How To Solve The 3 Most Frustrating Money Problems This Year
So, you have started 2023 in debt or some missed financial goals. You are not alone.
Let’s recap what happened last year: Malaysia’s inflation in 2022 jumped to 3.3% from 2.5% in 2021. Meanwhile core inflation increased a whopping 3.0% in 2022 compared to a mere 0.7% in 2021! What this means is, the cost of living just keeps rising.
Now that the major festive seasons are over and feasting have worn off, it’s time to get your A-game and rein in those frustrating money problems.
We have a few actionable steps you can take and start working your way to a brighter year.
Did you overspend in the recent festive season or look back on the first half of 2023 wondering where all your money went?
Of course, spending is not necessarily a bad thing but when it is done emotionally or gets out of control… it becomes a problem.
One way to beat overspending is to remember that money is money – it is all the same. Don’t put a label to it, but look at money for what it is: the value.
Remember that spending an extra couple of thousands to secure that RM100,000 car is the same as spending RM2,000 more on a bottle of vintage wine. As soon as you drive the car or pop that bottle of wine, the money is gone.
Be disciplined, but if labels are your thing, try the 50/20/30 Rule. So, no more than 50% of your net income should go to essentials such as rent and groceries; 20% for financial priorities such as an emergency fund or retirement savings; and 30% for lifestyle choices such as eating out or shopping.
Not being able to save – or not knowing how to
Rising inflation and higher cost of living is making saving even harder. Most Malaysians already do not have enough to last them more than five years in retirement, according to a recent Employee Provident Fund (EPF) statement.
With average life expectancy at 73.4 years, that means many Malaysian will likely run out of their retirements savings 15 years too early!
Contrary to popular belief, savings are not piles of money stashed away never to be seen again.
It’s money you put aside now to be used later, in case of a large purchase such as a house or an emergency like a car accident or illness.
The easiest way to get started is to have your savings automatically set aside before you spend it.
One way is having money automatically transferred from your savings account to your fixed deposit account or other investments.
Another option is to set up auto debit standing instructions for money to be deducted monthly for unit trust contributions. Make use of technology!
Mishandling your credit card
Previously, iMoney polled millennials on their spending habits and what we found, among others, is that many are knee-deep in debt.
Our survey showed that credit card debt and mortgage inch up in tandem with our income, but it is alarming to find that the younger group of millennials with the lowest income (below RM1,500) having an average credit card debt that is higher than their income at RM1,850.
Credit card debt is no laughing matter, particularly if this is one among other debts you are shouldering at the moment.
Pay the minimum due and you will accumulate a lot of interest payments over time. Late payments are even worse: lower credit score and late payment fees. To know how much of a difference it makes to pay more than the minimum, go here.
So, prioritise clearing your credit card debt as quickly as possible. If other debts are bogging you down, consider extra part-time work. Click here to see how taking on side hustles can help alleviate your struggles.
Getting a handle on your finances requires work. But discipline is key and there are no two ways about that.
Consider the consequences if you fail to curb your bad spending habits. What’s worse is depleting your EPF savings too early will leave many Malaysians unable to sustain themselves during retirement.
Factor in a longer lifespan, not having enough money during retirement is a situation you don’t want to find yourself in. Or that one day joblessness or even an illness might just take you out of the workforce, leaving you incapable of dealing with your credit card debt which could have been easily cleared with some determination on your part. Or even not being able to take out a loan when you genuinely need it because of a bad credit report.
The silver lining here is that while your money problems will not fix themselves, you can certainly do something about it.