NURTURING gratitude within our hearts for what we have is the best way to enjoy all we possess today. Yet, we should always aspire to improve our lives.
We all start on the socioeconomic ladder of our respective countries at the same point our parents were at our birth. Then, throughout the first, say, 25 years of our lives, our position on the ladder stays in lockstep with that of our nuclear family.
After that, though, our elevation upon that ladder is really our call. Thankfully, economic mobility exists in countries where capitalism has taken root, including that of most of my readers and me — Malaysia.
Unlike the specific evils of a stratified caste system — which traps countless generations in a cultural straitjacket — countries where socioeconomic mobility is possible and positive personal factors like merit, education, diligence and entrepreneurial drive are encouraged can be levellers of opportunity that allow anyone willing to pay the steep price of success to get the chance to inch, or in some cases surge, up this fascinating, albeit metaphoric, ladder.
However, the mobility granted by capitalism works in either direction. If we encounter major financial misfortunes — like pricey medical interventions or dicey legal woes, for instance — those will impoverish us by devouring our financial resources, and we will slip down the ladder.
All of us, of course, aspire to move up, not down. In Malaysia, most of us are familiar with the public policy planning divisions of B40, M40 and T20 for, respectively, the so-called bottom 40 per cent, middle 40 per cent and top 20 per cent of our population.
Thankfully, regardless of where we may be today, we should aspire to make things better for ourselves and thus our families. Author Deborah Day once wrote: "Recognising that you are not where you want to be is a starting point to begin changing your life."
SOMETHING TO ASPIRE TO
Towards that end, consider this nuanced analysis of socioeconomic standing that allows any society to define its components using a seven-layer structure based purely on socioeconomic gradations (but NOT human value and personal character):
1. Upper-upper class;
2. Lower-upper class;
3. Upper-middle class;
4. Middle-middle class;
5. Lower-middle class;
6. Upper-lower class; and
7. Lower-lower class.
The vast majority of us sit on rungs 2 to 7, from lower-upper class to lower-lower class. Since there is space above us, that means we have the opportunity to move up the ladder. This should be something we aspire to for the sake of our families and, frankly, ourselves.
As mentioned, the avenues we may take to climb the ladder are working hard and smart, committing to lifelong education, staying focused on our goal to move up in life, and focusing on career advancement and business development.
You should decide which of those positive actions to prioritise. Then do the work.
Within the lifelong education path, focusing on gaining linguistic expertise will be of immense value in decades ahead. Today, as we look at the economic value of languages, it is evident that those willing to learn and grow proficient specifically in English, Mandarin and Spanish will gain a sharp edge over everyone else who also wishes to compete for economic gains in the burgeoning global marketplace of the remainder of the 2020s to the 2040s, and beyond.
GROWING WEALTH
Regardless of the specific path we choose for our goal of personal economic uplift, the common denominator is our capacity to grow wealth, which can be described as net worth enhancement.
We calculate our individual and family net worth by adding up the value of all our financial assets and subtracting from that sum our aggregate financial liabilities. In other words:
What we own today MINUS what we owe today EQUALS our current net worth.
To move up that seven-rung ladder, we should focus on growing our net worth. There are numerous ways to increase what we own and reduce what we owe.
Here are four ethical steps we would be wise to take:
1. Elevate our active income by working harder and smarter;
2. Curtail our expenses by establishing and sticking to a practical spending plan or personalised budget;
3. Build our monthly cash flow surpluses by focusing on bringing in more money and reducing our expenses over time; and
4. Allocate those cash flow surpluses wisely.
CLIMBING THE LADDER
Psychologists identified two traits in all of us that play important roles in determining our level of success. They are immediate gratification and delayed gratification. Both traits sit at opposite ends of what we may term a self-sacrifice spectrum.
Building upon this foundation, economists and later even financial planners identified this strong correlation to success:
The tendency to succumb to our appetites instantly (immediate gratification) is a key reason for slipping down the ladder, while the rarer ability to give up even good things today for much better stuff, services and experiences tomorrow (delayed gratification) is the main impetus that propels us up the ladder.
So, if you crave to clamber up this fascinating ladder, do three things:
1. Build up your monthly cash flow surplus by working harder and smarter;
2. Allocate your surplus toward savings and investments that make you wealthier over time; and
3. Attack the loans that are dragging you down.
Enjoy your ascent.
© 2022 Rajen Devadason
Rajen Devadason, CFP, is a Licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com. You may also follow him on Twitter @Rajen Devadason and on YouTube (Rajen Devadason).