Rajen Devadason sits down with FLY Journalism Director Michelle Aw and Journalist Tan Kian Leong to talk about his past problems with credit card debt, how saving money helps your career flourish, and what you can do with your EPF in this first of two articles with him.

Rajen Devadason is a Securities Commission (SC)-licensed financial planner with Manulife Asset Management Services Berhad. The CEO of RD WealthCreation, he is a graduate of King’s College London with an Honours degree in Physics and Computing. FLY: Malaysia’s Journalism team caught up with him in Seremban in January to see what he had to say.

If you’re ever fortunate enough to meet Rajen Devadason in person, then you’re certainly in luck: the first thing to note about him is that he’s an extremely gracious host (being treated to lunch is luxury enough, but being treated to lunch at the Royal Sungei Ujong Club is an entirely different experience altogether). But more importantly: he’s a very knowledgeable man, and time seems to fly when you’respeaking to him. With an answer to every question that we pitch to him, as Michelle and I sat down with him for lunch, we got the feeling that we were in for a very rare treat – both on our platters, and in conversation with our host.

The Credit Card Conundrum

When asked to share with us some defining moments in his past that shaped his understanding of personal finance, Rajen was forthcoming with his historic problems with credit card debt both in the United Kingdom in the 1980s as a student and upon returning to Malaysia to continue his career in the early 90s.

“I got a scholarship to do my A-Levels in the UK. Later on I went to university and then worked there for more than a year after graduating. Throughout my 7-year stint, I was quite short of cash … My parents did the best they could, but after a while money started to get tight and both my parents ended up borrowing money from their friends and relatives to send to me in the UK. Obviously, the amount of money I could expect from them began to decline. It was clear that I was consistently spending more than I was earning. I worked as much as I possibly could, but my income simply wasn’t enough.”

Saddled with spending problems, Rajen eventually turned to credit cards to bridge the gap. Students, Rajen explained, were seen as a safe credit risk by British banks at the time, with the expectation that they were likely to graduate from university, find a job, and eventually earn enough money to pay off their debts. As the unpaid credit balances on his credit cards rose, he began to rely on other credit cards to pay those off – inadvertently triggering a spiral that would continue to hound him for many years.

Following his A-Levels, Rajen completed his degree in Physics and Computing at King’s College, University of London, before securing a chartered accounting training contract with KPMG. “After a year working at the accounting firm I realised I really didn’t want to be an accountant – it was a bad fit for my personality. As a result, I decided to quit,” he recounts. Leaving the UK about 36 hours before his work permit and visa expired, he Rajen returned to Malaysia in search of other opportunities, still determined to pay off his UK credit card debts.

“It took me many months before I got a job, and when I did I used to catch the bus from my home at that time to Seremban town and then walk to Standard Chartered bank and convert a major chunk of my monthly salary to [pound] sterling. I would buy] the bank draft, sent it to my bank account in London, and then gradually pay down my credit cards. It took me years and years and years, but I paid every credit card off. I’m happy about that – at least I didn’t owe them money.”

With most of his income going towards paying off his debts, however, Rajen soon found himself short on cash in Malaysia – and once again, he resorted to credit cards to make up for this new series of cash flow shortfalls, which led to growing deficits. In the red once again, he thankfully managed to dig himself out quicker this second time thanks to the lessons he had learned earlier. The damage, however, was done – the debt was only one half of the story, and Rajen’s career progression had stalled in those intervening years as he tried to make ends meet.

Working Your Way Up

“I want you to quote me on this.”

Midway through our interview, Rajen pauses to touch on something that is especially important to him. “I’ve seen it in my own life and I’ve seen it in the lives of my best clients. Money saved acts as a magnet for money earned. If you are serious about [saving], you’ll find that your life is more stable, you’re less stressed about the kinds of things that bothered me with my credit cards in the UK and again here, and you’ll be able to manage your money more intelligently. Your bosses can pick up on this, and you will be deemed more trustworthy, more responsible.”

For budding entrepreneurs making the leap from the relative security of employment to an entirely new world, he has another piece of advice. In order to become a better employer, Rajen reckons, you would be doing yourself a favour by spending a few years as an employee first. “If you do that, you will understand what it’s like to be an employee, you will become more empathic and more compassionate. You will grow into a better boss!”

