Start investing now

as long as your emergency fund is there.

According to financial planner, as long as there is an emergency fund backed up for 3-6 months of our expenses, one should consider to start investment. Putting too much money in the bank will not help to grow our wealth. It is advised to allocate 10% - 20% of our income for investment.

With current expenses of RM32K per annum, which is about RM2.7K per month, assumming no additional expenses during the retirement age, because of 4% inflation, we will have to spend for RM85,307 per annum, which is not less than RM7K per month after 25 years. In other words, if you are spending RM2.7K a month, and you are now 33 years old, please make sure you have RM1.5M when retire at 58 years old with 75 years life expectancy. The number could be more with higher inflation, higher medical expenses and travel expenses.

Personally i do not wish to just stay at home in my golden years.

Inflation Efffect

At 4% inflation, RM100K will be worth only RM67,566 after 10 years. For a new born child, a local private university education which cost RM73,500 today, will cost RM235,935 in 20 years with 6% inflation. If we target to have half a million at the age of 55, look at the below table to see the consequences of delaying the saving.

Simple Mathematics

This is simple mathematic calculation base on 8% compounding return. So, if we are doing the saving in the bank with the very low interest, the monthly saving requirement would be 3-4 times higher.  Don't think that you will have better saving in future with the increase of your income because commitment will increase in tendem.

I have friends who are working as management level, earning 20K income per month buying big house and luxury cars and sending their kids to overseas for study, will face  financial challenge if they are not working for a year. In nowadays, the definition of 'rich' interpreted from how long one can sustain his/her life if not working, disregard how much saving he/she have. Of course their saving can be one of the passive income generator if this saving is put in any investment instrument.