Updated September 26, 2025 by Samantha

Budgeting your salary means dividing income wisely: 20% savings, 10% insurance, 10% investment, and 60% for expenses and commitments. Save first, protect with insurance, grow through investments, and control spending. Starting early builds long-term financial security.

How to Budget Your Salary Effectively

Follow 2116, Basically this allocation is apply to every individual what they will do at the income . Borrow , Save , Invest & Protect

 i. 20% Savings

ii. 10% Insurance

iii. 10% Investment

iv.60% Commitments & Expenses

Start Saving Early (20%)

Averagely everyone life span is until 80 & 85yrs old.
Strongly advise start saving habit as early as you can . When you start work , allocate your income with 20% saving, save first and spend on left over . This encourage budgeting and you will find spending the want instead of needs . Rule 72 by saving consistently with small amount in long term will bring big effect . Time is the effect.

Protect Yourself with Insurance (10%)

10% Insurance , start the basic of LIMA ( Life , Illness , Medical & Accident ) Through my experience, many clients will rely on company benefits , but the problems are company usually will offer medical benefits only which is hospitalization , but with minimum or limited coverage that don’t aware . The right way is get your 1st personal policy, take the full coverage of ( LIMA) because each of this will give different coverage and getting the right sum assured is equally important. 

What is insurance ? 

I always tell my client , insurance is money from the payout of the policy sum assured. Therefore, getting right sum assured really matters and make sure its will align to your income , because once the payout to you or your beneficiary , its means that is a crucial time for you and financially you and your family is covered. The Rules of Sum assured align with income is (Life 10 times of yearly income , Illness 5 times of yearly income & Personal accident 10 times of income .) 

Why it so important to align with income ? 

When someone fall into sickness, accident or passed away, we hope the LIMA payout claim can help family to ease burden and themselves which the amount will help to cover the monthly expenses, commitments .In short , we are allocating this 10% premium to cover 90% of your income . Do you agreed?

Grow with Investments (10%)

The 10% investment , basically is very depends on individual risk . Basically risk profile comes in high , medium and low risk. My experience is those client which are risk adverse usually will save all money in the bank instead of invest , because they don’t know what to invest and worry about losing the principal . Therefore, too many saving is not good because the money doesn’t work for you.

Manage Commitments & Expenses (60%)

Lastly the 60 % referring to commitment & expenses . 

How to difference this two ? 

Commitment is refer to long term example are the installment and payment is long term , like housing and car loan ,your parents that need you to take care . For expenses this refer to lifestyle, need and wants. So when this to add together, the ideally is still within the 60% . I see many people rush into getting to own the 1st property but the mistake is the purchase price of property is already consume the 1/3 of their income , and currently the standard living of Malaysia is so high and inflation . Therefore once they committed the loan and start to serve monthly installment , they will have tied or no cash flow and no able to do regular saving. When you apply loan , usually the bank will approved loan based on income monthly that don’t count into all these expenses . And there is no more savings allocation from income and this group of client will trap into ratrace for whole life serving bank installment for 30 or 35 years. Lets be reality , if we started to work at 25 yrs and retire at age 60 years , 35 years of income will be trap with debts & serving interest to bank for whole life . If you Therefore , strongly advise to follow this formula .

Whether you want to safeguard your family, expand your wealth, or explore new career paths, FTA is here to guide you every step of the way.

FTA Wealth Solutions is a one-stop financial consultancy in Malaysia, offering holistic services from financial planning and nomination to will writing. As an approved HRDF Corp (Human Resource Development Fund) training provider, we also deliver structured financial literacy and professional development programmes. With over 20 years of industry experience and partnerships with leading providers, we help Malaysians protect, grow, and secure their wealth with clarity and confidence.

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