How To Solve The 3 Most Frustrating Money Problems This Year

So, you have started 2017 in debt or some missed financial goals. You are not alone.

Let’s recap what happened last year: Malaysia clocked one of the highest household debts in the region at 89.1%; the ringgit seems to be on a perpetual tumble; and the cost of living just keeps rising.

But it does not mean you have to greet the new year with doom and gloom. Now that the holiday sugar rush and feasting have worn off, it’s time to get your A-game and rein in those frustrating money problems.

We promise all you need are a few actionable steps and you are on your way to a brighter year.

Overspending

The Asian Institute of Finance (AIF) polled Malaysians in their early 20s and 30s on their spending and found many overspend when buying on impulse.

What’s more, this group is savvy when it comes to using technology, but not on financial matters, resulting in 40% splurging on purchases while a whopping 70% lived beyond their means.

Of course, spending is not necessarily a bad thing but when it is done emotionally or gets out of control… it becomes a problem.

Sound familiar?

One way to beat overspending is to remember that money is money – it is all the same. Don’t put a label to it, but look at money for what it is: the value.

Remember that spending an extra couple of thousands to secure that RM100,000 car is the same as spending RM2,000 more on a bottle of vintage wine. As soon as you drive the car or pop that bottle of wine, the money is gone.

Be disciplined, but if labels are your thing, try the 50/20/30 Rule. So, no more than 50% of your net income should go to essentials such as rent and groceries; 20% for financial priorities such as an emergency fund or retirement savings; and 30% for lifestyle choices such as eating out or shopping.

Not being able to save – or not knowing how to

One in three Malaysians do not have a savings account, and most do not have enough to last them more than five years in retirement, according to the Employees Provident Fund.

It added that 90% of rural households have zero savings while in urban households, 86% do not have savings.

Sound familiar?

Contrary to popular belief, savings are not piles of money stashed away never to be seen again.

It’s money you put aside now to be used later, in case of a large purchase such as a house or an emergency like a car accident or illness.

The easiest way to get started is to have your savings automatically set aside before you spend it.

You can do this by having money automatically transferred from your savings account to your fixed deposit account or other investments.

You can even set auto debit standing instructions for money to be deducted monthly for unit trust contributions. Make technology work for you.

Mishandling your credit card

Last year, iMoney polled millennials on their spending habits and what we found, among others, is that many are knee-deep in debt.

Our survey showed that credit card debt and mortgage inch up in tandem with our income, but it is alarming to find that the younger group of millennials with the lowest income (below RM1,500) having an average credit card debt that is higher than their income at RM1,850.

Also the AIF found professionals aged between 20 and 33 live beyond their means. Majority of its respondents live on credit, with 38% taking personal loans and 47% living on high-interest-rate credit cards. Only 28% claim to know how to manage their finances.

Sound familiar?

Credit card debt is no laughing matter, particularly if this is one among other debts you are shouldering at the moment.

Pay the minimum due and you will accumulate a lot of interest payments over time. Late payments are even worse: lower credit score and late payment fees. To know how much of a difference it makes to pay more than the minimum, go here.

So, prioritise clearing your credit card debt as quickly as possible. If other debts are bogging you down, consider extra part-time work. Ride-sharing comes to mind, and we have done that maths for that, too. 

No shortcuts

Getting a handle on your finances requires work. But discipline is key and there are no two ways about that.

Consider the consequences if you fail to curb your bad spending habits. For example, only 22% of 6.7 million EPF members have sufficient savings of RM196,800 or more to sustain themselves during retirement.

Factor in a longer lifespan, not having enough money during retirement is a situation you don’t want to find yourself in.

Or that one day joblessness or even an illness might just take you out of the workforce, leaving you incapable of dealing with your credit card debt which could have been easily cleared with some determination on your part.

Or even not being able to take out a loan when you genuinely need it because of a bad credit report. Worse, being denied a job because of that.

The silver lining here is that while your money problems will not fix themselves, you can certainly do something about it.

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