As a newly graduates you will usually find it difficult to manage your financial.
This will be your first time receiving a considerably big amount of money for your salary.
This chapter will give you few tips that we deemed beneficial.
1) Know where your money goes
It must have happened to everyone at some point in life, that we do not know where the money from our salary goes to. Our money does not even last till the next date of our salary. To prevent that from happening again and again, we would recommend you to document every single transaction (in and out) every day. This task will be much easier if you have smartphone (which most of us have these days). You can just download pocket expense which will cost you a few bucks. With that, you can track down your incomes and expenses.
Picture 1: Printscreen of pocket expense in action
If for example you have had an emergency that require you to spend considerable amount of money on something that you usually dont eg.cost of hospitalisation, you will be more cautious on bleeding your money elsewhere as you know the amount of money left for that month.
2) Savings
Most writers on self financial management would recommend a portion of 10 per cent of your salary for your savings. The very first thing that you have to do after receiving salary every month is to put aside the 10 percent to an account not easily accessible eg. Tabung Haji, Unit trust (asb/public mutual). So, every month you will only have 90 percent of your salary to spent on.
3) Emergency account
Another 5-10 percent is for emergency fund. Try if possible not to use this. The money from this account is only for emergency. Every month we will have to spent on something outside our budget for unforeseen circumstances eg. car involved in small accident, and you decided not claim as it will affect your No Claim Bonus in your car insurance policy.
With this fund, you would be able to fork out the unused fund from previous month for the unforeseen circumstances.
4) Marriage
Marriage will give you financial strain. Start planning as early as possible so that you can avoid unnecessary personal loan.
The usual budget needed for a marriage these days is around 40-60 thousands (try to minimise this) but you can easily calculate yours using a simple calculator provided by this website http://bajetkahwin.my/ that we think useful.
If you are planning to get married in 2 years time and your budget for it is around 40k, the amount needed is around 40k/24 = RM 1666 a month. This amount might looks big, but for a fresh graduates without much financial commitment, this is easy to achieve. Plus as a house officer, you don't really have time to spent the money. Some might resort to some easier option eg.personal loan. However, if possible try not to use this, as you still need them for something much more beneficial financially in the future (e.g deposit for house, buying a piece of land).
5) Car
The usual mistake made by fresh graduates is buying luxury car (above 80k) . Yes, we do admit that initially, being single without much financial commitment, spending around 1500-2000 a month on car loan seems affordable. But you also to remember, once you buy the car, the loan committment is at least 7-9 years. By 9 years you will have more financial commitments. You might married few years after started working, and getting few children few years later and believe me, this require a lot of money. So think wisely before buying a car. Some people argue that, you can always sell the luxurious car if you can no longer afford it. But remember, value of a car depreciate 10-15 percent a year. Car loan is similar to personal loan. It is not like home loan where the yearly interest depends on the amount of principal loan. To put it in simple words, the interest amount that you have to pay, reduce by year. There is also option for you to pay the principle loan earlier so that the interest would be lesser.
Personal loan on the other hand is different. The yearly interest that you have to pay is the same every year. It is based upon the original amount that you borrow from the bank. There is also no option to settle the principal loan earlier like home loan. No matter how fast you settle your car loan, the total interest that you have to pay the bank is still the same if you settle it as stipulated in the agreement. If for example, the car loan is 3% for a period of 9 years, total interest that you have to pay to the bank is 27% of the loan amount. If your loan is RM 100 000, the total amount that you have to pay to the bank is RM 127 000 (including the interest).This is also the amount that you have to pay the bank even if you make full settlement within 2/3 years of your loan (you sell it to someone).
If you pay monthly RM 1200 for 24 months, the total amount that you pay to the bank (RM 28 800) . Your car value would depreciate 20-30% from the original price (RM
70 000 -80000). As you have paid 28,800, the amount of loan that you still have to pay the bank is RM
127 000-28 800 = RM 98 200. So if you able to sell the car to someone at a price tag of 80000, you still have to pay the bank RM 18,200 !
6) House
Buying a house is indeed a very critical decision that we have to make in life. Any mistake will make us suffer for the next 20-30 years (loan tenure). So, before deciding on buying your own house, you better equipped yourself with knowledge.
As houses' price appreciate so much these days, some people would have thought that it is better for us to buy a house rather than renting. Even though the monthly commitment is much higher than renting a house/room, we will ended up owning the property.
However, there are few things that we have to consider before buying a house.
If you decide on buying a house, make sure that the property is rentable as you might not be able to stay there for long. As a house officer, you will most probably ended up elsewhere after you finish housemanship (current KKM policy).
Make sure that there is someone to look after the house, in case you need to move elsewhere. A rentable house is also appreciates faster, much easier to be resold and just in case you can't keep it.
Even if you manage to rent the property, you still need someone to be the landlord on your behalf. So buying a house near to your family, would be a good idea.
Buy a house that has the potential to appreciate the most. Strategic location, planned housing area are among the few things that you have to consider. Buying property investment books would be a good idea.
Price? Is it worth it. Kindly get some advice from property valuer before buying a property. If you are buying a property that is valued lower than its price, you will have problem in securing loan from bank.
How to fund your purchase ? As a house officer you are not eligible for government home loan yet. You need to get your loan from banks or building society. The question now is which loan and which bank?
Advertised personal loan might seem attractive to you. The current offered rate is usually around 3%. Home loan on the other hand might look more expensive. The rate is around 4.1-5.5 % (it is usually advertised as BLR-2.xx %, as the current BLR for most bank is 6.6, the current interest is around 4.xx%) However, the interest calculation for these two loans differ. For personal loan, the yearly interest is charged based on the principal amount borrowed, while for home loan the interest rate is based on the principal amount left. In simpler word, your interest reduce every year for home loan. For that reason, personal loan is much more expensive compared to home loan. So, you should never ever take personal loan to fund your house purchase!
Once you have found your ideal house, apply for loan to as many banks as possible and choose the one that give you the best rate. Negotiate with them.
But, if you can wait till you get your job confirmation, government home loan is still simply the best option as the interest is only at 4%.
7) Being a house officer means you are still not a confirmed government servants. You will not enjoy some of the privileges enjoyed by government officials. If any catastrophy befalling you, like a motor vehicle accident that caused total disability, as a government servant you should be able to get 'illat pension'. However, as a non comfirmed government officials, you will not get this. You will only get all your EPF savings (contribution made by you and the government), which is a very small amount. Because of that, we would recommend a life insurance. Get ready for the worst case scenarios.
