Debt Management in Malaysia

By Norsalina Aisyah Salim

Managing debt continues to be the most sought-after topic as many Malaysians struggle with it. Learn some of the ways to have a better debt management.

Debt management is an important aspect of personal finance that everyone should know, especially in Malaysia, where debt is a common problem for many people.

According to the latest statistics from the Malaysian Insolvency Department, the total number of bankruptcy cases administered for the period of 2018 to December 2022 was 49,133.

The main causes of bankruptcies in Malaysia include personal loans and business loans.

Many people in Malaysia find themselves in financial difficulties due to job losses, medical emergencies, or business failures. Left unchecked, debt can spiral out of control and cause financial stress that affects various aspects of life.

So, what is the importance of debt management in Malaysia, and what are the options to manage debt? What are the benefits of hiring a financial planner to assist you manage your debt?

Why is Debt Management Important?

Debt management is important because it helps individuals avoid financial instability, stress, and problems caused by excessive or unmanageable debt.

If you are in debt, you may feel overwhelmed and stressed, which can negatively impact your physical and mental health. In addition, debt can restrict your financial freedom, limit your ability to make important life decisions and prevent you from achieving your long-term financial goals.

One of the main reasons debt managements is important is that it helps you maintain your credit score. If you have high debt or miss payments, it can negatively impact your credit score and make it harder to access credit in the future. A low credit score can make it more difficult to get approved for loans, credit cards or mortgages and prevent you from making major purchases or investments.

Debt management can also help you avoid falling into a debt trap. If you do not have a plan to manage your debt, you may have trouble making your payments, default on loans, or incur additional costs or fees. This can make it difficult to get out of debt and lead to a cycle of borrowing that is difficult to break.

Debt management can help you achieve your long-term financial goals. If you have high debt, it can be difficult to save for retirement, purchase a home, or invest in your education or business. By managing your debt effectively, you can free up more money for your long-term goals, making them easier to achieve.

4 Ways to Manage Debt

• Budgeting: The first step in debt management is to create a budget. A budget is a plan that lists your income and expenses. This lets you see where your money goes and identify where to save more. When you create a budget, you can set aside a specific monthly amount to pay your debt, reducing your debt over time.

• Debt Consolidation: Debt consolidation combines multiple debts into a single loan. Debt consolidation can make managing your debt easier because you only have to make one monthly payment rather than multiple payments with different interest rates. However, it is important to know that debt consolidation is not always the best option for everyone and be sure to consult a professional before making a decision.

• Debt Snowball Method: In this method, you pay off your smallest debt first and then use the money you would have used on that debt to pay off the next smallest debt, and so on. Using this method can effectively pay off your debt. It gives you a sense of accomplishment and momentum as you pay off each debt.

• Negotiate with Creditors: If you are having trouble paying your debts, you should negotiate. You may be able to work out a payment plan or negotiate a lower interest rate, which can help you reduce your debt over time.

Getting Professional Help with Debt Management

If you are having trouble getting a handle on your debt, it may be a good idea to get professional help. A financial planner can give you personalised advice and show you how to effectively manage your debt. They can also help you create a debt management plan tailored to your needs and goals.

Benefits of Hiring Financial Planner for Debt Management

• Expertise: Financial planner have the expertise and knowledge to help you effectively manage your debt. They can advise you on the best debt management strategies and help you create a plan that works for your unique financial situation.

• Objectivity: A financial planner can look at your finances objectively and help you make decisions in your best interest.

• Accountability: Working with a financial planner can help you stay on track with your debt management plan. They can help you monitor your progress and adjust as needed to ensure you are making steady progress toward becoming debt-free.

Considerations When Hiring a Financial Planner

Hiring a professional financial planner can be a wise decision for individuals who cannot manage their debt. However, it is crucial to consider some key factors when choosing a professional financial planner. Here are some considerations:

• Qualifications and experience: Before hiring a financial planner, check their qualifications and experience. You can look for professionals certified by reputable organisations or with a proven track record of helping clients successfully manage their debt.

• Fees: You must know the fees for hiring a financial planner. Some experts charge an hourly or flat fee, while others charge a percentage of the debt, they help you manage. Make sure you fully understand the fees before hiring a professional.

• Services offered: Different professionals offer different types of debt management services. For example, some focus on debt consolidation, while others specialise in negotiating with creditors. Understanding a professional’s specific services is essential to ensure they meet your needs.

