On a scale of 1 to 10, how important is self-leadership in ensuring long-term prosperity?
Parliament has been dissolved. Malaysia’s 14th General Election on May 9, a mid-week day, looms large on the horizon and in the hearts and minds of Malaysians.
An enormous amount is at stake for all of us who love this country. Most things in life rise and fall on the quality of leadership. By the way, that’s true for leadership on all scales.
From the calibre of statesmanship within sovereign nations to the savvy headship of multinational corporations or MNCs to that of medium-sized companies to extended clans to nuclear families and all the way down to the granularity of solo individuals. In personal financial planning it’s the ‘smaller end’ of the leadership spectrum — families and individuals — that is most pertinent. You see, personal finance is, unsurprisingly, a deeply personal matter.
Of course, we all hope our national leaders, present and future, will do a good job steering Malaysia further along the global value chain and thus up the wealth curve.
But even in the wealthiest nations on Earth you will find stratified populations comprising the elite, the well-heeled, the middle class or average, the below par and the downright poor. Where do you fit in?
For most families, there tends to be limited upward economic mobility in the absence of relevant higher education. Formal university and professional degrees and qualifications go a long, long way in helping people break free from their socioeconomic ‘castes’ of the past.
However, the convenient yet dangerous excessive availability of personal credit around the world means many of us can still don the trappings of wealth, such as driving nice cars, going on pricey overseas holidays and purchasing branded goods, without genuinely being able to pay for them.
By that I mean without paying for them with available funds of our own instead of endlessly borrowing from banks and credit card companies to keep up with the Joneses (or in our case, more likely the Alis, Ah Kaws and Arumugams).
Thankfully, regardless of our formal education levels, another form of education is more relevant to our long-term prosperity.
To do a great job of building tomorrow, today, by which I mean laying a firm foundation for future wealth through wise moves in the present, we should be sensitised to three factors:
1. Our reference group — if we surround ourselves with high calibre individuals keen on learning about business, economics, investing and financial planning, some of their passion for true wealth accumulation will rub off on us. Conversely, if we waste our time with shallow people who are eager to show off fancy lifestyles they can’t truly pay for, then we — like them — will sink deep into a quagmire of ferocious financial afflictions.
2. Our planning time horizon — if we train ourselves to think and strategise over the short-, medium-, and especially long-term, then we will be more likely to exercise delayed gratification, which will help us defer expenses now so we may accumulate future wealth, obviously later, through consistent saving and investing. But if we fixate on having too good a time today without sufficient regard for tomorrow, we cannot grow future wealth.
3. Our propensity to learn — specifically about investing and financial planning. If we are curious to discover and apply sound principles of money management, we will regularly set aside funds for growth and learn to embrace investment risk, which pertains to price volatility.
However, if we just want to have a fabulous time today that’s paid for by all the money we have PLUS all the money we can borrow, then we can’t prosper.
Powerful Teachings
Earlier this year, the world’s third richest person, chairman of investment holding company Berkshire Hathaway, Warren Buffett wrote to his shareholders explaining two pertinent terms, which are relevant to us all. (The entire shareholders’ letter is available here: www.berkshirehathaway.com/letters/2017ltr.pdf). This is what Buffett wrote:
“Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.”
You should reread and internalise Buffett’s lesson. Better yet, download his entire letter to imbibe and digest Buffett’s powerful teachings.
As each of us decides on the economic future we want, it would be wise for us to educate ourselves on money and train ourselves to focus on activities that enrich (not impoverish) us.
For an easy start, in addition to reading this week’s Money Thoughts column, you might enjoy studying some of the previous pieces I’ve written for a wide Malaysian reading population. You’re welcome to do so at: www.nst.com.my/authors/rajen-devadason
Then, as you learn or are reminded of simple, sound financial planning principles, I encourage you to apply the lessons that are most relevant to your aspirations. Later, do generously share some of those lessons with the people you love.
Next week I plan to begin exploring a series of so-called rules of wealth distilled by an American teacher who used them to become a US dollar millionaire! For now, as you contemplate your next step in self-leadership to strengthen your personal financial position, allow me to borrow a famous Vulcan farewell from Star Trek:
“Live long and prosper!”
© 2018 Rajen Devadason
Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at https://www.linkedin.com/in/rajendevadason, rajen@RajenDevadason.com and Twitter @RajenDevadason