MALAYSIANS, especially those in the low-income bracket, should set aside at least 30% of their income for rainy days and retirement, said the expert who formulated the Employees Provident Fund (EPF) spending guide.

EPF contributions count as part of the recommended 30% savings, said Universiti Malaya Social Wellbeing Research Centre director Emeritus Prof Dr Norma Mansor.

She told The Malaysian Insight Malaysians lacked financial literacy and that the EPF Belanjawanku was drawn up to help the low-income group plan their budget.

Launched in April, Belanjawanku is to help Malaysians in the Bottom 40 group manage their expenditure and not fall into the debt trap.

“Even if it is a little and not a big amount, they should try to save… the rule of thumb is (to save) 30% of your income,” she said.

“You have your EPF and that is 23%, so 10% more of your income should go into your savings.”

Belanjawanku recommends that one should set aside one’s expenditure for basic needs, such as food, transport and housing, before allocating a portion of the disposable income to savings.

“If you feel that you spend more in one category, then you should reduce your expenditure in another category. That will help you manage your monthly expenditure,” Norma said.

Malaysians in the B40 group tend to spend more on food, transport and housing.

A survey by the Credit Counselling and Debt Management Agency (AKPK) last year found that 52% Malaysians would have trouble raising RM1,000 in an emergency.

Up to 68% of those retiring at 55 do not have at least RM240,000 in their EPF account, which is the minimum savings to live for 20 years.

Norma said it’s possible for those earning a minimum wage to accrue RM240,000 in their EPF account by retirement provided the person consistently contributed to the fund from the time he started working until retirement age.

The person should also refrain from withdrawing more than 30% of his EPF savings at age 55.

Low minimum wage

Low and stagnant wages are among the biggest problems for the B40 group, Norma said.

She said the median salary of about half of all EPF contributors is RM2,000 per month.

“We are hoping that the minimum wage can be raised gradually.”

It is no longer true that high wages will lead to job cuts, she said. In fact, a good salary will boost productivity.

Meanwhile, she said by grouping all low-income earners together under B40, it is likely that those living below the poverty threshold are overlooked.

“That is why I am not so keen on the term B40. I think we have different types of low-income (groups) and by focusing on B40, we are actually missing the B10, the lowest income earners.” 

The average PPR flat household with a monthly income of RM1,100 would fall into this category, she said.

Don’t borrow to spend

Norma said a person should only resort to loans or credit cards to supplement a shortage of funds. Loan facilities are not to bankroll spending.

“(Spending on credit) is one of the reasons Malaysians are in debt. If that can be addressed, perhaps then they can manage their finances better.

“They should plan. If you are not able to commit and if you can’t afford that kind of loan, then you shouldn’t take the loan in the first place.”

The Belanjawanku guide estimates that a resident in the Klang Valley, who is single and uses public transport, requires RM1,870 a month to get by, while those with their own transport need RM2,490 a month.

A married couple require RM4,420-RM6,620 a month depending on the number of children. An elderly couple can get by on RM3,090 a month.

This is based on a survey conducted in 2017-2018.

The figures in the budget, however, have been scoffed at for being unrealistic and out of date.

Norma maintains that Belanjawanku caters for the lowest income strata whose lifestyle differs from that of well-paid professionals who travelled by taxi and used private healthcare.

EPF is also working towards developing a “Belanjawanku” app that will allow users to keep tabs on their expenses.

Similar budget guides for other cities such as Alor Star, Johor Baru and Sabah and Sarawak will be available next year. – August 15, 2019.