I have been blogging for more than 4 years as part of capturing & sharing my retirement & financial independence process with you. I have written over 250 posts in these 4 years but never about my personal finance rules. Although it is part of my daily life & activities, these rules have guided me to achieve my financial goals while being able to enjoy my life at the same time too. One thing I realized in my whole process towards financial independence is that it gets easier & comfortable over the years as I am used to it but at the same time, my retirement fund has grown from negative into a chunk of funds that I can use when I am ready to retire.
What Are My Top 11 Personal Finance Rules?
1. Save Before You Spend This is the basic rule of thumb for any financial blogs, books, and advice that you will always hear on personal finance. It is relatable to me because I used to spend before I save in the early part of my life. I was never able to save any money from that. When you save before you spend, make sure you make that money hard to access such as keeping the bank card somewhere or opening an inconvenient bank account that will make your withdrawals inconvenient. If you are disciplined enough, those steps are not required.
2. Record Your Spending There are 2 usual ways that many people are doing it such as using an excel sheet to only record macro expenses or using an app to record all your expenses including micro expenses. I personally use a mobile app that records the majority of my expenses which is as accurate as 98% of my spending & investments.
3. Invest At Least 20% Of Your Income Ideally, you should invest at least 20% of your income but it also depends on how much you actually earn. If you are earning less than RM2,000 a month, investing 20% of your income can be challenging especially after EPF deduction. With the current situation where everything is expensive, it can be really challenging to invest 20% of your income if you are earning less than RM2,000. For those who earn more, it is highly recommended to invest as much as possible for your future. The more you invest, the better it is for your future but make sure you are investing in those platforms that are approved by the Securities Commission of Malaysia.
4. Review Your Spending & Investments Each Year It is important to review your spending & investments each year to ensure that you do not overspend or invest in the wrong investments. You can also review it every 3 months depending on what suits your best. By reviewing both your spending & investments, you should be able to optimize it to make it better.
5. Find Ways To Save From Existing Spending The reason why I am splitting this from reviewing spending by quarter or yearly is that we can have an instant savings by just making some small changes. For example, by using Grab Delivery, I can save money from driving & parking while getting free deliveries by using a certain promo code. Or, by purchasing selected items during the sales period in Shopee, I get to save more than buying them at a physical shop.
6. Have Emergency Savings Ideally, we should have at least 6 months’ worth of cash savings based on our monthly expenses. From the lesson that I have learned from the pandemic, 12 months should be ideal just in case a situation like the pandemic occurs again. But as a start, you should have at least 3 months & slowly build it up into 6 & eventually 12 months’ worth of emergency savings.
7. Buy What You Need Not What You Want Most of us have the habit of browsing on platforms such as Shopee or other shopping platforms to just “see” some stuff. How often do you buy items that you do not need from those platforms? It happened to me when I was having bad control over my finance & since I learned my lesson a hard way, I started to learn to buy stuff that I truly need. It is normal for us to shop sometimes but you can plan your spending & buy it during the sales period or set it as a goal. Or else, if you truly want it, give yourself a 2 to 3 days cooling period & revisit it again once you are calm.
8. Reward Yourself Within Your Limits There are times when we need to celebrate some occasions or memories with a reward for ourselves. It can be a gift for ourselves, a good meal, or even a holiday. You should always reward yourself within your spending limits or budget. Whether you can earn the money back in a few months to come, do not get yourself into those habits of spending in advance unless you are planning it well.
9. Do Not Get Yourself Into Any Long Term Or Heavy Debt Credit card debts without an actual plan to pay them off are definitely a no-no. If you are looking to purchase a car & commit to a 9-year loan, you should reconsider buying a less expensive car & commit to a 5-year loan instead. As for your house, you can consider a flexi loan where you can borrow for a period of 35 years but those flexi loans allow you to pay it at a minimum or you can pay more than the minimum to cut short the payment period.
10. Don’t Be Overly Entertained Social life or after-work entertainment can be your financial worst enemy. Some of us have our usual weekend meals & drinks with friends or we have a monthly subscription to platforms such as Netflix. All those little expenses can look small when you are spending them individually, but when you combine & sum them up by end of the month, the numbers can be really high. Find ways to reduce it by going out less or relooking into your subscriptions to save some money from it.
11. Plan Your Retirement & Financial Independence Early Some of us may think that you should only plan it when you get older & it should not be now. I personally think that you should start planning early & executive your plan ASAP by savings or investing whatever amount you can afford & slowly increasing it over the years. With my years of planning, I realized that my lifestyle has changed over the years. Despite me planning it from my late 20s to date, my spending lifestyle has changed over the years. The thing about life is, we can’t predict the future but we can have a dream & plan how we want it to be. There will be some changes from time to time but it is best we visualize how we want our future to be & plan accordingly. Even if you have some slight or major change in your plan, you may have saved a good amount of money since you start it early. Also, there is never too late for those who did not start early as long as you are willing to start now.
Conclusion:
Despite me reviewing & having changes to my life goal each time, one particular goal remains the same which is to retire early & be financially independent. I find that these guides have helped me not to only optimize my finance, spending, investments & goals, but also to enable me to enjoy my life while going through these processes. I hope these tips will able to guide you as well.
OSS!
You can also check out my latest YouTube video on How To Invest Like Warren Buffett:
