Cost of living too high? Here are 10 tips to help you to live within your means and grow your wealth.

The topic on cost of living was a hot issue recently. The concept of a Living Wage was introduced by Bank Negara Malaysia (BNM).

A living wage refers to the income level needed to achieve a minimum acceptable standard of living depending on geographical location.

Through surveys conducted, the living wage in Kuala Lumpur is estimated between RM2,700 to RM6,500. This range is deemed applicable for a single adult to a young couple with two children. BNM further recommended for employers to adopt this benchmark as a guideline when paying employees. There are pros and cons to implementing the proposed living wage as guidelines to live by are colorful and varied, such as cost-past down to consumer and impact to inflation. A white paper could be written on this issue alone.

One of our MyPF readers commented as below:

I’m a single adult that earns around RM4k a month and it’s not enough due to inflation and taxes. Not forgetting commitments like my car, insurance, and family expenses. Nowadays, young adults who can make it with under RM3k survive with help from parents. I can’t even afford to buy a decent property! The living wages given is not living comfortably… it’s just surviving!

While we admit it is a difficult issue and every individual has his/her own scenario and circumstances, we do believe that we can always do something. Although it may be just a small step every time, it all does add up in the long run!

One very important question to ask yourselves is:

“How I can live meaningfully with whatever earnings I have?”

Regardless of whether it is minimum wage (the legal amount currently set) or living wage, it’s not only your salary that determines your financial wellbeing. Its also your SPENDING habits.

If you are a salaried worker, you can still live meaningfully and grow your wealth. The minimum wage or living wage are economic statistics over which you have little control. Instead, what you truly have control over are your skills. You have control over the negotiation of your salary with your employer. You have control over what you do with your salary received.

The bottom line is that your SPENDING or OUTGOINGS must never exceed your EARNINGS. Otherwise, you will incur debts to fund the excess. Most likely you will use credit cards which incurs interest charges and thus increasing expenses.

Learn to live within your means. How? By following the 10 personal finance principles below:-

  1. Write down all your earnings and outgoings.
  2. Budget and track all your outgoings.
  3. Pay yourself first (savings/invest).
  4. Scrutinize any expenses that can be reduced.
  5. Keep an emergency fund.
  6. Practice delayed gratification (wants versus needs).
  7. Don’t bow to peer pressure.
  8. Pay in cash rather than use credit card (only when necessary and you can pay in full monthly).
  9. Find different sources of income.
  10. You can still enjoy and have a meaningful life.


Let’s look at each principle in detail:-

1. Write down all your earnings and outgoings

“It’s not your salary that makes you rich, it’s your spending habits” – Charles A. Jaffe

List down all your earnings such as your salary from your job, side income, and commission. Likewise, do the same for your outgoings segregating between fixed and variables expenses. Examples of fixed expenses are rental, car loan, insurance where the amount is fixed every month. Examples of variable expenses are clothing, entertainment, food. The one you need to watch out are the variables.


2. Budget and monitor all your outgoings

“A budget is telling your money where to go instead of wondering where it went” by Dave Ramsey

Start by tracking your actual expenses for one month. This will show whether your spending exceeds or below your income.

Prepare a monthly budget for each of your income and expenses. A budget lays out what and how you should spend your money on over a period of time, e.g. a month, a year.

Start identifying which expenses can be reduced or even removed (refer principle no. 4). A progressive reduction is easier to achieve. The objective is to ensure you spend less than what you earn.

A budget is only a plan. You need to monitor your expenses to ensure it stays within the plan. Without a plan and tracking system, you won’t know what and how much you can really afford. With plenty of online and mobile apps available nowadays, it is easy and simple to plan and track your outgoings. Tracking highlights any excesses immediately and allows for rectification action to be taken.

Budgeting and tracking are the best habits to adopt when you decide that you want to live within your means and at the same time grow your wealth.

3. Pay yourself first (save/invest)

“Do not save what is left after spending; spend what is left after saving” by Warren Buffett

On payday, don’t pay your bills first. Pay yourself first. Instruct your bank to transfer a fixed amount every month (say 10-30% of your salary) to another account. You need to save and invest to grow your wealth.

