The following is a question posted by Joseph:


Here, I’ll work out a scenario with fictitious figures based on the above to share how anyone, especially Joseph, can assess his current financial status and share 3 things to focus on immediately to turn around his financial situation. They are as follow: 


Step #1: Calculate Your Debt Service Ratio (DSR)

DSR measures the proportion of your income that you use to service your debt. For instance, if Joseph has the following debt repayments:


and if Joseph makes RM 7,000 in monthly income, his DSR works out to be 50% as he uses ½ of his income to service his debt repayments. 

So, the first step to take control over your financial situation is to list down your debts, their current outstanding debt amount, their effective interest rates, and their monthly debt commitments. Out of which, you could then easily calculate your DSR by dividing your total monthly debt repayments with your income per month. The formula is stated below: 


Debt Service Ratio (DSR) 

= (Total Monthly Debt Repayments / Monthly Income) x 100%

= (RM 3,500 / RM 7,000) x 100% 

= 50%


Step #2: Calculate Your Savings Rate

Let’s say, in addition to RM 3,500 in monthly debt repayments, Joseph spends a monthly living expenses of RM 2,800. Hence, his total expenses works out to be RM 6,300 and thus, allows him to save RM 700 a month based on his income of RM 7,000 per month. 

As such, Joseph’s savings rate is 10% as he can save 10% of his monthly income. 

Savings Rate 

= (Monthly Savings / Monthly Income) x 100%

= (RM 700 / RM 7,000) x 100% 

= 10%


Step #3: Calculate Your Wealth Ratio 

Your wealth ratio will tell you 2 things: 


1. How long will your liquid assets last if you lose your active income today? 

2. How far away are you from attaining financial freedom? 


From Joseph’s message, it mentioned that he has invested into Amanah Saham, Private Retirement Scheme (PRS) and unit trust. In addition, Joseph shared that he has less than RM 10,000 in his bank account. So here, let’s say, Joseph has:


We find that Joseph has RM 30,000 in liquid assets and made a total of RM 50 a month in passive income from his investment in Amanah Saham. Thus, Joseph’s wealth ratio is 4.8 months. This means, if Joseph stops making money today, his liquid asset will last him for 4.8 months before he runs out of money. 

Wealth Ratio 

= Liquid Asset / (Monthly Expenses – Passive Income)

= RM 30,000 / (RM 6,300 – RM 50) 

= RM 30,000 / RM 6,250 

= 4.8 months 


Step #4: Set Your Near-Term Financial Targets 

From above, Joseph had calculated his DSR, savings rate, and wealth ratio to be 50%, 10% and 4.8 months presently. 

Ideally, he can work on improving his ratios by first setting targets such as:


To hit his near-term target, he needs to do the following: 


a. Increase his income from RM 7,000 a month to RM 7,875 a month. 

The formula is to calculate is as follows: 

DSR = (Total Monthly Debt Repayments / Targeted Monthly Income) x 100%

40% = (RM 3,500 / Targeted Monthly Income) x 100%

Targeted Monthly Income = RM 3,500 / 40% x 100%

Targeted Monthly Income = RM 7,875


b. Save the entirety of extra income made of RM 875 a month

If he does that, Joseph will increase his savings rate from 10% to 20%. 

Savings Rate 

= (Monthly Savings / Monthly Income) x 100%

= (RM 1,575 / RM 7,875) x 100% 

= 20%

c. Hang in There for 5 Months 

First, let’s begin by computing his targeted liquid assets needed to hit 6 months in wealth ratio. 

Wealth Ratio = Targeted Liquid Asset / (Monthly Expenses – Passive Income)

6.0 months = Targeted Liquid Asset / (RM 6,300 – RM 50) 

6.0 months = Targeted Liquid Asset / RM 6,250 

Targeted Liquid Asset = 6.0 months x RM 6,250 

Targeted Liquid Asset = RM 37,500 


Second, we calculate the amount of time Joseph needed to save RM 1,575 (RM 700 (original savings) + RM 875 (extra income)) to grow his liquid assets from as much as RM 30,000 to RM 37,500. 

Time frame 

= (Targeted Liquid Asset – Current Liquid Asset) / New Monthly Savings

= (RM 37,500 – RM 30,000) / RM 1,575

= RM 7,500 / RM 1,575

= 4.76 months


and that’s it. You will be hitting your near term targeted ratios in 5 months. 


Step #5: Find Ways to Make an Extra Income of RM 875 a Month

There are many ways to make extra income in addition to one’s main income. It is not so much about how to make them but rather your motivation on wanting to make them. This is because if you want to make that income, you will indeed put your mind into it, find opportunities, and work on it. That, I’ll leave it to you to think, plan, and do something about it as my purpose of writing this article is to share with you how to assess your financial situation and set yourself a near- term goal to make improvements on it.


Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 450+ Financial Articles featured in KCLau.com in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with KCLau.com. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

    2 replies to "How to Save Money When I Have High Debt Repayments?"

    • Shahredza

      I have learned new and exciting things about financial tips and this is great! I have read a lot of articles about financial tips with catchy titles but in the end, I get confused or have to enroll in a program to get the REAL tips. But this KCLau.com articles gives free tips! Thank you KC Lau!

      • Ian

        Hi Shahredza, thanks for your kind words. Will come up with more good reads. Stay tuned.

        Regards, Ian.

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