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7 Tips to Manage Personal Finances as an Employee

By Nor Ellya Ezamal

For employees who have just joined the workforce, managing your monthly salary as part of your personal finances can be confusing with so many priorities to choose from. We explore some of the key points you do need to prioritize.

Personal finance is a process that involves all aspects of money management, including saving and investing. Budgeting, banking, insurance, mortgages, pensions, retirement planning, and tax and estate planning are all included in this area.

If you are new to the working world, or new to taking an interest in managing your money, it sometimes feels like there are too many things to consider when it comes to figuring out what to do to best handle your money. Should you consider this or that (or that or that)?!

#1. Plan a Budget

As an employee, most of you receive a largely fixed income every month. This makes it much easier for you to plan your budget compared to a business owner, entrepreneur or someone with high variable income.

A budget is needed to guide your spending choices. This is so you can live within your means while still investing enough to meet your long-term priorities.

If you don’t know where to begin with budget planning, consider starting with something as simple as the 50/30/20 Rule. When you set up your own household, you need to also start working together on budget-setting as a couple.

Aside from setting up a budget, you will need to track your spending. This is made easy with personal budgeting apps. Tracking your spending helps you identify whether you are able to stick to your budget or whether some adjustment is needed to your budget.

Do also plan as well for your bonuses (i.e. contractual bonus, performance bonus) to be allocated between spending and saving.

#2. Build Up an Emergency Fund

As an employee, although your income is more stable, there are still risks. We have seen in the last year how certain jobs faced pay cuts, reduced overtime work and allowances, or even job cuts!

It is important to “pay yourself first”. This means putting aside money to cover you should an unexpected event occur. While some may believe paying yourself first means spending on fun wants rather than parking money aside for the future, the truth is that when we are faced with sudden financial tragedy every sen counts; we will regret spending that RMX,XXX on that handbag or nice watch.

How much should your emergency fund hold? For many, three to six months worth of living expenses is a good number to start with.

How much of your income should be channeled to your emergency fund? Many financial experts suggest setting aside 20% of each salary each month until you reach your target amount.

#3. Reduce Your Debt

It seems easy enough: To avoid falling into debt, do not spend more than you gain.

Of course, most people must borrow from time to time, and going into debt can be beneficial in certain cases.

However, the risk is getting into so much debt that it becomes unmanageable. For example, imagine if you already have plenty of debt. Suddenly, you or a close relative face a medical emergency that drains your emergency fund and your personal savings. In a matter of days, you are unable to service your debt. Very quickly, the interest snowballs into a monster amount.

To avoid such a scenario, try to keep your debt (good or bad) as low as possible all the time, regardless how much you can afford to pay off regularly.

As an employee, it is easier to get loans (especially if you are in the civil service). Thus you may face temptation to borrow more than you can afford. The maximum amount you are eligible to loan is NOT the amount of loan you should be taking.

#4. Use Credit Cards Wisely

Credit cards can be big debt traps, but in today’s world, it’s impossible not to have one due to the convenience.

While it is very easy to own one, the ownership of a credit card is a big responsibility. The best way to be responsible is to only use your credit card up to an amount you can fully clear at the end of the month. Meaning, you need to stay disciplined to always pay your monthly bills in full.

Don’t get carried away with swiping your card increasingly more often to gain more rewards, whether cashback or in points. Also, look out for the temptation of charging big purchases on your credit card that you know you can’t pay for in one go. While yes the banks allow you to do so and in fact encourage you to do so, you need to stop yourself.

Credit cards charge high interest rates when you are unable to clear your monthly repayments. While oh so convenient to use, missing a payment whether on purpose or not is one of the quickest ways to destroy your credit score. This can have dire consequences on your money future as it will impact your ability to secure future loans when you really need them.

#5. Start Retirement Planning

Retirement may seem like a long time away, but it arrives much quicker than you’d expect!

As an employee, you will have regular contributions to EPF. However, your EPF contributions will likely be insufficient to cover your retirement funds required!

If you were to rely on EPF alone, you will at the minimum need to place RM3,800 monthly into EPF for 25 years. At a 23% EPF contribution rate (11% employee + 12% employer), this means will you need to earn at least RM17,000 monthly for the entire duration.

If you imagine retirement means the freedom to pursue anything you like with your time, then you must make sure you are on the right track with having enough money so that that dream can come true.

To begin with, start putting aside money regularly for retirement. And then, you need to invest that money so that it grows faster than the inflation rate. You’ll also need to figure out what you imagine you want life to be like in retirement so you can identify your target amount but do prioritize saving and investing while you think about this for a bit.

The earlier you begin preparing for retirement, the more you gain from compounding, or what financial advisors refer to as the “magic of interest over time,” which describes how small amounts multiply over time. Don’t wait any longer and start today!

#6. Expand Tax Breaks

Many people lose hundreds or even thousands of ringgit per year as a result of not understanding tax filing. By ensuring you file correctly and maximize your reliefs and rebates, you’ll have more money to put toward paying off debts from the past, having a good time, and making plans for the future.

While employees do not have as many tax breaks as a business owner, do maximize all the various tax relief and rebates you can. Do take note as well on the latest tax filing changes including special tax relief or those that end after a certain year.

#7. Consider Your Family (Will-Writing)

Now that you are a working adult, your income allows you to accumulate assets. As such, it is only proper you carry out the necessary to ensure your estate passes to the right recipients should you be taken from this world unexpectedly.

Create a will and, depending on your wishes, set up one or more trusts to protect your estate and ensure that your wishes are carried out when you pass away. You should also need insurance as a form of protection, including insurance for cars, home, life, disability, and long-term care (LTC) coverage. Revisit the strategy on a regular basis to ensure that it continues to meet your family’s needs as life’s big milestones pass.

A living will and a healthcare power of attorney are two other important documents. Although not all of these records are specifically related to you, they will all save your family money and time if you become sick or otherwise disabled.

For muslim, wasiat are regulated by separate sets of rules. However, both will and wasiat have the same purpose: to protect a deceased person’s assets after their death. For example, both will and wasiat have aspects of a testator and assets; however, the wasiat has features that are only available to Muslims.

“A person takes a vow during his life against his property or privilege to complete something for the purposes of a welfare in which is acceptable in following to Syariah Law, after the death. – The definition on the Muslim Wills Enactment in the State of Selangor 1999

In Islam, Muslims are advised to prepare a wasiat to secure the appointment of a Wasi (executor/trustee), who will be capable of transferring the testator’s assets to the waris (beneficiaries).


As your spending powers grow, so do your responsibilities to yourself. Managing your personal finances effectively allows you to live at ease knowing that your future is financially stable. With careful planning and active execution, your wealth will continue to increase! You don’t necessarily have to startup the next unicorn or buy the hottest cryptocurrency to retire well. Do save, invest and plan out your finances well for the financial wellbeing of you and your family.

Are there other personal finance tips you would like to share?

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