Monthly Budgeting: Money Saving Tips to Manage Your Salary Wisely & Avoid Deficits
Many people wonder why their bank account balance runs out so quickly, even though their salary was credited only a few days ago. This situation is not always necessarily caused by a low salary.
In many cases, the cause is the lack of a clear monthly salary budget, which can lead to spontaneous spending that ultimately results in a financial deficit at the end of the month.
Simply put, a monthly salary budget is a plan for allocating your net salary among your regular commitments, needs, wants, and savings. With a clear structure in place, you can more easily control your cash flow and avoid spending beyond your means.
Why is a Monthly Salary Budget Important?
A budget does not mean you have to live too frugally or restrict every expense. Instead, it helps you understand where your money goes and make smarter financial decisions.
With a realistic monthly salary budget, you can:
● know how much you can actually afford to spend each month;
● manage your monthly commitments more systematically;
● reduce financial stress;
● build your savings more consistently; and
● avoid deficits at the end of the month
The main goal isn’t to create a perfect budget from the very beginning. Instead, what’s more important is to stick to it consistently and make sure your expenses don’t exceed your income.
Meaning of Gross Income and Net Salary
Gross income (gross monthly salary) is the total income before any deductions are made. It includes your basic salary, fixed allowances, overtime pay (OT), commissions, and bonuses.
For example, if your employment offer letter states a salary of RM3,000 per month, that amount is your gross income.
Net income (net monthly salary), on the other hand, is the amount that is actually credited to your account after deductions such as EPF, SOCSO, EIS, and Monthly Tax Deductions (MTD), where applicable.
For example, if your gross salary is RM3,000 per month, the amount you receive after deductions may be around RM2,600 to RM2,700. You can also call this your take-home pay.
When preparing your salary budget every month, use your net income, rather than your gross monthly salary. This is because your net monthly salary is the actual amount available for spending, saving, and meeting your monthly financial commitments.
What is a Monthly Commitment
A monthly commitment is a recurring payment that must be prioritised every month. Among the monthly commitments that Malaysians commonly face are:
● House or room rentals
● Car or motorcycle installments
● PTPTN loan repayments
● Electricity and water bills
● Telephone and internet bills
● Insurance or takaful
● Financial support for parents or family members
Although some of these payments may seem small, the total amount can take up a large portion of your net monthly salary. Therefore, monthly commitments should be taken into account first before planning other expenses.
Identifying the Difference Between Fixed Commitments, Needs, and Wants
Separating your expenses into three categories makes it easier to manage your monthly salary budget more effectively:
● Fixed Commitments: Expenses that must be paid each month.
● Needs: Essential expenses for daily living, such as food, transportation, and groceries.
● Wants: Optional expenses, such as entertainment, dining out, or vacations.
When creating a budget, prioritize fixed commitments first, followed by your daily needs, and finally your wants. This approach helps ensure that your spending remains within your means.
How to Make a Simple and Realistic Monthly Salary Budget
(Money Saving Tips when Preparing Your Monthly Budget)
1. Start with your net monthly salary
Write down the net monthly salary you receive each month.
Example:
Net monthly salary: RM2,800
This is the actual amount available for planning your monthly budget.
2. List all your monthly commitments
List all monthly commitments that need to be paid first.
Example:
● Room rental: RM500
● Motorcycle installment: RM300
● Telephone and internet bills: RM100
● Family support: RM200
Total Commitments = RM1,100
If your net salary is RM2,800, you will have a remaining balance of RM1,700. This balance can then be allocated for daily needs, wants and savings.
3. Set daily spending limits
Uncontrolled spending can cause your budget to go off track. Therefore, set realistic spending limits for:
● Food
● Transportation
● Kitchen items
● Personal expenses
As a basic guideline, you can use the 50/30/20 method introduced by the EPF. However, this budget structure can be adjusted according to your income level and financial commitments.
For individuals with a more limited income, an approach such as 70/20/10 or 60/30/10 may be more suitable.
4. Save first, even if it's a small amount
You don't have to wait until you have a large surplus to start saving. Even saving as little as RM20 or RM50 a month is a good start.
Consistency is more important than the amount of savings. As the saying goes, a little goes a long way. A consistent saving habit can help you build an emergency fund and increase financial stability.
5. Review your budget every week
Set aside some time every week to review your budget. In this way, you can identify any changes and make adjustments early:
When reviewing your budget, make sure you assess:
● The total amount of money that has been spent
● Whether your spending is still within budget
● Expenses that can be reduced or avoided.
Things to Avoid to Keep Your Budget from Leaking
(Money Saving Tips 2)
Overusing BNPL (Buy Now Pay Later)
Buy Now, Pay Later (BNPL) payment services may seem light because it is divided into smaller installments. However, if used too often, it can increase your monthly commitments without you realizing it. Before using BNPL, make sure that the purchase is truly necessary and still within your budget.
Installment Plans with Interest
Don't just look at the monthly payment amount. Check the total amount that you will need to pay over the entire financing period as well. Although a 0% installment plan is preferable to one that charges interest, the purchase should still fit within your budget.
Accumulating Too Many Small Commitments
Streaming subscriptions, app purchases, and gadget upgrades may seem like small expenses. However, when combined, the total amount can place a strain on your finances. Review these small commitments regularly and cancel those that are no longer needed.
Treating Overtime, Bonuses, or Side Income as Regular Salary
Overtime (OT) pay, bonuses, and side income are not necessarily received every month. Therefore, avoid using them as the basis for your regular monthly budget. Instead, use this extra income to build your savings or emergency fund, or to work towards your long-term financial goals.
Conclusion: The Goal Is Not a Perfect Budget, But One That You Can Follow
The real goal of a monthly salary budget is to help you understand how much money you can actually afford to spend, manage your monthly commitments more efficiently, and avoid a financial deficit each month.
The foundation of a good budget starts with understanding the difference between your gross monthly salary and what your net monthly salary means. Always prepare your budget based on your net monthly salary, which is the actual amount credited to your bank account after all deductions have been made.
Financial management doesn’t have to be perfect. Even if you can only save a small amount each month, small steps taken consistently can still help build healthier financial habits and help you achieve greater financial stability in the long run.
About ACOM(M)
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