It’s commonly said that it takes money to make money. That is effectively true – those who live payslip to payslip with no spare cash have little to re-invest or save for emergency. However, if you take the time to re-evaluate your finances, you’ll realise that setting aside even the smallest of Ringgit amounts can add up over a lifetime.
Remember these 3 numbers – 50/30/20
It’s simple in principle and practice:
- Use up to 50% of your income for what you need
- Allow for up to 30% to spend on the fun stuff
- Save 20% for emergency, invest or your savings goal.
These numbers aren’t necessarily fixed; however, they provide a strong foundation for building healthy financial habits to help you to set your workable ratio based life condition to achieve your financial goals.
Pay yourself first
When you get your paycheck, many people make the mistake of spending first, and then saving what is left over. The problem with this is that it doesn’t guarantee any savings; your savings become dependent on how much you spend each month (and often in a rather unplanned fashion).
A better strategy is to pay yourself first by setting aside a fixed percentage of your income towards saving and investing (for example the 20% from the numbers above), and then spending with what is left over.
Automation is your friend here, which effortlessly take out the money from your spending account before you have a chance to spend it. Setting up a recurring deposit into your Raiz account is one way to do this.
Trimming the fat on your budget
If you take a bird’s-eye view of your budget, you’ll soon see that there are a few types of expenses from your pay. You can think of them as this:
- Investment/Emergency funds
- Essential expenses you cannot change.
- Essential expenses that you can control.
The key is to make your essentials are efficient as possible by finding alternatives or shopping around. For example:
Many Malaysians forget that basic household bills like electricity, internet, and insurance can all be shopped and swapped. By switching providers, you can easily save hundreds off your annual spend!
Buy in bulk (within reason): you may look like a madman for a moment, but it pays off to buy non-quickly damaged essentials in bulk.
Try to pay for things upfront or on time – some providers will give discounts for on-time payments or bulk payments (e.g. annual premiums for insurance could be cheaper than monthly)
Don’t have the Raiz App?
Download it for free: https://links.raiz.com.my/gKYf