You’ve heard it all before and you’re probably already carrying out some (A+ if it’s all of it) of these tips. But if you’re new here and looking to get into the best financial shape this year, this is the article for you.
For most of us, we didn’t have any money-ducation until we started working. Getting thrown into the big world filled with bills and commitments, we wished that there was some guide to navigating our finances so that we didn’t have to find out the hard way like eating maggi at the end of every month.
So for those of you starting out in the big urban jungle, we’ve gathered 10 of the best financial tips that will get you on the right track towards your financial goals, aka not broke.
Track your spending
Start today or tomorrow by noting down how much you spend on everything for a week. Your Grab ride to work, lunch, e-wallet reloads, everything! To make tracking easier, you could use an app like BigPay.
After a week, sit down and take a good look at what you’ve been spending on. The science behind tracking your expenses is for you to become more self-aware of your spending habits, monitor your expenses, and stick to your newly created budget.
Improve Your Spending Habits
Now that you’re aware of your spending habits, it’s time to improve them. #changeisgood
If you see that you’ve been spending too much on Grab rides in the past month, maybe it’s time to take the train to work. Or if you notice that you could save RM50 a week by eating at home, why not start cooking?
By slowly incorporating these small changes into your lifestyle, it’ll be much easier to get into the groove of saving as well.
That’s right, whip out a pen and paper and create a budget based on how much you earn, along with your fixed expenses. Keep calm as you go through the numbers because they’ll give you some perspective on how much you can spend.
To start, try out the 50/30/20 rule.
Where you allocate 50% of income to your needs (rent, bills, groceries), 30% to your wants (shopping, fun, entertainment), and 20% directly into your savings.
Manage Your Debts
Nobody likes to be in debt, which is why it is very important to pay them off as soon as possible.
A trick is to write down all your debt and visualise the total amount owed. This may be hard to look at, but it’s crucial in creating a plan to pay it off.
Decide on which debt to pay off first (usually credit cards have the highest interest), and commit to paying your bills or the minimum payment every month to avoid getting charge late payment fees and accumulating more debt.
Build an emergency fund
Depending on your lifestyle, monthly expenses, and income, ideally, an emergency fund should amount to at least three to six months’ worth of expenses.
Don’t pressure yourself into achieving that amount in the least time possible, instead slowly yet surely work your way towards it.
For example, if your expenses are equal to RM2000/month, your emergency is fund would be RM6000 - RM10,000. According to the 50/30/20 rule and assuming your income is at RM5000, your potential savings would be RM1200 a month. Keep it up for 6 months and your emergency fund would already have accumulated over three months’ of your expenses.
Think of an emergency fund as a shock absorber for when the unexpected happens. This fund not only saves you money but is also an important component of your long-term financial goals.
Set some goals!
Whether it’s paying off your PTPTN loan by 35, ordering food without looking at the price, buying that house by 30 or treating your parents to a classy buffet. Your goals and dreams are key to making your financial journey worthwhile because only you can define the meaning of being financially free and what money actually means to you.
An example of working towards a goal could go like this: if you’d like to go on a vacation after the pandemic, pick out a destination, a date, and the amount needed, and start working towards achieving that specific amount for that well-deserved vacation.
Speaking of emergencies, a medical emergency is one that you should always be prepared for with medical insurance.
In the unfortunate event that you are injured or hospitalised, being medically insured provides you with financial protection against the high cost of medical treatment and hospitalisation.
Start investing, if you can
Investing may seem overwhelming, but it is one of the key steps towards financial freedom and security. First and foremost, learn as much about investing as you can before you start investing.
Also, if you’re in your 20s, take advantage of time. If you were to consistently invest RM400 a month at 8% compounded annual return, you’d be a millionaire by the time you retire!
Start small with unit trusts or fixed deposits, and slowly work your way up to bigger investments such as stocks and bonds.
Start a side hustle
Starting a side hustle doesn’t necessarily mean coming up with your own business, but it is solely to generate another source of income.
An extra stream of income can be very empowering if you like what you do. Moreover, it helps you to alleviate some financial stress, pay off your debts faster, and even allows you to afford some of the finer things in life.
Be financially literate
A good understanding of the concept of money, savings, investing, and debt allows you to be more confident in your financial decisions by providing you with the knowledge to handle life’s ups and downs.
By creating a budget, knowing where your money goes, paying off debts, being prepared for emergencies, and eventually generating more than one source of income - these are steps that will lead you towards financial freedom.
Check out the best financial books to read this year, read articles on saving and how to make budgeting even easier, watch a few Youtube videos on investing like Mr. Money TV, or follow financial social media accounts to stay updated and focused on your financial goals.