Managing your money wisely
Financial management means planning how to use money. We compare income (money coming in) with expenses (money going out) and try to save the difference.
Key idea
Savings = Income − Expenses. Spend less than you earn so you can save.
A worked example
Worked example
Encik Rahim earns RM1200 a month. His expenses are RM900.
Savings = RM1200 − RM900 = RM300.
If he saves RM300 every month, in one year he saves RM300 × 12 = RM3600.
Needs and wants
A need is something we must have, like food and school shoes. A want is something nice but not necessary, like a new toy or a game. Buying needs first, then saving, and only then spending on wants, is a smart habit. When you keep some money aside as savings, you are ready for surprises and can reach bigger goals later. Some people also earn a little extra when a bank adds interest to their savings.
Remember
- Make a budget: a plan for spending and saving.
- Pay for needs before wants.
- Debt is money you borrow and must repay.