There are five essential goals in organizing your finance:
- Investing
Although the significance and benefits of investments are widely recognized, not much people will prefer to invest their money, as they may think about the potential risks that possibly bear. Proper investments enable investors to earn a strong real return, even after factoring in inflation, unlike your low return savings in deposit accounts.
First of all, you must decide on your risk-taking level. The principle in investment is “higher risk, higher return”.
Some investors who prefer lowest risk can consider bonds or gold-related investment options which are usually hailed as “safe”, whereas those who can take higher risks could invest in equities, which are more volatile.
For investment beginners or for those who lack investment-related knowledge, unit trust can be a good option.
- Accumulate 6 months of salary as liquid cash
It is important to have sizable amount of liquid cash in saving accounts in case of any emergency or immediate use.
However, 6% of working adults in Malaysia have savings which would only keep for half years, as indicated by Bank Negara Malaysia’s “Financial Capability and Inclusion Study 2015” report.
While adding six months of salary is easier said than done, this could be achieved in the long run if one commits to save certain amount every month.
To be effectively reaching the six-month salary target, avoid from using the saved money except for emergency use. Obviously, savings meant for your desired vacation or the newest smartphone should be made individually.
- Achieve good credit rating
Credit rating means creditworthiness of an individual found on previous records of servicing credits or loans. Every banks use credit score to study a person’s ability to pay loans and to decide whether the person are qualifies for applying another loan.
To maintain a good credit rating, one must ensure to pay monthly installments on your existing loans within the specific time.
- Start your retirement fund
A strong retirement savings is essential for everyone, nevertheless, most Malaysians could not afford to retire. According to EPF (2015), 68% of its members of 54 years old had savings of not more than RM50,000.
Conversely, EPF foresees its members to have minimum RM228,000 upon retirement, as shown in EPF’s annual report for 2016.
Also looking for other appropriate retirement savings options like Private Retirement Scheme to enhance your retirement fund.
As you resolve to assign a certain amount of your monthly salary for retirement, eventually this will provide you with a greater sum in your golden years.
- Getting yourself insured
Insurance plays a vital role in enhancing your personal finances in the event of accidents happen. Sadly, Malaysians are grossly under-insured.
Based on latest statistics, it finds that nearly 50% of the Malaysian population are not covered by any life insurance, hence making them liable to financial complications in the event of any health critical situation. Many Malaysians who own certain form of health insurance coverage at present, are not fully covered, considering the medical inflation which moves about 15% in Malaysia.
The rule of thumb when buying life insurance policy is to insure an amount equivalent to 10 times of your annual salary.
Discussion about this post