The Poor: More Income vs Financial Literacy. Which is important first?




A recent article in Malay Mail recently had caught my eye and something close to my heart.


The writer does have her points but again just my two cents worth to put my thoughts across - for a person who had gone through financial disaster and back to financial independence. There were deep lessons learned, climbing out from financial disaster. It is not just a simple financial technicality but the core values and principals underlying the journey to financial success.


The stinging words ‘You can’t budget your way out of poverty’ can be true and false at the same time. At the core of poverty is the acceptability of circumstances. Do one surrender to the circumstances and being the victim or does one have the courage to take responsibility to get out of the circumstances?


Nobody wants to be poor, yet we have the B40, M40 and T20. Why do we need such categorization in which the benchmark is earmark to income earning capability when we are all humans each with unique ability? Shouldn’t we be equal?


The B40 and M40 would sometime blame their luck for their circumstances. But do one realize that underlying our income earning capability are the beliefs and values, finally the courage to act. In my many encounters with luck, I come to realise that all the preparation – sheer hard work, wisdom, courage, and strategies in the right direction gives us the leverage when the opportunity arises. The common man will call that luck but what one fail to realise is the sweat and tears behind the preparation. Sweat does not only mean hard work which is a must but also the stress and anxiety of not knowing the direction. Sweat also means the hard choices we must make. And that takes enormous courage which in my journey, I come to realise is one of the factors separating the have and the have nots. Tears are disappointments of not getting the result we want or falling short of our expectation. In short, our income earning capability is never just about the brain, but it is about the heart. The sad truth is many thoughts that brain trounce heart. But in my journey of 40 over years, it is the other way around. At the core of heart are the belief systems and value system which sends the signal to the brain to assess and finally the ingredient call gut or courage are needed to make the decision for action.


To illustrate the blabbering above, many know the difference between an employee and an entrepreneur. But how many realise that what is difference between a CEO of a big company and the employee at the bottom of the pyramid? Aren’t both also an employee of someone? But why the disparity in position and thus the income. Save me the argument on luck as I have already explained. The biggest difference between the CEO and the bottom-rung employee is the heart. One took the courage and responsibility to have the wisdom and intelligence for everyone to accept and push him up to be their leader, while the other one is someone who lacks courage and responsibility, though they may have the same wisdom and intelligence. It is the courage and responsibility that differentiate the quality of one’s work. And courage and responsibility come from the heart. Never the brain.

I absolutely agree with the writer that the poor needs more income. In fact, everyone. Not just the poor. To get out of one’s current circumstances which one do not wish to have, more income is needed. Income is a resource.


My point is one’s current income are dictated by the life decision one has made previously. Question is, do one wish to maintain status quo or change for the better? Hard work alone is not going to cut it. Productivity must be there as well. Productivity in one’s life is your ability to enhance your skills in thinking, decision making and knowledge in your endeavour. In short, to increase one’s income, one must understand life. How can one be valuable to the world? The only challenge, there is no guidebook. Thus, mentors and literature are important references for one to have clear understanding about life.


Financial literacy – another big topic with some guidebook.


I cannot agree that the poor only need more income than financial literacy. Fools will only believe that once one has bigger income, then one can start learning about financial literacy. I was there during my early years, when my starting income – a mere RM1,100 when it grows to more than 10x, which leads to my financial disaster. What I fail to realise then, financial literacy is highly linked to life. It is life that our wants, greed, selfishness, and fear are born. These are the source of our financial decisions. And if one does not have the wisdom and control, financial disaster will ensue. The joke was I was trained in the financial industry.


After my hard climb from abyss of financial ruin, I only then realised again to understand financial literacy, it is about the heart. But this time is more of the responsibility rather than the courage. Financial literacy will give us the foundation of being financially responsible, only if, it is coupled with the underlying belief, values, mindsets, and emotions. Not just the technical and know how.


The mantra ‘If you cannot handle a RM1,200 income, you will never know how to handle RM10,000 income’ still hold true in my heart today.


To illustrate, one must understand that when we received our income, one must save certain portion. The balance of course goes to expenses to maintain our lifestyle. Only savings will create assets. And assets can create passive income which will increase our income. That is the foundation. Thus, if one earns high income but unable to save, sooner or later, one will head towards financial disaster because when the wants are unable to be controlled, with high income, the privilege to access to debts are given. But when abuse, calamity will ensue. My point here is, if one understands the foundation, financial literacy knowledge will give us the strategy to control our emotion – delaying our purchases.


To illustrate further, there is definitely a huge difference in our mindset between savings first when we receive our income than saving after paying off all expenses. To ensure that we can save, we put in strategies to ensure that we take away the amount to proper financial products – away from the account where our income is credited. After paying off all expenses and debts, if there are some leftover, then, our wants will be more controlled. The mind will tell us that we do not have enough money. The mind will also tell us that we are glad that we have already save some amount somewhere.

Financial literacy was never about the technical i.e. calculations and products but a system to make us a disciplined saver and later investors. One cannot become an investor if one does have the ability to save. It is in fact riskier for one to be an investor without a proper saving habit.


Increasing income is 80% heart, 20% brain. But the mindset is to want more. Financial literacy is also 80% heart, 20% brain. Heart is therefore, the foundation of our income and financial literacy!

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