Have A Problem With Saving Money? You Are Not Alone
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Do you have a problem with saving money? You are not alone.
It’s the end of the month and you are broke or down to your last RM100 ringgit to stretch till the next payday. Is it time to ask yourself if you have a problem with saving money?
We all have our excuses or reasons for why we can’t save. The only way to overcome this difficulty is to realise and identify the problem first. Then, we should work towards eliminating our excuses and working to find better solutions.
A study by PIDM revealed that 55% of Malaysians have less than RM10,000 in available savings to fall back on when faced with an emergency. One key factor is that many people only save when they can instead of regularly.
In order to overcome this biggest saving hurdle, we must understand the cause.
Here are the top excuses that are perhaps unique to Malaysians for not saving money—and how you can bust them to build your financial stability.
Lack of financial literacy
People with higher financial literacy will assume greater responsibility for their financial well-being. For example, individuals need to determine not only how much to save for retirement, but also how to allocate the retirement wealth wisely. They can learn about budgeting and saving to manage expenses and debt. Indeed, financial literacy is an essential living skill for all of us to build financial security and achieve financial well-being.
However, individuals with low financial literacy are less likely to take calculated risks and invest their money in stocks. Many have also fallen prey to financial scams and lost their life savings.
Take the initiative and start reading up on personal finance and how money works in the real world. Seek help from trusted professionals and don’t be afraid to ask questions.
Servicing multiple debts
Another reason that prevents people from saving money is the continual need to play catch up on their debts. You most likely fall into this category if you owe massive amounts of debts – credit card, student loan, personal loan, housing loan and/or car loan.
The worst part about this position is that it is hard to get ahead. Once you are behind, it makes it that much harder to reverse things unless you make drastic changes.
According to the Malaysia Department of Insolvency, 13 Malaysians are declared bankrupt every day, with the majority of them being under the age of 44. The top reasons cited for bankruptcy are inability to pay off personal loans, business loans and car loans, .
For example, it is highly possible for an average Malaysia earning RM4,000 to service debts worth RM3,700 every month:
| Monthly repayment | |
|---|---|
| Credit card | RM500 |
| Student loan | RM200 |
| Personal loan | RM300 |
| Housing loan | RM2,000 |
| Car loan | RM700 |
| Total | RM3,700 |
Sure, you need to repay your debt. But it’s not the only financial priority that deserves your attention. Your twenties and thirties are your prime saving years. A ringgit saved today can be more than a ringgit earned tomorrow – thanks to the power of compound interest over time.
Low financial incentive for saving
Savings and fixed deposit (FD) accounts do not yield returns as much as investments do. The maximum interest rate offered is only about 4% per annum, which may come with various terms and conditions. If that’s not bad enough, current inflation rate stands at about 1.8% – and this means the effective interest rate we earn from our savings is only 2.2%.
Some may still stick to savings and FDs as they have a low tolerance for risk and is dead afraid that they will lose all their hard-earned money in investments. However, understanding how an investment works can help you take calculated risks when it comes to growing your money through investments. Consider investments like unit trust, REITs and share trading if you are looking for higher yield for your savings.
“I will start saving next month”
This is another huge financial mistake. Procrastination can be very costly; for example, if you save RM100 per month for 25 years at an interest rate of 3% you will accumulate RM44,712. If you chose to start saving later, and you saved for 15 years instead, you would only have accumulated RM22,754. This is the advantage of compounding interest. And this is a really conservative example!
Having the wrong concept of saving
In past years, whenever there is a hike in petrol prices, we can see Malaysians queuing up at the petrol station to fill petrol the night before the price rise. They somehow believe that they are saving money on petrol – which is a misconception altogether.
What happens if a Toyota Vios driver decided to fill up a full tank before a petrol hike of RM0.10 for RON95? Before the price hike, his full tank would have cost him RM87.75 (RM1.95 x 45 litres). After the price hike, it would cost him RM92.25 (RM2.05 x 45 litres). So, he would have made a one-time saving of RM4.50 only.
That may just be enough for a plate of mixed rice with two dishes. Look for real ways to save instead of focusing on the petty things.
Malaysians love to hang out in shopping malls
Not shopping is probably a tough thing to do for most Malaysians. With shopping malls at almost every neighbourhood, pasar malam, warehouse sales every weekend, cutting off spending can be truly torturous.
And this is probably the number one cause for Malaysians’ inability to save money. As Malaysians we are always spoilt for choices, from food, entertainment or branded items. A friends gathering never goes away without an eat-out or sales never swing by without us taking advantage of that.
You can always enjoy a better television or a newer car, but splurging on the latest models can be a very expensive (and unnecessary) habit. You should only upgrade when your current item, be it smartphone or TV, is broken, not every time a newer model comes out. This is a result of the mentality that believes your money is yours to spend (now).
Don’t let these excuses stop you from saving for the rest of your life. If you don’t, you won’t achieve what you want. Or worse, if something bad happens, you’ll be completely exposed financially.
Identify your common excuses that stop you from saving and start taking proactive steps in overcoming your stumbling blocks. Once you have done that, you may find saving money much easier to accomplish. It may not be easy, but it is possible and it is well worth it, because saving gives you peace of mind and financial independence.