• Reputation and references: Before hiring a debt management expert, check their reputation and references. You can search online for reviews and testimonials or ask for references from previous clients. This way, you can get a better idea of the professional’s track record and quality of services.

• Compatibility and communication: Finally, you must choose a financial planner you enjoy working with and can communicate clearly and effectively. You should feel comfortable discussing your financial situation with the professional and confident they will work with you to create a customised debt management plan that meets your needs.

Conclusion

Debt management is an important aspect of personal finance, especially in Malaysia, where debt is a common problem for many people. By creating a budget, exploring debt consolidation options, or using debt snowballing, you can effectively manage your debt and reduce financial stress. If you struggle to handle your debt, you should get professional help from a wealth advisor.

Wealth Vantage Advisory Sdn. Bhd. was established as the company of choice for clients and financial advisors, leading the change in the industry by focusing on the right way to do things.

Find out more at: https://www.wealthvantage.com.my/

Would you get professional help to manage your debt situation?

About the Author: Norsalina Aisyah Salim

Norsalina Aisyah has experience as Dealer Representative in Stock Broking Company for more than 5 years and was involved in many women and community-educating financial activities in Malaysia for years before joining Wealth Vantage Advisory as a Licensed Financial Advisor. She is now pursuing her PhD. at University Utara Malaysia and has a Certified Financial Planner (CFP) qualification. With her education, certification, and personal experience, she is keen to help others make the right financial decisions and has healthy finances to live a well-balanced life

Kos Membesarkan Anak di Malaysia

Oleh Saidah Asilah

Kos membesarkan anak-anak di Malaysia sering dibicarakan tetapi tahukah anda berapakah yang perlu diperuntukkan untuk ibu bapa setiap bulan bagi memastikan keperluan anak-anak mereka mencukupi?

Tahukah anda kos membesarkan seorang anak ketika lahir untuk ibu bapa bekerja di Lembah Klang secara puratanya mencecah hampir RM800 sebulan?

Waima, kenaikan gaji tahunan secara purata bagi individu berjawatan eksekutif di Lembah Klang adalah sebanyak RM300 setahun. Hal ini daripada pengalaman penulis dengan klien sebagai seorang Perancang Kewangan Bertauliah. Tujuan artikel ini ditulis untuk memberikan panduan kepada ibu bapa muda bekerja dalam membuat perancangan kewangan bulanan mereka. Sejurus mendapat khabar gembira bahawa mereka akan menimang cahaya mata, mereka juga disarankan telah bersedia daripada segi kewangan untuk menampung kos di luar jangka sebaik bayi mereka lahir.

Penulis telah membuat satu tinjauan ringkas di laman sosial Twitter untuk memperoleh data untuk artikel ini.

Kos Bulanan untuk Ibu Bapa Muda

Tinjauan berdasarkan 16 responden yang terdiri daripada ibu bapa di Malaysia

Kos Bulanan Menghantar Bayi ke Pusat Jagaan

Berdasarkan data di atas, sekiranya ditambah purata kos pengasuh berjumlah RM500, kos susu formula dan lampin pakai buang, kos ini boleh mencecah sehingga RM746 sebulan. Angka ini bukan sedikit. Justeru itu, tidak menghairankan jika ada ibu bapa muda yang sanggup mengambil langkah berhenti kerja atau sedaya upaya memberikan susu ibu untuk menjimatkan kos.

Kos Pendidikan anak di Prasekolah

Selepas anak mula menjejakkan kaki ke alam pra-persekolahan antara umur 4 hingga 6 tahun, kos bulanan dijangka masih kekal sama.

Kos untuk 3 prasekolah di Malaysia

Bergantung kepada aliran pra-sekolah yang menjadi pilihan, penulis telah membuat kompilasi tiga pra-sekolah yang dikenali dengan cawangannya di seluruh negara.

Ibu bapa yang memilih prasekolah untuk anak mereka mempunyai pelbagai kriteria, samada kos, jenama, atau kaedah pembelajaran yang diterapkan. Tambahan lagi, ibu bapa bekerja lebih memilih untuk menghantar anak mereka dari pagi sehingga petang.

Kos Pendidikan Anak di Sekolah

Kebanyakan ibu bapa berasa lega apabila anak mula bersekolah di sekolah rendah. Mereka mendapati yuran bulanan tidak begitu membebankan.

