Managing Personal Finances 2021

MANAGING YOUR
PERSONAL FINANCES
- Refraining from undesirable debts
Wong Yew Yip
yewyip@gmail.com

Designed & Developed by : Wong Yew Yip ~ updated 17 September 2021
Modules
MODULE 1 Managing Personal Finances
MODULE 2 Getting into Undesirable Debt
MODULE 3 Staying out of Undesirable Debt
MODULE 4
Applying Personal Finances
Techniques

What is Managing Personal Finances?
Managing Personal Finances is about making
financial decisions to budget, save, and spend
monetary resources from time to time, taking
into account various financial risks and future life
events… it does not matter how much or how
little money you have

Importance of Managing Personal Finances
Managing Personal Finances will
help you to:
☺ Know what you want to do with
money
☺ Know where your money goes
☺ Know how to save money for
your goals
☺ Plan in advance your spending
☺ Know your credit limits and how
to keep control
☺ Organize your financial records

A bad management of
personal finance will provide
nothing but financial trouble

Will - Skill Matrix in Managing Personal Finances
Low
Low
High
High
SKILL
WILL
(High Will, High Skill)
Free from
debt!
(High Will, Low Skill)
Susceptible
to getting
into debt
(Low Will, Low Skill)
Will get
into debt
(Low Will, High Skill)
High chance
of getting
into debt

What is Undesirable Debt?
 A personal debt consists of any money owed as a
result of an individual purchasing items or goods for
personal consumption
 Very few individuals do not have debt
 In fact, maintaining some level of debt is necessary
for most people, mainly because they do not have
the cash available large ticket items like house and
car
 Thus, personal debt is not necessarily a bad thing
 But, when the debt is too much and escalates out of
control due to inability to repay, then this is
undesirable debt

“Debt can turn a free, happy person into
a bitter human being.” - Michael Mihalik

Reasons why one gets into debt
1. Get a credit card (or two or three or more)
and don't service them promptly
2. No habit to save
3. Ignore your budget or don't even have a
budget
4. Tend to be lazy - pay for people to do
things for you, like washing car, cleaning
house, cutting grass, etc
5. Try to win big - the lottery or gambling at
the casino is by far one of the most fun
and exciting ways to blow all your money!

Dumb ways to get into debt
1. Financing an expensive car
2. Using credit cards
3. Financing latest gadgets
4. Having expensive habits
5. Spiraling debts
6. Giving family and friends a loan
7. Stand as guarantor for loan
8. Upgrading unnecessary stuff
9. Playing lottery and gambling
10. Hire purchase on furniture and appliances

Clues that you are in debt
1. Your credit card balances continually increase
regardless of the fact that you are making a steady
income
2. You are consistently making only the minimum payments
on your credit cards and the balance never goes down
3. You have to work overtime or take a second or even
third job to simply pay off all of your credit card bills in
addition to your regular monthly bills
4. You have no idea how much you owe your creditors and
you are too afraid to call them to find out
5. You start ignoring phone calls because they are from
your creditors

Clues that you are in debt
6. Your savings account is getting lower and lower
because you have been dipping into it to pay your bills
7. You lie to your spouse about how much items cost
8. Your spouse or family has no idea how severe your
bills are & you hide your debts from them
9. You are regularly late in paying your utility and other
monthly bills
10. You are consistently worrying about money to the
point that you are losing sleep and it affects your daily
life

The Debt Cycle
First, we JUSTIFY the
need to take a new debt
Then we TAKE on the
new debt
This causes more
STRESS and financial
consequences
To RELIEVE stress, we
take on a new debt
When we start explaining,
rationalizing, defending or making
excuses why we need to add new
debt, we’re caught in the debt cycle

Credit Card Debt Cycle
You use
your credit
card
You pay the
minimum
payment
You buy
even more
stuff
You still pay
the minimum
payment
And the
debt never
seems to
reduce!

Debt leads to Fraud & Wrongdoing
 The 1st element of the Fraud Triangle
represents pressure to resolve “non-
shareable problems” (to be kept
confidential & secret)
 This is what motivates the fraud and
wrongdoing in the first place
 The fraudster has some financial
problem that he is unable to solve
through legitimate means, so he
begins to consider committing an
illegal act, such as stealing cash, as
a way to solve his problem
The Fraud Triangle

If you are in debt
Assess in detail your indebtedness
1
Admit & Accept the fact that you have a
problem
2
Acknowledge it - Don’t ignore the
problem - it won’t go away
3
Don't leave it until it's too
late - ACT FAST
4
Simple steps that can be taken to get back on
the road to debt recovery

