Malaysians Have The Highest Debt In Asia

According to the latest Manulife Investor Sentiment Index (MISI), Malaysian investors rank the highest in Asia in terms of indebtedness, with more than two-third (68%) of investors burdened with debt.

This is the highest proportion of all eight markets surveyed in Asia. This figure is more than double the regional average of 33%.

Although Malaysian investors choose saving for retirement as their top financial priority, MISI showed that investors lack financial planning and effective management of their cash flows. This has affected long-term financial security and caused them to be compounded by high debt levels.

The average debt of investors are RM56,000, which is nearly 10 times average of Malaysian Monthly Personal Income. This debt is mostly due to daily living expenses (60%), rental payments (44%) and children’s education (37%).

Majority of these debt is long-term, with a quarter of them not expecting to be able to pay it off in less than three years.

Although a majority of Malaysian investors (89%) track their expenses regularly, 44% of investors spend 70% of their monthly income every month, suggesting that they are not tracking their finances or curbing expenses.

Against the backdrop of volatile financial markets and slowing economic growth, investors need to better manage their finances and track expenses to prevent them from incurring too much debt. Without effective debt management, Malaysians are less likely to achieve their long term financial goals, which could jeopardise their future financial security.

However, MISI indicated that investors are generally aware of their high debt levels as they ranked paying off debt and credit cards as the second most important financial priority overall with 16% of investors rank this as their top priority.

MISI also showed that saving for retirement is now the number one financial priority for investors, with 21% of investors ranking this as their top priority. In spite of this, investors fail to efficiently save for their retirement.

Many investors do not have a target savings goal (41%), including those aged 35-49 (43%) who should be the most active in retirement planning.

While almost half of the savers (48%) have set medium-term time frames of five to 10 years to achieve their goals, these high savings targets may be unrealistic to achieve. This might be the explanation as to why the majority (67%) have only been able to save less than 40% of their target.

Related to the lack of effective savings management, 74% of investors surveyed wished they had done better investment planning, 38% wished they had done more research, 28% wished they had been more active in reviewing their portfolio while 27% regretted holding too much cash. This may be explained by the fact that most investors rely on themselves for financial advice (79%) while investment experts ranked only fifth (24%), after friends and family.

It’s encouraging that investors are prioritising their retirement planning, but many seem to lack a clear financial plan. Investors should set realistic monthly savings targets and seek professional advice to ensure they are wisely investing to meet their long-term financial goals.

Investors also need to think about supplementary options for retirement planning such as Private Retirement Schemes (PRS) and regular savings plans that provide steady long-term returns, to help ensure they meet their financial goals upon retirement. Investors should equally start saving early to enjoy the benefits of compounded returns.

[Source 1]