10 Useful Tips on How to Manage Personal Finance

Kali terakhir diperbaharui September 22, 2023 oleh Shafiq Wahab
10 Useful Tips on How to Manage Personal Finance

Many individuals, especially young people today, experience difficulties in finding a way to manage personal finance. Either way, after just leaving university most young people already have PTPTN loan debt. This does not include car loan debt and the rising cost of living. Because of this, many individuals in Malaysia fall into high debt or become bankrupt due to lack of knowledge in the proper aspects of financial management.

Manage Personal Finance: 10 Common Mistakes in Financial Management

Inclining to a luxurious lifestyle and wanting to look the same as other people’s more glamorous lives is one of the reasons many people get stuck in debt. Basically, financial management problems and high debt risk can happen to anyone if they don’t know how to manage their finances prudently. In fact, such mistakes can have lasting effects on individuals. Here are some common money management mistakes for your reference:

Financial Management in your 20s

In this category of early 20s, it can be said that some of you are still studying at university. In fact, there may be many among you who have just set foot in the world of work or are building their respective careers. Therefore, this phase is important to pay attention to. You need to be careful in managing finances. If you get it wrong, it may have an impact on your long-term financial management:

1. Practice a Luxury Lifestyle

For some people who may be holding their own hard-earned money for the first time, there are many things they want to do with their own salary. There are many things in the bucket list that need to be fulfilled such as sophisticated gadgets, the first car, designer clothes or traveling abroad with your own money. If you couldn’t afford it before because you were still studying, now you can buy it and become a priority in shopping.

However, if not planned well, it can cause you to be burdened with a high monthly commitment, especially if the desire to spend lavishly exceeds your own financial ability.

2. No Emergency Savings

Usually, many among the young generation who have just started working do not have the awareness to save and spend all their salary extravagantly on the grounds that youth is the right time to enjoy and spend. Even so, spending recklessly without saving can lead to losses. Set aside at least 10 percent of your salary for savings or emergency use.

At the very least, this savings can help you in the event of an emergency or urgent need such as the cost of treatment for health problems and so on without having to ask for help or debt from others.

3. Not Using Credit Cards Correctly

Basically, the use of credit cards is very good especially if you practice the correct way of using credit cards. It is not a problem if you are highly disciplined. However, many users use credit cards without financial planning and spend beyond their means. While credit cards can basically make your life easier, uncontrolled purchases can leave you entangled in bad debt and high monthly commitments.

Without proper financial planning, you may default on credit card debt and only be able to pay the minimum amount each month which will eventually cost you because of the increasing amount of interest.

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Financial Management in your 30s

When you reach the age of three series, many of you may already be married or have children. The following are some of the mistakes in financial management that are commonly made in this age category of 30:

4. Poor Budget Planning 

There are many commitments and expenses to consider, especially if you already have a family of your own. Usually, the responsibilities and commitments become greater and multiple than when single. If before you only had to think about the cost of basic needs such as food and clothes, but now you also have to take into account other costs such as the insurance payment for buying a first home, the cost of a nursery, nanny and so on.

Many people take for granted the importance of planning expenses such as saving for children’s education, especially when they enter their 30s. This is because, they think as long as the children are not big, saving for education is not important. But in fact, savings should be made as early as possible or as soon as your child is born, especially if you have many children. You can consider saving in children’s education funds such as SSPN, Tabung Haji and so on.

5. Lack of Awareness About Insurance

For privately employed individuals, most workplace companies offer group insurance coverage for all employees as one of the benefits offered by the company. Because of this, many choose not to have personal life insurance because they feel it is a waste to have two life insurances at the same time. However, you need to consider that if you quit or are fired, the group insurance contributed by the employer will also stop immediately.

For health insurance coverage or life insurance, you need to get it as early as possible. This is because, the price of insurance premiums will become more expensive if you get older because of the risk of your higher claim needs.

Financial Management in your 40s

Usually, many already have a stable source of income and a higher position at this age. Even so, if financial management is still not properly planned you may be stuck with common mistakes that are often made by individuals in their 40s:

6. Not Reviewing the Investment Portfolio

A financial portfolio refers to financial assets in the form of a group owned by an investor that includes stocks, bonds and various other financial instruments in the portfolio. Each of these investment portfolios has its own risk. In other words, money invested can be a profitable return or an unexpected loss.

Many investors want to make quick profits without sufficient knowledge. Although as an investor you need to be brave enough to take risks, you are advised to learn how to manage them in order to get optimal profits. Learn tips for managing risk for a portfolio to prevent you from facing losses.

