Wednesday, 20 March 2013

4 Simple Tips to Manage Your Finance Better

The mindset of many Malaysians are always about "making more money" or "finding investments that will give the highest returns". While finding the best invesment or making more money is a good mindset, we should always remember and practice the basics of personal finance. Don't you agree that it's easy to become complacent with our spendings and finances whenever we make more money? Hence it is of upmost importance that we strenghtened the roots of financial management in order to prevent loss of wealth.
You don't need to be a genius to manage your personal finance. With the right mindset and discipline, managing your personal finance can be a breeze. To have better control of your own finance, start by practising these 4 simple tips.
Tip 1 : Set A Goal
Anything is achievable if you set specific goals. When it comes to financial goals, setting a target in mind is a great way to ensure your finances are within control. Setting a goal can be easy as "123" but sticking to it is the difficult part. Most of the time we fail at achieving our financial goals due to lack of proper financial planning.
It's easy to say "My goal is to set aside 30% of my income monthly for savings", yet why so many fail to do so?  The key failure reason is in the statement itself. Setting aside 30% of your income is a means toward achieving a goal. With no measurable and specific goal set, how are you able to drive yourself to save that 30%?
Tip 2 : Track Your Income & Expenditure
For those who have taken the Accounts subject for SPM, you'll remember that in the ledger book, there will be a section for debit and another for credit. In school, we were taught to balanced our ledger yet after leaving school, many of us fail to do the same for our personal financial ledger. Knowing or unknowingly, most of the time our financial ledger is in overdraft (credit card debt) due to uncontrolled and unmonitored spending.
Keeping track of your income and expenditure helps you to get a better grasp on where and how your money is spent. Having a record tells you how much you've spent on a day to day basis. That allows you to cut back on unnecessary expenses whenever you find yourself overspending for a particular month. Despite the tedious process of tracking your income and expenditure, the control you have over your financial situation far outweighs that of the effort spent on tracking.
Tip 3 : Buy Your Needs not Your Wants
This age old financial advice have been repeated so often that many Malaysians are probably immune to it. In the new age of personal finance, the advice is not about discouraging people from buying the "Wants", instead "If you REALLY WANT IT, go buy it!"

The new financial advice encourages us to spend on something that we really want as a form of self reward for achieving certain financial goals. However, you should only spend on your Wants only when you have the extra cash to spend. How do you know if you have extra cash to spend? Read Tip No 2 again.

Tip 4 : Live Within Your Means
A fresh graduate starts working with a basic pay of RM3000 per month. He needs a car to get to work and believes that getting an imported car is a better value for money. He's needs to pay about RM1000 a month for the next 7 years based on a RM80,000 car loan. He "feels" that with the remaining RM2000 per month, it should be sufficient to live on. In your opinion is he making the right decision to purchase a RM80,000 car?

Has he taken into account the cost of petrol, maintenance, annual road tax and insurance of the car? These addtional hidden expenses of a car that will eventually eat into our income the moment you start owning one. Eventually, that graduate would have to start skimming on certain expenses such as food just to make ends meet. Could he have had a better way of life if he had choosen a local car worth about RM40,000 and switch to a better car once he earns a larger paycheck?

Living within your means is not about being extreamly thrifty/stingy with your money. Living within means is about having all your needs addressed, being "bad" debt free and ultimately worry free.

I'm very sure that you've come across all four tips countless times yet why are there still so many Malaysian living in debt and below their means? Are we to blame others for our lack of financial control or should we start learning how to manage our money? I leave that decision to you.

Cheers and Happy Investing!

If you like this post, reward me by :

1. Sharing this article on your Facebook!
2. Like my Facebook Page
3. Join Invest Made Easy Forum HERE

Related Articles:
1) Financial Freedom, Making It Your Own Business
2) Investing In Yourself

1 comment:

  1. Thanks for these tips, Shane. But I think regardless of how effective these tips are, it's still up to each one of us what kind of approach we're gonna use to save our pockets from grandiose spending. Sometimes, no matter how much we try to take good advice, if we don't control ourselves from doing the usual things that we do, all of them would be worthless.