In this video we talk about goals that will build a strong foundation for your personal finances.
1. Get Organized
I’ll be the first to admit that this is an area of weakness for me because I don’t really keep track of my spending and income very well.
However, for us to even start with any financial planning we need to know where our money is going.
This to me is the fundamental and should be practiced by everyone who feels like they don’t have control over their finances.
With so many apps out there that we can choose from, its a lot easier for us to track our expenses throughout the day.
Once you do this, you’ll have a better gauge of what you’re spending on and where you can potentially cut to improve your financial health.
This may seem obvious, but we should be cutting the things out that don’t matter to us and watch out for any areas of potential overspend.
I used to use this app called Money Manager to do it and it was pretty easy to use.
Once you put in your daily expenses, you get handy graphs like this to identify your major spending areas.
2. Emergency Fund
Once you’ve got your cashflow organised and manage to budget well, its time to build your emergency fund.
I’ve said this before in many videos in the past but this is to me one of the most critical aspects to personal finance.
This is especially true in times like these where we’re facing an impending recession that could lead to job and income uncertainty.
Even Jeff Bezos who made his wealth off of impulse purchases is warning us not to be to trigger-happy with our spending during times like these.
However even if the economy was good I’d still rank this high up the to-do list.
Ideally, we want 6-12 months worth of our spending as an emergency fund I know this sounds daunting especially since our money still needs to go to other places in this list.
What you can do is start off with a small emergency fund of maybe 1-2 months as quickly as you can.
After this, you could decide to reduce your monthly contribution to the emergency fund if you want to.
This can be used to help with unexpected costs like paying for medical bills, replacing a broken car window, or touch wood paying for necessities if you lose your job.
You can store your emergency fund in places like ASB if you’re Bumiputera or money market funds so you can earn some extra interest while your cash sits idly.
Never try to invest it into stocks, bonds, or any crypto at all because that defeats the purpose of an emergency fund.
For Malaysians, there are options like StashAway, Versa, and KDI.
3. Medial Insurance
Once you’ve got that starter emergency fund going, I’d highly recommend getting medical insurance.
I used to be one of those guys that thought insurance wasn’t so important bcs I could end up paying for nothing.
As its name implies though, its meant to cover us in case something bad happens.
It’ll also stop us from having to go into our emergency funds to pay off any medical bills if an unfortunate accident happens.
One thing to take note off is that the earlier you get insurance, the less you’ll be paying in premiums so its best to do it as soon as you can.
Just like the emergency fund, if you can’t afford such a high monthly payment then you can start off small.
Right now, I’m paying about RM270 a month which I understand can be a bit high for many people especially those just starting their careers.
You can opt for less coverage or go for the medical card only without the investment linked option.
Insurance agents won’t be happy selling that to you and they may even say its not an option but I’m 100% certain it is so look for a better agent that will give it to you.
There are some cons to this but at the end of the day its better to have basic standalone insurance rather than nothing at all because you can’t afford an investment linked one.
So get insured, and have peace of mind knowing that any medical bills you could have in the future will be covered and won’t ruin you financially.
4. Pay off (high-interest) debt
What we should be aiming for is stuff that accrues interest the later you pay it like credit card debt, payday loans, any BNPL related debt, and unpaid personal loans.
These can snowball really quick which will lead to your hard-earned cash just going to paying off interest.
You don’t have to pay off all debt immediately though...
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