MANAGE YOUR MONEY WISELY
There are some benefits to actively managing your money. You will know where money is going & whether spending more than you can afford. It also will give you peace of mind & a sense of control. Besides, this also can help you to avoid debt problems, prepare for emergencies, save money & achieve future goals
4-Step Guide To Managing Your Money Better
Step 1 – Complete a financial health check
Step 2 – Identify your goals
Step 3 – Make a budget and stick to it
Step 4 – Shop around, switch and save!
Step 1 – Complete A Financial Health Check
A financial health check gives a clear picture of your finances & helps identify where to make changes. Complete this step at least once a year, particularly if your income changes/experience a big life event.
Financial Health Check
Use this sample health check as a guide for drawing up your financial year in review. You do not have to fill in every part – only what applies to you. When you have looked at your situation over last year, you can move onto the next stages – goals setting & budgeting for the future.
Wages (after tax): you & partner
Other social welfare benefits
Day-to-day expenses eg coffee & lunches
Occasional expenses eg insurance, TV licence, medical expenses
Ongoing expenses eg gas, electricity, broadband, phone
Other bank loan
Credit card repayments
Total loans & debts
Total spending (add 1+2+3)
Surplus or loss (take total spending from total income)
Calculate amount of money you have in any savings accounts you have.
Calculate Your Total Income
Have a clear picture of all your finances and know all your sources of income. Payslips will show what you earn from employment. Include extra earnings that you would classify as income eg interest on investment income
Calculate Your Outgoings
Keeping track of your outgoings can be difficult. It can help to categorize them as follows:
coffees, lunches, taxis, cinema, pubs, phone credit, etc. Identify what you spend your money on. Keep receipts for each item you buy and enter cost of the item in your weekly diary.
Ongoing Expenses – rent, gas, electricity, TV, phone, broadband, etc. Bank statements and regular bills will show how much you’re spending.
Loans And Debts. As well as listing your monthly/weekly repayments, it is important to write down how much you still owe on your mortgage/loans and the time it will take to repay them in full.
List all savings/deposits you make regularly. To get full picture of your finances, record amount of money you have in all savings accounts as part of your financial health check.
Occasional Expenses eg medical costs, insurance, holidays, birthdays/TV licence. If you have money leftover after reviewing your financial situation after 1 year, think about how you can use it effectively. Eg think about paying off your loans early (pay off high-interest loans first) or opening a savings account to help you reach your goals. If you are spending more than your income, think about how you could cut back on expenses. Use a budget planner to figure out where you can cut back. If you find you cannot keep up with your loan repayments, contact your lender immediately.
Step 2 – Identify Your Goals
With a goal, it’s easier to stick to a budget. Once you have identified your goal, work out how much it will cost and how to put money aside to achieve it.
Examples Of Goals
Step 3 – Make A Budget And Stick To It
Think who this budget applies to. If you have a family, include them in budget planning process and talk to them regularly about how you are doing so everyone knows where they stand and you can manage expectations. In this case, consider all household income, spending and other commitments. If share your home with a partner, it is likely to have some shared expenses but you may still wish to budget separately for yourself. Consider opening a joint account to manage shared household expenses and make a budget separately yourself.
Use budget planner to capture all your details. Tie it in with your wages. Be honest about the figures in your budget – don’t overestimate/underestimate your income or spending. Don’t include money from your savings as income – use regular income only. If you don’t keep to your budget, don’t be discouraged. Start again. It can take time to adjust to a new spending pattern. Be realistic.
Step 4 – Shop Around, Switch And Save
Shopping around for financial products before you buy can save you money. Use cost comparisons and shop around for current accounts, savings accounts, credit cards, loans, car, home and life insurance to help you compare costs and benefits of these products. Look at how you manage your bills. Remember, small changes can amount to big savings.
ESSENTIAL MONEY SAVING TIPS
Spend Less Than You Earn – obvious but most people don’t get it. Spend less than you earn – be able to save money for future and not rely on credit to get through tough months.
Make List Of All Sources Of Monthly Income with the dates they are received. If your income varies, assume lowest possible earnings to stay on safe side.
