The Easiest Way To Cut Your Biggest Household Expenses

Housing, groceries and dining out are the biggest outgoings for families in Malaysia based on the figures released by the Department of Statistics last year. The average Malaysian household spent a total of RM5,150 a month, an increase of 43% since 2014. In 2014, the average household consumption expenditure was RM3,578 a month.

On the other hand, the median monthly household income only grew at 38% per annum in the same period (2014 to 2022).

This means consumers are being pressured on both sides, making it increasingly difficult to thrive financially.

Reduce expenses

Based on the chart above, the average Malaysian spends about RM5,150 on these necessities, which include transportation, education and utilities.

According to the latest State of Households Report 2024 by Khazanah Research Institute, Malaysian households spent 48% of their total food expenditure on food away from home.

The report highlighted that this percentage is the highest share compared to previous years. This means that while the real spending on food at home reduced amid growing food prices, the expenditure on food away from home continued to grow at a rate higher than its inflation.

While food, eating out and petrol may be hard to control if you are working in the city, there are ways we can manage our expenses and cut spending without sacrificing quality of life.

Don’t worry, we are not asking you to start penny pinching and butchering your personal budget (though that may help in most cases). By making use of existing financial products to optimise your finances, you can still cut your household expenditure. At the same time, you are stretching your hard earned money further.

One of the easiest tools to use is a credit card. However, the key is to use the right credit card that fits your spending habit and lifestyle.

1) High cashback credit card

Some of us think that a cashback card would only make an impact when you spend on big-ticket item. However, small recurring expenses can also add up to a large amount at the end of the month.

The best way to maximise your cashback is to identify your biggest monthly spending, and then find a credit card that offers high rebates for those spending categories. Some of the highest recurring expenses that most Malaysians have are groceries, dining out and fuel.

There are many cashback credit cards in the market, but one of the cards that offer the highest cashback on petrol and groceries is the HSBC Amanah MPower Platinum Credit Card-i. For example, if you spend more than RM2,000 on the card in a month, you get to earn up to 8% cashback on groceries and petrol.

If dining out eats up a big part of your monthly expenses, consider the HSBC Live+ Credit Card. It can give you up to 8% cashback on your dining spend. Plus, you can get 15% off your total dining bill at over 200 restaurants.

Let’s say you manage to get RM50 monthly cashback by using the right credit cards for dining and groceries.  If you put the same RM600 in an investment product that gives you 5% per annum for the next five years, you will have RM4,246.92 balance waiting for you!

Read More: Best Cashback Credit Card: Get Up To 15% Cashback

2) Good rewards credit card

If cashback is a little too complex for you to keep track of, you can stick to good ol’ rewards credit cards. Though you are not rewarded with cold, hard cash, you get to slowly accumulate your points and redeem something worthwhile.

How do rewards credit cards work? For every ringgit you spend, you will be rewarded with credit card points. The points can then be used to redeem products or air miles. The best rewards credit cards are not just those that give you high points for every ringgit spent, but also those that give you high value for the points accumulated.

Air Miles credit card

One of the most popular redemption items is air miles. Many cardholders stack up their reward points in exchange for free air miles.

Malaysians should consider credit cards that offer reward points that convert to Enrich or Krisflyer Miles. For example, with 21,000 HSBC Credit Cards Reward Points you can redeem 1,000 Enrich Miles.  On the other hand, just 6000 Alliance Bank Credit Card Timeless Bonus Points can get you 1000 AirAsia Points

Of course, you can redeem more than air miles with your reward points. With 84,000 points collected in a year, you can redeem an Elba Microcomputer Rice Cooker 1L with 73,000 points. That’s RM200 savings!

Read More: Hack Your Credit Card Rewards

3) Reduce debt

With the high cost of living, it really takes some financial ninja moves to stay out of debt. However, if you have incurred some credit card debts, it is not the end of the world.

The best action to take is the swiftest action. Don’t neglect your problem, but find a solution before your debt balloons into something unmanageable. One of the easiest ways for you to tackle your credit card debts is to use a good balance transfer programme.

Balance transfer programme

What makes a credit card balance transfer programme good?  It should have a low to  0% interest rate, long repayment tenure and 0% processing or management fee.

With the right balance transfer, you get to pay off your debt quickly and at zero interest! Never sweep your debts under the rug, but tackle it as soon as possible. In this case, time really equals money because the longer you wait, the bigger your debts will get due to the compounding interest.

Read More: All About Balance Transfer Credit Cards

Credit cards with easy payment plans

Another option for cardholders to better manage their monthly expenses is by spreading out the cost of a large purchase over several months. This can be in the form of an Easy Payment Plan (EPP) or through using an Instalment Payment Plan (IPP).

The right credit card should provide you a 0% interest rate to convert your purchases into instalment payments of 3 to 6 months or more.  Some cards like OCBC Cashflow Mastercard actually offers 0% Auto-Instalment Payment Plan (Auto-IPP). This means you can automatically convert a purchase of RM600 into monthly payments of RM200 over 3 months.

Read More: Best Easy Payment Plan Credit Cards

The point of this article is really to point out the importance of having the right credit card for your needs. There is no single credit card that is the best for everyone. It all boils down to your lifestyle and spending habits – and sometimes, even location!

Even a credit card that is perfect for your lifestyle can be rendered useless if you have terrible money management habits. Missing payments or late payments means incurring interest, and that will ultimately dwarf whatever gains from the cashback and reward points you have accumulated.

Don’t be a slave to your credit cards.  Compare and pick the best credit card for your needs to make your money work harder for you.

This article has been updated on October 22, 2024.