Budgeting 101 for Working Millennials
While starting your first job is exciting, many often neglect the painful consequences of failing to plan, set and keep to a budget during their working life. To recap, most fresh graduates and entry-level executives have been suffering from a decreasing and stagnant purchasing power over the past five years, according to a report on the Nasi Lemak Index by CompareHero.my.
The figure is scary. If the lack of urgency in learning to create, plan and keep to a budget continues, the number of bankruptcy cases amongst millenials may rise further in the near future. As of April 30 this year, 15% of the 429,588 clients seeking advice from Credit Counselling and Debt Management Agency (AKPK) were aged between 20 and 30. Interestingly, 75% of them earned below RM4,000 monthly, and about 52% did not know how to manage their finances. The good news is the power of change is in your hands. 
By creating a budget to manage your personal income, expenses, debts, and other money-related matters, you can then monitor and balance it by making the appropriate changes as time goes by. So, what are you waiting for? Here are five simple steps for Budgeting 101:

1. Break down your budget according to priorities

Make a habit of breaking down your expenses with the 50:30:20 rule, 50 for essential expenses, 30 for financial needs, and 20 for lifestyle choices. Essential expenses include your food, transportation, rent, utilities, and insurance. Financial needs comprise of savings (including retirement), debts, and investments. Lifestyle spending on your clothing, entertainment, food and the like is always the most rewarding but causes most people to end up in financial muddles due to impulse spending and lack of control. 
Also, the recently announced Budget 2017 entitles you to RM2,500 tax exemption for purchase of reading materials, computer and sports equipment, combined as lifestyle tax relief. This also includes gym memberships, internet subscriptions and purchase of mainstream newspapers. So make sure you keep those receipts!

2. Compare everything

Regardless of what you budget for,  always do your homework by comparing different brands, providers and  prices. This way, you will be able to make better informed decisions that suit your needs and finances. For example, our Prime Minister and Minister of Finance,  YAB Dato' Sri Mohd Najib Tun Haji Abdul Razak, recently announced in Budget 2017 that broadband speed will be doubled starting from next year at the same price. So, if you’re shopping around for broadband internet subscriptions, do remember that whatever speed you are paying for will be doubled soon, but with the price staying the same! 
Similarly when it comes to investing, remember to shop around before making your investment decision! In the process of making comparisons, be aware of and consider all related fees such as management fees, exit fees, brokerage fees, clearing fees. 
3. Avoid the debt trap!
As a first-timer in the working world, you may or may not sign up for a credit card. And if you do, spending with your first credit card is indeed exciting. But sometimes, you may lose track of your expenditure and before you know it, you are knee deep in debt! Remember, think before swiping. Always consider your ability to repay debts before purchasing anything, especially products that are expensively priced and allow you to pay in installments. When it comes to the convenience of installment plans, the general rule is that if you need to pay something in installments, you probably can’t afford it. With GST unchanged in Budget 2017, it is important to stay alert of your spending and avoid falling into the debt trap!

4. Opt for a moderate lifestyle

We all crave for a luxurious lifestyle, but the truth is not many of us can really afford. Learn to embrace a moderate lifestyle by accepting and maximising your financial capability. For example, if you can’t afford to own a Honda City, why not drive a Perodua Axia instead?  Being able to afford the downpayment is not a guarantee that you will be able to afford the monthly repayments, maintenance costs and annual insurance fees. The bottomline? Affordability should be the most important factor in living a moderate lifestyle!  


5. Always save some money for emergencies

In life, emergencies can hit you when you least expect it! A flat tire? Last-minute travel? Family emergency? Anything can happen! So, put aside some money from your salary every month for emergencies. If you are saving for retirement (it is never too early to start!), take note that the government is increasing to RM1,000 the incentive given to Private Retirement Scheme (PRS) contributors. To be eligible,  the PRS contributor should have a minimum accumulated investment of RM1,000 over a period of two years.
Happy budgeting!
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