FP Article 16
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by Rajen Devadason
Our chief want is someone who will inspire us to
be what we know we could be.
succeed financially, simply making
oodles of money is not enough. We
need to also manage that money well.
That is why we are looking closely
today at the subject of personal
The bulk of this
article is made up of an edited
excerpt of one my books,
Liberty! From Debt-Slave To Money
As you read this
piece, I would like you to think
closely about your own situation.
Are you stewing in too much debt? If
so, you aren't alone.
The book from which the excerpt below comes from
was written a few years ago for a largely
Malaysian audience. So, if you happen to live in
Malaysia, then it will have maximum relevance.
But even if you don't live in this equatorial
paradise, you can still benefit greatly by
focusing on the key principles outlined at the
end of this piece.
This is an article on escaping debt
slavery. I hope you enjoy
reading it. But if it isn't what
you're looking for, you're welcome
to search for something that better meets
your needs. Thank you for allowing
me to serve you.
Winston Churchill once observed,
"Sometimes it is not good enough to do your
best; you have to do what’s required."
In terms of getting your
financial house in order, are you doing just
As you read this brief book
excerpt, I want you to put yourself in the shoes
of Iskandar. If they fit, pay close attention to
the key debt management principles at the end of
Malaysians generally fall
into one of two categories when it comes to
having an opinion on the Kuala Lumpur City
Centre Twin Towers. As with durians, cheese and
American-style free speech, you either love or
hate the Twin Towers.
However, a few years ago,
the few who found themselves on the fence
concerning what were the world’s tallest
buildings – until late
2003, when the Taiwanese completed an even
taller skyscraper – fell in love
with them after seeing the beautiful Catherine
Zeta-Jones cavort around the structure with Sean
Connery, in the 1999 action-heist movie
Nowadays, in these still
early years of the 21st century, even in the
absence of the greatest ex-James Bond and the
current Mrs. Michael Douglas, the Towers look
spectacular. On days when the weather is kind,
when the sun blazes and the haze beats a hasty
retreat, visibility goes on for miles and miles.
Today is one such day.
The view outside
Iskandar’s office, two-thirds of the way up one
of the Towers, is stupendous. Most of the Klang
Valley is sprawled below him in mute testimony
to the vigour of one of Southeast Asia’s
greatest capitals. As the natural sun sets, the
artificial lights powered through Tenaga
Nasional’s electricity grid come on. It is a
sight to behold. But, working late as usual, the
riveting scenario fails to captivate Iskandar.
How can it? He isn’t even
Iskandar’s at his desk,
with furrowed brow, still thinking about his
latest credit card statement. Some background
might be useful:
Iskandar isn’t married.
Thankfully, being single doesn’t upset him in
the least. On the contrary, at 28, Iskandar is
quite the lad about town! He’s got a great job,
earns RM10,000 a month and is loved by everyone,
especially the delightful ladies he meets with
great regularity at KL’s hottest nightspots.
However, Iskandar has a
secret problem he’s, so far, succeeded in
keeping hidden from all his friends and family
(except for one other person, but we’ll come to
What’s important to
realise is that for all his trappings of
success, the size of his salary and his
world-class working environment, Iskandar is a
debt-oholic of ponderous proportions. Not
physically, of course, but fiscally.
Just how bad are things?
Well, let’s say if he kept track of his
month-to-month expenses (which he hasn’t),
Iskandar would realise that he has been in
fiscal imbalance – with expenses exceeding
income – for every month of the last three
years. But, naturally enough, young, fast-track
executives have a proven capacity for eliciting
the approval of credit officers.
That’s why, up to now,
Iskandar has been able to fund this persistent,
and growing deficit, by applying for a fresh
credit card every six months, or so. But there
is a truism of financial planning that Iskandar
has never heard: Unless you’re the government –
with the power to print money, as long as you
don’t mind fuelling inflation – you shouldn’t
indulge in long-term deficit funding.
Therefore, till now
Iskandar’s modus operandi has been to use a
credit card until its credit limit is close to
the ceiling and then apply for another one.
Today he is the ‘proud’
possessor of seven credit cards, four of them
‘gold’, with average individual balances of
RM15,000. He owes a total of RM105,000 on them.
That’s more than 10 per cent of a million
ringgit, all in unsecured, expensive debt. How
did Iskandar manage such a stupendously stupid
Well, without trying to
sound (too) facetious, he did it the same way
you would eat an elephant.
One small bite at a time!
Or more correctly in Iskandar’s case one small
fiscal indiscretion at a time. Over the last few
years, Iskandar has gradually grown accustomed
to tolerating ever-higher monthly interest
charges. Sadly, the imperceptible increases have
snowballed into a monthly credit card interest
total that amounts to more than 15% of his
If you’re in the mood for
a switch of metaphors from a large mammal to a
small amphibian, you’ll understand that
Iskandar’s gradual increase in interest charges
can readily be likened to the best way to boil a
living frog. (Stick with me; this is not some
irrelevant, gruesome product of a sick mind, but
a most relevant – albeit yucky – analogy for you
to carry inside your skull.)
If you were to pick up a frog from your garden
and just chuck it into a shallow pot of really
hot water, it would immediately react to the
scalding by jumping out to safety. (Way to go,
However, if you were to
pick up the same frog a little later and put it
in a shallow pot of cold water, its reaction
would be different. Because it is cold-blooded,
and since the water’s temperature closely
matches that of its body, the frog will
contentedly sit in the water. So far, all is
well in the frog’s little, wet world.
But if you were then to
play the ‘evil, sicko cook’, you would
surreptitiously move the pot onto a very, very
slow fire. Result: The water’s temperature would
rise slowly. But surely – up to 100 degrees
Now, being accommodatingly
cold-blooded, the frog’s body will adapt to the
rising heat. It is in its nature to match its
blood’s temperature to that of its surroundings.
And, for a little while, that will be fine. But,
long before the water reaches boiling point, the
frog will have adapted itself to death.
If you haven’t lost your
appetite (for reading, at least), before we
continue with the sorry tale of Iskandar and his
seven credit cards, just remember a guiding
principle that we will constantly hearken back
to in this book:
The key to reaching
financial freedom is to focus on strengthening
your net worth statement.
I hope you enjoyed that excerpt.
If you'd like to improve your economic future by
investing in a copy of my book Liberty!
From Debt-Slave to Money Master, 2nd Edition
2004 just drop me a line at:
with the words: Rajen, I need to get Liberty!
in your subject header.
But please do remember to clear
yourself through my spam filter, otherwise your
email will never reach me.
Now, onto vital material you must
3 Key Principles To Heed
When it comes to dealing
intelligently with debt, I urge you to read,
study, memorise and apply within your life these
3 key principles:
1. Ask yourself why you are
borrowing this money - is it for unjustified
consumption or to make you richer?
2. Work out - or have someone
else do so for you - the exact APR (annualised
percentage rate) or EIR (effective interest
rate) of the loan.
3. Based on that correct
assessment of the actual cost of the money you
plan to borrow, ask yourself if this loan stands
a good chance of helping you grow your net
worth. If your answer is no, don't borrow the
money. If your answer is yes, by all means go
ahead. If you aren't sure, then take the time to
© Rajen Devadason