Learn how to distribute your money wisely before starting your investment journey!
It is shocking to find that 70-80% of working adults have credit card debts.
The average U.S. household with revolving credit card debt has an estimated balance of $6,849 as of September 2019. Recently, we read from the newspaper that more and more Malaysian youngsters are getting into a lot of financial problems due to credit card debts.
Watch Out your credit card debt
Before starting your investment journey, pay off your credit card debt first because your credit card has the highest interest rate you could possibly imagine. You can’t find any investment that returns better than your credit card interest. PAY OFF YOUR CREDIT CARD DEBT before starting investing!!
Bankers would tell you one thousand and one reasons for you to have what they call ‘auto-debit’ or ‘standing instruction’. They advise you that for your convenience (or maybe their convenience) , they would debit your saving/current account to pay off your home mortgage, car loan every month.
You should not get yourself trapped by signing the agreement, don’t you find it is ridiculous for the bank to ‘get a taste’ of your hard-earned money every month before you even have the opportunity to hold the money?
Pay yourself first- You are the master
Therefore, always remember to ‘pay yourself first’ every month after you get your paycheck. I would always suggest you distribute your salary every month by saving 10% of your salary as an ’emergency f
If you tell me you can’t even save 10% of your saving because you have to pay your debt. I must say that you are the type of person whom I call ‘ Generation X ( X money- No Money!) who is living in credits’.Cut down your debt and never try to buy things using your credit card anymore!
It is shocking to find that 90% of us like to buy things we actually do not need. If you are earning two thousand a month, do not live in a house that costs you one thousand a month to pay as home mortgage. Always take into consideration your income before spending a cent!
After you have saved enough for your emergency fund, then you can increase your investment to 30% to even 80%. The more you save, the faster you achieve your financial independence.
A lot of people ask me should they pay their debt first or invest first if they have extra money.
Make sure you have enough money in your ’emergency fund’ first before deciding what to invest. Settle your loan with the highest interest unless you can find an investment with a higher return than your loan.
For example, if you think you can get a return of more than 18% a year by putting your money in stock markets, then you can delay paying back your credit card debts since banks charge you 18% per annum for your credit card debts.
Distribute your money wisely
I have the habit of investing 30-40% of monthly income into long term investment. If you are only saving 10-20% of your monthly income, think of ways how to save more.
Cut off all the small recurring daily expenditure that you think is small. A cup of coffee, a pack of cigarette or even a bottle of mineral water can make a dent in your finance when you add them up after months and years.
Saving and distributing your money wisely is your first stepping stone towards financial independence!
Excellent insight. Out of the 40% saved monthly, where do you park the savings? ETF or do you invest in stocks personally via Rakuten et al? What are REITS by the way? Thanks in advance
Dear Saiful,
I used to put some money in Malaysia and Singapore stocks especially banks and REITs but I stopped doing so 6 months ago. Instead now I put all my monthly savings into stock/bond ETFs according to my desired allocation 85/15%. About the REITs investment, soon I will be writing out common mistakes investors make when they invest in REITs.