‘Adulting’ is an informal term to describe behaviour that is seen as responsible and grown-up. Some people even joke that the word ‘adult’ isn’t a noun; it’s a verb. Just because a person’s age qualifies him as an adult, it doesn’t mean he acts and carries out the responsibilities worthy of an adult.
Adulting involves maturing and being more accountable. One of the first things everyone has to do as they begin this process is plotting out a money plan. Sadly though, many fail to do so even after years of entering the workforce. In fact, many Malaysians live a lifestyle well beyond their income. Our country’s household debt at present is ranked as one of the highest in Asia.
Financial planning grows in importance once you get married and become a parent. Now, you are no longer planning for solely for yourself. Your family enters the equation and you need to cater for their needs too.
Adjust your budget
There any many ways to create a budget, but one of the simplest to follow is the 50/30/20 method. Here, 50% of your monthly income should go towards paying the necessities such as housing rent and bills. 30% goes to your wants, such as entertainment, dining, new clothes, etc. The remaining 20% is allocated towards your financial goals like debt repayment or savings.
However, this budget needs to be adjusted once you have a family. If you’re expecting a baby, you’ll have to pay for diapers, baby food, childcare, and the one-time costs of various baby equipment.
Take a look at your current income and expenses and determine how much room you have for additional costs. Be realistic with your new budget. If you’re barely scraping by as it is, you’ll have to cut back on your current spending. You may need to lower the 30% allocated to your wants and give it to some other area of your budget.
Prioritize Your Emergency Savings
Creating a safety net for your family is one of the most important aspects of financial planning. In the past, experts suggested that having three to six months of salary stashed away is sufficient.
However, depending on your circumstances, that might no longer be enough. Proper planning on your budget is needed so in the case of disaster, you will be able to safeguard you and your family.
Prepare for the future
The cost of education in Malaysia seems to be constantly rising. For this particular need, you have a few saving options for you children, including:
- Junior Savings Account — Most accounts require a nominal starting fund of RM1 and pay higher interest rates compared to regular adult savings accounts.
- National Education Savings Scheme (SSPN) — a great way to regulate withdrawals as it only allows full or partial withdrawals only when your child is enrolled into a higher learning institution or has decided to drop out for exclusive reasons
- Fixed Deposits — advantages of Fixed Deposits over normal Savings Accounts are much higher interest rates, lower risks, a guarantee of investment returns, and protection from inflation. Learn how Islamic Fixed Deposits offer even more benefits in our article here.
Do not neglect your retirement fund
Although we’ve just touched on the importance of creating an education fund for your children, do not forget to save for your own retirement. In fact, it might carry more weight than your child’s education. This is because it’s usually more difficult for you to get financial help in retirement than it is for your kid to find the funds for college.
Update your tax returns
It pretty clear by now that having a family involves increased costs. With this in mind, the government has provided plenty of tax reliefs to ease your burden. Be sure to check out what applies to you so you can update your tax returns and save some money.
You need insurance. Whether it is life and disability insurance, homeowner’s insurance, auto insurance, or any other kind, you will need it. Islamic finance offers a unique type of insurance called Takaful.
Takaful is a concept whereby a group of participants mutually guarantee each other against loss or damage. In the event of loss or damage suffered, the Takaful operator will disburse the funds accordingly to its participants. Any surplus is paid out only after the obligation of assisting the participants has been fulfilled.
Learn more about Takaful in our article here.
Have a proper will sorted out
It is hard to find a more catastrophic event than your own death! It is inevitable and because of that, we need to prepare for it.
Without a will, the distribution of inheritance could take about 2 to 5 years or more depending on the complexity of the case. For Muslims, the process of wealth distribution involves faraid, wasiat (similar to a Will), and hibah.
Want to delve deeper? Take a course!
If you’re a new parent and want to learn more about financial planning for your family, why not join the ‘Duit for Baby’ campaign? It is conducted by Agensi Kaunseling dan Pengurursan Kredit (AKPK) in collaboration with Bank Simpanan Nasional (BSN) and supported by the Ministry of Health Malaysia (MOH).
The campaign runs from June 23 until December 31, 2020. It focuses on educating young parents through financial education modules that are available on their online learning portal.
In support of the campaign, BSN will be offering prizes up to RM5,000! To be in the running, parents need to open a BSN MyFirst account from June 23 until December 31, 2020; for children under the age of seven years old.
Personal Financing may help you if you’re hurting financially during the new normal.
Is now a good time to get personal financing? In normal times, you’d consider the interest rate as a primary deciding factor — and you’d compare different products from multiple financial institutions to get the lowest rate. But now, in challenging times and less steady incomes, there are additional questions to ask. We answer those questions in our article here.
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The service is provided free, simple to use and you will be matched instantly. Apply now and get approved in no time!