Turning 30 is a milestone that compels people to look back on what they have accomplished in the decade prior. This is the age where adult expectations and responsibilities start to catch up, and one area that might be at the forefront of Malaysians’ minds is personal finance.

Here are six areas that may be keeping you up at night if you’re in your 30s – and if you aren’t thinking about these, perhaps it’s time to start.

1. Neglecting to budget

In your 20s, optimism – and perhaps “fear of missing out” – guides your spending habits. Graduates probably start their career needing to pay off student loans. Most deductions are handled by employers. Salaries received are likely net take-home pay.

After a couple of years of working, however, financial commitments start to pile up. Don’t make the mistake of not preparing a budget, which gives you an overview of how much you actually get to spend after deducting commitments.

Start by identifying your income for the month. How much do you take home after statutory deductions such as your EPF, Socso, and EIS contributions?

Depending on your employers, your tax and zakat may have already been deducted on your behalf. If this is not the case, you will need to set aside some funds to pay the amount owed at the end of the tax year.

Your expenses include cost of living, which covers items such as monthly groceries, rent, phone bills, personal grooming expenses, petrol, and travel. Financial commitments include your credit card and loan repayments, including car and study loans.

Besides these generally fixed expenses, you could include ad hoc line items such as entertainment and shopping.

For the purpose of accounting, savings and investments are not expenses per se. Still, whether you want to put these down as an “expense” or in their own unique category is up to you.

With a budget at hand, you know how much is earmarked for commitments, savings and spending in that particular month. Tracking your expenses becomes easier and, when push comes to shove, you have an idea of which item to reduce or eliminate entirely.

2. Not building up different funds

The second personal finance mistake one may make in one’s 30s is not setting aside enough extra funds, such as an emergency fund that you could draw from in the event you lose your job, or should something happen that requires urgent and immediate financial output.

When you have to tap into your emergency fund, your goal is to replace the sum utilised as soon as you can. It’s good to consistently adhere to a minimum threshold.

You should also consider building ad hoc funds, which could be for postgraduate studies, getting married, or purchasing your first home. While Malaysians’ EPF contributions allow them to tap into Account 2 for education and home purchase, this should be a last resort – it would be better to retain your contributions to help your retirement years.

Then there’s something called a “doodad fund”, for spending on miscellaneous goods or services every now and then, such as investing in the latest gadgets, or for your travels or hobbies.

3. Not exploring different investment vehicles

Technology and competition in the financial space have created a myriad of savings and investment vehicles beyond the traditional savings, current, and fixed-deposit accounts.

For those who are intimidated by the complexities of the stock market, consider unit trusts, where investors pool their resources together in the fund managed by reputable fund houses.

Different funds offer different risks and investment focus. Broadly, there are five types of funds: equity funds, fixed-income funds, money market funds, balanced funds, and shariah funds.

Then there are Exchange Traded Funds (ETFs). The concept is similar to unit trusts where investors pool their money together, but the exposure is limited to the basket of shares within the stock market.

One could also venture into P2P business financing, where investors fund financing facilities applied by micro, small, and medium enterprises.

The more risk-averse among you could venture into the stock market, crypto assets, as well as non-fungible tokens (NFTs).

In one’s 30s, it is important to be aware of these different vehicles and the necessary knowledge to successfully utilise them to achieve your financial goals.

4. Not minding one’s debts

Unchecked, one’s outstanding credit card balance could balloon to the max – a dangerous situation, especially if one only services the bare-minimum monthly repayment.

What leads to this increase? Often it is either owing to emergency or impulse purchases. That is the danger of spending without a budget or not having the appropriate funds set aside.

Having a massive amount of debt affects your credit score, which indicates to financial institutions – and some employers – how likely you are to repay our debt. Each time you apply for credit or loan, these institutions would get a credit report from an authorised credit rating company.

It is recommended you check your credit report and score at least once a year to see and evaluate your creditworthiness. Often these reports come with suggestions on how to improve your score, as well as how you fare compared with other Malaysians.

5. Not having enough protection

This is another crucial component in personal finance: having enough protection. Don’t make the mistake of not having insurance or being underinsured. Insurance providers offer different plans that cater to different needs and levels of protection.

The most basic insurance to have is health/medical insurance, also known as a medical card, to help cover the costs of hospitalisation. While health insurance in Malaysia is not all-encompassing, it does tend to cover major medical costs, while some have additions such as critical illness coverage.

Another insurance plan you should have is life insurance, which is there to provide financial protection for your family should something unexpected happen to you. The payment will be paid out in lump sum to your beneficiaries (or to you, in the case of permanent disability).

After covering these bases, you should then consider other specialised insurance plans to protect yourself and your family:

• Mortgage Reducing Term Assurance (MRTA), which helps you pay off your home loan in the event of your death and other permissible circumstances;
• credit card debt insurance, which helps settle the outstanding sum accumulated on your credit card upon your death, permanent disability, or critical illness; and
• other insurance plans and policies such as property and motor insurance.

6. Not saving for retirement

Finally, do not make the mistake of not saving for your retirement. Preferably, your retirement fund should be kept in a different financial vehicle that you cannot easily access.

Saving for retirement is also why you should try to avoid touching your EPF – even Account 2 – as much as possible, so you can rely on the power of compounding and dividend yields.

Besides EPF, the government has introduced the private retirement scheme (PRS), intended to supplement statutory contributions made to the EPF. Similarly, PRS contributions and savings can only be accessed once the individual reaches age 55.

Source : FMT