Personal Money Tips

Recently, the price of fuel in the country where I stay, increased by a whopping 18%. In the past the price increase has been rather gradual between 5-10%. For your information, the price of fuel is a controlled item in Malaysia. The government has a formula that takes into account the needs of the public, the oil prices in the open market and also taking into account the distribution, refining cost etc. For some years now, Malaysia being a net exporter of Oil & Gas products, the government subsidizes the fuel, be it diesel, petrol, cooking gas and natural gas.

So big jump in prices, caught most unaware and with it, naturally there is hue and cry from all quarters. Many fear it would put the cost of goods much higher. I observed the unhappy reactions, to put it lightly, from the news, and I found it rather interesting. You see, in the past year, although the total price increase was higher than this one time hike, it was spread over several months. Therefore even though there were some complaints, the pain was not so sudden. But this time, it made everybody take notice, which brings me to this article.

The danger of slow environmental changes to your money. Most people are not sensitive to small changes in the investing environment. The big changes are more easily noticed. I’m pretty sure you have heard about the frog in the boiling water experiment. Well if you have not, it goes like this. If you put a frog into a pot of water at room temperature water and slowly increase the temperature, the frog will not feel any danger. It will adjust itself to the warming water until the water gets hot enough to boil the frog alive. But if you have heated the water before you out the frog in, it would do all it can, to get out of the pot. Now, please don’t do this at home, ok. The lesson here is that, humans are like frog sometimes. We do not notice the small changes and even if we did, we often don’t take action. This is true for many things, not just money or investing. Another great example is most people don’t exercise regularly until there are told, they are a heart attack waiting to happen. The same thing happened in the 70s and 80s when the oil embargo caused oil prices to shoot through the roof. Only then, energy conservation got underway and as consumers demanded fuel efficient cars and energy efficient appliances and home.

By the way, although the increase in fuel price affected me as well, I thought that is was a necessary and wise move. Otherwise, our nation is lulled into the idea everything is smooth and rosy, until one fine day we all wake up to face a bigger crisis.

How do you ensure you are not caught off guard? I think one key thing is to change before change is necessary. If your current income provides a comfortable lifestyle, then choose to be uncomfortable. Either you live below your current lifestyle or get you income higher than you need. Setting income and investment goals here would help. My previous article on setting goals would give you some ideas.

Let me share with you a story I heard about change and comfort. A long time ago, an emperor fought hard to conquer the land. After many years of war, finally all eastern land fell under his control and there was finally peace in the land. He made sure his subjects worked hard and lived well. Some thing troubled the emperor and he asked all his wise advisors, how he can remind himself and his subjects not to forget the past struggles they faced to make his nation what it was, and not to be complacent about their current success. His advisors went away and finally after many weeks they came back to his with just one verse to remind the emperor. The verse is just this, “This too shall pass”

The deeper meaning to the people is this. When times are good, don’t be too comfortable as this too shall pass. I feel most people wouldn’t have trouble to see big change coming their way. And people have the tendency to relax when things are going well. A simple and wonderful verse to remind ourselves not to let small dangers creep up on us.

By the way, the same saying is useful when bad times. Don’t worry too much, as this too shall pass.