A 21st century fact: most of us are in some sort of debt. Home mortgages, credit card balances, student loans- these are the realities of modern life, especially for hard-pressed parents of young children! Without proper management and financial planning, these debts can easily pile up, and spiral out of control.
Add in the effects of the pandemic, plus a high inflation environment- and the money struggle can be painfully real. In fact, with most of the pandemic government aid packages ending (or having ended) this year, many Malaysians aged between 30 to 45 are expected to go bankrupt.
Financially stressed and looking for some direction? Read on as Julian Ng, the co-founder of Akru, Malaysia’s first homegrown robo-advisory platform, gives his expert advice on how to manage your debt and money struggles in the second installment of our makchic x Akru Financial Wellbeing Series.
Financial Wellbeing: Part 2
Struggling with Money
Debt laden, with finances messier than the kids’ playroom? Julian shares his thoughts on useful repayment strategies and ways of streamlining your accounts.
“Is debt consolidation a good idea? Should I do it via a bank or a third party agent?”
Julian: Pay off expensive debts, like credit cards or ah long [loan sharks]. (Never borrow from ah long!)
Do not pay off cheaper loans on appreciating property, as the spare cash can be invested for higher returns or to establish emergency funds. It’s also a good idea to use the EPF account to pay monthly mortgage. This will free up cash flow while the property returns more or less compensate for the withdrawn EPF funds.
Car loans are also ok if you’re financially tight. In that sense, no third party agents are needed.
Last year, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz revealed that 40% of Malaysian millennials were spending beyond their means- reiterating the need for many to rethink their spending and saving habits!
“How do I manage my savings when I have debt (credit card or loans) to clear? Do I really need to keep a credit card or should I go without?”
Julian: Do not take out a loan on your credit card, unless it’s really needed and very short term.
If you have credit card debts, the first priority is to pay them off rather than save or invest. Credit card interest rates surpass investment returns, so you would have made money by paying off the debt.
Credit cards are useful for points accumulation and other advantages. Compulsive spenders should cut up their credit cards and use a debit card instead. Debit cards are linked to bank accounts while offering the same credit card conveniences, so no more spending on credit.
We buy cute little piggy banks for our kids with the aim of instilling good saving habits. They drop their shiny little coins in, and over time, that toy they’ve been eyeing is theirs to bring home. If only things were so straightforward in real life!
Julian speaks on issues related to savings (in the real world):
“How should I save if I don’t have enough every month?”
Julian: Nowadays, you don’t need a lot of money to save or invest. As little as RM10 will allow you to have a diversified portfolio. Point is, whatever amount you can scrape together is investible.
However, if you only have enough money to survive, don’t invest. Spend the money to put food on the table, or a roof over your heads, and think about how to save costs and have career advancement.
#makchicmumtribe, we know how money struggles can affect our mental health, our relationships, and ultimately our quality of life. We truly hope that this second session of makchic’s Financial Wellbeing series with Akru will help alleviate financial anxieties by equipping you with practical guidelines on effective ways to handle debt.
For those interested in growing your money further, check out our first Financial Wellbeing session on “How to Invest in a Pandemic“.
Stay tuned for next month’s session as well- and find out all about financial planning and budgeting with (and for) the little bosses in the house!
This is a sponsored post by Akru.
Akru is Malaysia’s first homegrown robo-advisory platform, providing an always-on, easy-to-use product in your pocket, and empowering you to invest in diversified portfolios with exposure to global investments. If you are interested to know more about how Akru can help you begin your investment journey, sign up here.
Get RM20 in your account by using our MAKCHIC20 promo code when you start investing with Akru. Using this code helps support makchic.com.
Disclaimer: makchic may earn a small commission through the referral link above, without additional cost to you.
