• Jearn Xiu Lee

Increase Your Wealth With This Income Allocation Method!

Become wealthy with just your pay! Allocate properly to achieve financial freedom.

In my first article, I mentioned that the chances of one becoming wealthy by just working and saving is low. As we all know, most of the wealthy people are those that owns or work at the executive level of a business. Today, I would like to share with you how you might have a better chance to become wealthy with this income allocation method that I came out with. Though it is meant to be a guideline for you to build your own personal income allocation method, you are free to follow it exactly if you deem it viable. Do note that the salary and tax rates that I'll be using as examples are based on the Malaysian economy so this method might not work best for you if you work elsewhere in the world.


Let’s now imagine that you are a fresh graduate and you got an offer in a firm that pays you RM 2635 (Malaysia’s average salary for fresh graduate). Does the figure appear to be a big amount to some of you? If yes, I’ll let you think twice in just a moment. Firstly, since there will be a high rate of unpaid taxes if you were to pay taxes only at the end of the year, your actual take home income wouldn’t be RM 2635 but lesser. Below is a list of expenses that will be deducted from your income before you receive it:


EPF (11%) – RM 289.85

SOCSO (0.5%) – RM 13.175

EIS – RM 5.30

Government Tax – RM 15.82 (amount might vary depending on tax relief)


~ RM 324.20 will be deducted which brings you down to RM 2310.80, that number that was deducted is already 12.3% of your income!


Now that those compulsory amounts have been deducted, how should we allocate our RM 2310.80? I will just be using RM 2300 so that it’s easier to calculate. Let’s assume that you do not move out and live with your parents instead, that means there is no rental for you to pay. Since you are living at home, some meals are cooked for you too hence your meals expenses would also be lower. However, as a gratitude, you would be paying your parents each RM 150. An estimated expense amount can therefore be seen below:


Parents – RM300

Workday Lunch Meals (RM 15/meal) – RM 300

Leisure Expenses – RM 400

Transport – RM 150


These expenses totals up to be RM 1150, which is 50% of what you have left. These figures are considered quite low, as I only set aside one paid meal per day during workdays, expecting breakfast and dinner to be at home whereby the expense is not borne by you. Hence, if you were to eat out more often maybe you might spend another 10-20%. The leisure expenses were added to ensure that you can have some enjoyment during the weekends sporting/going out with friends.



With RM 1150 left, we should allocate them accordingly for your savings and investment. We already know that just saving your money wouldn’t make you wealthy. You have to invest instead.


Normal Savings – RM 200

Liquid Investment – RM 375

Long term Investment – RM575


You might be wondering why I have separated the investment into 2 different categories. I made it so that the long term investment is 50% of your remaining salary and it shouldn’t be touched, whereas for the liquid investment it is more towards emergency funds. Investments such as stocks can be liquidated easily which allows you to get your money back within a few days, therefore there isn’t really a need to have all your emergency funds in the bank collecting nearly no interest.


If you are reading this article to know more about income allocation, I am quite sure that you came across the 50/30/20 rule. 50% on needs, 30% on wants and 20% on savings. While you can see mine is clearly different, I have put a heavy emphasis on savings/investment since a fresh graduate doesn’t have a lot of commitment and responsibility to bear. Therefore, it is better to start building your investment portfolio early.


Sometimes we might think that an increase in pay means we are wealthier. Is that always true? To an extent, yes. But once again it all comes down to how you manage your money. If your pay were to increase by let’s say 20% (RM 527) but your expenses were to increase by 20% as well, that means you aren’t even investing more and your investment inflow is still the same or even lesser if you were to look at it percentage-wise.


Diagram 1 shows your first income allocation with RM 2635.

Diagram 2 shows your income allocation with an increment of 20% and having all of it spent on leisure expenses.

Diagram 3 shows your income allocation with an increment of 20% with the extra cash mostly spent on investments.


As you can see in the diagram above, one should aim to keep their expenses roughly the same or only increase them by just a little (no more than or equals to) when compared to their salary increment. This way, your investment amount will keep growing and not stay the same. I would like to repeat once more before concluding that there isn’t a fixed formula when it comes to money management, these rules that I have shared are just a guideline.


I hope they might help you out currently or for the future. If you are interested in more finance related blog, click here. To learn more about other subjects, click here. To receive notifications when there’s a new article, subscribe below!


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