6 Financial Decisions That You Should Never Put Off

financial decisionsWith the rising cost of living and inflation, more people are exposed to the danger of far outliving their savings. What makes it worse is that, on one hand, many aren’t even aware of this becoming their circumstance and on the other, they are continuously losing time.

Furthermore, with the increasing commitments and liabilities that people in this age are obliged to, we will need to make several crucial choices to ensure our financial sustainability a lot sooner than later.

Here, we list down some major decisions that one needs to confront ultimately, if not immediately.

1) Buying a home

Nothing can make us feel safer than having a roof above our heads. Buying a house is always a high priority and it is a decision that we should not avoid or put off. Other than providing us shelter, a house can also provide us with financial backup during hard times too.

The problem is the massive amount of down payment and other miscellaneous fees and charges involved to afford one nowadays. According to Global Property Guide, the average price for a high-rise residential property in Malaysia has escalated to approximately RM248,567. For those who are looking to purchase a decent property in urban areas, such as in the Klang Valley, will definitely have to pay more.

For this reason, it is absolutely imperative that thorough and detailed preparation is done to determine your readiness in buying a house and to understand your housing affordability.

For a middle-income earner, there is an affordable housing initiative developed by the Government that can be considered, or consider sub-sale or auctioned properties other than brand new ones to look for a reasonable bargain.

2) Getting a credit card

This credit instrument can be very handy not just for its convenience, but also its ability to help us manage our finances better, if used correctly. Financially, we should welcome them like our best friends, but sadly, most people shun them due to mismanagement and abuse.

However, to reap optimum benefits from using a credit card, we should first identify our spending behaviours and lifestyles. Only then can we hunt for one that gives us the best value for our money.

For those who consume petrol a lot, these petrol credit cards should be your top considerations. As for those who travel frequently, you may want to take a quick look at the RHB Travel Money credit card which gives you rewards both in cash back and reward points!

The key is to use online credit card comparison tool to find and choose one that matches you the best!

3) Clearing your debts

Like what Robert Kiyosaki has always said, there are good debts and bad debts. However, if one fails to service their loans and keep it up to date, then even a good debt can become a bad one.

We should always have a solid repayment strategy in place. If we don’t, we can easily fall into a debt spiral and risk getting burdened with even more debt than we initially started out with. According to a recent article by The Star, our national household debt has already risen to a record of over 86% of our country’s gross domestic product (GDP), with property loans being the bulk of the debt composition.

The number of bankruptcy cases has been on an increasing trend too, with car and property loans being the major culprits, based on stats provided by the Insolvency Department in Malaysia. Other loans from personal use, credit payment cards, securities and others make up the rest of the composition.

Therefore, it is pivotal to devise an appropriate repayment plan to tackle these debts. There are several alternatives available when our mortgages become unmanageable and we can also learn to avoid making these car loan mistakes to save ourselves from becoming part of the bankruptcy statistics in Malaysia. Furthermore, we can look into the credit payment card balance transfer facility to clear our debt faster and avoid paying hefty interests, too.

It’s important to note that a good debt service history and a healthy credit report will ensure favourable terms and interest rates for our future loan applications.

4) Getting insured

Unfortunate accidents happen unpredictably all the time. With alarming crime and accident rates, coupled with the risks of coming down with severe illnesses and damages to our major assets (car and property), we do need the necessary coverage (some even have been made mandatory) to indemnify ourselves against any sudden hefty financial obligations, if unfortunate events do occur in the future.

According to a study conducted by the Life Insurance Association of Malaysia using 2012 statistics, many Malaysian households are still underinsured. If anything unfortunate happened to an underinsured, or worse, uninsured, breadwinner of a family, the financial consequences that the remaining family members would have to face can be very overwhelming.

But with so many different types of insurance policy available in the market now, it is crucial for us to identify those that we may need the most. Some of the frequently sought-after ones are life insurance, car insurance, child life insurance, and mortgage live insurance. Like we have always professed, educating oneself is pivotal. Understand the risks that you are exposed to and take the initiatives to learn about the insurance that may be able to provide you with the right coverage.

5) Planning for retirement

It has been made known a few years back, based on the Employees Provident Fund’s (EPF) statistics, that most of the retirees in Malaysia do not have sufficient savings to sustain themselves through retirement and a majority of them spent all their savings just within three to five years alone!

With that said, perhaps just relying on one retirement savings framework, the EPF in this case, isn’t enough. Thankfully, one can now opt to allocate another portion of his or her money in a Private Retirement Scheme (PRS) to complement their EPF savings. With extra flexibility in the amount and time intervals of contributions, as well as tax relief and incentives that come along with PRS investments, you’ll be able to build a stronger retirement nest.

6) Turning to investments

A penny saved is a penny earned. Without a doubt, most of us have been taught to save our money for the future since young. However, saving is no longer enough in today’s economic climate.

To protect the value of our money, we must turn to the right investments. However, not many of us were taught or made aware of the importance of investing their money. One can save without any nominal change to the amount saved, while another can save and see his or her investments increase in real value or becoming favourable at certain points of time.

It is unthinkable to always have to work to earn more money to sustain ourselves. Isn’t it better to have money to work for us too? With the risks of inflation, getting laid off, and changing market and economic conditions lurking around, we should not be too comfortable with our current financial standings. At some point in our lives, we will have to look into available investment vehicles so that we can snowball our savings and it’s always better to start looking earlier than later.

The first step that we should always take is to educate ourselves about investing and about available investment instruments here in Malaysia. There are a handful of asset classes that we can adopt according to our time horizon and personal circumstances. With just RM1,000, one can get started on these investments.

These are the six financial decisions that an individual must not avoid but instead take steps to address as early as possible. Prompt, necessary actions are needed to safeguard our future livelihood and to put our financial worries aside.

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