Managing personal finance – a survey

Crawling traffic felt less annoying when there’s something engaging on the radio (my default radio is Radio IKIM). Yesterday, it was a Wanita Hari Ini segment by Puan Siti Fatimah binti Abdul Rahman, Fellow Kanan di Pusat Ekonomi dan Kajian Sosial, IKIM. She commented on a survey she conducted among working women (number of sample not specified) on managing personal finances. The survey was short and was based around the following indicators. How would I fare had I been included in her survey?

• Do you have monthly budgets? 77% said yes. Moi: do draw budgets together with my hubby from time to time, but they were neither structured nor strictly by month. So I guess that’s a no.
  
• Do you put away a portion of your income as savings? 64% said yes. Moi: yes.
  
• What is the percentage of this savings from your income? 21% said they save 6-10% of their income, while 27% save 11-15%. Moi: it’s difficult to answer because the amount varies from month to month. But this should change next month when I start my Tabung Haji monthly potongan gaji, insyaAllah.
  
• Is savings your priority when doing monthly budget? 43% said yes. Moi: based on my answer to previous question, it’s a no as well. Spend first, save whatever’s left, rather than the correct idea to save first, and spend whatever’s left.
  
• How much of your income is taken up by debt (monthly instalments)? 81% said they use 20-50% of their income to pay up debts. Moi: also belongs to the 20-50% category.
  

The survey doesn’t cover much, but I guess it is a starter, and mine says I have a lot to improve on! Managing personal finance is quite an essential skill (kemahiran hidup) and yet it is not in the school syllabus. I remember learning Perdagangan in form three Kemahiran Hidup, but that’s from the viewpoint of a company, which is rather different. Puan Siti Fatimah suggests three things we can do; first is to learn by reading or attending courses. A recommended book to begin with is Cukup Wang, Hati Tenang by Hajjah Rohani Datuk Mohd. Shahrir. I’ve read it; it’s quite good - not elaborate, but comprehensive and simple. I’m sure there are a lot of resources in the net, as well. Second, practise what you’ve learnt. And thirdly, inculcate good financial habits in your children.

Dan juga mereka (yang diredhai Allah itu ialah) yang apabila membelanjakan hartanya, tiadalah melampaui batas dan tiada bakhil kedekut; dan (sebaliknya) perbelanjaan mereka adalah betul sederhana di antara kedua-dua cara (boros dan bakhil) itu. (al-Furqan: 67)

Borrow to invest?
A related topic to managing personal finance is investment, and I am intrigued by the rising numbers of banks offering loans for people to invest in unit trust, specifically ASB. Whilst theoretically this makes sense provided that the returns on the investment exceeds the loan interest, the more practical side of me questions whether it's really worth it or not – the hassle, the commitment. Especially now that the base lending rate has soared to a high 6.75% from 6% within 6 months this year, and who knows how it'll go up or down 10 years down the road? With ASB returns not guaranteed, let’s say 7%, that’s a profit of only 0.25%! Of course the actual calculation is more complicated than that, but that’s sufficient to give me a ‘feel’. Of course, some people choose these borrow-to-invest schemes because it’s a form of ‘forced savings’, but wouldn't potongan gaji work as well? On the other hand, we see articles in the newspaper about people who rushes to buy other PNB’s products (for example ASW) the moment the counter opens for the new (limited) units being sold. A lot of people voiced dissatisfaction because they couldn’t manage to get their hands on the units. So we have one group of people borrowing money to invest in ASB, and another group that have ample of money but no ASW units to buy. I prefer not to spell out the suggestive implication. (Note: Of course, when talking about loan and investment, we have to consider whether they comply to syariah principles, to put it in a nutshell. But since I'm no expert, I'll refrain from elaborating.)