{"id":7611,"date":"2013-12-02T10:40:16","date_gmt":"2013-12-02T02:40:16","guid":{"rendered":"http:\/\/www.imoney.my\/articles\/?p=7611"},"modified":"2015-04-16T11:09:24","modified_gmt":"2015-04-16T03:09:24","slug":"8-common-money-mistakes","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/8-common-money-mistakes","title":{"rendered":"8 common money mistakes you can avoid"},"content":{"rendered":"

\"AvoidYourCommonMoneyMistakes\"<\/a><\/span>Almost everyone has made at least one money mistake in their lifetime, especially in their youth. When we first join the workforce, we are left to our own devices to manage our salary amid temptations, such as freely available credit cards and various other material goods.<\/span><\/p>\n

According to Bank Negara Malaysia, Malaysia\u2019s household debt-to-GDP ratio has increased from 69% as at end-2006 to 83% as of end of March 2013.<\/p>\n

Most debts are created by overspending. In order for us to tackle the issue, Malaysians need to understand the implications of having excessive debts. Leveraging heavily through credit card spending is not the only money mistake many of us make.<\/p>\n

Here, we share eight common money mistakes to help young professionals circumvent them and avoid setting themselves up for a financial meltdown in the years to come.<\/p>\n

<\/span>8. Buying a home before you are ready<\/span><\/h2>\n<\/p>\n

The idea of owning your first home is appealing. With most Malaysians, it is seen as a benchmark of financial stability, giving one the bragging rights to friends and relatives.<\/p>\n

However, it does you more harm than good to purchase a home before you are financially ready. Being financially ready for a house is not just about saving up 10% of the price of your dream home as down payment. There are various other fees and charges<\/a> that you need to pay upfront, too.<\/p>\n

Owning a home is rewarding, but it requires time, money, and a serious commitment to financial prudence.<\/p>\n

<\/span>7. Getting a loan for your wedding<\/span><\/h2>\n<\/p>\n

Even more so than buying a property, marriage is a big life commitment. Within the Asian culture, weddings are traditionally grand affairs. However, not everyone can or should afford the grandeur.<\/p>\n

Times have changed even for the most traditional families. Where parents of the bride or groom pay for the wedding, most brides and grooms now pay for their own wedding. However, with a meager bank account balance, younger nuptials may not be able to afford their dream wedding.<\/p>\n

Being newlyweds is difficult enough, you really don\u2019t want to start off the marriage carrying a huge debt burden. If you do not have the resources, opt for a small and simple wedding ceremony and resist the temptation to max out your credit card or take up a personal loan for a party.<\/p>\n

<\/span>6. Brushing aside health insurance<\/span><\/h2>\n<\/p>\n

According to last year\u2019s statistics from the Credit Control and Counselling Agency (AKPK), the number one reason people fell into debt was because of unforeseen medical expenses.<\/p>\n

A study by Swiss Re, a global reinsurance company, entitled “Health Protection Gap: Asia-Pacific 2012” revealed that total healthcare costs in Malaysia are projected to rise by 8.8% yearly to US$25.8 billion (RM83.3 billion) by 2020.<\/p>\n

If you don\u2019t have health insurance, you have to ask yourself: Do you have additional contingency funds in the event you fall ill and need extended medical treatment? What about the income lost should you be incapacitated for an extended period of time because of illness?<\/p>\n

We shrug off health insurance when we\u2019re young and healthy. However, accidents and illnesses can happen to anyone. When we are sick, we really don\u2019t want the added stress of looking for money to fund our treatment. A medical card may not cover doctor\u2019s visits for every sniffle, but they could save you from bankruptcy for more expensive, unexpected medical incidents.<\/p>\n

<\/span>5. Not saving for retirement<\/span><\/h2>\n<\/p>\n

How much will you need in your retirement? You can work it out with this formula:<\/p>\n

\"moneymistakes_diagram1\"<\/a><\/p>\n

For more information on how to calculate how much you need, click <\/span>here<\/a>.<\/span><\/p>\n

To maintain a middle-class lifestyle after retirement, you may need RM1 million in accumulated savings by the time you reach retirement age. But according to the EPF\u2019s annual report for 2011, the average savings for active members at the age of 54 stood at RM149,216.<\/span><\/p>\n

How can you save up RM1 million by the time you retire? If you are earning RM30,000 a year, you will need to save at least 20% of your salary every month for 45 years.<\/p>\n

Forty-five years is a long time and it could be the whole span of your career. Therefore, it is imperative for you to start saving the moment you enter the workforce. There are various other investments you can take-up to help you save faster, such as Private Retirement Scheme<\/a>.<\/p>\n

<\/span>4. Dismissing a good credit score<\/span><\/h2>\n<\/p>\n

Not having a loan or a credit card until you are well into your late 20s or early 30s is not necessarily a great idea. Most lenders (banks) refer to the repayment record on your previous or on-going loans and credit cards to gauge your potential to repay a new loan or credit card.<\/p>\n

If you do not have a credit history at this stage in your life, most banks will be a bit skeptical towards giving you a loan or credit card.<\/p>\n

Remember, a good credit record matters. All you have to do is pay every bill on time to establish a minimal but healthy credit record.<\/p>\n

<\/span>3. Paying unnecessary bank fees<\/span><\/h2>\n<\/p>\n

Bank charges are pretty standard in Malaysia due to the strict regulations set by Bank Negara Malaysia. However, there are ways you can avoid paying additional and unnecessary fees. Some of the things you can do to avoid paying extra are:<\/span><\/p>\n