How to manage your money?

Most people are aware of the global economy crises, those who are affected may resort tighten budget, downsizing their home, relocating to lower cost of living area etc.  But these are just circle of life in the modern era where sometimes market is up, sometimes it is low.  But overtime, you will notice the trend, that market will eventually pick-up. We just need to know if we are prepare for the situation.

Emergency fund 

Unit Trust

It is scary when I decided to move from my secure job in Malaysia and come to stay in the states, without my income, how will I be able to pay my current expenses in my home town?   Not many people understand about the concept of unit trust, but this actually relieve some of my financial burden during unemployment.  I do not intend to promote unit trust.  But there are plenty out there for you to pick on, but before you start buying one, you will need to read the prospectus and learn about the company.  Shopping around before buying works even for unit trust.  Unit trust is not a way to get a quick bucks.  It is a conventional way to save and invest your surplus income.  Is it still relevant to save in unit trust when the economy is bad?  Absolutely, again this is the time when dollar cost averaging come to play.  It is the concept of putting money away diligently every month. The thing about unit trust is you will need an agent to be able to open and invest in unit trust, which is not a bad thing, since the agent will help to advise you and assist you in the area that may be foreign to you.

Good old saving
It is not very advisable to keep big sum of money in the saving account as they do not generate profitable interest.  We need to remember that money depreciate over time, so we have to keep our saving where it could off-set the depreciation value.  The emergency fund also need to be easily liquidated.  Keeping money in Fixed Deposit is great but it shouldn't be consider as emergency fund, since taking them out before maturity may be a hassle.

Insurance

Insurance is a necessity but you have to know what type that best to your need.  Life insurance may be good for saving (in the golden age) and for critical illness.  But it is better to have a health or medical insurance, in life there is no certainty, so be prepare with health insurance in case for major surgery, accident etc.  Don't forget that you still need to nominate your beneficiary(ies) again to avoid hassle when the unforeseen happens to you.

Retirement

It is a requirement for a country to contribute for retirement,  it is also a law for some country to add to the employee provision fund.  If you work on your own, it is best to start one yourself and put some money away for your retirement.  Why? As people grew old, medical expenses will crop up and you need money to pay for these, apart from that you will need money to pay for living expenses.  In the states, you can have 401K, Roth IRA, IRA.  In Malaysia it will be EPF or employee provision funds.  The best way is to contribute as much as your company could match on the amount.  After that, you can invest in other means for your retirement.

Estate

Buy or rent?  That is the question.  Well, it is my personal view to rather pay for a house that belongs to you rather than rent.  But in time of financial difficulties,  to buy a house is not a practical option.  Loan or mortgage payment is always higher than rent, you also have to consider maintenance or up keeping the house, bills etc. With rent, you can put the extra money away for emergency fund, for maybe a down payment if you decided to purchase a house somewhere along the line.

Will and Trust

People tend to neglect the important of having a will.  Maybe because death is not a topic that people willing to discuss.  Nonetheless, it is important to ensure your love one are provided for and to prevent families squabble over the estate in time of untimely departure.

Trust is basically put up for the children, education is not cheap. How many of us start up working with already student debts on our name?  Trust is best set up when you have a child,  you tuck away small amount of money into the account for education savinfund.  So when they turn the age for college, you have them provided for.  

Credit Card
Who can live without plastic money? Those who already own one will find it inconvenience to go without credit card.  The problem with credit card is how deceiving it is,  you have to keep in mind that the money spent on credit card are not your money to begin with; it is meant to be pay in full by end of the month.   Otherwise the amount will snow ball to the point of ruining your life.  How many marriage has ended because of debt? Plenty.  The easiest way is to keep your credit card down to maximum 2.  Don't start getting into another debt until you get your credit card debts under control, if you unable to pay in full then pay more than minimum payment recommended by the credit company.

Here's a guideline on how to budget your income.

Salary :                       $2000
Pay yourself first:            $200 (10%)

Rent or house expense:   $600 (30%)
(house payment, Utilities bills)

Living expenses:             $500 (25%)
(Groceries, clothes, entertainment etc)

Transportation:               $300 (15%)
(Car payment, gas, toll, parking etc)

Debts reduction:             $400 (20%)          
(credit cards, personal loan, student loan etc)



Financial Planner
If all this budgeting chores give you headache, and if you can afford to hire a financial planner, you can do that.  There are certified financial planner who can help and advise you on how to manage your expenses, reduce your debts and hopefully get your financial situation under control.

Financial Management Tool
There are also budgeting tools or financial management tool such as Microsoft money or mvelops that could track your expenses and help you budget easily with less headache.

Good luck.