Effendy Lie

I was raised in small countryside of North Sumatera, Indonesia. Life in there was very traditional and from what I can recall, no one has mentioned or teach us about anything about investing. Although there are many wealthy people, they mostly inherited business and wealth from their parents or grandparents.

Most successful businesses that the locals own are pig farms, chicken farms, catfish farms and owning the palm oil fields. One of my friend whose dad is very successful in all of these fields once told me that, the chicken’s wastes were enough to pay all their employees. The waste was sold to a fertiliser manufacturer and generated enough to pay the workers and more.

My dad tried to get involved in the chicken farm business. However, he woke up one day only to find all the chicken have died because of the disease. His venture and dream to be a successful chicken farm owner shattered that day.

My dad used to work for his uncle and earned a minimum income and he had to support his mom (my grandmother), 5 of his siblings plus his own family, mom, my sister and myself. That was about 30 years ago but i guess the cost of living are quite low back then. But imagine having to put bread on the plate for 10 people with such a low wage.

I appreciate dad so much for what he has done and sacrificed for us. However, nobody has ever thought him how to invest or pay himself first. Throughout his business and working life, together with my mom, he had a few pay rises and other business opportunities which generated them quite significant amount of money. However, that did not make them rich.

After I read books about personal development and investing, I began to understand the rules of money and what everyone should do to be financially free. I learn why my parents aren’t getting rich is because of their lack of financial education.

I remember my mom’s spending habits where she would purchase many antiques, plants, furnitures, and many more. Those items that she purchased depreciates in values and today, most of the items that she purchased has either gone to the wasteland or given to her friends and family.

If instead, she invested the money, I believe she would be very comfortable right now and never depends on her children to give her money. I am not saying that she should not purchase any of those, but if she is financially educated, she would budget her money and spend only a small percentage of their household income.

Us humans tend to think that money is a renewable resources and there will be another income coming in again the following month, this type of thinking can delay or erase our chance of being able to retire.

Most people will spend their money as they come and never invest any of it. When crisis comes, these people will be hit hard which could result in bankruptcy. 

Below is the formula I personally use to budget my income, of course you can do it differently if you like.

10% Investing
10% Giving
10% Holiday
10% Hobby / Splurge
10% Long term saving
50% Daily expenses (house payments, foods, utilities, etc)

Before you invest and save for holidays, I would suggest you to hose down any high interest loans like credit cards, personal loans and car loans as such loans comes with high interests. Again, this is my personal opinion only, you are free to customise the plans to suit your situations. 

The key is to start NOW! We should manage what we currently have, not tomorrow, not next week, not next month. We need to start budgeting and spend less that we earn now before it is too late.

In our young age, we have to take advantage of compounding, when we get older, the power of compounding is getting weaker and weaker. Therefore, it is better to start investing early.