Recognizing Red Flags
1. Fail to save money for rainy days
2. Always financially tight and out of money
before payday
3. Longer time needed to pay or frequently
late in settling bills
4. “Juggling” payments to creditors
5. Borrow to pay fixed costs such as rental, insurance…
6. Credit card cash advance used to pay daily expenses
7. Resort to borrowing from illegal money lenders
8. Creditors often call up and send letters demanding for
payment of overdue debts
9. Unsure how much actually owing

Living Within Your Means
 Live a comfortable life, not a
wasteful one
 Do not spend to impress others
 Do not live life trying to fool
yourself into thinking wealth is
measured in material objects
 Manage your money wisely so your
money does not manage you
 Always live well within your means
 Resisting the gratification of your
ever-growing whims and desires

Safeguarding Your Reputation
“It takes 20 years to build a
reputation and just 5
minutes to ruin it
If you think about that, you
will do things differently”
Warren Buffett

His advice to young people:
"Stay away from credit cards & bank loans
and invest in yourself and remember:
A. Money doesn't create man but it is the man
who created money
B. Live your life as simple as possible
C. Don't do what others say - listen to them,
but do what you feel good doing

His advice to young people:
"Stay away from credit cards & bank loans
and invest in yourself and remember:
D. Don't follow brand names; just wear those
things in which you feel comfortable
E. Don't waste your money on unnecessary
things; rather just spend on those things
you really need
F. After all, it's your life so why allow others to
rule your life?"

Tips for Living Within Your Means
1. Redefine your definition of “rich”
2. Borrow & share instead of buying all
the time
3. Refrain from going to the shopping
malls unnecessarily
4. Limit your intake of advertisements –
consciously manage excessive desire
and temptations for luxurious comfort
5. Buy on need basis with ready cash or
use credit cards prudently

Tips for Living Within Your Means
6. Find a better deal which
results in savings
7. Stay in and relax
8. Prepare yourself for rainy
days in a realistic way
9. Stop competing with others in
material comfort – no end
10. Avoid impulsive buying - buy
things you truly need

Avoid Credit Card Blues
 It is so easy to make purchases
when all you need to do is just
pull out the “plastic card”
 Easy, that is, until the monthly
bills arrive…
 Many use credit cards to make ends meet and then
find it difficult to make all the monthly payments
 That is when the “credit card blues” set in
 If you have trouble just meeting your monthly
payments, then it’s a warning to you to cut back on
using the credit cards

GIVE UP on these!!!
 GIVE UP your needs to impress others
 GIVE UP living your life to meet others’ expectation
 GIVE UP your needs to be the envy of others
 GIVE UP satisfying your desire to buy, buy and buy
 GIVE UP comparing yourself with others
 GIVE UP borrowing to maintain luxurious lifestyle
 GIVE UP gambling, sticky habits…
 GIVE UP owing more than one bank’s credit cards

Effective Tips to stay out of undesirable debt
1. Prepaid cards - using prepaid cards for shopping
2. Good offers - on the lookout for the best deals and discounts
on products and services
3. Timely payments - paying your bills on time is a great way to
budget your spending
4. Avoid being ‘slaved’ by luxuries – even you earn good
income doesn’t mean you spend on everything that catches
your fancy…
5. Emergency fund - having a consistent and regular savings
for emergency situations is a sound choice for your family
6. Will power - last but not the least; you need to have the will
to save

Where does your money go?
 Do you know where your money
goes?
 You may say, “house payments,
car loan, utility bills and food”
 But after that, things begin to get a
bit blurry
 You are not sure where the rest of
it goes - Right?
 You will not be sure until you learn
to manage your personal finances
properly

Tips to manage your Personal Finances
 Start saving today - make it a habit to save a portion of
your paycheck on a monthly basis
 When you can borrow or rent, don't buy
 Go for high down payment and low monthly installments
 Have good insurance coverage for emergencies
 Holding credit cards considered to be important for
establishing credit standing but watch your spending
 Read books on personal financial management - to learn
proper financial management skills from experts
 Save a few ringgit a day and it will snowball to become a
million some day…

Spending Habits
DO YOU …
1. Decide on the needed items and plan how much
can be spent BEFORE going for shopping?
2. Always use a shopping list?
3. Buy only items on your list?
4. Compare price and quality before buying, especially
on expensive purchases?
5. Use your credit cards only when necessary?
6. Make effort to return poor quality or defective items
to the seller?

