Understanding your monthly cash flow will help you to find out the reason why you are overspending and show you which expenses to limit or even to remove altogether. With that, you will know how to allocate your income better.
The following table shows an ideal budget on how to allocate your monthly income.
For example if your monthly salary is RM3,000, then 60% of your income (which is around RM1,800) should be allocated for your living expenses. 15% (RM450) should be saved and you should allocate 25% of your salary (which is approximately RM750) for your investment account.
Saving at least of 15% of your salary continuously will make a huge difference. For instance: a person with a monthly salary of RM3,000 can save up to RM5,400 per annum excluding interest earned. These savings can be used to pay off your bank debts or credit cards.
Once you have developed and consistently adhere to the habit of saving, you can consider how to get a better return by investments instead of keeping money in the bank. Investments like stocks, unit trusts and mutual funds are common but there are also other alternative investment options like REITs and commemorative coins.
A gold commemorative coin in conjunction with the installation of His Majesty the Yang Di-Pertuan Agong XIV was sold at RM1,800 in 2012 and its current market price is approximately RM3,000. Of course, it is always important to find what type of investment suits you the most. It is best to allocate some money to your contingency fund should any emergencies occur. A credit card can also be used as a second option for this fund.
Bear in mind to allocate some of your salary for proper insurance coverage and policies. It could provide you and your loved ones with peace of mind in case there are any terminal/critical illnesses or even accidents.
Last but not least, set your own financial goals. By having a proper allocation of your salary, it will bring you closer to your goals.
Overspending and not saving enough could be one of your top financial regrets. To avoid them from happening, read our article on how to be your own financial planner. Furthermore, here are some articles regarding REITs and bankruptcy.