Experts: Youngsters should manage their income, cut down debts
Expert financial advisors are proposing that young people in Malaysia need to alter their financial habits in order to escape the burden of debt. The focus should be on living within one’s means and saving money to prepare for unforeseen circumstances.
FA Advisory Sdn Bhd financial consultant Dr Rajendaran Vairavan suggested the 50/30/20 rule as a guiding principle for personal finance management. This approach involves dividing one’s salary into 50% for necessities, 30% for discretionary spending, and 20% for savings and debt repayment.
Rajendaran also pointed out the importance of regularly reviewing and adjusting one’s budget as financial circumstances change. In cases where debt repayment is a challenge, a more aggressive approach of devoting 30% of income to debt repayment may be necessary.
According to the financial consultant, overcoming high debts such as credit card bills and car loans requires proactive steps and disciplined financial management. This includes assessing the full extent of one’s debt, creating a realistic budget, and prioritizing debt repayment by focusing on high-interest debts first.
Rajendaran also advised against accumulating additional debt while working towards debt repayment, suggesting that credit cards should be used sparingly, if at all.
As for Rajendaran’s golden rule of finances, he believes that individuals should learn to live within their means and prioritize saving and investing for the future. However, economics expert Prof Dr Chung Tin Fah of HELP University emphasized that discipline is crucial in managing finances amidst the temptation to spend. He recommended putting aside 10-20% for savings as well as making lifestyle changes to reduce unnecessary spending.
By making frugal living a lifestyle, Malaysians can ignore social pressure to keep up with others’ spending and focus on savings as the target, according to Dr. Chung.
