How To Save Money?: Advice For Gen-Ys


The magic word to personal finance for Generation Y seems to be “save”. But what are we saving for?

Most Gen Ys understand the importance of saving after witnessing the 1997-1998 Asian financial crisis their parents went through. But the big question is HOW?

And alarmingly, more than half (52%) of Gen Y surveyed by KPMG in 2008 said that they do not actively save portions of their salaries every month. The survey further discovers that “rather than investing for their future, they much preferred to “live for the moment” and they “don’t like to commit to anything”.

This is indeed worrying. Saving doesn’t have to take a toll on your exciting lifestyle, if you set a plan and know what mistakes to avoid. Identify a goal for yourself and understand saving will be able to help you achieve your goal, will help you see the bigger picture.

Here’s a low-down on creating an effective saving plan to save money:

1. Create a budget

What is your monthly income and what do you spend on every month? Set down all your monthly commitments, such as car repayment, rental or home loan repayment, petrol and toll and other necessities. However, do not include variable expenses, such as buying a designer handbag.

Deduct all the total monthly expenses from your income and set out an amount from the balance for saving. You need a buffer to act as contingency. You’ll never know when your car will breakdown, which may cost an arm and a leg to fix.

2. How much should you save?

Most individuals don’t save enough money for rainy days. A common recommendation when it comes to the appropriate amount to save is about three months’ salary, or six-months’ worth of expenses (based on your monthly expenses calculation above).

For instance, if your gross annual income is RM36,000, three months of your income (the ideal emergency fund amount) is about RM9,000. This fund will help keep you comfortably afloat in an emergency.

3. Set your goals

Other than saving for the unknown (the proverbial rainy days), you need concrete goals to keep you motivated to save. Determine what you are saving for will provide a helpful guide in savings. It acts as a constant reminder of what you’re working toward, and lets you know when your efforts have been successful. If you are saving for the down payment of a car, you need to know what car you are aiming for and the market price of the car before you know how much you need to save for how long. Setting a deadline is helpful, too.

4. Track your spending

Human beings are an emotional bunch. Sometimes you spend with your heart instead of your head. By tracking your spending, you will know when you have overspent and where to cut down on. There are various free tools online to help you do that. Even a simple spreadsheet is a great way to keep track of your monthly expenditure.

5. Create a buffer

Don’t stretch your money to the last ringgit every month. Allow yourself some buffer that is not inclusive of your savings, every month. Sometimes small and seemingly harmless purchases can cut into your savings, which should be avoided whenever possible.

6. Control credit card spending

Having your first credit card can be exhilarating. It can help you afford many things you may not otherwise by allowing you to make big purchases on instalment plans. However, the inability to manage your credit card spending can lead to dire consequences. Missing your payment one month may not seem like a big deal right now, but as the amount snowballs with interest and additional purchases, you may not be able to overcome the damage on your credit card statement. Only get a credit card if you are sure you can manage your usage and payment.

7. Start now

Procrastination is your worst enemy when it comes to money matters. Do not procrastinate on getting started with your savings plan. The longer you procrastinate, the longer it will take to achieve your goals. To save up to three months’ income, it may take up to 16 months, depending on how much you save a month.

8. Keep your eye on the prize

Saving to achieve your goals is a marathon, and not a sprint. Small amounts over time can yield big results. Don’t make the mistake of not saving at all just because the goal doesn’t appear achievable right away.

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