The Backbench

In Backbench 18 (Final Issue) | Generation Y

The Young, the Spendthrift

By Edmund Ang

Quite a while back, I read a book, The Millionaire Next Door, which is written by Stanley and Danko. I am not here to comment about the contents of the book nor its writer. However, after reading this book about how most of the millionaires in the US achieved what they have today, I took the initiative to observe the spending habits of the youngsters we all see today.

Being an undergraduate studying in the UK, I have quite a number of friends who are from different layers of family background. As we mix around with each other every day, it makes it convenient for me to observe their usual spending behavior. From these observations, I can clearly draw the conclusion that most of them spend well above their means.

Ever since I came to UK, I started to feel ashamed of myself as most of the westerners (English and the Europeans) that I encountered are far more independent than any of us Asians. For most of these westerners, they are earning their own living expenses and moreover, they are even earning their own tuition fees. As for us the Asians, all of us are coming here to UK with our parents' hard earned money or with other financial sources. From my observation, the westerners and the Asians have roughly the same spending habit where they spend on alcoholic drinks, clubbing, branded clothing and other things that they want, not things that they need. However, the thing that makes the difference here is that the majority of Asians are spending their parents' money and the westerners are mostly spending their own money.

The level of maturity in the Asians leave a doubt in me as for the same age Asians that I encountered, they have no idea in financial planning and other relevant things. However, I did encounter some older Asians (one of them is from Hong Kong and another from Japan) and they are very smart with their money where they are living well below their means and trying to be frugal in all aspects. As for the Asians around my age, the way they spend really makes you shiver down to your toes. They are not really earning any significant income here in the UK, but they are willing to spend GBP100 (A$260) on a pair of shoes and as well as few hundred pounds on clothing and other fashion accessories. They are merely earning less than GBP100 from their part time jobs and now, they are spending all the GBP100 from their part time jobs.

I have no right to force my thoughts and my way of financial management on anybody else. However, I am hoping to at least wake up some of these people to the importance of proper financial planning in the early 20s. The earlier you start to plan your personal finance, the more rewards you’ll have in the future. One of the most fundamental basics in investment is that time is your best friend and by compounding your initial investment, you can earn far lot more than those who started later than you. By dedicating your time in properly planning your finances, you are doing yourself a big favor by being more disciplined. If you do have a financial plan, sticking to it requires discipline and as the famous quote from Warren Buffett says, “We don’t have to be smarter than the rest; we have to be more disciplined than the rest”.

By having a proper financial plan, spendthrift youngsters can change their spending habits and start to live well below their means. Instead of getting an iPod or a new pair of Nikes, you can now direct your extra earnings into mutual funds or high interest deposit bonds. At least by doing so, your money appreciates in value over time and not depreciate. (Things like electronic gadgets will lose their value once purchased and the same goes for cars.) After sometime when your investment matures, then you can choose to take part of the earnings and treat yourself to something good. For the rest, you can choose to re-invest them back into your financial plans.

I told my idea of financial planning to some of my friends and I was quickly swept away by statements like, “I’ll start when I am earning more money”, “I’ll be working for 30 years or more, why do I have to worry now?” and other similar statements. In my opinion, people like them are short-sighted as they fail to foresee the future for themselves. If they continue to keep their spending habits in the future, they will not be able to sustain their life style as for a fresh graduate. A decent paying job will give you something like a gross GBP2400 a month. After deducting their income tax and other overheads (car installments, rents and living expenses), they will not have much left and if they practice spending well above their means, they might go into debt before the end of the month. Because of this reason, most of the graduates who are working in Malaysia now still dependant on their parents for financial assistance in one way or another. Another statement that makes me wonder is the, “I’ll be earning money in the future, so why afraid to spend now?” Such thought is wrong. Things will not change regardless of how much you earn if you don’t have any discipline when it comes to managing your money. If you are earning 2000 per month, you’ll still spend all of it and the same goes for 20,000, 200,000 or more.

Another problem I find among the majority of Asians is that they are ignorant to the real world, especially for those Asians who are studying or yet to start working in the real world. They are so obsessed with branded things like Nike and they’ll be able to tell you about the launch of this new gadget or this new clothing line, and as for other areas, they’ll completely ignore them. They expect to be able to find a job based solely on their course of studies and if you ask the majority of them, they’ll have little or no knowledge at all for things outside their field of studies. (This is also said to be part of the reason why a lot of graduates can't find jobs in Malaysia.) Of course, all of us love spending on stuff, however, instead of spending on things that depreciate in value over time, has anyone ever considered spending on things that will appreciate in value or at least remain the same? For example, instead of spending on a piece of cloth so that you can satisfy your satisfaction with looking good, why not spend your money on magazines or books that will increase your knowledge?

