Financial advice for Gen Z? Adulting can be a challenge, especially when you have financial commitments. It is important for you to stay afloat financially and learn how to manage your finances well. Here are 8 tips that will help you.
If you’re reading this, chances are you’re part of Generation Z. (If you didn’t know, Generation Z refers to those born between 1995 and 2010, and are true digital natives that grew up with the internet… and probably a camera shoved at your face right from your birth.)
Now, at this point you’re still new to the workforce or to adulthood, which could mean that you haven’t gotten your first house, you’re still considering your first car, you may not even have a credit card yet. Where do you start? How do you start?
Take it from someone who has gone through adulting: it is overwhelming, but not impossible. Here’s a rundown of some financial planning tips that you can use to help you in your present and future.
1. The three most important digits of your life is your credit score.
You’d be surprised to know that many adults don’t actually know what a credit score is. So, what’s a credit score anyway? Very simply, it is a number between 300-850 which represents your creditworthiness and how likely you are to repay debt. These are the three most important digits of your life.
If your score is low, it indicates that you’re probably a bad paymaster and raise red flags for banks. If your score is high, it tells banks that you’re a responsible and safe candidate to lend money to.
There are five factors that affect your score:
- The number of credit facilities and the amount owed to the banks
- Whether you pay your loans on time or have missed payments in the past
- Your credit history length
- Types of secured and unsecured credit you hold – secured (home, car loans) vs unsecured credit (credit cards, personal loans)
- If you have been approved for new credit facilities recently
Not to scare you, but some companies and even future in-laws use this to check up on a potential hire or potential match for their kids!
Read also: Ultimate Guide To Credit Scores
2. Never, ever, spend above your means.
We’re sure you’ve been told this multiple times, but this advice doesn’t get old no matter how many decades one lives through.
While there are some things that should be invested in - like a good laptop and phone that you can rely on for your day-to-day stuff - there are others that can wait. If you can’t pay for that fancy new sneakers in cash, then save up until you can actually do so. (But pay with your credit card so you can get the rewards, and make sure you pay off the charge immediately.)
Read also: 10 Ingenious Money Tips From Malaysian Dads
3. Credit cards are not evil - it all depends on how you manage it.
Credit cards have a bad rep of getting people into massive debt. But the truth is that credit cards can actually be quite good for you - there are so many rewards that you can reap, so it just makes more sense to spend with a credit card.
(If you’re already spending on your day-to-day stuff, might as well get rewarded for it, right?)
So what really matters is that you pay your bills on time, and that you clear off your debt in full. Each time you carry forward your debt, you get charged the notoriously high credit card interest. (It goes from 15% and all the way up to 18% per annum!)
4. Don’t delay paying your other debt, such as your PTPTN.
Don’t borrow if you don’t plan to repay. If you have existing debt, such as your PTPTN (education debt), you should always make it a priority to make your monthly repayments on time. If you ignore your debt, you’ll eventually get penalised.
Failure to make your monthly PTPTN repayments can bar you from leaving the country! While it may seem like a non-issue at the moment, this blacklist can eventually become a huge inconvenience to you in the future.
If you use your credit card, be sure to pay off what you borrow before your due date (typically a few weeks after your statement date). Never only pay the minimum amount. Always pay in full, so you won’t get charged an interest on leftover debt. When that happens, it’s easy for your debt to snowball and in no time you’d have lost control of your finances.
5. Save for your retirement!
Did you know that as you enter the workforce, you automatically start your retirement fund? You may find something called ‘EPF’ in your monthly payslip, which stands for Employees Provident Fund. A percentage of your monthly salary goes into your EPF so that your golden days will be secured. You definitely don’t want to be broke when you’re too old to work!
While there is an automated deduction system, you can also top-up your account on your own. The interest rate for EPF is generally quite attractive (although 2019 didn’t yield the best rate at 5.45% for conventional and 5% for Shariah accounts). Keeping your money there can help it grow.
6. Get an insurance policy as young as possible.
If you’re privileged enough to be able-bodied and energetic, that’s great! But with a life expectancy spanning several more decades, you should always be prepared for the worst.
Public healthcare may be close to free in Malaysia, but that comes at the expense of attention and service. Private healthcare is expensive, which is why health insurance can help you cover most, if not all, of the costs.
The younger you are, the cheaper your premium (the price you have to pay)... so it’s best to start looking for one and get protected as early as possible.
Other insurance policies you may want to consider include life insurance (which benefits your beneficiaries if you pass on), lifestyle insurance (which protects your gadgets, bags, and other stuff related to your lifestyle), and travel insurance (ad-hoc when you travel).
Do note that car insurance is compulsory if you own a car in Malaysia.
7. Start investing, but do your research first
If there’s one thing old cikus will tell you, is that you should invest as early as possible. There are many different types of investments, invest ranging from high risks high returns (e.g. stocks, cryptocurrency) and low risks low returns (e.g. fixed deposits, securities).
We’re not a trading or investment site, so we’d recommend you do your own research on the right investments for you. In the meantime, we’ve written a few articles where we spoke to experts about investing in this pandemic:
- Should You Start Investing During A Recession? An Expert Weighs In
- Should You Invest In Cryptocurrencies Post COVID-19? Experts Weigh In
- Should You Invest Via Robo Advisors In Today’s COVID-19 World?
8. Your emergency fund is NOT your personal savings fund.
We’re sure you’ve heard this saying - save for rainy days!
While you should definitely build your own personal savings, have a separate goal for your emergency fund. It would be healthy to have a buffer that will last you for at least six months if you were to lose your income unexpectedly.
Not every bank has an option to separate your saving goals, so if necessary, you could always consider opening another savings account in a separate bank to build your emergency stash.
BONUS: Most importantly, compare, compare, and compare even more before you commit to anything!
Once you commit to something big, it may be hard to undo without repercussions. That’s precisely why you should always compare before you sign up for anything!
As you move on with life, you’ll start to notice that a lot of people will try to sell you all sorts of stuff. That’s because you’re at a phase where you’re not the most informed, and at the same time, it’s also when you’ll start looking for all sorts of financial facilities to help you in your adulting journey.
Before you commit to one, take the time to compare everything. When it comes to credit cards and personal loans, you can always compare between different banks and lenders on CompareHero so that you’ll be confident in the choices you make!