Tip #1 - Did you PYF?
Have you ever thought of saving money, but when the end of the month comes, you are left with a single digit dollar amount in your account? Whether you are a salaried worker, commissioned worker or a businessman, the most and very basic foundation in personal financing is something so simple yet underestimated by many. Something that has to be habitual or else any other financial plans that you do, you can throw them out the window. Savings.
If I were to show you 2 formulas:-
- (1) INCOME - EXPENSES = SAVINGS
- (2) INCOME - SAVINGS = EXPENSES
Which formula do you fall into? (1) where you pay your telephone bills, gas, food, rent, entertainment etc, then whatever is left for the month you keep it as "savings". Or (2) where you leave aside some money first above anything else, then pay your bills?
PYF - Pay Yourself First (Inspired by Mr K.)
definition:- A way of saving by putting you, yourself as a priority to be paid first before paying anything else. Usually a % of your income salary.
You earned the money, you deserve to be paid first. Not your insurance company, not your phone service provider, not SESCO or LAKU, not Telekom. It's a way of discipline, a worthwhile and fulfilling one at that. It is what the title is. It is the ultimate way to SAVE MONEY. Every aspect of financial planning basics revolves around savings. Retirement, insurance, tax planning, investments or even estate planning. Pay yourself first above anything else, including debts (car, house, credit card loans), food, rent, entertainment, fuel, etc.
Whether it's putting 10%, 20% or 30% of your salary aside would depend much on your situation, debts, age, marital status, geographical area, spending pattern, living standards, and most importantly salary level You should put a percentage that is comfortable for you. At least by the end of the day, you saved something! Here are a couple of things that you can do to help:-
- Use 2 separate bank accounts, where 1 of which is your money saving pool.
- Once collected a decent amount, do something with it, either put them in an investment vehicle or at least locking it into a fixed D.
- Not advisable to keep an ATM card for the bank account that holds your savings.
- If by the end of the day, you find yourself not having enough money to spend, you know you've spent too much. Or revise the savings % ratio again for next month to a more comfortable level.
- Set a "reward target" for yourself; eg. for every RM 4000 savings that you hit, you're going to treat yourself to a nice electronic gadget.
For working youths, saving more money is just as important as earning more of them. Avoid debts and monthly payment obligations as often as you can to gain financial freedom. If debts cover more than 50% of your net take home salary, you know you need some help in debt planning.
