How To Avoid Going Into Debt As A Young Adult

Have you just entered the workforce and find yourself with income but also more and more needs? Or admittedly, some are wants. It’s easy now to reach for that credit card, e-wallet or buy-now-pay-later app to maximise its “benefits”, but you know the bill will hit you soon enough. How, you may ask, can you manage your personal finance better, in a time where cost of living is rising and you don’t have enough savings? Here are some practical tips:

Question your impulses

When wanting the latest mobile, a pair of trending kicks or that fashion statement piece - take a moment to ask yourself how you will pay for it? How much joy will it bring you and for how long? Your future self may thank you for questioning and resisting that impulse buy and not getting into debt for it. A finance podcaster for My Millenial Money even came up with a 1% rule for spending money.

Know Your Numbers

In Malaysia, late payment fees past the monthly credit card payment due date can range from RM10 to RM100. Finance charges are also applicable to any unpaid credit card balances and this typically ranges from 15% to 18% per annum, calculated on a daily basis. So an initial debt of RM1,000 can end up snowballing to >RM1,300 if unpaid for a year. Go through product disclosure sheets for any debt that you’d like to take on to know the numbers involved first.

Have a budget

You may not be running a country or a company but budgeting is still essential for personal finance. Budgeting can be as simple as using a calculator and notepad on your mobile if you find spreadsheets complicated. We share some tips on how to budget here.

Pay yourself: save and invest

In balancing your budget, factor savings and investments besides your expenses. Your savings and investments can grow over time but in a good way - providing some funds in case of emergency, and even to accumulate assets for retirement in the long term. Pay yourself by putting aside at least 10% or more of your income each month.

Consider investing in a savings plan that grows and maximises your wealth. With FWD Max Wealth, get 304% of your sum assured at maturity.

Protect yourself from the unexpected

Being a young adult, you can get insurance coverage with affordable premium rates. Getting the financial protection that you need against unexpected future injury or illness that can undo all you’ve done to avoid getting into debt. After all, medical expense is one of the reasons participants in AKPK’s Debt Management Programme cite for their debt. For a medical insurance plan that doesn’t break the bank, consider i-Med. Starting from only RM44.70 a month, get cashless and hassle-free admissions. Get an instant quote #here. 

As a young adult who’s new to handling your own finances, it’s important not to get carried away with your spending. Whether it be your friends having the latest gadget and you settling with your current one, avoiding a late night online shopping spree, or buying an overly-expensive first car. Remember, it’s always much easier to overspend than it is to spend less.