How a Malaysian employee with salary RM4k a month becomes a millionaire without doing anything

The answer is.....................

Time and EPF!!!

I have been thinking of this for a while. As a 25 year old kid earning RM4k a month, I contribute around RM350++ to EPF monthly, then my employer contributes another RM350++, I end up saving around RM700++ a month or RM8400++ a year.

Lets say I constantly contribute RM8400 a year to EPF for 35 years (I'll be a 60 year old cranky grandpa), and EPF annual dividend is 6%:

RM8400(1.06^1+1.06^2+1.06^3+...............1.06^34+1.06^35)= approx RM1 million

Presto! I'll have RM1 million in my EPF account! Without me doing anything active. Of course if my salary increases and I contributed more to EPF as time goes by, it won't take 35 years for my EPF account to accumulate to RM1 million.

If someone decides to put RM700 monthly under his pillow for saving, hoping to save enough to be a millionaire:

RM1,000,000/RM700= 1428 months or 119 years!!! (Only your skeletons will be left to enjoy the status of being a millionaire) Once again we can clearly see the power to compounding interest (6% dividend by EPF vs 0% dividend under the pillow).

Want to be a millionaire faster? Then you'll need to put extra effort to find investment which can give you a higher yield then EPF's 6% and to save more than RM700 a month.

For example, if someone saves RM2384 monthly in an investment yielding 10%, he can accumulate RM1 million in 15 years.

Others who wants to be an instant millionaire can buy some Indonesian rupiah or Japanese yen.

RULE OF 72

Story telling time~~~~~~~~~~~~

Ah Lan save RM100k in an investment yielding 10% annually. All the annual interest will be reinvested. How long does it take to double his money to RM200k?

Using the rule of 72:
72 divide by 10 (the interest rate)= 7.2 years for the money to double to RM200k.

How about 2% annually like bank account interest yield. Lets do the math:
72 divide by 2= 36 years!!! Bloody hell!!!

Now u understand why financially smart people don't tuck most of their money in bank accounts... Losers!

Investing- Why start young?

Hmm, my very first post in my very first personal blog....

I'm 25, started working for about six months, have received 5 monthly paychecks (about RM4k+ monthly).

I'm into share market, I'd described myself sorta mix value/growth investor, also leaning towards dividend play. I'm not into short term or day trading, will hold stocks for long term. Still a newbie, continuously learning along the way.

When I asked my friends of my age group about investing, most of them have never thought of it. Those who save would tuck their money in saving or fix deposit accounts. Some of them choose to take car loan for brand new cars or spending on credit cards, ending up in net debt.

Why start investing early? It has got to do with the magic of compounding interest. Here comes my story telling time~~~~~~~~~~~

In year 2010, Ah Lan and Ah Ciao are both 25 years old, earning the same salary.

Ah Lan started investing RM10k a year in 2010 for 10 years in an investment which yields 5% a year. Then Ah Lan stopped adding additional money and he just left all the money in the same investment vehicle.

Ah Ciao started 10 years later in 2020, invested RM10k a year for 15 years (5 years extra compared to Ah Lan) which yields the same 5% a year. Then Ah Ciao stopped adding additional money and he just left all the money in the same investment vehicle.

Ah Lan put aside RM100,000 in the investment, whereas Ah Ciao put aside RM150,000. Lets see how both of them fare in year 2050:

In end of 2050, Ah Lan will have accumulated approx RM774k

Ah Ciao will have accumulated approx RM663k (RM111k less), despite saving RM50k more.

So who do u wanna be, Lan or Ciao?