Review Bank Statements And Past Bills for accurate representation of regular expenses. List these along with dates they occur. Rent / mortgage payments, utilities, car payments, credit card payments and recurring prescriptions are easiest items to estimate and they stay relatively consistent.
Track Your Spending And Estimate Weekly Expenses for groceries, toiletries, entertainment & other expenses. Use receipts and bank statements to give an accurate picture of your spending. Don’t rely on your memory!
Operate With A Monthly Budget
Great way to keep track of spending and ensure spending money wisely. If don’t know where your money is going each month, won’t know how to get ahead with your finances. Check out budget planner on www.nca.ie to work out what you are spending your money on compared to your income. Get a calendar and fill in occasions, bill dates, insurance renewal dates and back-to-school related costs so you can get a clear picture of what your future expenses are for rest of the year.
Create A Weekly Budget
Balance income with expenses. Roll over remaining bank balance from 1 week to next. Add income and subtract expenses each week. You should always have positive balance. If you don’t, reevaluate for places where you need to cut back.
Keep All Receipts or make a note every time you pay with bank card. Once a week, add up expenses and enter into budget. Compare actual numbers with estimates made previously, look for ways to adjust.
Cut Back On Unnecessary Expenses until budget is OK again. Look out for expected earnings and expenses for future to ensure you won’t encounter any situations that put you into the red.
Prepare For Periodic Expenses
Car insurance, life insurance, new years, other gifts, car repairs – so be prepared.
Make a “Bills” Calendar showing when each bill is due. Review it once a week and pay the bills due for that week.
Check Your Bank Account at least once a week to make sure staying on track and to catch any incorrect charges as soon as possible.
If You’re Married, Combine Your Finances
Always deposit all money into one central account and distribute it from there – fosters good communication and with agreed budget by both, will eliminate money fights.
Once budget is done, put cash in envelopes for each spending category and spend only cash out of those envelopes. Simplifies things because you have a set plan to spend only so much, so you don’t end up spending more than you make.
Make A Savings Plan
Once you have worked out a budget – check if you can afford to put a little money aside on a weekly/monthly basis. Open a savings account. Accounts with higher interest often have limited access, so shop around for an account that is right for you.
Keep Track Of Your Net Worth
value of everything you own less amount of all your debts. It’s net worth, not income, that determines true wealth and financial freedom. Remember a monthly budget is closely tied to net worth. What happens with your monthly budget, whether you spend more than you make/ make more than you spend, is reflected in your net worth. Make more than you spend – extra income ends up in either increased savings/decreased debt. Spend more than you make and debt has to go up.
Start Investing Today
Do this as soon as you graduate from college. Don’t wait until school loans or other debt was paid off. Not a lot of money at first, but even a little adds up over time.
Diversify Your Income
Have steady stream of additional income from another source eg blogging, real estate investing, etc.
Create An Emergency Fund
If don’t have an emergency fund, forced to use credit / other savings to pay for unexpected expenses. Having emergency fund creates financial safety to count on. Set aside a bare minimum of RM2,000 in savings for emergencies. If your budget is tight, cut back on entertainment, eating out, cell phone / cable features until you have a healthy savings account. Ideally, save 3-6 months of living expenses.
Buy A Home And Live In It A Long Time
Long term ownership of real estate can build substantial wealth; renting never will.
Face Up To Debt
Debt affects your finances and impact on your health, relationships and work. It is difficult to face up to debt but ignoring it will not make debt disappear and could make situation worse. If you are finding it hard to make repayments speak with Bank Negara Malaysia/your bank to see what your options are.
Ensure You Get All Of Your Tax Relief Benefits/any social welfare entitlements. The Revenue site, Department of Social & Family Affairs are helpful points of contact.
Reduce Your Bank Charges
Check bank statements to see what charges you are paying on your current account. Bank charges can include transaction charges and ongoing administration fees. If you’ve overdraft you could be paying further charges like interest, a renewal charge and surcharge interest if you go over your limit.
