Are High Earners in Malaysia Really Better with Money?

You've got your salary and a shopping cart full of wishlist items, but before you hit checkout, have you taken a moment to check in on your finances?

If you're a high earner, you may belong to a group some call HENRYs, meaning High Earners, Not Rich Yet. These are people who are currently earning a strong income and have the potential to build real wealth later in life, but whose "rich" status comes mostly from their monthly salary rather than money they have actually accumulated. In Malaysia, the top 20% (T20) of households earn upward of RM12,680 a month, according to the Department of Statistics Malaysia's 2024 Household Income Survey¹, well above the national average household income of RM9,155 a month¹. Even at that income level, many high earners aren't necessarily "rich" in the way that word implies.

Even if your own income doesn't put you in that top bracket yet, you might still consider yourself a high earner relative to your peers, and you can fall into the same traps that other high earners do. If most of what you earn goes toward expenses rather than wealth building, you could be limiting your ability to build long-term financial security, especially if you're supporting ageing parents as well as your own children. In other words, part of the Sandwich Generation.

What are the common mistakes that high earners make?

1. Lifestyle inflation

Many high earners fall into the trap of increasing their spending every time their income rises. A pay rise often comes with lifestyle changes, such as trading in public transport for a car and taking on monthly loan repayments.

Some lifestyle inflation is healthy. Spending more on preventive healthcare or better food, for instance. Still, it helps to look at other areas of your life where your expenses can stay flat even as your income grows.

2. No cash flow management

When you're earning well every month, it's easy to assume you can afford anything you put on your credit card. In the worst case, you may rack up credit card debt without realising it. Even without falling into debt, not tracking your monthly spending can stop you from taking a proper look at your finances.

Having a budget, and sticking to it, is the first step toward your financial goals. It also gives you a clear picture of your expenses, which helps you optimise how much you save.

3. Low savings rate and no goal-setting

Your savings rate is the engine behind your future financial security. The more you save today, the more you'll have down the road, which matters even more once you're no longer earning a high income.

It helps to know what you're saving toward. Are you saving for a wedding or a house? Paying off a study loan? What monthly income would you like in retirement? Clear goals give your savings direction and help keep you on track.

4. Not enough protection in case of emergencies

A single accident or an unexpected retrenchment can throw your finances off balance if you aren't prepared. At minimum, keep an emergency fund covering 3 to 6 months of expenses in case you're temporarily unable to work. Set aside a small percentage of your income each month to build this up, and leave it untouched except for genuine emergencies.

It's also worth making sure you have adequate insurance coverage. A basic health insurance plan can help with hospitalisation costs, and a life insurance plan matters if you have dependants relying on your income.

5. Not investing properly, or at all

You might be cautious and reluctant to take on risk without doing your homework first. Or you might be in a demanding job that leaves little time to research investment options. On the other end of the spectrum, you could be taking on far more risk than you should, chasing speculative investments simply because that's what your peers are doing. Either way, investing too little, too recklessly, or not at all can quietly erode your future financial health and spending power.

Maximising your investing strategy as a high earner

Once you've got the basics sorted, budgeting, a healthy savings rate, and adequate protection, you're in a strong position to make the most of your income through smarter investing.

1. Reduce your taxable income

Malaysia operates on a progressive income tax system, so higher income is taxed at higher rates. This supports the wider social system, but it can also mean a larger chunk of your hard-earned income goes toward tax.

One way to lower your taxable income is by contributing to approved retirement schemes. Private sector employees can claim tax relief of up to RM7,000 combined for EPF (Employees Provident Fund) contributions and life insurance premiums, made up of a RM4,000 sub-limit for EPF and other approved schemes and a RM3,000 sub-limit for life insurance premiums². Topping up your EPF savings voluntarily can help lower your chargeable income.

If you'd like more flexibility with your retirement portfolio, consider the Private Retirement Scheme (PRS), a voluntary scheme regulated by the Securities Commission Malaysia and administered by the Private Pension Administrator (PPA). PRS contributions qualify for a separate tax relief of up to RM3,000 a year, currently available through Year of Assessment 2030³, on top of your EPF and life insurance relief.

It's also worth checking your medical and education insurance coverage. Premiums for approved medical and education insurance policies, which many high earners already hold for private hospitalisation cover, qualify for a separate tax relief of up to RM4,000 a year⁴. This sits apart from your EPF, life insurance and PRS reliefs, so between the four categories, a high earner with the right mix of coverage and retirement contributions can meaningfully lower their chargeable income each year.

Just be careful not to lock away so much of your income that you sacrifice liquidity. Keep some cash in accounts you can access easily in case of emergencies.

2. Diversify your investment portfolio beyond retirement accounts

Topping up EPF and PRS is great for tax relief, but diversifying beyond your retirement accounts may help improve long-term growth potential, depending on your investment objectives and risk tolerance. Depending on your risk appetite, you could look into unit trusts, ETFs, stocks on Bursa Malaysia, bonds, or (Amanah Saham Nasional Berhad) ASNB funds, a familiar low-risk option for many Malaysians. Unit trusts and ETFs are a good starting point if you're new to investing or prefer a more hands-off approach.

3. Consult a financial expert

Financial planning covers far more than budgeting, from estate planning to tax planning, investing and insurance, and that's a lot to manage on top of a demanding job. As a high earner, you can likely afford to bring in a professional to help, and you'll benefit from their experience. A licensed financial adviser or a Great Eastern Life Planning Advisor can offer expertise you may not have the time or background to build yourself, freeing you up to focus on what matters most to you.

As you work hard to make money, make your money work harder for you.

As a high earner, you're in a more privileged position than many to make choices that shape your future financial health. Don't fall into the trap of being the "working rich," rich only while you're working, and financially exposed the moment you're not.

A comfortable life looks different for everyone, whatever their income. With the right planning and a bit more intention, you can strike a healthy balance between living well now and being financially secure later.

Disclaimer: The information provided is for general educational purposes and should not be construed as financial, investment or tax advice.