Most of the time, Malaysians use up their monthly budget on three things: housing, transportation, and food. So how do we, as fresh graduates, steer away from this problem once we get our paycheck? This article acts as a rent affordability calculator for those who desire to maximise their income.
There is no strict rule on how much your income should go to rent. It depends on your neighbourhood, your place of work, and how much you earn. However, experts have advised you not to surpass 30% of your income when renting. Here’s a rent affordability calculator (at the bottom) which shows how much rent is within your financial means.
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Monthly Basic Necessities
Many people adopt the 50-30-20 rule, which allows you to focus on managing your monthly spending. Also, it enables you to plan out your future financial affairs. Let’s look at what this strategy entails:
The 50 in 50-30-20 means you should not exceed 50% of your income on monthly necessities, including your groceries. Necessities include your rent. If your monthly rent income ratio is just shy of 30%, you have about 20% of your income to spend on other necessities. On the other hand, if you spend more than 30% of your income on rent, you must calculate how the differences will affect your monthly budgeting.
The 30 in 50-30-20 refers to how much your income should go to nonobligatory spending. This means that you should allocate less than 30% of your income to cover entertainment, dining, night-outs etc. Anything that you can live without is considered nonobligatory spending. People who don’t have a clear budgeting strategy would spend more than 30% of their income on nonobligatory spending.
Lastly, the 20 in 50-30-20 represents the percentage of your income that should go to your financial goals ‘bank’. Just save 20% of your income on things you want to do in the future. Savings for retirement, your dream holiday, your dream car, or even saving for a rainy day can all come from this part of the strategy.
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However, what should you do if you accidentally jump the gun and sign a contract that’s above your financial means? You have nothing to fret over because here on SPEEDHOME, we offer you a chance to terminate your agreement early. You can learn all about it here.
Which one would you choose? Would you cut your rent by forgoing your quality of life, or would you opt for convenience? Or would you cut off your spending in other aspects of the budgeting strategy? Tell us what you think by leaving a comment below!