Different types of insurance offer different types of savings and benefits. When it comes to choose a policy, always:

1. Consider a policy that best suit your life stage
2. Understand the scope of cover provided under the policy
3. Be aware of the conditions stipulated should you need to switch policies

Good To Know:

You can relief of up to RM6,000 per year an ordinary life policy. This is inclusive of any contributions you have paid to EPF or any other pension scheme.

Life Insurance

Protects you and your dependents should you no longer be in a position to earn an income, either due to illness or death. Your beneficiaries will receive a sum of money determined by the scheme that you take up. The coverage period for life insurance is usually more than a year, which means you will have to make premium payments either monthly, quarterly or annually.

General Insurance

Protects you againsts losses and damages (to your home, health, car, etc) other than those covered by life insurances. The coverage period for most general insurance olicies and plans is usually one year, and premiums are normally paid on a one time basis.

Education Plans

Are targeted at new parents concerned about providing the best education possible for their children. One of the first things you can do as a young parent is speak to various insurance companies to assess the plans they have for children’s education. Another possibility is to speak to your bank to see if it has specific savings accounts that cater to the future of your children’s education.

Words of wisdom:

There are many different insurance companies offering very attractive packages. Shop around before making any decision on which insurance policy to settle for.

There are two major types of investment-those that are almost risk free(but will not make your money grow much) and those that carry some element of risk (but also have the potential to provide you with high returns). For the purposes of this blog, we will concentrate on the first, savings type investment here, More high risk investment will be dealt with in the following chapter, Making Your Money Grow.

All financial experts will tell you that the most practical and effective way of ensuring that you have enough to look after your needs at different points in your life is to place your money in different types of investment. Diversification gives you both security as well as the benefits (eg: high returns) of higher-risk investments.

Please have a look at my next posts on the investment vehicle that being offered around.

This is one of the most important aspects of living frugally. Analyse your spending habits. Are you buying things you don’t need? One way to distinguish between needs and wants is to have a “waiting period”. If you are able to do without this item during the waiting period, chances are you don’t really need it. And if you don’t really need, and can’t afford it, DON’T BUY IT !!

Pay With Cash

Life without a few unnecessary pleasures would be grim. But if you’re someone who has not been able to save up to now, you can’t afford to spend too much on luxuries. And you certainly don’t want to have to borrow for these. Make it a rule that all “wants” have to be paid for with ready cash-and only after your needs (which include setting aside money for an emergency fund and for retirement) have been taken care of.

Have an “allowance”

If you can count on regular income, and have enough after paying for all your needs, you can give yourself an allowance. This allowance is for you to spend on all life’s little luxuries - that lovely spa treatment or beautiful designer dress. But once that money is gone, it is gone. This means, for example that you can dip into your allowance only if you have some left over from the previous month. You cannot use this month’s allowance until you have paid for all of this month’s necessities.

Use a list

Before you do your weekly shopping, go through the house and make a list of things that you need. When you go to the store, buy only what is on the list. Shopping with a list can help you cut down on impulse purchases.

Be creative

One of the best way to develop new habits is to replace the old ones with better ones. Think of the expensive things that you do, and replace them with less expensive options. Instead of eating out, plan a special dinner that you make at home. Allow yourself more expensive ingredients, or ingredients for a more exotic meal than you would normally eat. It makes the dinner special, but doesn’t cost nearly as much as going to a restaurant.

Conserve Energy

Heed the call of environmentalists and be careful with the way you use electricity at home. Airconditioners, especially, are money guzzlers so use these sparingly. If you are used to have an air conditioner on all night, try cooling your bedroom for a couple of hours, then swicthing off and having a fan on instead. Never leave lights on when nobody is in a room. Making these changes, small changes, can make a big difference.

Get fresh

There’s no comparison between the freshness of vegetables, meat and fruit you can get at a wet market and that which is available in a supermarket. What’s more, the wet market offers prices that are much lower. if you are organized, you can do your fresh food marketing once a week. Go in the morning and you can even get cheap and healthy lunches (like popiahs) while you are there.

Frugal living is a lifestyle

It may take some getting used to, but if you take a hard look at your needs and wants, you can change your habits so that you are living in a way that allows you to save while providing comfort and security to you and your family.

Most grandmas will tell you to save at least 10% of your income. Let say you earn RM3,000 per month that works out to RM300 a month. You may think it’s much.

But you will be suprised to see how that monthly RM300 can grow, especially if you put it into an investment that offers a good rate of return, such as mutual fund expecially funds that offer a compounding interest.

Living Within Your Means

Living for the day has its attractions. The fact is, however, that we all would like to enjoy nice long lives. But in order to have nice long lives, we need to be able to support ourselves financially. That means having to save. if you are young now and have just entered the workforce, chances are the temptation to spend all your salary on clothes, eating out, going on holiday, and buying yourself a car will be too strong to resist. Understandably too!

But if you put aside any of your present income, you will not be able to cope with unexpected expenses, and your money will not grow sufficiently to meet your future needs. These include:

Buying your own home:

Chances are, you will want to have your own home. You may need to get a mortgage for it, and will have to pay this off. Then, once you move in, you will have monthly bills for electricity, water, Astro, etc, plus also food and laundry to take care of..

Starting a family:

When you get married, if your spouse is also earning and both of you pool your resources, your expenses may go down a little. But having children increases it dramatically again! You need to plan for: your gynae’s bills during pregnancy, basics for baby (milk, food, diapers, clothes, cot, car seat, etc). And then comes their education.

Education:

Today, everything from playschool to university carries a significant price tag. A large number of Malaysians are completing their tertiary education overseas, and you need only to go to the websites of some of better known universities in Australia, Britain and the US to get some idea of what the fee structure is like. To cope with their expected education expenses, more and more new parents are starting an education plan for their children from the day they are born.

