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Budgeting 101

Are Malaysians Saving Enough?

“If you fail to plan, you plan to fail”.


As the old saying goes, “If you fail to plan, you plan to fail”. The same applies to saving enough to have a comfortable retirement.

The Habit Of Saving

In order to save enough to retire comfortably in our old age or build up a sufficiently robust investment portfolio that could generate a steady stream of passive income, we need to plan our finances wisely and start cultivating the habit of saving monthly.

Read Also: Would It Make Financial Sense For A Malaysian To Work In Singapore?

The Importance Of Discipline

In this day and age, many temptations, commitments and societal pressures might pressure us into spending more and derail us from our plan to save regularly.

Every time Apple launches a new version of the iPhone or whenever we see our friends upgrading to a newer and better car, we might be tempted to do so ourselves. This cancels out our hard-earned savings again and again in the process while steadily increasing our monthly commitments to finance big-ticket items.

Hence, it is extremely important for us to be disciplined enough to resist such temptations and ensure that we save enough monthly and only spend on luxury items when we have already saved what we plan to save and still have extra money to spare.

If there isn’t, then buying those luxury items would just have to wait.

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“Sedikit, Sedikit, Lama-lama Menjadi Bukit”

We should not underestimate the power and long-term effects of being disciplined in our habit of saving monthly because it can add up to a lot over the span of years. If we take into consideration the effects of other factors such as compounding interests, the effects on the amount of wealth we would be able to accumulate over time would be even greater.

Likewise, upgrading our car to a slightly better one with a slightly higher monthly loan repayment might not seem like much at the moment, but could add up to tens of thousands of ringgit in lost savings over the years.

Set A Target

Have a fixed target of how much we would like to save every month, year and by the time we retire. Start by first deciding on how much monthly passive income we would like to have by the time we retire, how much capital we would need to be able to achieve that, how much we would like to spend on vacations and luxury items each year and work backwards from there.

That gives us a fixed goal to work towards every month and help us in being disciplined in saving and growing our wealth.

Proportion-Based Vs Amount-Based

Nowadays, many financial guides recommend a proportion-based savings plan where we are supposed to set aside a certain proportion of our monthly income as savings. While that is a great guide, it is also important for us to consider whether that proportion is sufficient for us to achieve our targets in the long run and be enough for our retirement.

The reason for this is because everyone has a different income level. If our income happens to fall on the low-side, then following those proportions strictly might still result in us not being able to save enough for retirement.

In that case, we would need to sacrifice other expenses by taking public transport instead of buying a car, not buying such an expensive smartphone or eating out less. Either that, or we would have to think of ways to increase our income by starting a side business or improving our skills so we can get a higher paying job.

Hence, we should always set our savings target from a target amount unless our monthly income is sufficiently high to ensure saving a standard portion of it would be sufficient for our retirement.

In any case, we should always try to save as much as possible and invest our savings wisely by building a well-diversified portfolio so we can continually grow our wealth.

Reduce Debt And Commitments

At the same time, it would also be good to reduce unnecessary debt and financial commitments whenever we can to free up additional capital for other purposes.

Read Also: How Much Do You Need To Save To Retire Comfortably In Malaysia?

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