According to a survey conducted by RinggitPlus, more than 30% of Malaysians rely on their entire pay cheques to cover monthly expenses, rendering them unable to save any meaningful amount of money – let alone invest. Clearly, this indicates that there is a disturbing number of Malaysians living this way.
The good news is that you can break free from the cycle and take control of your money. The bad news is it won’t be easy. Planning to spend less and putting more money towards debt or savings is easy, however following through with the plan is the hardest part.
Nonetheless, you should still start somewhere so here are 5 ways that can help you break the cycle of living pay cheque to pay cheque and get your finances into shape.
1. Know Where Your Money Is Going and Create a Realistic Budget
To better manage your money, you’ll need to do two things. First, write down all of your monthly mandatory expenses. Think rent, utilities, phone bill, groceries, car payments, insurance, etc. Second, figure out where the rest of your money is being spent.
The key to healthy budgeting is that you keep track of all your expenses. This is to ensure that you are not surprised when infrequent payments pop up. A proper budget will help you realise how much you have been overspending.
There is plenty of free online money management services and budgeting apps available for you to choose from that make it easy to help you track your spending so you can get a better understanding of where your money is going.
Once you have your purchases classified into groups, you can move backwards from there to determine what you can cut.
2. Cut Back On Spending to Match Your Current Lifestyle
Now that you’ve tracked where your money goes, look for opportunities to trim those expenses. Can you get a cheaper insurance policy? Great. Cancel the gym membership that you haven’t used since even before the first MCO started? Awesome. These are great steps in the right direction, but keep in mind, this is just a start.
The most challenging change will come from your daily habits. For example, cutting back on buying all those odd, necessary items from Shopee and cooking your own daily meals rather than ordering them from Foodpanda can easily save you up to RM100 a week.
If you need an extra push to kick the convenience-spending habit goodbye, try the good old jar system for saving and spending. The way it works is simple: have a jar or two labeled for big-ticket savings objectives such as a future vacation (once it’s COVID-19 free) or paying off your PTPTN. You can see your savings grow this way, which can be very motivating.
After you’ve taken care of your basic needs, give yourself a spending allowance in cash each week. That allowance now becomes your budget for all the extras.
3. Find Simple Ways to Save Money
Among the examples of ways you can save money are by turning the lights off when you leave a room, engage the power saver options with your monitors, televisions, or computers, dry your clothes at home rather than drying them at your local dobi, and reducing the usage of air-conditioners if you own any.
4. Start Investing and Diversifying Your Income
Whether that means finding a side hustle, asking for a raise, or looking for a new 9-5 with higher pay, earning more money is a surefire way to make it easier to balance your budget.
It is quite common for working adults to moonlight, albeit anonymously as this practice may be frowned upon by some employers. Moonlighting or having a second job can definitely help you to reduce the likelihood of living between pay cheques. So, put your hobbies, talents, and skills to good use.
5. Prioritise Your Payments
The most important thing you must do after receiving your salary is to pay your bills such as house rentals, car loan repayments, etc. Next, you should focus on paying yourself, and this does not mean rewarding yourself by buying yet another pair of shoes! Paying yourself simply means setting aside a portion of your salary to go into your savings.
This money should be off-limits unless it is needed for emergencies or long-term investments such as to pay for a down payment on a house.
Another important fact to ponder is that many financial experts advise working adults to save at least 20% of their monthly income for rainy days. However, you are always encouraged to save more money once you are able to do so.