Kos Persekolahan di Sekolah Rendah Kebangsaan

Merujuk kepada gambar di atas, sekiranya ibu bapa memilih untuk menghantar dan mengambil anak daripada sekolah, kos sebenar bulanan boleh dijimatkan lagi. Ia kerana, kos pendidikan sekolah kebangsaan hampir kesemuanya percuma, secara bulanan. Justeru, kos yang dipamerkan di jadual di atas setelah melibatkan wang saku atau tambang bas ke sekolah.

Walaubagaimanapun, ada juga ibu bapa yang memilih sekolah swasta kerana faktor kaedah pembelajaran yang berfokus, tidak memeningkan kepala dengan isu transit, dan jarak yang dekat. Secara perbandingan, ibu bapa boleh melihat kemampuan kewangan antara sekolah kebangsaan dan sekolah swasta.

Kos sekolah rendah swasta pada tahun pertama

Jelas perbezaan yang agak ketara dalam membuat keputusan samada untuk anak meneruskan pembelajaran di sekolah jenis kebangsaan atau swasta. Persekolahan swasta seakan menyambung dan menambah lagi kos selanjutnya sejak dari alam pra-persekolahan lagi.

Pelbagai pilihan untuk untuk ibu bapa bekerjaya, ditambah lagi dengan kos sara hidup dan inflasi gaya hidup yang sentiasa meningkat, ibu bapa disarankan untuk membuat keputusan setelah mengambil kira tahap kemampuan kewangan sepanjang tahun.

Antara kesan literasi kewangan seperti dipetik daripada Strategi Literasi Kewangan Kebangsaan Malaysia 2019-2023:

• Menjalani kehidupan yang bermakna, selesa dan stabil

• Kesedaran ilmu, kemahiran dan tabiat yang diperlukan

• Meningkatkan keyakinan dan kemahiran membuat pilihan yang bijak

Kesimpulan

Karakter dan matlamat setiap individu adalah berlainan. Walaubagaimanapun, keselesaan hari ini mungkin tidak berpanjangan sekiranya membuat keputusan kewangan yang salah. Buatlah keputusan yang berasaskan pandangan yang holistik, supaya mempunyai keseimbangan antara keperluan simpanan kecemasan, dana pendidikan tinggi anak-anak serta perlindungan pendapatan yang mencukupi.

Berjumpalah dengan Perancang Kewangan Bertauliah atau Licensed Financial Planner yang boleh memberikan satu pelan tindakan menyeluruh daripada analisa kewangan bersama supaya setiap keputusan yang diambil tidak berat sebelah dengan faktor emosi, favourite atau penyelidikan seorang diri yang boleh menjadi bias dalam membuat sebarang keputusan kewangan.

Apakah antara kos yang anda rasakan sangat penting untuk membesarkan anak-anak di Malaysia?

About the Author: Saidah Asilah Saidah started her career as a graduate trainee with the Securities Commission Malaysia. Then, with a deep interest in investments, she furthered her studies in MSc in International Business and Emerging Markets, graduating in 2013 from The University of Edinburgh, UK. Saidah is a Certified Financial Planner and describes herself as a multi-talented adventurer who gives a positive impact on each person she met.

7 Tips to Manage Your Wealth Well to achieve Al-Falah in 2023

Managing wealth in Islam is closely related to the Al-Falah concept. Learn the proper ways to managing your wealth to achieve Al-Falah.

Al-falah is an Arabic word for success.

While everyone strives to be successful in life, in Islamic wealth management, al-falah means success in this world and the Hereafter. To achieve al-falah, “Muslims must strive in Allah’s cause with his wealth and his self” (As-Saff:11).

Muslims are encouraged to seek ways to increase their wealth correctly. They have a duty to contribute to their families and community too. However, the process of Islamic wealth planning which involves acquiring wealth must adhere to Shariah-compliant principles and practices.

Generally, whatever is beneficial is permissible (halal). However, in Islamic wealth management, the following elements are prohibited (haram):

• riba (interest/excess)

• gharar (uncertainty)

• maisir (gambling).

Also, investments that involve things or substances that the Quran says are wrong, like alcohol, gambling, or pork, are not allowed.

With that, here are seven tips for managing your wealth and striving for al-falah.

#1. Set or reset your financial goals

This is the first step, as it leads to the actions you will take to serve your ultimate purpose in this life. And to be balanced, you also need to consider other areas, such as goals for your family, career, and social life. All your goals are interrelated. Be specific when setting these goals so you can plan well and decide what to do first. For example, goals include wanting to retire comfortably by 55 years old and/or going on Hajj when you are 45 years old.

