The government recently confirmed that a standardised minimum wage will be implemented throughout the country starting from January, 2019 making it RM1,100 per month. A good news for Malaysians to cater the increasing cost of living in this current economy. The question is, how to optimise your income in order to have a little saving for emergency needs?
Most of Malaysians say that they don’t have any saving and the income that they earn fully spend on necessity cost. Why is so?
The biggest concern most Malaysians have is perhaps the high cost of living, but to be honest, lack of financial planning is the right answer. You need to know exactly how much you spend on your car, home insurance, and basic necessity. Figure out how you can trim to match the current cost of living and know how can you ideally spend and save. The 50-20-30 rule is a proportional guideline that can help you keep your spending in alignment with your savings goals.
Here’s the breakdown of budgeting in the easiest way that you can follow:
1. Fixed costs – 50%
Fixed costs make up half of your income. Fixed expenses are usually made up of rent, insurance, student loan repayment, car loan, phone bill, and internet subscription. However, if you’ve listed down all your fixed costs and they turn out to be more than half of your monthly salary, then, it’s time to observe and optimise your expenses.
For instance, maybe you can downgrade your internet subscription, monthly expense on the phone bill or even use a less expensive car to lower down the car loan. Once you have listed down all the fixed expenses, you will immediately identify which areas you can make an adjustment to fix with your income.
2. Financial goals – 20%
Here comes our main goal, to have a little saving! First, you must be clear on what your financial goals are. Ask yourself what do you want in 5, 10 or 20 years down the line? Some might have a saving goal for travelling, buying a new house or anything.
Once you have a clear goal, then you’ll have the determination to start saving. Allocate 20% of your salary for the piggy bank. This little saving helps a lot when it comes to emergency cases such as your car break down.
3. Flexible spending – 30%
Other than fixed costs, there is one more area of your monthly spending, the flexible spending. It includes eating out, groceries, entertainment, petrol, hobbies or shopping. These day-to-day expenses can vary from month to month hence we call it a flexible spending. Allocate no more than 30% of your income for this area.
To identify the total cost you may cater to the flexible spending, you must first deduct the fixed costs and also financial goal-saving from your income. Then, you’ll know the total balance you may spend on entertainment, shopping or whatever you want.
Discipline is important
This 50-20-30 budgeting method sounds simple but it takes some discipline to make it happens. Don’t expect to achieve the target total saving in 2-3 months or your debts disappear overnight. You need to work hard and keep the momentum in the long run to see the positive impact on your finances.