Plan for the future

by Shelton on December 26th, 2015

filed under House Loan

About 20% of a workers salary is used to pay for petrol or public transportation. If the worker has a house loan, another big chunk is taken away, Selvaraj illustrates.

He also proposes that the Government set up a financial education commission to build financial knowledge and skills among young people.

Selvaraj says people should also track their expenditure so that they know where their money goes and can cut back on unnecessary items.

Credit Counselling and Debt Management Agency (AKPK) CEO Azaddin Ngah Tasir says workers should voluntarily tuck away about 10% of their salaries for long-term savings, on top of the 23% set aside from their monthly wages by the EPF.

This means about 30% of a persons monthly salary is for the future. AKPK also recommends against people having monthly loan repayments exceeding 40% of their monthly income, he says.

Azaddin observes that current lifestyle pressures are different from the past, such as the demand for expensive coffee among the younger generation today.

Last time, earning RM5,000 a month could provide a comfortable life, but now the same amount is easily spent on a variety of costs. Loan repayments for cars, houses and rental of properties are also higher today, he says.

Based on data from the AKPK in September, poor financial management is cited as the top reason for debt problems among Malaysians.

This constitutes 22.1% of total default or debt problems, followed by a failure or slowdown in businesses at 16.7%. High medical expenses (14.2%) is also another factor while other reasons are losing control of credit card usage (10%), retrenchment (9%), and the high cost of living (7.4%).

Malaysian Trades Union Congress secretary-general N. Gopal Kishnam attributes the lack of savings among young Malaysians to the relatively low salaries paid here.

The Government needs to come up with proper policies to increase wages so that there is enough for expenses and savings, Gopal Kishnam says.

He says a large number of workers withdraw their salaries within a few days of it being banked into their accounts to pay off loans and other expenses.

Having EPF savings alone is not enough. If our income is not even enough for survival, how are we going to save? he questions.

For Malaysians to have more disposable income, Malaysian Employers Federation executive director Datuk Shamsuddin Bardan suggests that there should be a reduction in monthly EPF contributions by employees.

Maybe for the time being, the percentage of income that goes into an employees EPF account could be reduced. Hard times require hard measures, he says.

Shamsuddin suggests that the Government also allow employers to contribute more EPF savings for their workers instead of capping the limit at 19%.

Some caring employers contribute up to 19% to their workers EPF accounts. But why should it stop at 19%? If some companies want to give more, why stop them? he asks.

Independent financial adviser Yap Ming Hui stresses that one of the most important habits that Malaysians should have now is to stick to a proper budget according to ones income. He adds that a high income does not guarantee a debt-free life.

Some people believe that just because they earn RM20,000 or RM30,000 a month, they will not have a problem. But your expenses can still exceed your salary if you are not careful, he says.

Yap says there is too much temptation for Malaysians to spend on, especially for Gen Yers.

Sales and promotions are quite frequent here. A lot of expensive and attractive items are in the market, like smart phones.

If we couple that with the convenience of a credit card, it is very easy to overspend if you do not control yourself, he says.

A good rule of thumb that Yap believes every Malaysian should have is to save something, no matter how much or how little one earns.

Such habits should be cultivated from young to counter the temptation to spend, he says.

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Measures to help EPF members

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