#2. Acknowledge your current wealth or resources

You would also need to assess your current financial situation. It means getting answers to these questions:

• how much your income is

• how much are your expenses

• what are your assets

• what are your debts.

If you are an employee, please clarify the benefits provided by the company so that you are clear on what you have at the current time.

#3. Review your existing spending

This is a reflection on the question: Where did you spend your wealth? (Hadith At Tirmidhi)

A review of your existing spending pattern is key. As an adult, you are responsible for the essentials like food, shelter and education for yourself and those under your care. However, to make the most of your life, you may want to spend on something that is not necessary but desired so that you can increase your quality of life, such as travelling, having more space with a bigger house or bigger car. To achieve al-falah, you should also consider the following:

• Spend for the needy as a donation or sadaqah, or to charity for protecting animals or the environment;

• Spend to acquire more knowledge or upskill that can make you a better person/ trustee

• Pay your debts on time or as per the agreed method

Most importantly, you must spend prudently.

“So, when they bear fruit, eat some of it, paying what is due on the day of harvest, but do not be wasteful; God does not like wasteful people.” (Al-An’Am:141)

#4. Revisit current financial plans/ products

There are two primary objectives of doing this;

1. To ensure the current financial plan/ solutions meet your need and to cover your gap

2. To ensure the product /solutions that you have are shariah compliant instrument

It may sound a bit complicated here, as it requires some technical knowledge or expertise to assess. However, you may start with a simple action like shifting your bank accounts, credit cards or your EPF savings into a shariah-compliant alternatives.

Next, you may review your existing investment as there are plenty of options available that meet your financial objectives. In Malaysia, all regulated investment schemes will have an indication if it is a shariah compliant schemes/ products.

As for your wealth protection needs, you may want to reconfirm if your current policies are conventional products or takaful products which are shariah compliant. Wherever possible, you must opt for a takaful contract. However, you are highly encouraged to seek professional advice on this as there are many other factors that you need to consider before you change your existing policies.

#5. Restructure your debts

This tip is similar to tip #4 and only applies if you have one or more debts. Other than ensuring your current arrangement is under a Shariah-compliant contract, this step will provide you with a better alternative if the current financing charges can be optimised. This is because, over the years, more options have become available in the market, which makes the financing costs more competitive and can be to the advantage of consumers or borrowers.

You should also equip yourself with basic financial literacy, such as the different types of debt which have different effective financing charges, known as ‘bad debt’ or ‘good debt’.

#6. Check your tax & zakat obligation and payment

These two types of payments are mandatory for Muslims who meet a specific criteria.

Taxes are payable to the government, and you can be penalised if you fail to comply with its rules.

In Malaysia, zakat payments is voluntary for which you won’t be penalised under the existing legal system. On the other hand, zakat is a religious obligation and one of Islam’s 5 Pillars. You can find out how much zakat you need to pay by using the online zakat calculator at your respective the Pusat Zakat Negeri website.

#7. Ensure and revisit crisis management plan

This can be addressed by having some basic practices as follows:

• List of your immediate family members

• Make known of your alternative contact person(s) in the event of an emergency

• Have a proper record of your assets and debts

• Keep your financial documents properly and make sure your family members know where to locate it

• Prepare a sufficient cash reserve of at least 6 months of living expenses

• Update your nominee(s) so that the fund can be distributed faster (note: Nominee for Muslims is an executor, not receiver)

• Hibah your takaful certificates as per your plan

• Allocate sufficient allocation for estate administration costs

Additionally, consider Islamic estate planning instruments such as wasiyyah, waqj, and hibah in planning for your wealth distribution.

Conclusion

Life is full of uncertainties. But putting in your best effort through proper Islamic wealth planning and trying to get richer is a lifelong journey that Islam encourages. It is one of the means to achieve al-falah. With that, you are taking the best care of yourself and your loved ones, which will impact society directly or indirectly. Lastly, be humble and grateful for all the resources that you have in this life.

What is your approach to achieving Al-Falah in your finances?

About the Author

Helwa Sofni has more than a decade of experience as a Chartered Accountant and held many positions in the corporate sector before venturing herself as a Licensed Financial Planner with one of the top leading financial advisory in Malaysia, Wealth Vantage Advisory Sdn. Bhd. This mother of three who resides in Negeri Sembilan is also a certified Islamic Financial Planner. She truly believes that financial literacy is crucial for everyone in order to live life confidently and peacefully while pursuing one's dreams. She can be contacted at helwa@wealthvantage.com.my