I am lucky to have parents who educated me in a way where, we must spend money wisely and well below our means so that we’ll have that extra cash when we need them the most. I am still in my early 20s and I started to plan for my personal finance quite a while back. My parents supported my studies by paying for my living expenses and instead of spending that extra cash on a new gadget, I diversified and invested them in mutual funds, fixed interest deposits and as well as other investments. I started with a small amount of money and I accumulated them slowly. I live a frugal life where I only spend on things that I need. I love music very much so therefore, each month I allocate some savings out for this hobby of mine. At least until today, when compared to my friends around me, I am proud to say I am earning more than I spend. I have started to plan for my financial future, have you started yours?


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Reader Comments

Kevin writes:
Edmund,

I commend you on your article, which critiques your own student cohort and provides a great deal of insight into Asian international students.

I agree with your sentiments. While I acknowledge that a great deal of international students (specifically Asia), are sensitive to the fact their parents are working awfully hard to allow them to study overseas, the suggestion of part-time work when put to them is usually met with derision.

Local Australian students (be they of any ethnicity), will generally take up a part-time job while in uni. This is in part to earn some $$$, with many saving up for overseas trips. But it's also about gaining life experience. The Asian view is that study is paramount, and one should not work while studying. However you learn a lot more about life by working, particularly if you are an international student - it allows you to mix with locals and gain valuable cross-cultural work experience.

I don't want to sound condescending, but it always astonishes me how so many Asian students will study a Bachelors, and then go straight on to a Masters. The emphasis is purely on academic achievement. However when they graduate they are simply another mass-produced clone: while they have attained a high level of education, they have not par took in extra-curricular activities, nor have they gained any work experience. They are not balanced or well-rounded graduates and unsurprisingly, are passed over for the most-sought after jobs.

I've always been struck by how insular their view of the world is. Ask them about Andy Lau, or Manga, and they can reel off all the latest hits and trends, but ask them for an opinion on say Chinese-Japanese relations, or bird flu, and they have NFI. Of course, a reason is the Confucian-style education which has moulded them into only listening to the teacher, but not questioning the teacher; and a less of an inclination to be individual. Conservatism is a common trait, and it is hard for many to break from the mould, to actually think for themselves, instead of just following the herd. Quite simply, in an era of globalisation it is paramount to communicate and interact across cultures. By hugging the group, and staying in one’s comfort zone will confine such unfortunate people to marginalisation.
» Kingsford - on 17/12/05 at 00:30:37

Edmund writes:
Thank you for the wonderful feedback.

Just as you said, part of this ignorance arises from the Asian education system where an A basically overpowers everything. It's a rather sad thing to see as some academically challenged individual constantly find themselve being ridiculed at just because they are not able to produce as many As as others. No doubt scoring good results during studies is important, however, because of this, most of the Asian I encountered (Surprisingly, they can out-perform the average local undergrads here easily) has the idea of "I'm the king of the world with 1st class honors degree".

I used to be in one of this ignorant category though my results are not as good as theirs. I'm surprised by my own ignorance and my naive thinking when I was studying in the earlier years. I ignored the real world and I'm feeling so content over my results and achievements. I'm really thankful for my parents to send me over here to UK for my education as upon my arrival here, I realized that there's a complete different culture and one of the major difference is that, there's very little spoon feeding culture visible here.

I was being slapped hardly back onto reality when I was applying for placements here. I can't really remember how many times I was being rejected but from there, I realized that I'm not even worthy enough to be looked at judging from my CV. The writings on my CV sounds so naive now when I am looking back at it.

Fortunately, thanks to a series of rejection, I realized that all this while, I'm being ignorant to the real world and having thoughts that if I excel academically, I'll be able to land a good career. After attending a few interviews with these MNCs, I finally realized that I'm still very naive and indeed, I need to improve myself.

From there onwards, I'm constantly looking for chances to be exposed to the real world and not being confined in a cage anymore. I'm really glad I bumped into so many failures, at least these failures are telling me that I need to constantly improve and expose myself in order to keep up with the whole world's globalization.
» on 17/12/05 at 16:08:58