If you fail to plan, you are planning to fail.
Creating a plan for your finances is essential these days for every young professional. It is important to create a realistic image of how you can fulfill and manage your short-term goals as well as your long-term goals when you reach the age of retirement.
With a financial plan, you can prioritise expenses, enforce savings, stabilize cash flow and have the courage to invest along while achieving your life goals.
Here are the top financial regrets you should be aware of:
1. Putting off saving
“I sold my good reliable car and upgraded to a premium car but I couldn’t save money for nine years because of this…”
Many young professionals do not understand the importance of savings. They are earning well but constantly upgrading their lifestyle with nothing left to save. The most common upgrade will be the irresistible luxury car that they have always wanted, but it comes with a premium price to pay every month for up to nine years.
After just a couple of months, they regret on how limited they can save and should have bought a cheaper car. Setting out 5-10% of your income per month for savings can prepare you for dealing with unexpected emergency, participate in a business opportunity or simply having more choices when it comes to making financial related decisions.
“I didn’t plan and save enough for my retirement, now I have to consider selling my place to rent a smaller unit.”
Savings are also essential for your retirement plan, as many retired seniors reported that they don't have enough money to sustain their lifestyle. Although our country has a mandatory retirement plan that will deduct your salary and contribute it directly into EPF, you still need to consider the inflation rate and unexpected expenses. So it makes sense to start savings as early as possible and look into other option such as Private Retirement Scheme (PRS).
To have a better idea about Employment Provision Funds or Private Retirement Scheme, you can learn more from our article ‘EPF or PRS?’
2. Over insured or NO insurance at all
“I used to commit to up to three life insurance products because I listened to my agents and they’re my friends.”
There are a great deal of insurance products out there in the market, but many young professionals allow their insurance agents to dictate what they should buy and end up with regrets of being over insured with way too many policies and riders.
For example, by having multiple basic life insurance plans, it could cost you up to RM250+ per month. But if you only need a basic life insurance to take care of your family & leftover mortgages, there’s an affordable way to do that with rates starting from just RM9.85 per month.
So you don’t have to commit to a great deal of insurance policies but choose wisely for what you really need. Having said that, be thoughtful and not to leave your debts behind to your family like many who have passed away unexpectedly due to accidents or health issues by at least getting an affordable life insurance for yourself.
3. Did not invest in property
“I have everything that I wanted to buy, but I missed the opportunity of having my own home as it’s too expensive to buy now.”
Learn to separate between extra income and savings. Letting your extra income lie in your saving accounts can be a big waste. You did not necessarily lose out from the potential gain from investing your money, but you definitely lose out on the opportunity to learn. One of the best and most important investment for a youngster to get is a property for themselves.
Too many youngsters are feeling too comfortable paying their rent without any effort to save up to purchase their 1st home. When they get older and look back at how the property price has increased, they regretted for not buying one when they are still young.
Nowadays bank usually offers up to 90% margin of finance, which means you are only required to pay 10% of your property price as downpayment and the rest could be paid as monthly installment. Better yet, if you are a 1st time property buyer and your income is lower than RM5,000, you might be qualified for “My First Home Scheme” which offers up to 100% full margin of finance.
You can always compare and get the best rate for your home loan effortlessly from the Loanstreet Home Loan page.
4. Credit card debts
“It took me 2 years to pay off my multiple credit card debts, which also means I couldn’t save any money during those years.”
Credit cards allow you to skip carrying loads of cash around, enjoy rewards in spending and building your credit score if it's used appropriately. However, most people regret overspending with their 1st card and end up having outstanding debt.
As a matter of fact, you should avoid funding your lifestyle with debt. If you overuse your credit card, your debt will pile up quickly because credit card charges high interest rate for outstanding debt and it may affect your future loan applications. So please stick to the budget by recording your expenses with a financial app, you should always live within your means and never take on more credit card debt than you can manage.
Even though building your career is important when you are young, but don’t overlook the importance of savings, investments and insurance. By learning from these financial regrets of others, be sure to start having proper coverage when you’re young and draft out a financial plan the soonest you can.