Preparing a Budget


After knowing the benefits of having a budget, you are now ready to create your own. All it takes are three simple steps:

  1. List down all your sources of income
    Your salary should be net of EPF, tax and SOCSO deductions.
  2. List down your expenses
    • Your expenses should include fixed expenses, variable expenses and discretionary expenses.
    • Here, you need to ‘pay yourself first’ as savings (minimum 10% of your total income).
  3. Determine your net cash flow position
    • If it is a surplus, well done!
    • Try to keep to that budget of yours in your actual spending.
    • If it is a deficit, revise your budget by cutting back on discretionary expenses until you get a positive net cash flow position.
    • Ideally, you want a surplus to be able to build up your emergency funds.

It is not difficult to create a budget. However, successfully maintaining and sticking to one requires a little more time and effort.

You also need to be realistic and flexible in your approach. If you have a moderate income, do not expect to save a lot of money in a short period of time. Also, there may be times when you need to revise your budget to cater for unexpected expenses.

When you are in a good financial position with cash flow surplus, then you are ready to invest. There are many types of investments, including real estate, stocks and bonds in the market. Returns on these investments vary in tandem with the risks associated. If you plan on being an investor, be mindful of your risk appetite levels before investing.

• Invest only on products that are familiar to you.

Do your homework and make sure you understand the risks involved.

Do not put all your eggs in one basket. Remember, spreading your money across a variety of investments is the key to spreading your risks.

Financial Scams

When investing your hard earned money, be extra careful of get-rich-quick schemes. Such schemes promise high returns with little or no risk. These get-rich-quick schemes are frequently promoted through various channels, with the Internet and short message service (SMS) being the more common platforms. The next time you come across these get-rich-quick schemes, be vigilant and remember that if it sounds too good to be true, it probably is!

Tell-tale signs of financial scams:

• Promise of high returns of between 5% to 20% a month with little or no risk.
• The offer is for a limited period only and you are asked to sign up immediately.
• The scheme is in another country and you cannot check on its office or confirm its status.
• You are asked to give confidential information such as your bank account number.
• You are asked to deposit a small sum of money to meet the processing and administrative fees.

The golden rule is not to be greedy. Always check with friends, family and professionals whether such investment opportunities are genuine or otherwise, even if it is recommended by someone close to you.

Find out more about the offer. Be particularly suspicious of an investment that offers high returns, low risk and is free of investment costs, as it is unlikely that a business venture can provide all these.