Cultivating good money habits

MANY people have had the experience of just paying the minimum on their credit card bills every month and owing the banks.

Not only is the younger generation guilty of this, but so are some senior citizens.

These credit card debtors probably maintain an expensive lifestyle, dining in posh restaurants, going for holidays abroad and wearing branded fashion.

To avoid credit card debt, all you need to do is control your expenditure.

In addition, terminating credit cards with a high credit limit or temporarily putting the cards in cold storage (read: safe deposit box or a trusted family member) are effective in controlling spending.

On the other hand, it is advisable to cultivate the habit of settling credit card bills in full every month. You need to remember that once there is unpaid credit card debt, credit card companies will charge you a compound interest for the unpaid amount as well as any new spending.

This basically means that you can no longer enjoy the interest-free period and you need to pay for more interest rate charges for every single purchase.

Falling into debt not only delays investment plans but also affects your emotional wellbeing, and may even affect your family finances.

As such, if you find it difficult to settle credit card bills every month, you must learn to control your spending and avoid debts before deciding to invest.

The famous investor Warren Buffett said it best: “Do not save what is left after spending, but spend what is left after saving.”

If you put this into practice, chances are you won’t fall into debt or worse, bankruptcy.

In fact, it is not difficult to save monthly if you have a regular income. The simplest way to segregate your savings is to have two bank accounts; one for income and daily expenses, another for savings.

You might even consider getting a debit card so that you know how much you are allowed to spend every month.

Of course, you should avoid withdrawing money from your savings account unnecessarily.

If it is hard for you to resist the temptation of withdrawing money unnecessarily, you might try using a bank book instead of the debit card, as this makes it inconvenient to withdraw. As time goes by, you will be surprised at the accumulated sum.

If you are keen to invest, be it for retirement or your child’s education needs, investing every month with’s Regular Savings Plan (RSP) Special List can make a difference.

The RSP Special List shows a list of unit trusts that you can invest in without an initial investment amount. In this list, you can just place as little as RM100 a month for most of the unit trusts on our platform (unless stated otherwise in the factsheet). There is no lock-in period for the RSP plan and if you need that extra money for a particular month, you can terminate the RSP at zero cost.

This article by Malaysia first appeared on the website.

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