Rajen can certainly attest to the truth of the statements he has made. With a career spanning multiple fields and having struggled in his formative years with financial problems, he offers some insights into the lessons that he learned from his time as an investment analyst with Standard Chartered Securities, and earlier on and then later, as a writer.

“As an investment analyst with Standard Chartered Securities, at the time, in the mid-90s, I learned a lot, but I didn’t enjoy my work. I tripled my salary, but my job satisfaction plummeted 90%. I was only happy one day a month: payday. So as I was driving back to Seremban from my office in the evening, I would often get stuck in a jam, and I would get more and more frustrated about this and think to myself, ‘Do I really, really want to do this?'”

The answer, ultimately, was no. Going back to his roots (having written for Malaysian Business magazine and winning the Citibank Pan-Asia Journalism Award prior to his stint with Standard Chartered Securities), Rajen decided to start his own writing outfit, and promptly left his job. Sadly, things did not go according

to plan, and due to poor financial planning on his part, Rajen was left in dire straits once again.

The lesson here? Ensure you have adequate emergency funds to cover your rainy days. Rajen says, “As a student, with your parents taking care of most things, just building up 3 months’ worth of expenses is more than enough. When you go out to work, as an employee, I would say 3-6 months of all expenses – not 3-6 months of your salary, but your expenses. If you’re starting your own business, aim for a 6-12-month buffer: 6 months if you have lots of clients across a wide range of industries, and 12 months if you are excessively reliant on just one or two clients. I would suggest that you keep it that reserve money exclusively in the bank, maybe in a 1-month fixed deposit on auto renewal, or a combination of bank savings accounts and a pure money market fund.”

Thankfully for Rajen, economic salvation came in the form of a phone call from Singapore – he received an offer to become the features editor for Smart Investor magazine; months later, he returned home to become the founding editor of Smart Investor Malaysia. On the lookout for a viable cover story, he eventually managed to get an interview with Edmond Cheah, the then-CEO of KL Mutual. Content in hand, he went on to publish his cover story, ‘Three Wise Men’, featuring Edmond, Wong Boon Choy, Senior General Manager, and Chong Chang Choong, the Lead Fund Manager of KL Mutual.

As thrilling as all that was, Rajen had chanced upon something altogether more interesting: dollar-cost averaging (DCA). “I guess you could say I wrote my cover story-accompanying sidebar on DCA so well that I convinced myself,” he quips with a smile. “After my story was published, I trotted over to the Seremban office of KL Mutual and declared, “I want to invest.” This was in 1996.

“A year later, I had started my dollar-cost averaging-based portfolio. And then the [Asian Financial] crisis hit. I had to wait for my monthly statements to come to track my unit numbers back then, but as the market dropped and as the prices for my unit trust funds dropped, I could see that I was buying more and more units each subsequent month with the same amount of money. Eventually things picked up.”

Tips for Young Adults

For adults working towards building their retirement fund, the go-to instrument has been the Employees’ Provident Fund (EPF). To Rajen, a retirement specialist, however, Malaysians should be thinking of doing more with their money – and not just by putting it into a Private Retirement Scheme (PRS). “My recommendation is that people should utilise their EPF money as intelligently as possible. There is

something known as the EPF Members’ Investment Scheme[1], where if you want to, you can take the excess amount of a basic sum that changes with your age from Account 1 to invest externally in a unit trust portfolio.

“What you want to do is to try and get decent returns there, [and] you should have money in EPF as well. Definitely also start a PRS account, but right now I think the number one reason for the PRS would be the RM 3,000 tax relief you get every year.”

In a final piece of advice for young adults, we speak to Rajen about budgeting for our parents’ allowance as we begin our careers. In line with the familial Asian ethos, he believes that it is important to give back to your parents – both to help them financially, and for you as a form of character development. This advice, however, is tempered with a word of warning. “Over the years you will earn more and more money. Be very careful as you escalate your giving to your parents, because even if you go through a tough time, [it’s] very difficult to cut back on what you’re giving to your parents.”

“So, should you give? Yes. Should you increase over time? Yes. But do so very carefully, and ever so gradually.”

Our interview with Rajen Devadason is continued in the second article of this two-part series.

[1] The EPF Members’ Investment Scheme allows for members to transfer a portion of their savings in Account 1 for investments in appointed Fund Management Institutions (FMIs). Further information on this and the various options available to EPF members can be found here.