Spending more than earning – first half of 2014

As reported in a business weekly, according to Department of Statistics Malaysia’s Housing Income and Expenditure Survey 2014, the average monthly total household expenditure is increasing faster than the household income. The survey covers a total of 42,000 households within the first half of 2014 and will eventually cover a total of 83,456 households by the end of the year. The median monthly household income rose 8% yearly to RM4,258. This is considered a healthy growth but the average monthly household expenditure increased by 8.8% yearly to RM3,496. Note that I quoted MEDIAN numbers for income and Average numbers for expenditure. The reason is because the average income may not correctly reflect the average family due to the huge numbers for the higher income households.
The main contribution to expenditure include housing, water, electricity, gas and other fuel categories (22.8%), followed by food and non-alcoholic beverages (18.1%), transport (15.4%) and restaurants and hotels (12.3%). All states also recorded incidences of poverty below 2% except for Sabah at 6.4%. These numbers are hardly surprising because subsidy is gradually being reduced, especially that of petrol. Typically for an average household, this takes up the biggest portion. On a normal month, a driver of Viva driving around 1,500km per month would already incur a minimum of RM200 – RM250 easily. Drivers of higher capacity cars would definitely be paying more. I am also driving around 1,500km per month and my monthly petrol expenditure comes to RM350 – RM400.
akpkNow you know why help is needed especially for the lower income households because otherwise, it would be extremely tough to even get by on a monthly basis. I feel that BR1M which was given needs to be targeted at the actual item, for example, food and non-alcoholic beverages. There are plans to change the BR1M from cash to actual vouchers for food etc by 2016. I welcome this. As for petrol subsidy, somehow it has to reach those who need them until public transportation is convenient and affordable enough. As for housing, I think the Budget 2015 was everything about affordability for first time buyers. The only concern is how soon can these low cost housing be made available. It should also be a minimum of 850sf and above and not those 650sf flats like previously. The standard of living is just not there for these extremely small units, especially for families with small kids.
The above is mostly about households but I think if we look at the youths of today, the expenditure would be even higher. Smartphones, gourmet coffee, fancy restaurants and expensive clothing and accessories would form the biggest percentage of their monthly expenditure. Most of the time, this is financed by their credit cards and thus not sustainable. After a few years, when they wanted to buy their first home, they suddenly found out that they do not have sufficient downpayment and prices are a little too high for them. This is where all these affordable housing schemes come in. To help them manage their finance, ‘force’ them to use it for their mortgage payments. At  least, these become continue to appreciate and would turn into an asset instead of liabilities in the future. In short, good debts.
written on 13 Oct 2014
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  1. Yes, i think ‘forcing’ spending by paying mortgage probably one of the best way to reduce some ‘not so important’ expenses, or reduce expenses on something that we ‘want’ insteads of ‘need’.

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