We always associate a new year with a fresh opportunity to improve oneself. But trust us when we say changes can happen anywhere and anytime as long as you put your heart and mind into it. Naturally, personal finance is an area where we all would like to see an upward trajectory.
We’ve listed down a few money management mistakes that Malaysians commonly make. If you’re guilty of performing any of them, make the rest of 2020 as the year you break free and leave them behind.
Here are 4 common money management habits that need to change immediately:
1. You live beyond your means
Too 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. Therefore, making adjustments to our spending is the best way to get our budget under control.
“Write down every cent you spend, and then put your spending into categories,” the National Foundation for Credit Counselling (NFCC) suggested in its guidelines on mid-year financial planning. “At this point, you can make conscious decisions regarding how you want to spend moving forward”.
Remember, if you are unable to save what you need to secure your future consistently, it is very likely that you are living beyond your means.
2. You have no proper budget
The sad reality facing Malaysians is that many just spend their monthly salary without any proper budget and only save if there is anything left. There any many ways to create a budget, but one of the simplest to follow is the 50/30/20 method.
According to this rule:
- 50% of your monthly income should go towards paying the necessities like housing rent or mortgage premium, groceries, fuel, regular bills like telephone, internet, electricity, etc.
- 30% of your income should be spent on your wants, like entertainment, dining, new clothes, etc.
- 20% of your income should go towards your financial goals like debt repayment or savings
To make it easier to determine how much money you should allocate every month for your savings, needs and wants, use a budgeting app. There are plenty of versions which are available for free!
3. You don’t have a savings and retirement fund
If you’re guilty of not having a proper budget, it’s highly likely that you don’t save money consistently enough. There are three major types of savings that you should allocate your money to – for emergencies, for retirement, and for your major personal spendings, such as holidays. The first two are the more important ones. If they have not met your target, you will need to increase your monthly savings.
If your income is tight, you’ll have to consider using a portion of the monthly amount you allocate towards personal spendings and use it for your emergency and retirements funds. As a general rule, your emergency savings fund should be able to sustain you for three to six months. This is to safeguard your finances if anything unanticipated happens in the future.
4. You don’t invest and make your money work for you
Renowned financial guru and author Robert Kiyosaki once said: “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for”.
Simply saving money is no longer enough to achieve financial freedom. You will need to make your money work for you by making wise investments. Be sure to read our blog as there are plenty of articles on how to make sound investments!
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