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Struggling not just to save for future investments but also to fund those well-deserved getaways or even just cover basic living costs?
Navigating financial commitments with a limited salary can be a daunting challenge. So, how can you stretch your income further, allowing for savings and the occasional indulgence?
With the 7:3 salary management approach, you can learn to manage your salary and uphold a comfortable standard of living, save effectively, and move closer to achieving financial independence at a faster pace. Give it a try; your future self might thank you!
7:3 Salary Management method
1. What is “7:3 Salary Management Method”?
The golden rule on how to manage your salary is the 7:3 salary management method.
Simply put, this method recommends dividing your income as follows:
- 70% dedicated to living expenses
- 30% set aside for savings
This method helps you use your money wisely.
It lets you be ready for unexpected costs and still have some fun.
2. How to Implement the “7:3 Salary Management Method”?
i. 70% salary for living expenses
As mentioned above, when your salary is divided into 70% and 30%, your living expenses must be controlled within 70%, including:
- Food
- Car loan
- Mortgage/Rent
- Car fuel
- PTPTN
- Phone bills
- Road tolls
- Parking fees, etc
For example, if your net income is RM3,000, 70% of your salary would be RM2,100, and your living expenses must be controlled within RM2,100.
If you spend more than that, it’s a sign to check where your money’s going and maybe cut back on some things.
ii. Allocating 30% for savings
Out of your salary, 30% should be set aside for savings. But don’t just lump it all together! Diversify where this 30% goes.
Break it down like this:
- 10% to an emergency fund.
- 10% to a consumption fund.
- 10% for wealth accumulation.
iii. Types of funds
Remember the global crisis of Covid-19 two years back?
Many found themselves without jobs and stable incomes almost overnight. Such sudden shocks can be less daunting if you’ve got an emergency fund. It’s your financial cushion for unexpected hardships in the long run.
Then, there’s the consumption fund. Think of this as your ‘wish list’ fund. We all have dreams – that new gadget, an exotic vacation, or even a fancy meal. Instead of giving up when faced with a hefty price tag, this fund ensures you can occasionally treat yourself without breaking the bank.
Instead of feeling disheartened by a high price, let it motivate you. With the 10% you save monthly salary, that dream purchase becomes more achievable. It’s all about setting and reaching your savings goals.
Say you’re eyeing an overseas trip that’s priced at RM3,000. Here’s how you can make it happen:
RM3,000 x 10%= RM300 (a month)
RM300 x 12= RM3,600 (a year)
Consider setting aside a small portion of your consumption fund for monthly treats. Over time, this will add up, and before you know it, you’ll have extra cash on hand!
So, when it comes to splurging on something you’ve always wanted, no more second-guessing.
Life’s too short—live it up and leave no room for regrets!
A wealth fund is all about making your money work for you.
Think of it as planting seeds to grow your wealth. It’s not about investing 10% of your salary monthly but accumulating it until you have a significant amount to invest effectively.
Imagine stashing away RM300 each month. Once you’ve saved up to RM3,000, you can invest in mutual funds or lock it in a fixed deposit. Let your savings pave the way to more prosperous returns!
3. Investment in Malaysia
Considering an investment in Malaysia? You’ll find a plethora of options, ranging from fixed deposits, stocks, and funds to gold and property.
While ASNB funds and fixed deposits hold their ground, real estate has become a favoured choice for many. Given the relentless march of inflation and the downward drift of currency value, real estate’s worth continues to soar. This makes it a robust shield against inflation.
However, diving into the real estate market isn’t without its complexities. However, knowing how to save money and set aside part of your income is one of the stepping stones towards reaching your financial goals.
Proper market research is essential to ensure you’re making an informed decision. And if you’re feeling a bit overwhelmed, consider working with a professional.
Enter IQI – boasting a global network of over 30,000 seasoned real estate professionals.
With top-tier training, they’re equipped to offer invaluable investment advice, guiding you to the perfect property investment.