But, if you have credit card debt, use that 10% to clear or pay down the balance. Credit card debts attract the highest interest among all types of legitimate loans. Moving forward, use your credit card only if necessary. (please refer to principle no. 7).


4. Scrutinize any expenses for possible reduction

“Beware of little expenses. A small leak will sink a great ship” by Benjamin Franklin

To grow your wealth, you either increase your income (refer principle no. 9) or cut your expenses. Examples of how you can cut expenses:-

  • Exchange that premium coffee with a 3-in-1 coffee. You can still enjoy hanging out with friends at your house over a cup of 3-in-1 coffee.
  • Do you need to spend RM50 per day (for a single adult) for your daily 3 meals? Cut it down to say RM40 and later RM35 and so forth. Small reduction at a time. Be creative in the choice of food. Learn to prepare your own home-cooked meal, especially for breakfast and dinner. It’s much cheaper and healthier. (refer the article “7 Frugal Tips to Improve Your Health and Wealth”).
  • Buying insurance is a good risk management. Please make sure that you can afford the insurance premium. An RM1,000,000 life insurance policy is more suitable for a family than a young adult in early twenties. You can increase your coverage as go through different stages of life.


5. Keep an emergency fund

“An emergency fund turns a CRISIS into an inconvenience” by Dave Ramsey

An emergency fund must be able to cover 3 – 6 months expenses of your existing lifestyle. An emergency like getting sick, major car repair, loss of employment can happen unexpectedly. Having this fund can reduce the stress associated with dealing with the emergency. It will give you some breathing space to find a solution or an alternative.


6. Practice delayed gratification (distinguish between wants and needs)

“Don’t give up what you want most for what you want now”

The sales seasons can be very tempting and mouth-watering. That leather jacket is screaming at you “I-am-50% discounted”, ” please take me home”. Before you hand over your credit card, ask yourself do you need it? You already have a leather jacket which you hardly wear.

Another example, buy a used car instead of a brand-new car. A brand-new car once leaves the showroom will have 10% reduction in value. Buy only what you can afford to pay monthly. If you must have that car, save up to pay a higher down payment to reduce the loan amount.


7. Don’t bow to peer pressure

“I’m not in this world to live up to your expectations and you’re not in this world to live up to mine.” – Bruce Lee

Your wealthy friends wore designers products (“branded goods”) and always surrounded by people. To keep up with the Joneses, you rack up your credit card debts buying designer goods you cannot afford.

Your friends are driving new cars, wearing designer watches and other expensive products. For all we know, they may also be financing such lifestyle using credit cards debts like you. Don’t ruin your life following such group of friends.


8. Pay in cash; use your credit card only when necessary

“Procrastination is like a credit card: it’s a lot of fun until you get the bill.”- Christopher Parker

The habit of paying cash for your transactions will keep debts away from you. Prepare a list of items to buy before going to the supermarket. Buy only what stated on the list. Don’t stay to browse. Stuff your wallet with cash enough for the day.

Use a credit card only when it is necessary. Settle your credit card debts every month.

It’s better to save up and pay cash later rather than pay for something now using future money.


9. Find different sources of income

“The average millionaire has 7 sources of income. How many are you working on?”

If cutting down expenses are not working, increase your means.

Negotiate for a salary increase with your current employer if you feel that you’re not fairly compensated for your labor. Negotiations should never be about bringing an ultimatum to the table; instead, have a professional conversation outlining what you have been doing that you feel requires better compensation. Then, work out a plan with your employer to see what else they think you need to do in order to deserve better compensation. If your negotiations fail, perhaps it’s time to look elsewhere that will reward you appropriately.

You can also look for side income during your spare time. There are many ways. For example, selling your unwanted things, freelancing, and starting a small business.


10. You can still have a meaningful life

“Life isn’t about having things to enjoy life. It’s about enjoying life with the things you have.”

“Cutting down on this, reducing that” sounds like a life of deprivation. Living within your means is not living a meaningless life. You can be happy and have a fulfilling life for less money. Be creative and use your imagination.

If you like buying new clothes, sell your unwanted item first to fund your spending. Or turn it into something new (there are many online tutorials).

You can still enjoy life and the lifestyle desired. Find a way to get good value with all your financial decisions.


If you have any other way or you find this article useful, please share.