7. Not Planning the Future

Investment aspects (such as ASB savings, EPF retirement savings) and financial planning (grant and takaful insurance) are things that need to be emphasized to ensure a more prosperous life. This way you can identify your existing expenses, savings and commitments to help you plan your finances better, especially when you reach retirement age.

In addition, it can also be used as a preparation for the survival of you and your family if you lose your source of income due to a calamity such as an accident, death and so on.

Financial Management in your 50s

By the time you reach your 50s, most of you may be approaching retirement age. However, if it is not well planned, it can lead to financial management mistakes as follows:

8. Misuse of Retirement Savings

Basically, the EPF allows the withdrawal of part or all of the EPF Account 2 balance upon reaching the age of 50 to be used in preparation for your retirement. However, many misuse these funds by making unnecessary expenses or paying their children’s university fees. While you can do whatever you want with your money, you should use these funds to prepare for your retirement.

Based on the survey conducted, an individual needs to have at least RM240,000 in the EPF for old age expenses based on the aging factor of Malaysians.

9. Invest Carelessly

Fraud cases of investment schemes or scammers usually target people of this age. Based on statistics from the Bukit Aman Commercial Crime Investigation Department, many individuals arbitrarily withdraw their savings to invest in investment schemes that promise various returns in a short time. In fact, some take out personal loans from banks that reach hundreds of thousands of ringgit in pursuit of false profits.

For those of you approaching retirement age, you are advised to review your investment portfolio and research investment offers before investing. Be careful before making investment decisions, and think critically and rationally.

10. Stop Taking Health Insurance

In general, your health insurance premium rates will become more expensive as you age. Because of this, many choose to stop paying for insurance to focus on expenses or other more important things. However, you are not advised to make this mistake and continue paying insurance as usual. This is because, the older you are, the higher your risk of being exposed to various risks of diseases such as cholesterol, heart attack and so on. In fact, medical treatment bills at the hospital can also skyrocket.

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7 Ways to Manage Finances Wisely, Build a Better Future

Bad financial management problems can actually be solved if you manage your finances wisely and plan your expenses and income well. Avoid overspending until the money that should be used for retirement savings has to be used to pay other commitments. However, smart financial management can help you plan your income well. Here are seven financial management tips that you can follow.

1. Plan for the Future Beloved

If you are the head of the family and be the breadwinner and breadwinner for the family, you need to make sure your family is prepared for any possibility that may occur. If you die or become disabled due to an accident, make sure your family can be independent without help or financial support from you especially if you have small children who are still in school or elderly parents. You can set up a salary protection scheme such as a takaful grant or set up emergency savings for use when needed.

2. Separate Monthly Salary

Make sure you set aside at least 10 percent of your income for savings every time you receive a monthly salary. There are various salary management formulas that you can practice according to your income. What is important, you must be disciplined in making monthly salary separation to show results. Just like tips for losing weight, you can read various tips that are provided, but if there is no discipline, the tips are useless.

3. Spend Based on Your Needs

In addition, you are also advised to shop according to your ability. Avoid getting into debt by buying unnecessary items such as gadgets, designer clothes and so on except buying items or necessities that cannot be bought with cash such as cars or houses. Also, make sure you prioritize your needs over your own desires. Pay off monthly commitments such as car loan debt, home loan payments, credit cards and so on before you can spend to fulfill your needs if there is any surplus.

4. Avoid Bad Debt

Also, avoid getting stuck with bad debts like credit cards, personal loans and so on. This is because such debt has a high interest rate. If expenses are not well controlled, you may end up with a high debt burden.

5. Maximize Income Tax Returns

Income tax exemption is basically the reduction of an amount of money withdrawn in the year of assessment from the total annual income. It can indirectly ease and reduce the financial burden. Therefore, you are encouraged to claim tax relief. In Malaysia, the government gives many tax breaks to the people such as for lifestyle, domestic tourism, health, electronic devices, education fees and others.

6. Save in ASB or Fixed Deposit

You are also advised to create a savings account that does not use an ATM card. This way can prevent you from withdrawing your savings at will. You can consider saving at ASB online, Tabung Haji or fixed savings that only offer the withdrawal process at the bank counter only.

7. Have an Insurance Plan

You may not be able to predict what may happen in the future. For this reason, make sure you have a health insurance plan or life insurance that can comprehensively protect yourself and your family in case something unexpected happens.

Hopefully this guide will help you manage your finances wisely. In addition, if you want to renew your car insurance online, visit the Qoala website for more information. Qoala provides the best insurance coverage from several insurance companies in Malaysia according to your needs and budget.

About Writer
Personal finance management expert to help you manage your finances better!

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