Stop living paycheck to paycheck

January 27, 2014

There is actually nothing like the feeling of knowing you always have some money to turn to in your savings.

By Michelle Brohier
Johan lives with his parents and earns about RM2,200 monthly, a raise from his past salary of RM1,800, but he has been struggling to get out of the cycle of living a hand-to-mouth existence.

His necessities include his motorbike loan, phone bill, laptop installment, internet broadband service and food.

The remainder of his money is spent on emergencies like repairing his motorbike after an accident, and on his girlfriend of which he is in a long distance relationship with and travels to see as much as he can.

While this is a scenario many who earn around Johan’s salary can relate to as they struggle to get by with such an amount, there are those who earn more and go through the same issue.

Anish earns about RM8,000; double from the amount he earned before, and his necessities include paying for the house and the car that he bought.

While this does take up a RM3000, this still leaves over RM4500 in remainder money to use and save. But after spending it on movies, hanging out with friends and other forms of entertainment, Anish barely has enough to get by till the next payday.

Middle income earners are not exempt either.

 Annabelle earns RM4500; RM1000 more than her salary the year before and is also guilty of living paycheck to paycheck.

 “I don’t shop but after paying almost RM2000 for rent and RM300 for utilities; I use the remainder for nice meals and my ultimate indulgence: expensive books.

 I pay more for rent because I insisted on having a fully furnished unit in a nice part of town because those things are important to me.”

Annabelle admits that at the end of every month; she has less than RM200 in her account.

Be it out of a lifestyle choice or out of necessity, there are many Malaysians who live paycheck to paycheck, with some even living beyond that.

While they work hard to earn more than before, they find themselves still depending on the entire amount they get from their monthly salary.

For some reason, their salary and expenses seem to rise together although their circumstances seldom differ.

A matter of choice“It is true I could have saved more money if I wasn’t in a long distance relationship,” said Johan.

“But even then, I probably could have used the extra money to buy a better motorbike, like a Ducati.

Either way, I would have found some way to spend the money that I have.”

The reality is that people with this propensity will always find a way to spend the money that they earn, even if they’re earning more than previously.

The extra money opens up possibilities to gain items or experiences that were previously not available to them.

“I could live in a smaller unit or eat out less but I always think; I work so hard for my money, why can’t I enjoy it?” Annabelle admits.

But the problem happens when a major calamity crops up and the person finds they are unable to cope.

An empty savings account can mean a lot more problems than many realise.

Whilst it’s always nice to have a treat every so often, it’s important to temper this with moderation.

In most situations, the paycheck to paycheck phenomena is a matter of choice, and thus actually a lot more controllable than people realise.

Here are some tips to avoid the dreaded hand-to-mouth experience:
1. Budget realistically. If you aren’t used to saving your salary; start small to build confidence.

There’s no sense in drawing up a budget with zero entertainment spending and sudden RM1000 savings because such a sudden saving requirement will set you up to fail.

Failing from the outset will make sure you are demotivated enough to give up.

Don’t fall into the trap. Start with small savings and do budget for leisure.

The successes (and the growing bank account!) will encourage you to save more.

2. Automate savings. It’s harder to slack off on saving when you don’t even see the money leaving your bank account.

Have an automated saving deduction set up with your bank.

3. Rethink rewards. Many people spend more when they earn more because it fulfils the ‘reward’ criteria.

Higher salaries generally mean more work and responsibility so this spurs them to believe they deserve more rewards and gratification.

 Try looking at your savings as a reward for your hard work.

Although you definitely deserve a treat once in a while; you deserve the security and peace of mind of a cushy savings balance a lot more.

You can get out of this cycle and live a more comfortable and fulfilled life with just a little adjustments.

There is actually nothing like the feeling of knowing you always have some money to turn to in your savings.

Good luck!

This was brought you by Michelle Brohier from RinggitPlus.com. RinggitPlus compares credit cards, personal loans and home loans to help Malaysians get more for their money.