Planning and Budgeting
Planning and Budgeting
Managing your finances always starts with planning and budgeting. Do you think that planning is impossible because you don’t always know how much money you’ll earn every month? Well, start small and try making a budget for one month. Remember, planning and budgeting is even more important if you don’t earn a regular income because you’d need to be extra careful with your money. So at the very least, you need to find how much money you need to survive.
Here are some other things to think about when you’re planning your budget:
Managing your bank account
You’ll need a bank account to receive your payments. If you already have a bank account, you could think about setting up a different account so you can clearly separate your personal banking activities from banking related to your work, such as receiving payment or paying for work-related expenses.
Some things you should think about include where the bank is located, if its ATMs are widely available, the minimum deposit needed to open the account and fees that may be charged. The deposit needed to open an account is different from one bank to another. Depending on the bank, certain accounts charge yearly fees, withdrawal fees and transaction fees.
You should also set up your online banking account so you’ll have easier access to your account. Check with your bank on how to activate online banking.
Should you get an e-wallet?
With the rise of e-wallet usage, you may find that e-wallets are convenient for tracking your expenses. If you work with an e-hailing company or other e-commerce platform, you may also need an e-wallet to receive payments. Check with the platform you’re working with about the apps you’ll need to use.
But remember, e-wallets have low monthly transaction limits ranging from RM2,000 to RM5,000 per month. Depending on the e-wallet, you also might not be able to transfer the money in your e-wallet to your bank account to withdraw cash. To learn more about e-wallets, read our blog.
Who is affected?
If you earn at least RM34,000 per year, you’ll have to file taxes with the Inland Revenue Board (LHDN). You can read our guides for more details on tax filing and to get a step-by-step guide on how to file your taxes, and here is some other useful information on tax filing for self-employed workers:
- If you work with an e-hailing or e-commerce platform, they may also send you an annual statement showing your earnings. You can check with your platform provider on how to file your taxes using the annual statement.
- Remember to check what expenses you can claim tax relief for to reduce your income tax. For example, e-hailing drivers may be able to claim tax relief for fuel costs, car repairs and maintenance, car loan interest, Zakat and other allowances under business and individual income.
Remember, even if you file your taxes, you actually might not have to pay taxes if your income doesn’t reach the amount required to pay taxes – – In fact, you could even get a tax refund! But if you make enough money to require you to pay taxes and you don’t pay your taxes, you can be fined or face imprisonment.
Keeping financial records
As a freelancer/self-employed worker, you’ll usually need to produce quotations to your customers/clients so that you agree on how much you’ll be paid for your work. Once you’ve completed the work, you’ll need to bill/invoice your customers/clients so they can process your payment. And if you need to file taxes or want to apply for a loan or credit card you’ll also need to show proof of your income.
So, be sure to keep all records of your finances such as bank statements, income tax receipts and payments received from your customers or clients. Don’t forget to also check with your e-hailing or e-commerce platform on your annual earnings statement.