How to save money (Hint: it's not about how much you make)

It is essential to have some form of personal savings. Getting into habit from young is important.

Some of us have been there. At the end of the month, our bank account is empty and we wonder where our money had gone.

We know we need to keep a nest egg, but not everyone saves for a rainy day because most say, ”it’s impossible to put aside money each month!”

True, everyone has financial commitments. We can’t not spend on the necessities. But can we effectively cut back on our spending and meet our commitments with just a few minor changes, and still save?

Financial advisor Yap Ming Hui thinks so. He says it’s really all about having the right mindset. According to him, getting into the habit of saving is very important – especially from a young age.

“People often fall into two groups. Either you’re a saver or a spender. Savers accumulate capital and start businesses or become investors. Spenders will end up as debtors, ” he points out.

Yap explains that spenders in this context are people who don’t even save a little bit of what they earn each month. As such, they will always not have enough, no matter what the circumstances are.

“If you never get into the habit saving, you will get used to spending. You can start small. Force yourself to save even a little. When your income increases, because you’ve got a habit of saving, you’ll save more, ” he says.

“Even saving RM50 a month will put you in the ‘savers’ category. I’ve met people earning RM10,000 or RM50,000 a month who are not used to putting aside some money, and they tell me they don’t have enough to save.”

In 2015, Bank Negara Malaysia said about 32% of Malaysians can only cover a week’s worth of expenses, at most, should they lose their source of income. More than 75% of them find it a challenge to even raise RM1,000 of immediate cash for emergencies.

This has not changed much over the years. A 2019 report by the Financial Education Network, an inter-agency grouping co-chaired by Bank Negara Malaysia and Securities Commission Malaysia, said 52% of Malaysians have difficulty to raise RM1,000 as emergency funds.

It added that only 24% of Malaysians are able to sustain living expenses for at least three months or more if they lose their main source of income.

Also read: 'How do you manage your money?', we asked five Malaysians

Yap notes that everyone earning a decent income should be able to save. This includes graduates, most of whom are just entering the career market and working in their first job.

He says ideally a person needs to save between 30% to 55% of their gross income each month if they are serious about working towards a future of financial freedom.

“Young children are never educated about the importance of savings, ” he says, citing that as a reason Malaysians are facing problems of actually starting some form of personal savings.

Below, are a few tips on inculcating a savings habit. It is true that every little bit helps – and a small shift in thinking can lead to a big difference.

Save first, spend later

People tend to spend first, then save. It is always better to save first, then see whether you have the money to spend. Setting up an auto-deduction scheme for the savings account where your salary goes into, is a good start. That way, a portion of your monthly earnings will be moved automatically to another account.

Invest in yourself first

Instead of putting your money into high risk investments, sign up for a course or class. It may lead to you starting your own business or help you make the right choices in your future investments. This may also make you more competent in handling your finances.

Re-examine what is important in life

We all spend based on our values, which is different from individual to individual. The things we deem important (or essential) differ greatly from one person to another. It is good to always take a step back and look at the bigger picture. Is eating out with friends frequently a must? Do we absolutely need to upgrade to the latest gadgets every time they are launched?

Know the importance of delayed gratification

Buying a car may be important to some people. But can you delay your purchase for a few years, instead of taking out a really big loan? Investing the money that you have saved from it will allow you earn, and revisit the purchase in the future when you have a more ready form of cash-in-hand.

Look into a more tangible form of savings

Know that having all your money in the bank will not help you in a major way. Your goal of achieving financial freedom cannot come from just the compound interest of your savings accounts. Look at properties or other forms of investment if you want to grow your savings.

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finance , personal savings , money


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