The most important starting point on whether you are building wealth or heading towards financial disaster is whether your save every month. Or in other words, spending less then you earn.
Money has this peculiar habit of slipping out of our hands very quickly. Before you know it, you are left holding nothing but air in your hands. Or as the Malay saying goes “Gaji habis, bulan belum habis” (your month is longer than your pay check).
“Monthly income RM10,000, monthly expenses RM6,000 results in happiness. Monthly income RM10,000, monthly expenses RM11,000 result in misery.” ~Adapted from Charles Dickens
The whole idea is to save before spending money on wants or things you do not really need. So how do you make sure you are on your way towards happily saving?
The Concept of Paying Yourself First
Take yourself as if you were an employee for Me Company Sdn Bhd. Every month, your number 1 priority is to make sure that you get paid. The moment you receive your pay, set aside the amount into another account that you will not touch!
This amount you pay yourself every month should be used for your emergency savings (if you have yet to reach your emergency savings goal) or to be invested.
How Much to Pay Yourself?
Only you can decide how much you are worth and how much to pay yourself. It can be a percentage (e.g. 10-30%) or a fixed figure (RM500, RM1000, RM2000, etc).
Suggested guidelines as follows: –
- Employee with EPF/pension: 20% of your income
- Self-employed or no EPF contribution: 40% of your income