THERE is an odd aspect of politics that often leads countries down a slippery slope of failure.
In democracies, the majority rules. Since leaders of democracies generally wish to remain in power longer rather than shorter, there is a tendency for them to implement populist measures that dole out "gifts". This pleases the masses in the short-term and may get themselves re-elected, but hurts their countries over extended time horizons — from decades to centuries.
Think of the parallel situation of frazzled parents giving in to every demand of badly brought up children screaming at the top of their lungs for what they want, when they want it in, say, a toy store!
The only lesson such brats learn is that vocally agitating for short-term gratification works every time. So, when those children grow to adulthood, some will predictably push for quick gratification from the government of the day. Weak leaders invariably cave in to strident demands from the masses who lack the ability to focus on long-term good.
In doing so, those politicians sacrifice long-term national health — which can only be built on the firm foundation of viable principles like meritocracy, productivity, honesty, and self-sacrifice. Instead, such pseudo leaders opt for short-term public placating measures.
In my opinion, the sad state of many countries worldwide today is caused by our surplus of opportunistic career politicians and a depressing scarcity of genuine statesmen and stateswomen who possess a vision of a hopeful brighter future for all.
Veritably everything in life rises or falls on the quality of leadership.
So, if we can't rely on our political leaders to make things better for us over the long haul, whom can we depend on?
Ourselves!
Consider this mantra of countless motivational speakers:
If it's to be, it's up to me.
COUNT OUR BLESSINGS
Here in Malaysia, we live in a land that has tolerated too much theft, corruption, inefficiency, and incompetence for too long. The net result is that our beautiful and bountiful nation has no choice but to pay for much of its needed development budget with borrowed money, which leads to ballooning sovereign debt. That's the bad news.
The good news is that our country is still a wonderful place to live in, with more kind and gentle people of all ethnicities abounding than the minority of loudmouthed, toxic self-serving parasites we read about too often in the news.
Layer on top of Malaysia's main positives our scrumptious food, stunning natural beauty, and scarcity of natural disasters, and you see why it isn't hard for us to count our many blessings.
Furthermore, with the vast personal and corporate opportunities that abound here with our 34 million-strong, economically sizeable, population, the best among us (the most proactive individuals in our midst) can succeed in life.
So, despite Malaysia's mounting pile of sovereign debt, worsened grievously by government initiatives to raise public sector salaries far beyond the productivity gains of our overarching national economy, we the self-reliant and diligent are not doomed to wallow in personal debt all the days of our lives.
GOOD DEBTS
When we take a hard look at our debts — and most of us have some — it is easy to realise those personal liabilities readily fall into one of two categories:
Bad debts that make us poorer and good debts that (are supposed to) make us richer.
I recently wrote a Money Thoughts column that expounded on bad debts. You may read it here: www.nst.com.my/lifestyle/sunday-vibes/2024/08/1089697/money-thoughts-bre....
Today we'll zero-in on "good debts".
What are they, and can once good debts go bad?
Good debts are borrowings used to buy assets that generate income streams larger than the servicing cost of their associated loans.
Consider a mortgage on a house that you rent out for more than your bank repayments plus your maintenance and tax payments. Such a situation means your piece of investment real estate is cash flow positive.
If you're able to put together one such "good debt" system, you can always do the same again and again. During economic booms, it may seem as though there is no upper limit to the number of such cash flow positive "systems" we may stack up.
But booms ALWAYS eventually give way to busts.
That is the nature of the business cycle with its oscillating, almost sinusoidal, boom-bust pattern. And precisely because things can go wrong, they inevitably will go wrong. American super-opinionated, exceedingly wise anti-debt financial guru Dave Ramsey has declared: "There's no such thing as good debt."
Do note, though, that most other personal finance experts disagree with Ramsey. So, make up your own mind.
My professional advice to you is to utilise much of the excess cash inflow you enjoy during good times to achieve four goals:
1. Build an emergency buffer fund;
2. Pay down your bad debts;
3. Save and invest for passive income and capital gains; and
4. Pay off your so-called good debts.
If you take all four steps and then, prudently, commit to never sinking back into debt, your financial life will zoom upward like a SpaceX rocket to Mars.
© 2024 Rajen Devadason
Rajen Devadason, CFP, is a securities commission-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).