Retirement:

No matter how much you love your job, you will have to retire some day. This may seem like something too far in the future to worry about now, but sooner you start saving for retirement, the more comfortable it will be. What’s more, advances in medicine and public health mean you are likely to live longer than your mother or grandmother, hence will need more money thatn they to see you through your golden years.

Emergencies:

All of us will have unexpected expenses in the course of our lives. This could be anything from needing a new roof for the house to medical expenses or a job layoff and sudden loss of income. You need to put aside for these emergency to avoid going into debt.

-Ivanka Trump-

daughter of Donald Trump, who works in her father’s conglomerate.

They learnt that having children is not cheap! Both realized that if they continued their current way of life, they would not be able to afford a good education for their little ones; neither would they be able to retire comfortably. 

So both sat down to review their monthly expenditure. they found that there were many items that they could cut down on, such as limiting themselves to one holiday a year rather than the three they were taking.

They also decided to sell off one of the three cars they owned. By doing just this, they found they had RM5,000 extra each month to put in savings and investment.

By telling this morale story, you should now change your lifestyle. Don’t eat at Posh restaurant everyday.

Once they are old enough to accompany you to the supermarket or any other shop, let them know beforehand that you are out to get groceries, or a present for Auntie N, and that you are not going to buy them anything. If you keep doing this, and stick to your guns, your child will soon realize there is no point in kicking up a fuss about that lillipo or toy that he feels he just has to have!

As soon as your children are old enough to handle pocket money (generally when they enter primary school), you could start teaching them to handle their own money by giving them a weekly allowance.

Let them know that you will buy everything they need, and that their pocket money is for them to use on the little extras that they would like to have. As they grow older, they will probably want computer games and other items which their pocket money will probably not be able to pay for (unless they saved for years).

At this point, you could introduce them to the idea of earning money. This they could do, for example, by taking additional chores around the house, or by doing very well in school.

• You are using your savings to pay off current bills; savings are savings, they should not be touched. Your bills should be paid for by your monthly income
• You are often late in paying bills or are paying them only after receiving the warning notice
• You have to take new loans to pay for your existing loans
• When you are out shopping, you buy things that you know you don’t really need
• You are borrowing money from friends and family members and at the end of each month, you find that you owe them more money than you can
• You begin to delay or defer your loan repayments

If you stick to your budget, you should not have to resort to any of the habits above. Not only will you have a clean bill of financial health, you will also be in a position to start planning for your future needs.

• We don’t keep track of our expenses - for this, we need to keep all pur bills and receipts, and enter them into a log either daily or at least weekly. Left too long, we will start losing and misplacing our bills, etc
• We were unrealistic in making our  budget, and then got frustrated when we kept spending more than allocated. To prevent this from happening, don’t go overboard unnecessarily in keeping costs down.
• We allow ourselves luxuries over and above what we have budgeted for, telling ourselves that we will simply cut our expenses the following month. As tempting as this is, don’t do it. Especially with luxuries. If there is something you want which you cannot afford now, you need to save enough before getting it, rather than the other way round.

Adjust it accordingly to suit your needs. This is just a sample. You can create better than this. Check it either it balance or not?

Eating out, for example, is something we all enjoy. But by just cutting down on eating at an expensive restaurant once a week, you can make a difference to your financial situation.

You need to be brutal and keep slashing your expenses until you not only have matched your income, but are actually left with extra for emergencies, plus some to save and invest. Without saving and investing, your money will not multiply the way it could, and should.

But more about this in later chapters.

Tips : Open up Google and search for available sample budgets for free on the net. Those that come on Excel files are practical because they do the maths for you.

Don’t worry - it is the same for everyone, even Bill Gates or Warren Buffet. The sample provided above is just a sample. You may need to modify it to better suit your circumstances. For example, if you don’t have children, remove the whole section on kids’ costs.

On the other hand, you may have elderly parents staying with you, you will have related expenses. This is important part in making a budget is to think of all your expenses and list these down.

Tips:

• When starting a new budget, use your last bills for items such as electricity, water and other utilities as a benchmark on how you will spend on these
• For food, if you are the kind who keeps all your shopping blls, this should not be a problem. If not, then you need to estimate roughly how much you think you should be spending. You can modify this figure at the end of the next month, by which time you will have your grocery bills to check against
• Unless your finances are truly in a bad shape, do allow for certain luxuries: life would be a very boring without a few frills! The good thing about having a budget is that you know how much you can afford to pamper yourself and your family, and (hopefully) will not go overboard. The idea, you see, is to be in control. This is the key: without a budget, your money is controlling you and not the other way around.

Once you have filled in all the blanks in your budget chart, add up all your incoming and outgoing money. If your inflow is more than your outflow, congratulations, you are doing well.

You actually have to make your money grow. If on the other hand, you are spending more than you earn, it’s time for a reality check.

Don’t Let Money Control You 

The first and most basic step towards becoming financially savvy is knowing how much money you are earning and whre it is going. Most of us know exactly how much we earn, but are clueless as to how much we’re spending.

While you are relatively young, so long as you are able to pay your bills, and your bank account is in the black, you probably do not have a care in the world. But stop! You cannot go on like this if you are going to make your money work for you, For that to happen, you have to take control. That means budgeting.  

Learning how to budget is important o matter how much or little you earn. For most, the word means cutting down on expenses. But actually to budget is simply to have a very clearly defined chart of inflow and outflow of your money. This is the only way you can keep track of your money and be in a position to decide how you want to spend, save and invest it.

-By the way, thank you Mr xBrain for sponsoring me this blog and hosting!!

And that is being able to make a difference, not only in your own life, but in other people’s lives.

-Oprah Winfrey-