It’s safe to say all of us have made mistakes when it comes to money, some are big one-time mistakes and some are often but small blunders. From overspending on food, to not saving for retirement, many wish they had handled their money differently. Don’t blame the fact that we never learned financial literacy skills in school and while we can’t undo past financial mistakes, there are always ways to fix these slipups and improve your finances for the future.
We asked around, here in Kuala Lumpur, and these were the most common financial regrets mentioned:
- not saving any or enough money, for family or retirement
- taking on get-rich-quick schemes
- regretting shopping, eating out or entertainment purchases
- not investing at all or not investing sensibly
- regret taking on additional debt from fancy weddings or expensive holidays
Generally, we found that men tend to regret most of not investing their money, while women’s biggest financial regret is not saving. A large group of people said their No.1 money mistake in the past year was not having emergency funds.
Without savings on which to fall back on, you could be in trouble if there’s an unexpected situation. It’s a general rule of thumb for everyone to have an emergency fund. Ideally, you should have between three to six months’ worth of income to cover any costly surprises like home damages, medical expenses or if you happen to lose your job.
To build your emergency budget, set side an amount you can afford to save every month. Then automate part of your salary to go into a separate account every month. Over time, you can build up your emergency fund for a greater sense of financial security.
Malaysians are a fairly lucky bunch to have a government mandated retirement savings scheme, the Employees Provident Fund (EPF). You’d be surprised that many think EPF savings would be adequate but EPF did state that only 18% of their members have a minimum savings target of RM228,000, to have a decent life after retirement.
We found that the minimum figure now quoted by financial planners when they advise clients looking at retirement, is that at age 60 they must have at least RM1 million in savings. If they do not have that amount, be prepared to live very frugally. So we strongly suggest getting your retirement portfolio in order before you regret even more. The risk of “pensioner poverty” is frighteningly real, so you’ll be much better off the sooner you start.
Don’t believe that you can get rich quick! Investing, by definition is high yield over the long term (that is the trading of your money today for a lot more money in the future). Operative word being long term. You need to invest your money. It simply doesn’t make sense not to. Even if you only invest 5% of your money, it would still be worth it.
There are various options for investment. Did you know you can even start investing in gold for a mere RM1? So, start gathering your available options and start small. Gain enough knowledge and experience to move on to bigger investments.
One big tip we can advise you when it comes to overspending, make a “monthly regrets” budget. A monthly regrets budget is essentially a check-and-balance system that allows you to track your overspending and compensate appropriately.
For example, if you splurged at dinner and spent RM100 on the meal when you only meant to spend RM40, you’re now RM60 in the red, and you’ll need to save this RM60 from other expenditures. You could make your own lunch and bring it to work or not buy the latest trendy fashion that everyone is wearing now. The monthly regrets budget will give you room to make mistakes and overspend each month by giving you a system to compensate for these oversights.
Young working adults might find it especially difficult to limit their spending. If you are in your 20s, you’re typically considered “in the prime of your life”, filled with temptations that can lead to spending too much on non-essentials. This certainly hinders your retirement savings and also the ability to save for large purchases, such as a down payment on a home.
To protect your wallet, we recommend following the “50/20/30 rule” of budgeting. The rule states you should spend only up to 50% of your income on essentials, such as housing and food; 20% on financial commitments, such as debt repayments and savings; and 30% on lifestyle choices, such as vacations. We understand that social pressures also influence your spending. From the latest phones, to the latest fashion trends, the next time you’re considering a pricey purchase, take a moment to think if it’s something you really need.
Ultimately, you need to LEARN from your mistakes. Figure out WHY you made that decision – determine what kind of emotion were behind it, and why you didn’t make a different choice. Then next time you will do better. And don’t let fear of making mistakes keep you from making decisions with your money.
You will never have every piece of information needed to make a truly “perfect” decision but PROGRESS can be made from every single decision you make – no matter what the consequences are.
This article is contributed by Kee Hong, from CompareHero.my. CompareHero is your go-to website for finding, comparing, and applying for credit cards and personal loans products in Malaysia. Their service is free, easy, and completely unbiased. In addition, you may also find useful personal finance articles and money saving tips to help you better your financial health.