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The Ultimate Guide to Portioning Your Salary

by Emily Goh |


Crunch is partnering with Hey Alfred - the smartest financial assistant app powered by Ai to help you track all of your financial assets; to bring you this series.

In this series, we want to provide you with helpful information to gain better financial literacy. Through this journey, you will learn how to manage your money better, save more and secure your finances for the future. If you often find yourself clueless on money matters like paying your first income tax, applying for loans or even how to save more without feeling miserable, this series is just for you.

We got your back. It’s time to take control of your #MoneyMatters.

We all know that awesome feeling of payday - when your near-empty bank account is refilled and you feel this comfort and security knowing that you no longer have to keep double-checking your expenses before you buy yourself that cup of bubble tea.


However, after the celebratory meal of slightly fancier food followed by paying your bills such as rent, car loans, PTPTN etc, there really is not much to play around with. And you don’t want to go back into that same vicious cycle of feeling super broke at the end of the month right?


Ultimately, it all comes down to how we portion our salary right, so there is a clear boundary as to the budget portion for each spending category. Not only does this prevent the whole “broke at the end of the month” ordeal, but it can also give you a sense of security because you will be able to plan your spending in advance, while still having sufficient savings as your safety net.


The Famous 50/30/20 Rule:


Coined by Harvard bankruptcy expert Elizabeth Warren, this savings rule essential is this - after all tax your tax deductions such as EPF, Income Tax, SOCSO etc (a.k.a. your net income), your salary should be portioned by 50% going to “Needs”, 30% going to “Wants” and 20% goes into savings.


Image from: The Balance


So say you have a gross salary of RM 2500, and after all deductions, you are left with about RM 2,000. So RM 1,000 goes into needs which would include paying your bills, your recurring costs like utilities and student loans, while RM 600 goes into wants like fancy meals or buying that favorite dress you have had your eye on etc, and RM 400 goes into your savings.


As much as this is the general rule, but you can always tweak it into something that works for you. For example, if you are still living with your parents and you don’t have that much “needs” to spend on, you can add more percentage into your savings portions in order to financially prepare yourself towards getting your own house.


Savings Tip: How To Keep Yourself Accountable?


I personally believe that if I were to portion my savings into a separate bank account right when my salary comes in, it helps to keep me accountable.


This means that you have 2 separate bank accounts, one for your usual cash flow, and one solely for savings (in which you don’t touch unless you have no choice).


When you separate your savings into another account, it would directly reflect the amount of cash flow you have to play around with, without the temptation to overspend. If you come to the end of the month and realized you have some extra, you can always transfer more money to your savings account.


How to Stay Motivated to Save Up?


Besides the “rule” you have set for yourself to portion your salary for savings, it is always helpful to stick to it by setting an annual savings target each year.

This is so you can have a clearer goal and motivation to set aside more savings just to achieve that target, and you get to feel that sense of accomplishment when you come to the end of the year. If you are looking to save for a specific reason, say a holiday or buying your first car, this would further add motivation for you to stick to your savings regimen.

Now that your savings portion is in check, how can you stick to your spending allocation for your “Needs” and “Wants”?


“Needs” vs “Wants”: What is the difference?


We all have a different definition as to what we “need”. But ultimately, your "needs" refer to things you cannot simply survive without. This includes your rent (because what are you supposed to do without a roof over your head?), your daily necessities like simple grocery of milk, eggs, rice etc, or even your doctor checkup fees.

Your "wants" would refer to everything that we enjoy, even if it feels as if we cannot live without, but can be removed from our life if we had no other choice. This would include your morning coffee from the deli beside your office, your Spotify and Netflix Subscription, your Friday night restaurant meals or Sunday brunch etc.


But again, budgeting should not seem like a fixed rule in which you force yourself into, but rather, work around with something that fits your lifestyle.


There is no need to micro-manage yourself to an extent in which you feel suffocated because you have to decide if anything you buy is a need or want. What you can do is to have a larger overview as to what you are spending on, and just spend some extra time deciding if it is something you need or would really find joy in, or is it your impulse taking over just temporarily.


Here are some additional tips as to how you can stick to your budget portion more efficiently:


Tracking, Tracking, tracking:


When there is no clear line as to where you are spending your money on, it is hard to stay on track with your budget. A good way to better understand your cash flow is by tracking your expenses. This may take some extra effort to get used to, but recording your expenditure daily before you go to bed will help you gain a better idea as to what you are spending on, and stick to your budget accordingly.



There is so many readily available spending tracking app out there in which you can track your spendings; or better yet, get a smart financial assistant like Hey Alfred to help you manage your spending better.


Segregate your salary into physical portions:

If you often find yourself to not bother with tracking, or don’t have much self discipline in handling your budgets, an alternative option would be to literally segregate the medium for each category allocation.

Image from: Straits Times For example, you can use e-wallets like Grabpay or Fave credits for your eating out or transport spending (categorized under “Wants”) and use cash or debit cards for other expenditures like groceries and other necessities. That way, you will have a specific, tangible budget for each category without the risk of overspending.

Again, remember that budgeting never has a one size fits all. If you find this 50/30/20 rule to be too stressful and limiting, you can always opt for simpler saving rules like the 80/20 rule, in which you stick to saving 20% of your net income, while the 80% is free to be used for anything else.


In short, a major priority is to always have a percentage of your income to be put into savings, because we always need to factor in emergencies or to act as a contingency plan in case you need to change jobs or take a no-pay leave from work for whatever reason.

Other than that, you can work on a budget plan that works for your wants and needs, and further tailor it according to your income (remember, with hard work, you might be able to get a raise!).


All the best in your #MoneyMatters!

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