Do you know where your money goes every month? Does your family run on a budget breakdown? Or do you go on spending everything you have without setting aside some savings for a rainy day?
Here are 6 Personal Finance Tips that you can apply for yourself and your family to help you start saving.
1. Spend less than you earn
IMHO this is the most important rule in personal finance which is why it is numero uno.
According to a study by the Asian Institute of Finance (AIF), Malaysia’s Gen Ys are experiencing significant financial stress early in their life with many living beyond their means and trapped in emotional spending. Credit card liability is a major problem and every year millions find themselves over their heads in unpaid debt.
Spending less than you earn sounds so simple in theory. But when you actually sit down to do a budget, most people find themselves living paycheck to paycheck or buried in debt.
- Sit down and draw up a budget of your monthly spending.
- Separate wants from needs.
- Evaluate your routines and look at where you can begin to cut cost.
Seeing everything on paper helps you to see clearly and plan your paycheck. Then you can begin plans to reduce your debt, increase your savings, and allow yourself to enjoy life more.
2. Start saving today
It is always better to start getting your finances in order today than to never start at all. The earlier you can start setting good financial habits, the faster you can retire.
Starting early means you gain more, as you have time on your side and more time for your money to grow through compound interest.
3. Nobody can help you except yourself
Heard of the saying, “You can lead a horse to water, but you can’t make it drink?”
Those around you can give you advice on how to best manage your finances. We even have budget apps at the tip of our fingers that can set us on the right path. However, if we do not act on it, nothing can be achieved. You must make a conscious effort to want to manage your finances. Set a realistic goal and break it down to yearly or monthly achievements so that you are more likely to keep to it.
4. Stop trying to keep up with The Joneses
This will most certainly keep you living the paycheck to paycheck lifestyle. If you are always hanging out with friends that can afford to spend, it is very likely you would be influenced to do the same.
Instead, set a budgeted amount for social activities a month. Try to find free or cheaper activities to do together.
5. Pay down the highest interest-bearing debt first
Today, the average Malaysian undergraduate would already have one of these education loans, unless they are on FAMA (Father and Mother) fund. On top of this, some may have car payments and credit card debt.
The fastest and most efficient way to start reducing debt is to start with the highest interest rate. This can save you hundreds or thousands of interest expense that can be used to pay your other debts.
6. Have an emergency plan
Life will definitely throw you curveballs, so aside from having an emergency fund, more importantly you must have an emergency plan.
For example this checklist in the event you lose your job:
1. Eliminate all your non-essential expenses – cancel what you can immediately
2. Prioritize your bills – in case you can’t pay them all
3. Establish what you will do during your downtime – part-time jobs to tie you over
When you have a plan, you have a planned response instead of panicking and stressing on what you should do next.
Original article contributed by TheAsianParent.