The first quarter of 2024 hasn't been easy on our wallets with the depreciating ringgit against the US dollar, combined with rise in Sales and Service Tax (SST) and revision to aviation service charges effectively on 1st of June 2024; causing many Malaysians to feel the financial pinch.
Some Malaysians are confronted with the urgent need to reassess their financial strategies and implement prudent saving practices to safeguard their economic well-being. This article aims to explore the financial challenges of the current landscape and offers practical solutions for achieving financial resilience in 2024.
Inflation in Malaysia
Malaysia's recorded inflation rate stood at 2.5% in 2023 vs 3.3% in 2022, and the annual inflation rate measured through the Consumer Price Index (CPI) was a seemingly manageable 1.5% in December 2023. While these figures might appear reassuring at first glance, a closer examination unveils concerning trends, particularly in essential sectors such as healthcare, transportation, and recreation, where prices are steadily on the rise. This poses significant challenges and concerns for individuals seeking financial stability within the economic landscape.
However, amidst these troubled times, experts from S&P Global Ratings forecast a promising 9% rebound in the ringgit's value by the year's end. Despite the currency's volatility, Malaysia's sovereign rating remains unscathed, supported by robust external reserves and consistent current account surpluses.
There has never been a more pressing need to make financial cuts, whether due to the growing price of necessities or the economy's unpredictability. Nevertheless, these difficulties present a chance for us to take charge of our finances by starting smart saving practices.
Embrace the 50-30-20 Rule
Adopting smart saving strategies is essential for financial resilience. One such strategy is the 50-30-20 rule, which advocates allocating 50% of income to needs, 30% to wants or discretionary expenses, and 20% to savings and investments. For example, if your monthly income is RM3,000, you would allocate RM1,500 for necessities like rent or mortgage payments, groceries, and utilities. You would then allocate RM900 for discretionary expenses, such as dining out, entertainment, and shopping. Finally, you would set aside RM600 for savings and investments, which could include contributions to retirement accounts, emergency funds, or investment portfolios. This rule provides a structured approach to budgeting, ensuring that essential needs are met while allowing for discretionary spending and long-term savings growth. You can embrace some frugal living practices, such as minimising unnecessary expenses, comparing prices, and meal planning can further enhance savings potential.
Leverage on Compound Interest
Additionally, take advantage of compound interest by being BFFs with it and ensuring monthly contributions to your EPF. Even for those who prefer not to take big risks with investments, contributing to EPF can provide a stable and secure way to grow your savings over time. By contributing a portion of your income to EPF each month, you can enjoy the benefits of compound interest and build a solid foundation for your retirement years.
Leverage on Financial Apps
You might have heard of the phrase “power at your fingertips” once in your life before. In fact, financial app installs grew by 34% in Q3 of 2023 compared to H1 2023. Based on that statistics alone, it's evident that smartphones play a significant role in our daily lives, and fintech apps are growing.
This is where financial analysis tools from MoneyX - FinAnalysis come into play. Designed to empower individuals with valuable financial insights, FinAnalysis offers a comprehensive suite of features tailored to optimise personal finances, manage risk effectively, and identify recommended financial products. All done with your fingertips, reducing the hassle of creating your own financial analysis sheets.
Features that MoneyX’s FinAnalysis can help with:
- Insights into your financial health.
- Clear view of your income, expenses, and savings.
- Tracking progress towards your goals.
- AI-powered suggestions for improvement.
- Informed planning guidance.
- Recommendation of financial products
Automate Your Savings
It is good practice to set up automated transfers to a savings or expense account that can streamline the saving process and remove the temptation to spend impulsively. This means having two bank accounts; one for savings and one for spending. By automating savings contributions, you can ensure that a portion of your income is consistently set aside for future goals, whether it be retirement planning, emergency funds, or investment opportunities in the future, which simplifies the savings process.
Incorporating Personal Financial Goals
In addition to general savings strategies, it's essential to align your savings efforts with your specific financial goals. Whether you are saving for a dream vacation in a year, a down payment on a car in a few years, or a comfortable retirement decades down the line? Each goal has a different timeframe and requires a different savings approach. For instance, if you've recently invested in property, allocating funds for renovation and furnishing costs should be prioritised. These expenses can range from as low as RM20,000 to RM70,000 and above, depending on quality and scope.
In conclusion, navigating the financial challenges posed by the ringgit's decline and inflationary pressures requires proactive measures and strategic planning. So, start saving smart and remember to make use of the tools at your fingertips.