An alarming 75 percent of Malaysians were unable to fork out even RM1,000 for emergencies, according to Bank Negara Malaysia (BNM) governor Muhammad Ibrahim in a news report earlier this year.
The report also mentioned that many lacked the skills to manage their money and could not make wise spending decisions. Lack of motivation is also one of the reasons Malaysians are having a hard time saving.
Are you living beyond your means and not saving adequately?
Here are 10 signs to show you’re bad with money, and simple solutions to fix the problems:
1. You have no budget
Budgeting and sticking to your budget is essential in order to control your cash flow. It’s like an anchor that prevents you from drifting away (in this case, overspending).
Having no budget is a clear sign that you’re bad at managing money.
The solution: Before creating a budget, start by tracking your spending and see where the money goes. Do this for at least a month to understand your spending pattern.
Then follow 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.
2. You don’t have an emergency fund in place
If you don’t already have a budget to stick to, you’re also less likely to save consistently. If you’ve only saved once or twice a year, that’s not enough.
Your emergency savings fund should have enough money that will last you three to six months to tackle expenses triggered by unanticipated events.
The solution: Start saving for emergencies by setting aside at least RM500 to RM1,000 a month. If possible, avoid using credit cards to pay for emergencies that’ll accumulate debt.
Read this for some direction: Emergency Fund: Why You Need It Now, and How Can You Build One
3. You’re an emotional shopper
If you can relate to Rebecca Bloomwood from Confessions of a Shopaholic, or keep finding yourself at the mall every time you have a bad mood or day, you’re an emotional shopper who spends impulsively.
The solution: Don’t freeze your credit cards in ice cubes just yet. If you saw the Shopaholic movie, you’d know that there are ways to solve your excessive splurging: join a support group, get financial counselling (check out the Credit Counselling and Debt Management Agency, AKPK), and sell all the things you don’t even wear or use.
Remember: retail therapy will never help you solve your personal problems. If anything, it’ll only lead you to financial distress. You’re better off spending your hard-earned money on something more beneficial, like taking short courses to switch careers or get a promotion (click here for helpful tips).
4. You regularly miss payment deadlines
If you’re constantly running late in payments, and often find yourself being hit by late fines and overdraft fees, you’ve been managing your money poorly.
The solution: Set up as many automated payments as you can. Most banks allow their customers to automate payments for convenience, and you can easily do it online these days. By automating everything, you don’t have to worry about missing a payment deadline.
5. You keep borrowing money
For those who keep borrowing money from their family members and friends, you need to stop! Not only will you ruin your relationships with them if you constantly borrow money, it will reflect badly on you, and will lead people to lose their respect for you.
The solution: Make an effort to repay everyone. If you’re in deep financial troubles and are unable to find a way out, seek help immediately from a financial coach or join the free debt management programme or get financial counselling from AKPK.
6. You keep postponing your retirement plans
If you haven’t planned for your retirement, you’re risking your future. If you keep putting off contributing for your retirement, your future is also at risk. It may seem years away but time flies so quickly. The sooner you start the better.
If you’re self-employed, open the SP1M account, a retirement scheme designed for those with irregular income.
7. You have credit card debt
If you have credit card debt, that means you’re not using them properly, and you haven’t made payments on time.
The solution: Always make it a high priority when it comes to paying your credit card debt. Due to the high interest rate, it could cost you thousands of ringgit if you aren’t careful. Plus it will reflect poorly on your credit score which in turn will work against your interests when you apply for a bigger loan like a home loan, car loan or personal loan.
8. You live beyond your means
So many Malaysians live like they’re earning RM20,000 a month, which leads to so many of them being in huge debt. If you frequently find yourself feeling bad after every spending, it’s time to go on a financial diet.
The solution: Simple: have more discipline. Stick to your budget. Follow the 50/30/20 method religiously. Cook at home more. Try carpooling every once in a while. Limit your visits to the movies, the mall, or the nightclub to once a month (or once every two months).
9. You live paycheck to paycheck
It’s barely week three of the month and you’re already penniless and eager for the next paycheck. Where have all your money gone?
The solution: Track your spending and stop wasteful expenses. Use money management apps if you have to. Again, always have a budget and stick to it. Follow the 50/30/20 method.
10. You don’t invest
There are many among us who have avoided being in debt (congratulations!) and have saved up some money as well. But guess that’s not enough. You must also consider growing your wealth by making investments.
The solution: Start with small investments and aim to gradually diversify your portfolio by investing both in low-risk instruments (like fixed deposits, ASB, etc.) and riskier but more lucrative mutual funds and stocks.
You may also like some of our other investment-related blogs:
- 5 Good Reasons Why Millennials Should Invest in Unit Trusts
- 5 Intelligent Reasons Why Millennials Should Invest in PRS
- ASB Investment FAQ: How to Buy Units, How Lucrative Are They?
- 9 Essential Questions About Fixed Deposits That Everyone Needs to Ask Before Investing
- 6 Common Biases That Hurt Your Investment Decisions and How to Overcome Them