Tuesday, October 21, 2008

Managing Money Part 4: EXP

Sharing a thought...

Malaysia's inflation rate jumped to a 26-year high of 8.5 percent in August 2008, driven by the escalating cost of food and fuel. It is said the cost of food and non-alcoholic drinks rose 11.7 percent in August compared to a year ago.

The August data showed escalating prices in most categories, including transport which jumped 21.8 percent, and restaurants and hotels which rose 6.5 percent.

Malaysia's government hiked the fuel price by 41% in June 2008, in a move to rein in the ballooning cost of subsidies but it has on numerous occasions since then lowered the fuel price from a high of RM2.70 to current price of RM2.30 when the global fuel price has decreased from a high of USD147/barrel to USD69/barrel in October 2008.

The high inflation is already hurting many consumers especially those with fixed income with many Malaysians cutting down on food bills.

In managing our money, it is suggested that one's expenses should be lower than one's income to ensure that there is surplus for other uses eg savings and investment. The recommended amount that one should cap on one's expenses is 55% max.

Some of the suggested ways to ensure that our expenses do not exceed the 55% cap is by preparing a budget and identify our needs from wants. Following a budget requires discipline however, if a person stays focused on his financial goals, the whole process could be easier.

Identifying one's needs and reducing or eliminating one's wants would help tremendously as priorities are set thus reducing wastage of resources and ensure there is a surplus for other usage.

In the event that the situation does not permit one to place a cap on his expense account due to the depleting purchasing power of cash, it is recommended that one should look for another source of income to boost his take home pay.

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