According to an Asian Institute of Finance survey, about 38 percent of young respondents in Malaysia relied on personal loans, while 47 percent of them had expensive credit card borrowings. However, millennials are not amassing debt at a rate faster than the generations before them, as revealed by the Credit Counselling and Debt Management Agency (AKPK), based on a report by the Malay Mail Online.
About 68.77 percent of individuals who come to AKPK are aged between 30 and 50 years old, with most of them being those who already have families and are heavily burdened by loans to manage their family life. If you’re drowning in debt and need help in managing your debt, or if you require financial counselling, get in touch with AKPK as soon as possible. The organisation also provides learning resources related to personal finance management.
And for those under the age of 35, it’s time to pay closer attention to how you manage your finances so that you won’t end up drowning in a huge debt later.
Here’s a list of 10 financial milestones you should achieve by 35:
1. You’ve set clear financial goals
You’ve identified what you want to achieve financially (and have figured out the ways to achieve them), for example, living within your means, investing for retirement, saving money, eliminating debt, buying a home or a car, or accumulating money for your children’s future.
These are the most important basic money goals to achieve while you’re still young to ensure you won’t be burdened in your future. If you are yet to achieve your financial goals, start with taking an audit of your current finances.
Next, make a list of all the bills that need to be paid (e.g. credit card, car loan, personal loan, etc.) and identify the things that you can do without or cut down (e.g. trip to the movie theatres every weekend, emotional shopping binges, frequent dine outs).
It’ll be easier for you to achieve your financial goals once you’ve seen the monthly cash flow and the things that can be sacrificed in order to achieve those goals.
2. You know how to budget, spend and save
You’ve mastered the art of budgeting and sticking to it regularly. The best way to spend money responsibly is to use the simple 50/30/20 method:
- 50% of your income should go for funding necessities (necessary expenses like food, housing, insurance, transportation etc.)
- 30% of your income should go to the things you want (e.g. travel, entertainment)
- 20% of your income should be devoted to savings and paying off debts
To determine how much money you should allocate every month for your savings, needs and wants, use a budget calculator like this one.
3. You’re consistent in payments
Since you have financial goals and know how to budget, spend, and save smartly, you’re consistent and disciplined in your monthly payments. Which means you’re less likely to be in a huge debt.
Try not to fall behind in repaying the money you owe, especially if you’re carrying high-interest consumer debt (e.g. credit card dues) or student loan debt to avoid late payment charges and poor credit score.
4. You know how to file your taxes and take advantage of the tax reliefs
By your mid-30s, you should already know how to file your taxes (click here for an infographic on how to file income tax online) and take advantage of the tax reliefs available. These are some of the things that you can claim for tax relief:
- Lifestyle (e.g. the purchase of computers, smartphones, internet bill payments etc.)
- Medical check-up expenses
- Higher education
- Breastfeeding equipment
- Child care or kindergarten fees
Also read: 6 Ways Women Can Save More on Taxes
5. You’ve built a solid emergency fund (and other savings funds)
In case of emergencies, you should have in place an adequate emergency fund that ideally should be able to sustain your expenses for three to six months. Whatever kind of emergency it is, you must’ve saved up enough money to cover the damages, losses or expenses. Read our blog on how to build one.
Other savings funds that you also need to take care of include:
- Savings fund for personal expenses
- Savings fund for vacations
- Savings fund for debt repayment
- Savings fund for food
- Savings fund for housing expenses
Related: 4 Wise Things to Do with Your Salary
6. You’re adequately insured
If you’re adequately insured and your family members’ interests are taken care of by the time you turn 35, you deserve a pat on your back.
If not you need to decide which insurance you should take first based on your lifestyle and personal needs. The most important thing would be to get a life insurance and a health insurance, followed by car insurance, home insurance, and travel insurance (especially when you visit a foreign country).
7. You’ve started saving up for your post-retirement years
If you’re a full-time employee, chances are your employer has already taken care of your EPF. If you’re self-employed and has taken the initiative to open up the SP1M account (and a PRS account, which is a plus!), you’re on the right path!
The SP1M plan was designed for those who do not earn a regular income to voluntarily contribute within their means, and you can start your retirement savings with just RM50 (minimum). The account allows you to make contributions at any time and for any amount.
Meanwhile, a PRS plan serves as an extra cushion during your golden years (available for both full-time employees and the self-employed).
8. You invest regularly
It’s a good thing if you’ve adequate savings, but if all your savings are sitting idle in a savings account you’re probably doing a disservice to your financial health. You must invest in multiple instruments to ensure your money grows over a period of time, simultaneously offsetting combined risk.
Your total investment portfolio should be a diverse combination of low risk (like fixed deposits, ASB) and riskier, but potentially more lucrative tools (like equity-linked funds and stocks). Also, you should give prefernce to tax-saving investment tools.
Having said that, you must clearly understand the risk factors involved before investing in a particular tool. Our suggestion, start reading investment-related books and online articles and seek the advice of financial pundits to set the foundation of a sound financial understanding.
9. You’re a savvy credit card user
You’ve mastered the art of using your credit cards, and you mostly use them for the benefits they provide. To earn cashback, air miles, rewards, and other loyalty perks, make sure you pay your credit cards in full every month.
Also, choose a credit card that rewards your usual transactions. For example, go for an air miles credit card if you travel around very often, but a petrol credit card might be more useful for you if you drive to work regularly.
Having said that, it extremely important to understand the terms and conditions of these reward credit cards like minimum spend requirements to get the desired cashback, cashback monthly cap, minimum income requirement, air miles conversion rate, so on and so forth.
10. You’re (mostly) debt-free. Congratulations!
If you’ve managed to be mostly debt-free by age 35, congratulations! That means you’re really good at managing your personal finances; an achievement that unfortunately not many Malaysians are able to do so far because of several factors, including the high cost of living.
Which brings us to our bonus tip.
Bonus tip: Work towards increasing your income
Many among us are unable to meet our financial goals (like savings goals, investment goals, etc.) because we fail to manage our money well, especially in our times of skyrocketing cost of living. The best advice is to work towards increasing your income.
Keep calm, and read our tips on:
- How to participate in our thriving gig economy by making some money on the side
- How to land a coveted promotion
- How to upgrade your skill sets for better career prospects
- Improve your job search to bag a more lucrative offer
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