or garage sale or eBay, selling them helps offset debt.
If the LRT is nearby or where buses are frequent, sell the car and use public transport. Its resale value depends on popularity, brand value and maintenance costs, among others. Let’s take a model that does well on the resale market: the 2011 Perodua Myvi 1.5 AT.
| Price in 2011: | |
| Price today: | |
| Depreciation: |
Move back home
Now this might be a drastic move, especially after living independently, but moving back home might free a person from financial burdens. If being debt-plagued is the problem, living with mummy and daddy might just offer room to recuperate.
| Rent: | |
| Utilities (electricity, water, gas): | |
| Internet: | |
Prioritise getting out of debt
From the above exercise, you can see yourself saving about RM65,607 in a year!
Regardless of how extreme the measures are, the goal is to service debt on time and be free of it eventually. It all boils down to lifestyle.
There are many ways to deal with debt, from the snowball technique to stacking, that compliment a frugal lifestyle. In fact when done right, the both allow you to clear debt quicker.
But perhaps the best place to start is not getting into it. The next time a purchase seems tempting, ask if you actually need or can you live without it. If the answer is yes, then move along.
