The topic of money management is often ignored or given little thought. It is not taught in school nor in higher education institutions, so, for people in their twenties who are starting to build their futures, it can be a challenge. Here 12 effective money management tips for young adults. (Artikel asal dalam Bahasa Malaysia)

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Despite money being used multiple times every day for almost any transaction, yet the topic of money management is not often brought up. Managing personal finances is not taught in schools or higher education institutions, leading this to be a subject often ignored or given little thought.

For many unprepared young adults in their 20s, with your own career and commitments to fulfill, money management is an increasing challenge. The importance of money management cannot be ignored lest poor management bring a mountain of debt and regret tomorrow.

Here we have 12 effective money management tips for such young adults in their 20s.

#1. Money Management Apps

Using money management apps such as Spendee (Google Play, App Store) tracks and calculates every sen spent. It can also be connected to your personal bank account for a fee of RM50 per annum to generate a detailed monthly personal spendings report. With such reports, it will ease your efforts in budget building and knowing where your money is going. Every little sen eventually builds up to a wealth of ringgit afterall.

#2. Following the 50-20-30 Rule

Divide your income (after tax deductions, of course) into 3 pools – your needs, lifestyle, and future.

50% of your income goes into your “needs” pool where your necessities are such as household expenses, and loan re-payments.

20% is for your “future” pool where you place your money into savings or invest it.

30% is for your “lifestyle” pool which you use for shopping, travel, gym membership and other things that make your life better.

#3. Enjoy Things That Bring Satisfaction

All work and no play makes Jane a dull girl. It is no fun torturing yourself by sacrificing the things that bring you joy such as buying that new novel from your favorite author or treating yourself to a delicious meal, but do so spend wisely.

List out the the things that bring you satisfaction according to strengths and weed out the lesser ones. For example, if you enjoy running outdoors more than running in the gym 1x a week, perhaps it is time to consider dropping that gym membership.

#4. Give Some Thought To Your Future

As a young woman in your 20s, you may feel that it is too soon to plan for life in your 60s. However, the reality is that it is never too soon. Retirement planning beginning in your 20s is wise and contributes to more comfortable golden years. With retirement planning, ensure you have enough rolling towards having sufficient funds and assets to keep your retirement years financially free of fuss.

#5 Save Your Excess Allowance

Make it a habit to save any remainder of your daily allowance in an actual container (e.g. a piggy bank) whether in your room, your car, or even beside your washing machine (hey it works well for spare change you find just before doing the laundry). Even if your remainder cash is just RM1, any little bit can help fuel your emergency fund especially when times are rough at the end of the month before your next salary comes in. If you save RM5 a day for a year, you would end up with RM1,825! Now, think how much more you would earn if you invested it the following year and harvested the power of compounding interest!

#6 Set Up Automatic Transfers

Setting up an automatic transfer, or standing instructions, to set aside 15%-20% of your salary can and does give you more control over your spending.

Tip: If you have an ASB savings account, automatic transfers can be set up without you needing to remember to do it yourself manually every month.

#7 Have Money Conversations With Your Spouse

If you are married, it is imperative that you and your spouse are honest to each other in money matters whether personal or household finances. Learn about each other’s credit score, income, and also debt. If either of you are facing financial difficulty, it is best to work together to find a workable solution together. If you need professional help from a neutral third-party, working with a licensed financial planner can help.

#8 Have At Least RM1,000 In Your Emergency Fund

In an article by The Star recently, statistics revealed 52% of Malaysians are not able to afford RM1,000 in an emergency. Having an emergency fund is extremely important to carry you financially through an emergency or unexpected situation. Work towards having a sufficient emergency fund while you are still young.

#9 Know Your Credit Score

Your credit score is evaluated based on the number of loans and credit cards you have, and also how consistently your have been paying them off. It is an in-depth analysis of your debts and re-paying ability, while monitoring if you have missed crucial re-payments. Your credit score is tracked by a secured online platform owned by Bank Negara Malaysia (BNM) and is known as Central Credit Reference Information System (CCRIS). Be aware that your credit score is used by banks when deciding to approve or reject future loans you apply to borrow from them.

#10 Own Just One Credit Card

Break away from credit card addiction and own just one credit card and use it only when you have no cash in hand. If needed, cancel all your other cards and go with the one credit card that you have the longest good credit history with.

#11 Have a Shopping List

Make a shopping list before you begin shopping, whether it is in an actual store on online. This helps avoid over-spending or spending on unnecessary items. Don’t easily fall for cheap sales on items you may not need. Be sure to also list items you need to restock soon and items you have been looking out for for a while now.

#12 Ask For a Salary Increase

According to studies, 20% of women have never asked for a salary increase. Even those who do are still paid 30% less than men performing the same duties. Be bold and speak up to your management about how you can get a salary increase, especially if you have been working for the same employer for at least 3 years. Track your job performance and use that as evidence as to why you are seeking better rewards.

For any successful woman, money management can get lost in among the many commitments and responsibilities you are balancing. However, with careful planning from an early age, your future comfort can indeed be assured. If you need professional help, working with a licensed financial planner can help simplify and coach you on better financial habits and set you back on the right track.

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Do you employ other methods for money management? Share your ideas with us in the comments below.