Article Search: Pn. Siti Noratyirah Kamit

Source : https://relevan.com.my/2023/07/17/5-inti-utama-pengurusan-kewangan-peribadi/#google_vignette

 

ACCORDING to the National Financial Literacy Strategy 2019-2023 document produced by the Financial Education Network (FEN), 84 percent of Malaysians admit they save but have to withdraw all savings at the end of the month to cover daily needs.

In fact, about 20 percent of working adults in Malaysia have not saved in the previous six months.

This is only part of the evidence of the financial literacy crisis in this country. People who are not financially literate will have difficulty managing personal finances, thus plunging them into various financial problems at an early age.

 

Accordingly, efforts to educate Malaysians about personal financial management should continue and be welcomed by stakeholders.

What is personal financial management?

According to Investopedia , personal finance is a term that includes money management, savings and investments.

 

Personal financial management encompasses many things, including budgeting, banking, insurance, mortgages, investments and retirement planning, taxes and real estate.

Each of us has our own financial goals. Most basic people want to have enough money for their basic needs every day. If these basic things can be met, we will build other goals, such as wanting to travel every year, buy a house, or achieve financial freedom.

How you manage your personal finances will determine the success or failure of those goals. That's why it's important for us to understand personal finance and the best way to manage it.

 

There are five main points of personal finance that need to be understood so that we can manage personal finance well, namely:

 

1) Income

Income is the beginning of personal financial management. It is a source of money that wants to be managed, including from salary, investment returns or other things. These inflows need to be managed and organized as spending, savings, investment or protection.

 

2) Expenses

If income is an inflow, expenses are an outflow. Expense components are usually numerous, including rent, mortgage, groceries, food, home furnishings, home repairs, travel and entertainment costs. Managing expenses is an important aspect of personal finance. An individual needs to make sure their expenses are less than their income if they don't want to get stuck in unnecessary debt. Financially, debt is very dangerous, especially high-interest debt like credit card debt.

 

3) Savings

After income and expenses, there is savings. Everyone should aim to have enough savings for major expenses or emergencies. Although it is difficult, especially if you have enough income to meet your needs, it still needs to be worked on to avoid difficulties in the future. There are a few things to think about when it comes to savings. First, we need to realize that if we keep money in a savings account, the value of that money will decrease due to inflation. For that reason, some choose to save in an investment account so that the value increases over time. However, we cannot make all our savings into investments because we need to think about liquidity. For emergency storage, it should be easy to remove when needed. 

 

4) Investment

Investing involves the activity of buying financial assets, such as stocks and bonds, in order to get a return on the money spent. We invest to increase personal wealth beyond the value invested. However, investment comes with risk because not all financial assets we own will increase in value. For that reason, it is important to have investment knowledge before engaging in this activity. But if there is no time or it is difficult to learn, we can just hire a professional to handle our investment.

 

5) Protection

In this context, protection means the measures that a person takes to protect themselves from unwanted events, such as accidents or illness, with the aim of maintaining their financial situation. This includes life and health insurance, retirement, and estate planning.

Date of Input: 31/01/2024 | Updated: 05/02/2024 | muhammad.isam