Until recently, the measurement of our nation’s debt healthiness has hinged on the public debt to Gross Domestic Product (GDP), which the government has capped at 55 per cent and is looking to reduce in the post election years.
As most countries, especially developed ones, tend to run on a deficit, it was constantly argued that our public debt to GDP level wasn’t that high if compared to Greece, which has gone up to 158 per cent; or to cite the other rather successful examples, like the United States (90 per cent), Japan (174 per cent) and Singapore (110 per cent). Overall, it all depends on how the nation is financing these loans and what the nation is spending on from these debts.
Worrying household debt
We have a larger behemoth to tackle, however. One that could be looked at in a more straightforward and quantitative way: our personal debts or household debts. Malaysia’s household debt to GDP currently stands at 82.9 per cent, far higher than our public debts, and is ranked the highest among Asia’s emerging economies.
There is indeed much to be taken at face value in terms of household debts, because they are simply the loans we take to finance our necessities and, appallingly, non-necessities. And it appears that the Bank Negara Malaysia (BNM) is not happy about how we manage our debts these days, as it imposed stricter controls on both personal and housing loans recently.
This is unsurprising because if both the government and its people are embroiled in debts, it would imply that both do not have the extra cash to bail out the other should an emergency arise, unless they take up more loans. We will be so much closer than Greece than we think if that happens.
Understandably, some of the household loans are due to the cost of necessities (like housing loans or mortgages, which make up 44.5 per cent of the debts) and starkly reflects our knee-deep middle-income trap.
But it is unfair to say that our financial management habits should be free from scrutiny, or worse, reproach. Forming the second largest bulk of our household debts are personal loans, taking up 16.8 per cent of the total debts. I need not mention much about how people these days are spending outside their means, especially with civil servants making the cover story of two online news portals about how they practically financed their life through loans, augmented by the availability of credit cards and the rather lax lending practices offered by non-bank financial institutions (NBFIs).
Why spend on non-neccessities?
It is unbelievable how people have allowed themselves to be so engulfed in debts for the purchase of mobile phones, luxury items and other non-necessities with no social mobility capital attached rather than just a superficial demonstration of social status. This is expected to be more prevalent during the Raya season as many might take loans to purchase new cars and mobile phones just to balik kampung with more glory and then sell these items later.
Of course, this is not a strictly civil servant limited phenomenon. The fact they are highlighted is not because private sector employees do not take such loans, but that civil service might be more prone to it due to the perceived “stability” of their job, thus perpetuating the behaviour of living practically on a deficit. Since these NBFIs are not Ah Longs, they at least do not face the threat of imminent danger when they can’t repay their debts.
In light of more difficult times and shallower wallets now, it is of course fair to demand higher pay in Malaysia. No thanks to the fact that Malaysian wages have been largely outpaced by the rising cost of living.
The government, for its part, does not seem serious enough to tackle the issue, quoting flimsy statistics to placate the masses (by using illogical poverty measurement indices) and continuing its so called transformative economic policies that expand the pie but leave little for the majority of the working class.
But we should not exempt ourselves from the larger question as well, which is, why do we spend money like that? Why are we willing to pay more than we earn? Why do we invest money in areas of non-returns when we have so little extra to flex with in the first place?
The wedding expenditure
Let’s take something anybody can relate to. Marriage. Or rather in my own words, the advertising of one’s marriage. For far too long, we have heard of sad stories about people landing in financial woes when getting married, all races alike, as well as those who can’t get married because they want to avoid such a bear trap. A conventional marriage ceremony in Malaysia costs a lot, sums that could cost up to a working couple’s whole year’s worth of savings.
Hence, we see parents chip in a lot when it comes to marriage to spare the couple the burden. The younger the couple is, the more likely the parents would have to pay. With the culture of segregated households now, one would have automatically expected the new couple to be bearing the cost of housing outside of all these ceremonial expenses, making a honeymoon for the poorer newly weds to be more bittersweet rather than caramel sweet.
Of course, some “smart” financial whiz kids who go on a national tour to teach people how to earn money (or rather earn money for them) will say, you have only yourself to blame if you did not earn enough to hold a grand wedding. But the fact is, the average household in Malaysia earns only RM5000 per month. Assuming they can save up to RM1000 per month, a RM12,000 budget is the bare minimum to cover any traditional wedding ceremony in Malaysia. The dowries or mas kahwin would have easily taken half of that amount.