Too many people spend money
they haven’t earned, to buy things
they don’t want, to impress people
they don’t like – Will Rogers

Spending Log (1 of 3)
WEEKLY SPENDING LOG
A FIXED EXPENSES WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5
1 Rent, management fees
2 Mortgage
3 Credit Card payment
4 Insurance
5 Child care/support
6 Alimony
7 Vehicle loan
8 Allowances
9 Monthly prescriptions
10 Other Fixed Expenses
TOTALS
(A) FIXED EXPENSES TOTAL

WEEKLY SPENDING LOG
B FLEXIBLE EXPENSES WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5
1 Electricity, gas, oil, fuel
2 Water, Indah Water
3 Telephone, internet
4 Groceries
5 Cable TV, Satellite
6 Dry cleaning
7 Dining out
8 Other Flexible Expenses
TOTALS
(B) FIXED EXPENSES TOTAL

WEEKLY SPENDING LOG
C DISCRETIONARY EXPENSES WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5
1 Education
2 Medical, Dental, Vision
3 Entertainment
4 Going out, events
5 Clothing
6 Personal Services
7 Sports, hobbies
8 Home repairs, maintenance
9 Vehicle repairs, maintenance
10 Newspapers, books, magazines
11 Other Discretionary Expenses
TOTALS
(C) DISCRETIONARY EXPENSES TOTAL
OVERALL EXPENSES (A, B, C)

Spending Tips (1 of 3)
1. When you go for ordinary shopping, bring only cash, don’t
take credit cards…why?...
2. Buy consciously only the things you really need - before
going for shopping, make a list of your needs and stick to it
3. Save up the money to buy what you need – don’t get a
loan or use credit cards
4. Shop at thrift stores, negotiate prices whenever practical
5. Swap clothes with friends and relatives
6. Avoid trendy clothes; buy classic styles made from high-
quality fabrics
7. Look for sales and off-season bargains, compare prices…

8. Carefully inspect everything you buy; make sure the item
is worth the money - keep your receipts
9. Buy furniture and household appliances on cash, not on
HP
10. Shop for food at supermarkets with a shopping list based
on menus; avoid costly convenience stores
11. Use coupons, and buy store brands at the supermarket
12. Buy larger quantities of things if you frequently use – for
better prices
13. Eat at home - make your own meals
14. Take your lunches to work
15. Share driving or use public transportation

16. Arrange baby-sitting with neighbors, friends, and relatives
17. Write letters or emails instead of calling long-distance if
these calls cost extra on your phone
18. If you use mobile phone, be sure you're not paying for
minutes you never use
19. Give home made gifts to people
20. Read books, magazines and newspapers at the library if
practical or from the internet
21. Do as much repair work as possible by yourself
22. Buy only energy-efficient appliances - you will be paying
for electricity

6 Steps to balance your Budget
Balancing
Your
Budget
Set your
financial
goals
1
Know your
income
2
Estimate
your
monthly
fixed
expenses
3
Estimate
your regular
flexible
expenses
4
Estimate
your
occasional
expenses
5
Compare
income &
spending and
adjust to
achieve
balance
6

 Set your financial goals
• Your values should be reflected
in your financial goals
• No one can tell you what your
lifestyle ought to be but every
lifestyle comes with a price tag
• Only you can decide how to
match your money with your
lifestyle and goals

 Know your income
• You must know how much
money you have to work with in
order to make a plan to live
within your income/means
• Your income will be your take-
home pay (not basic) and
allowances

 Estimate your monthly fixed
expenses
• Fixed expenses stay basically
the same each month and are
committed for a period of time
• You may need to adjust the
amounts to reflect any
changes, such as a rent
increase, higher insurance
premiums, new loan repayment

 Estimate your regular
flexible expenses
• Flexible expenses occur each
month, but the amounts change
so you have to carefully track
expenses for items such as
food, clothing, transportation
• Unlike fixed expenses, you
generally have more control
over these amounts

 Estimate your occasional
expenses
• Occasional expenses come
periodically throughout the year
such as holidays, birthdays,
home maintenance, education
• Don’t let occasional expenses
creep up on you and find
yourself without the money to
pay them

 Compare income & spending &
adjust to achieve balance
• If your income and expenses
don’t balance, determine where
can you make adjustments
• If your income exceeds expenses,
consider additional savings or
investment goals
• However, if your expenses greater
exceeds income, you have 2
options - increase income or
reduce expenses

Action Learning Project on Budget Planning
 Prepare your monthly budget
for next month using the
Monthly Budget Planning tool
 Ensure that you adhere
strictly to what you have
budgeted and planned
 Determine the differences at
end of month and, if your
actual expenses exceed
budget, identify expenses you
can give up or reduce

Thank You
Contact :
yewyip@gmail.com
for PowerPoint file

Managing Personal Finances 2021

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