Financial budgeting made simple
It's about crafting a personalised financial plan that adapts to your unique lifestyle and priorities. It's not a one-size-fits-all financial plan.
You might be a young professional or a family with children. Financial budgeting can help you manage your money effectively based on your priorities.
Learn how to budget by setting financial goals
Financial goals can give you a clear purpose to work towards. Start by breaking these down into short, medium and long-term goals.
For example:
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What do you need to purchase in the next 12 months?
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What are your holiday plans?
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Any high-interest debts you want to clear as much as you can?
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What are your medium-term goals (e.g. saving for a home deposit)?
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Do you need a long-term savings plan for the future?
You may have different priorities – remaining focused on your goals can be hard. It's good to break big goals into smaller ones, write them down, and regularly review them.
Create a financial budget
A well-structured budget helps you make conscious choices about how you spend your money. This allows you to prioritise your needs and wants and helps you to live within your means.
By creating a budget, you can:
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Record income and expenses
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Identify areas to cut back on expenses and save more
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Establish new saving and spending habits
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Feel in control of your finances
It should provide a framework for setting financial goals, whether it's saving for a home, planning for a vacation, or building an emergency fund.
You can start in 3 simple ways:
1. Use a spending diary
Do this every day, over the course of a month. Alternatively, you can go through your bank and credit card account statements to review your transactions. Include regular commitments, such as house/room rental or mortgage, and utility bills. Then add non-regular payments, like holidays.
2. Record your sources of income, after tax
Record all your fixed income. If your have varied income, take an average over a 3-month period.
3. Calculate your cash flow
From your total monthly income, substract the total expenses.
Use a financial budget calculator
Use financial budget apps or an online calculator to stay organised.
Input your income and expenses and see how you're managing your money with the Perbadanan Insurance Deposit Malaysia (PIDM) government budget calculator.
Follow budgeting tips to reduce spending
By creating a detailed budget, you gain insights into your spending patterns, allowing you to make more informed decisions about where your money goes.
If your budget indicates that your expenses are higher than your income, you might want to look at ways to reduce your spending.
You could:
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Switch insurance companies or plans, or utilities providers
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Choose activities or days out in nature over those that cost money
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Try going a whole day without spending any money, or one day a week
Embracing budgeting is a proactive approach to manage your finances, which can lead to greater financial confidence. You can also build a stronger foundation for achieving your short, medium and long-term financial goals.
Estimate how much you should save
Everyone's financial situation is different, so there's no specific amount of money you should save each month. Your financial budget will help you determine what you can afford to put aside.
Some people find it helpful to follow the 50-30-20 model, where you aim to spend no more than 50% of your income on the things you need, 30% on the things you want, and 20% goes to savings.
One of the most important things you should budget for is an emergency fund. Find out why an emergency fund is so important, and how to start one.
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