Sua is attached to the number one unit trust company which has won a multitude of awards, and her credentials include young clients who have managed to purchase their own homes at the age of 24 and older –retired – clients who enjoy multiple sources of income from savings and investment plans. Read her full profile here.
Q: I have just started working, I spent all my salary every month. I don’t seem to be able to do any saving. What can I do?
A: It’s good that you have observed difficulty in managing your own money at an early stage. What I would encourage you to do is to list down all your expenses. For a start you should allocate aside at least 20% of your net pay as savings. Therefore, only 80% of net pay can be spent. Go through the expense list and identify those expenses you can do without or those expenses that can be reduced so that your total expenses does not exceed the 80%. Keep track of your cash outflow on weekly basis.
Q: My parents always encourage me to save some money, but I feel that I am still very young and I don’t need to start savings as yet. I shall be able to catch up my saving when my salary is much higher. Isn’t it right?
A: The younger to start saving the less stressed you would be due to the compounding effect of money. Suppose if you invested RM1,000 today in an investment that gives 10% per annum return. In one year, that account would be worth RM1,100 [RM1,000 + (RM1,000 x 10%)], yielding a profit of RM100. However, in year two, that same initial investment would be worth RM1,210 [RM1,000 + (RM1,000 x 10%) + (RM1,100 x 10%)], yielding a profit of RM110. And in year three, the same RM1,000 would be worth RM1,331, yielding a RM121 gain. By the end of year ten, the initial RM1,000 investment would be worth RM2,593.
No doubt you may be able to catch up in your savings at a later stage. But you will have to save a lot more to achieve the same target. For example, with a 10% per annum return investment, if you start saving RM300 a month today for 10 years, you shall to able to achieve around RM61,000. If you only start saving 5 years from now, to achieve RM61,000 in 10 years from now, you will have to save around RM790 per month. From the scenario above, you can see that you need to save more than double if you start saving much later.
