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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.
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:
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.
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:
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:
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.
Record all your fixed income. If your have varied income, take an average over a 3-month period.
From your total monthly income, substract the total expenses.
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.
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:
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.
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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