In recent years, the cost of living and the concept of a living wage have been hot-button issues.

A living wage is defined as ‘the income level needed to achieve a minimum acceptable standard of living depending on geographical location’. Bank Negara Malaysia has estimated the living wage for Kuala Lumpur at RM2,700 to RM6,500 for a single young adult to a young couple with two children.

For some, the benchmark is way too low, taking into account inflation, taxes, car loans, housing and other commitments. They think Bank Negara’s benchmarks allow only for basic survival, not living, and many young people receiving such a wage are being helped out by their parents.

But there are steps that can be taken to reduce expenditure, whatever one’s circumstances, that can add up in the long run.

Regardless of whether you are earning the minimum wage or a living wage, it is not just your salary that determines your financial well-being. It is also your spending habits. Spending must never exceed earnings, or you will have to incur debt to fund the excess.

Follow these 10 tips to reduce expenditure and still lead a pleasant life.

1. Write down all your earnings and outgoings

Make a list of every source of income that you possess.

Now do the same for outgoings, segregating fixed expenses such as rent, car loan, insurance and variable expenses which include clothing, entertainment and food. These are the ones you need to watch out for.

2. Budget, and monitor all outgoings

Start by tracking your actual expenses for one month to find out whether your spending exceeds your income or is or below it.

Prepare a monthly budget for both income and expenditure. Identify which expenses can be reduced or even removed (see tip no. 4). The objective is to ensure you spend less than what you earn.

A budget is only a plan. Monitor expenses to ensure they stay within the plan. There are many apps available to help plan and track outgoings. Tracking highlights any excesses immediately so action can be taken.

3. Pay yourself first (save/invest)

On payday, don’t pay your bills unless you pay yourself first.

Transfer a fixed amount every month (say, 10 % to 30% of your salary) to another account. You need to save and invest to grow your wealth.

Those who have credit card debt, use that 10% to clear or pay down the balance. Credit card debt attracts the highest interest among all legitimate loans.

Moving forward, use your credit card only if necessary (see tip no. 7).

4. Scrutinise all expenses for possible reduction

To grow your wealth, you either increase your income (tip no. 9) or cut expenses. This does not have to be difficult. Exchange that premium coffee for 3-in-1. You can still enjoy hanging out with friends at home over a cup of cheaper coffee.

Gradually reduce your expenditure on meals. Be creative in your choice of food and learn to cook. Have breakfast and dinner at home. It’s much cheaper and healthier.

Buying insurance is good risk management but make sure you can afford the premium. A life insurance policy of RM1,000,000 is more suitable for a family than a young adult. You can increase your coverage as you grow older.

5. Set up an emergency fund

An emergency fund should cover three to six months of expenses. Emergencies, such as an illness, major car repair or loss of employment happen without warning.

An emergency fund can reduce the stress associated with dealing with it, providing a breathing space.

6. Distinguish between wants and needs

Sales can be tempting but before you hand over your credit card, ask yourself, “Do I need it?”

Buy a cheaper used car instead of a new one. A new car loses 10% of its value the moment you drive it out of the showroom.

Buy only what you can afford to pay monthly — save up to pay a higher down payment to reduce the loan amount.

7. Do not give in to peer pressure

Many people go into debt to keep up with the Joneses, buying stuff they cannot afford.

For all you know, friends with designer clothes and fancy cars are using credit cards to pay for them too.

8. Pay cash

Paying cash will stop you from going into debt. Use a credit card only when it is necessary and settle the bill every month.

Make a list before going to the supermarket and buy only what is on it.

Do not browse. Carry only enough cash for what you will need for the day.

9. Find different sources of income

If cutting down expenses is not working, increase your means. Try to negotiate a salary increase, but do not make ultimatums.

Have a professional conversation with your employer outlining what you have been doing that you feel requires better compensation. Then, work out a plan with your employer to see what else they think you need to do in order to deserve better compensation. If the negotiations fail, perhaps it’s time to look elsewhere.

Otherwise, look for side income during your spare time. There are many ways to do so, such as selling unwanted things, freelancing and starting a small business.

You can still have a meaningful life

Cutting down on this, reducing that sounds like a life of deprivation. You can still be happy and have a fulfilling life on less money.

Be creative and use your imagination. If you like buying new clothes, sell something first or turn them into something new (there are many online tutorials). You can still enjoy life; it is about finding a way to get good value from all your financial decisions.

This article first appeared in MyPF Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.