Money Not Enough? 5 Critical Personal Finance To-Dos

Money Not Enough? 5 Critical Personal Finance To-Dos

It’s that chicken and egg situation.

If I do not have money to start a business then how would I be rich. Erm… So we need to be rich so that we can be richer? Well, except for those whose parents are super rich when they were born, majority would have to start from somewhere. If we have no money, then get a job and get paid. When we have a salary, then we can do more to increase the wealth. If we did not do anything and just wait for things to happen, things will not be happening yeah. So what are all the building blocks to Personal Finance? Below are the 5 important things to note and do.

#1 – Earn More

Study hard, graduate from the university and get a good job. It’s the advice from my late father and it’s the same advice I will give to my children. This is the only way we can start earning a decent income versus leaving school after SPM. Do not just spend time browsing Instagram or watching entertainment videos.

Read more, know more, learn more so that one is able to adapt to technological advancements and not fall behind. This ensures our earnings remain strong and we would be replaced suddenly. Invest into education, skills necessary and always seek to diversify the income wherever possible. Higher pay does not guarantee anything but higher pay allows us to save more.

#2 – Spend Less

We will feel poor even if we earn a high salary because we could be spending a lot as well. Earning is much harder than spending it. If we need to rent, how about renting at a cheaper place, smaller unit or even just a room if we are a single? If we need to buy groceries, are we buying all the more expensive imported fruits? If we are browsing through Shopee, are we sure we really need the item? What about buying it later or waiting for a few days to determine if we truly need it? Maybe by then we will not need to buy it anymore.

If we need a handphone, do we need to buy the latest model or the most expensive brand? Why not a cheaper model which fulfills all the necessary? Any savings here could easily be hundreds of ringgit and many thousands of ringgit when we change the smartphone every 2-3 years for just 10 years. Spending less will allow us to do well in the next domain.

#3 and #4 – Save, Save and Save and Invest, Invest, Invest

If we save just RM3 per day from meals. Not ordering drinks for example. Lunch in cheaper restaurants for example. RM3 savings is easy and in one month, we could have saved RM100 just from this very simple habit. Now, what happens if we could save RM5 per day…? Anyway, how much is this RM100? It’s not actually just RM100 yeah.

RM100 saved per month is RM1,200 per year or RM12,000 per 10 years. If we invest this savings this into the EPF Voluntary Contribution Scheme and EPF continues paying a 5.5 percent dividend on average, this RM12,000 will turn into RM24,000 just from the dividends alone in 13 years. Doing the same with RM200 per month could mean RM48,000 by the end of 13th year.

From the above simple calculation, savings is indeed the base to everything. It keeps us safe since we would have saved some emergency funds. It keeps us safe as it would quickly add up into the retirement funds as well. Of course, it’s not just meals… we can save a lot if we could change our wants into needs too. An example as below.

There’s no need to think what could have happened if we did not buy that latest iPhone model for just 3 times and instead we bought a reasonable Android phone instead? Yes, easily RM10,000 or more, just within the span of 6 years if we change phone every 2 years…

#5 – Protecting our wealth

We buy insurance because they are a form of protection. We do not buy insurance because we want the payout yeah. So this is not like buying based on needs or even based on wants. This is a protection. Never be sen wise and ringgit foolish. We pay a little every month so that in the event of any unforeseen circumstances, we have someone paying the bill. A bill which is likely to be many months of our full monthly pay or even more depending on the circumstances.

If the insurance is to cover for when we are gone suddenly, then our loved ones would get the protection they deserve. If it’s medical insurance, then we do not need to fear a sudden hug bill which will eat into our savings. Briefly, this is non-negotiable because no matter how well we do for #1 to #4, if we do not do #5, then all the rest we did could just be gone suddenly. Worst still, if there are still loans to be paid, we will also leave all the burden to our dependents.

Happy knowing and remember, if property investment is not inside this mix, then we are going to need to prepare a lot of money to cover rental yeah.

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