Cancel Any Unwanted Subscription Services
eg recently signed-up trial introductory offer on a TV channel – are you now paying for full service? Or are you paying for gym membership/magazine subscription that you no longer use?
Ensure You Are Not Duplicating Insurance Policies
Eg does your employer pay for travel/health insurance as part of your package? Does your health insurance cover some elements of travel insurance?
Check You Are Using Cheapest Method Of Payment Some utility companies will give discounts if you pay by direct debit rather than cash.
Save On Utility & Phone Bills
Don’t Pay More than you have to on your personal finance products. Use cost comparisons to help make savings.
Try Buying Online
Better deals usually offered on smaller luxury items (for birthday and Christmas gifts) such as books & CDs. For special occasions, agree to spending limit and make a list.
Cut Back On Non-Essential Items if you need to free up some extra cash, but don’t stop spending money on luxuries completely. If your budget is too tight, you may not stick to it. We all need little treats now and then!
Eg certain models of cars have cheaper running, tax and insurance costs.
Change Your Credit Card Usage
If credit card balance is so high that you can only pay off the minimum each month, switch to a card with a 0% rate on balance transfer. Your monthly repayment will then go towards clearing outstanding balance and debt can be cleared much quicker – once you stop using the card.
Sell Your Crap
Most of us have too much junk that we don’t need, don’t use and just takes up space. If you never/rarely ever use it then sell it, donate it/give to someone that can use it. Those things don’t add value to your life and don’t bring you any joy. So get rid of the junk and pass it along to someone that can enjoy it.
Take Advantage Of Free Money
Look for money saving tips that do not require to sacrifice anything eg 0% balance transfer credit card offers, store gift cards at a discount, buy from internet/online, look for ways to lower utility bills – don’t pass up a good offer when you see one.
Give To A Good Cause
Give some money away to charity. Money management is also about doing something meaningful with a small portion of your income.
Take Advantage Of The Internet
Think of the things you can do via Internet in relation to money management: access checking account, view investments, apply for a credit card, get a mortgage, check value of your home, check value of your boss’s home, prepare and submit your income taxes, find money saving deals, comparison shop, etc.
Begin Saving For Retirement Early
Compounding interest is powerful tool. One who invests RM5,000 at age 21 will have RM120,000 more than person who waits until 39 years old to start investing (at 8% interest rate). Start early to begin building wealth.
Don’t Waste Money On Food
Grocery bill and eating out are biggest ways to waste money. Buying only convenience food can be expensive. Don’t spend double and triple on food that you could prepare yourself at home. Learning how to cook at home help save money on grocery bill each month.
Decide What’s Important To You
Spending money wisely isn’t all about cutting out everything you like just to make sure you pay bills. Decide what you want to keep in budget and what you’re willing to give up to ensure spending money wisely.
Realize When You Have Made A Mistake And Stop
If you have spent too much money unwisely, take a step back and observe your behavior. Stop and get back on track as soon as possible.
Buy Generic When You Can
Sometimes doesn’t pay to buy name brand. Things like food & clothing have some form of “generic” brand associated with them. If you are looking to spend your money wisely, buy generic or off label when possible.
Utilize Thrift Stores, Dollar Stores/Sales
If you are wise with money.
Aim To Pay Off Debt Quickly
Avoid using credit cards at all costs. These will only cost you more than the face value of your purchases through the interest payment.
Check For A Better Deal On Household Bills
It is worth checking once a year to see if you can get a better deal on regular bills such as gas, electricity, phone/broadband. There are a variety of different household packages that could work for you and your family, which may work out cheaper than paying for services separately.
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YouTube: Rachel Khor
Principal Trainer, Peak Success Abundance Sdn Bhd
From Directive Communication International & American Institute of Business Psychology:
– Certification in Colored Brain Communication
– Certification in Human Drive & Motivation
– Certification in Dynamic Speaking
– Certification in Curriculum Development
– PSMB Certified Trainer
– Certification in Neuro Linguistic Programming (NLP)
– Certification in Hypnotherapy from London College of Clinical
– 18 years corporate training experience