We should understand how companies, no matter how big, depend on earnings to survive. Where the bottom line is in the red, any continuation of the existing conditions will eventually lead to financial collapse.
Some people do not realize that good times are temporary, so extravagance during good times can also lead to financial problems because they are used to their high living even when times are bad. Common among these are those who inherited wealth from parents without knowing the business or at least have alternative investment plans. When properties or investments were sold, the large amounts of monies tend to encourage unnecessary spending on items which do not have residual values. Thousands of Ringgit spent a night in a lounge could mean spending beyond their normal incomes. Larger items like palatial homes (at least this has residual value and could even appreciate over time) and luxurious cars could cause a dent to the inheritance of a beneficiary of an average rich family. The high maintenance of the cars and mistresses (if any) are quite common reasons of their downfall.
I have actually wanted to start on a topic involving small amounts but got distracted in my thought process. It has to do with the free electricity for each household provided by government through TNB. Our unoccupied house seems to alternate between payment of just over Rm20 or free when the bill is below the magic figure. For the month before last, I was indignant when the meter reader came 3 days later which caused me to pay Rm20.70. Though I was prepared this time, like making sure that I did not use for the last few days, the units was just 5 units short of 91 (91x0.218 = 19.84) and the meter reader did not come on the day (28th) as the previous month! When he came on 29th, I was expecting a bill for just over Rm20 which I would have to pay, but was relieved to see the amount was only Rm19.40 (based on 89 units). Now, I am sure most readers would think why I fuss over a small amount, which I am sure most retirees do. Does it occur to those who think so, that the marginal 92nd unit actually works out to Rm20.10 which I have to pay, whereas up to 91 units I do not have to? It might be small change to some, but to the company (TNB) concerned, any effort to ensure those similar cases pay instead could mean extra thousands, possibly millions in revenue. Some people believe that our government might not actually refund to TNB for those whose bills do not exceed Rm20, or even if it does refund TNB, the long delay means disadvantageous cash flow. The other point is: how many households actually use less than Rm20 per month? The Malays would describe it as 'ajak-ajak ayam' or when someone asks you out half-heartedly, and which I likened it as an offer which is actually not an offer! Apparently, it was Proton which decided to do away with the Rm5,000 per vehicle trade-in for purchase of a new Proton. It seems the government has yet to re-imburse them (or if they did, after a long, long time)!
This morning, I am surprised to see Yahoo's subject is on savings...
http://financiallyfit.yahoo.com/finance/article-111092-7153-1-how-they-paid-off-big-debt-in-a-few-short-years?ywaad=ad0035&nc
Many young people would scoff at reminders to save money by not buying branded apparels, cutting back on Starbucks, McDonalds or KFC, or to buy from cheaper instead of convenience stores. But as a rich man used to say when asked why he is so thrifty and his children so spendthrift, 'My father was poor, but my children's father is rich' which sums up the reality of the situation.
The young should be made to realize that many 'rags to riches' wealthy people got to where they are today by being careful with their expenses, besides being good in investments. Warren Buffet and Li Ka Shing come to mind, while locally, Lee Loy Seng too. When Tan Sri Lee was Chairman of Multi-Purpose Holdings Bhd (by invitation to give confidence when the company was in bad shape), their Company Secretary actually borrowed his old company Merc which was being used by his junior staff member, to send him to the airport, so as to avoid being questioned about buying new company cars unnecessarily! My mother-in-law (dulang washer turned tin miner) once told me to return a bunch of rambutans which she suspected the seller cheated me for a difference of Rm1 (Paid Rm4 for Rm3 bunch) only! I was more concerned about whether it was worth the trouble and petrol! A case of woman's logic, but who was to say since she had proven her capability in business?
The basics of turning around troubled companies and our balancing of household budgets are the same, regardless of the financial size: to increase revenues or incomes and to cut costs on expenditures (eliminate if possible). The difference is in the number of digits only. It applies to sole proprietorships, partnerships, companies or even national budgets which deal in public revenues and expenditures.
In other words, how we wish our civil servants and their political masters would be prudent, (cannot put it as 'more prudent' because they have never been), in spending public funds. It is difficult to expect second and third generation aristocrats like our PM and Home Minister to empathize with ordinary folks. 'Change your lifestyle' was then DPM's exhortation to us, and I wish I could quote Hussein Hamid's reaction...
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