So what? Is the whiz kid now saying more than half of Malaysians should be condemned to the abyss and be a total failure in life? If I was really that smart, I wouldn’t risk offending half of my country people with such a contentious statement.
In my opinion, the accurate question to ask is, are we poor due to our weddings or are we poor due to the way we conduct our weddings? It is obviously very telling of on a couple’s financial awareness when he/she (or he and she) decides to spend more than a year’s worth of savings in one night (or two, for some) just for the announcement of matrimony – which most would agree is done for the sake of tradition (and ‘face’ – that’s where the parents chip in, to protect family honour).
The willingness to spend beyond one’s means in a ceremony (which in the legal sense is just the swearing of an oath and the signing of a certificate) that bears no guarantee to everlasting love or any tangible returns implies the short-sightedness and imprudent nature of most young adults towards money these days and their overindulgence on short-circuited happiness and face-aving exercises no matter what the cost.
Of course, in many instances, it is also the ego of the parents that has to bear the blame for forcing marriage into a debt-ridden affair by imposing unreasonably high standards in the expenditure required, as if it’s a shame to marry their child off in more modest means.
The lack of awareness of how money could be well spent, saved or invested, for example, to set up a fund for the coming child’s education, is just a harbinger of more difficult days to come. This is because this sort of financial management – or shall I say, spending audacity – is not only limited to weddings. Spending beyond one means is a habit and sometimes an addiction.
That is why we hear stories about how personal loans are taken to buy luxury goods, branded products and posh holiday getaways. And with so many avenues (e.g. multiple credit cards) for one to obtain some advance cash in the form of loans, these people may ask, why not? – not minding the fact that the weather is not always fair and the Employees Provident Fund (EPF) is never your guarantee of a cosy retirement. They will land in a quagmire soon, and no matter how much they do to satisfy the capitalistic sense of joy, the capitalist world will not save them when they run out of capital, ironically.
What will make us happy?
So back to the main question: why do we spend money like that? Why do we deem it important to have ‘face’ rather than financial security? For the young, it may be attributed to the porosity conferred by social media that we are more paranoid than ever, of being deprived of things that other people enjoy.
But the fact is, the lifestyle heralded by social media is an amalgamated lifestyle nurtured by the accumulation of photos and glosses of millions of people; the rich and the poor, the extravagant and the reserved. How are we as mere mortals going to compete with the lifestyle of millions out there? And why do we want to when we can’t?
No matter what we buy, where we go and what we eat, it will only be momentarily embraced, and then permanently digitised and buried under a pile of other digitised, scrapped information. This joy stems from the collective, and hence it was never uniquely yours and will be short-lived. Unless you are an actual celebrity like Lady Gaga with her 39 million Twitter followers, not a celebrity-wannabe. However, the despair when our loans overrun us is very real and personal, and most likely it will be chronic.
Ultimately, it is time we examined our core values and our understanding of happiness in order to justify our pursuit of happiness. A report by TIME on happiness, citing a study by San Francisco State University psychologist, Ryan Howell, has revealed that the possessions we purchase for the sake of impressing others actually confers less happiness. This is expected because in a materialistic culture such possessions can easily be obtained and shared by others, like a pair of shoes, a visit to a fancy restaurant or a new set of wheels.
The “look-at-me” hype would easily go away and the let-down sinks deeper than where the short-circuited happiness had elevated the person to. This may sound cheesy, but personalised experiences founded on meaningful relationships tend to give people much more joy and satisfaction, because they are unique, non-repeatable and built on a stronger foundation of human connections, as compared to say, a few simple click of likes on Facebook.
Like money, the pursuit of happiness is universal; but like our expenditure, it can be highly personal and customised. No doubt, with more income to wave around, we are automatically guaranteed greater happiness, that I don’t deny, as someone once told me crying in a BMW is better than crying in a Kancil, or worse, on the side of the road.
But if we are too occupied with the mentality to spend all we have, we are unlikely to be good business people, because the concept of financial surpluses which is the essence of all businesses will elude us as ever.
In this current time of duress, we should stop whining and really reprioritise our spending habits, and most of all rethink the entrenched “spend-to-impress” culture. If not, for every sen we spend on assuring people we are good, we may find every bit of joy being squeezed out from a painstaking, poor and by and large unhappy life. - Aliran - July 18, 2013
* Nicholas Chan is a socio-political research analyst at Penang Institute.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.