When I started working in 2000, I had three questions about money.
How much could I spend and still say I was living within my means?
How much should I save so I knew I was saving enough?
And what kind of car or property could I buy without overcommitting myself?
Our parents always told us to spend within our means. I understood the advice. But how do you know where that line is when you are making the decision?
It took me seven years of working before I came across the system I started practising: ICE JAR.
Let me show you how I use it, and why someone earning a good salary can still struggle to save.
First understand the three jars
ICE stands for Investment, Commitment and Expenses.
The rule of thumb I use divides your monthly income into three equal parts. In my original example, a salary of RM3,000 gives you:
| Jar | One-third reference |
|---|---|
| Investment | RM1,000 |
| Commitment | RM1,000 |
| Expenses | RM1,000 |
With RM12,000 of income, the same calculation gives RM4,000 for each jar.
Try the original one-third reference
Where would your income go?
Investment
Commitment
Expenses
Income ÷ 3 for each jar. This is the reference from my method; compare it with your actual allocations.
This gives you a reference to compare with what is actually happening. It helps us ask whether you are overinvesting, overcommitting or overspending.
Use the ICE JAR workbook for the categories. In my original method, investment-property instalments sit in the Investment Jar. Count each outflow once, so you do not put the same instalment in both Investment and Commitment.
If your current numbers are far from one-third each, write them down honestly. The exercise is to understand your situation. Forcing the jars to look balanced while borrowing to cover the month will not help.
The first problem was already sitting in his repayments
In my original article, I called these growing financial problems “money cancers”. Sometimes we feel the pressure but have not identified what is causing it.
Let me share the first case.
A client came to me after hearing that I helped people turn their finances around. He was earning RM8,000 a month. But RM6,000 was already going towards loan repayments.
Can you imagine? You earn RM8,000, then RM6,000 leaves before you have much room for anything else.
His spending and outflows had reached RM10,000 a month, leaving a deficit of RM2,000. The accumulated overspending had become about RM150,000 of personal-loan and credit-card debt.
So when he said it was difficult to save, you could see why.
Using ICE JAR, we could see the pressure in his commitments. The one-third reference for an RM8,000 income is around RM2,667, while his loan payments were RM6,000.
We then examined how the debts were structured and what could be changed. In the case I shared, we found a way to reduce those monthly repayments from RM6,000 to RM1,800.
From my article published 28 September 2020
How did we do it? In that original account, I used a 24% credit-card borrowing figure and compared it with replacement financing quoted at 4%–6%. Understanding the cost and the way repayments were calculated helped us examine an alternative arrangement for his case.
These are the historical figures used in that story. They are not a statement of current standard card rates or offers. Quoted rates can use different calculation methods, so compare the full repayment cost as well as the percentage.
That was the change in his case. It does not mean every RM6,000 repayment can be reduced to the same amount. We needed to understand his debts and the replacement arrangement first.
But can you see why telling him only to spend a little less would have missed a large part of the problem?
The second problem came from a business that had already closed
In 2008, another client went into an F&B business with a partner. They put in RM150,000 each, funded through their credit cards.
They had a good product. What they had not focused enough on was how to sell it.
Within six months, the business had closed.
His RM150,000 was gone, but the credit-card borrowing was still there. The business could stop operating; the repayments did not stop with it.
I encourage entrepreneurship. At the same time, when you borrow personally to fund a business, you need to understand what happens to your household if the business does not work out.
In this case, we looked for a way to replace the pressure from the cards. At that time, he raised RM150,000 from three relatives and agreed to repay them with 5% interest. My original article compared that with the fixed-deposit rates available then.
That was a specific family arrangement at that time. Borrowing from relatives still creates a real obligation, so it needs clear terms and a repayment plan. It is not an instruction for everyone reading this to borrow from family.
The case began with a monthly deficit of around RM3,000. After the card debt was settled through that arrangement and his finances recovered, he developed a habit of saving RM3,000 to RM4,000 a month. He also put aside RM500 a month for his daughter’s education.
Later, the original case recorded him buying two properties at RM1.7 million each.
I am sharing the full journey because the business failure was only the beginning. The work was to understand what he still owed, change the repayment pressure and build a way to manage the money afterwards.
The third problem can look like success from the outside
During the property boom around 2012, many Malaysians got caught in overinvesting in property.
I was one of them.
It is easy to think you are doing the right thing because you are buying an asset. But the monthly payments still need to come from somewhere.
In the example I shared, the Investment Jar reference was RM2,000 a month, while investment-property instalments had grown to RM10,000.
Can you see the gap?
Even if you believe the property will go up in value, you still need to manage the cash going out now. If rent does not cover the commitments, the difference comes out of the money you need elsewhere.
Property can also take time to sell. So having assets does not automatically solve an immediate cash shortage.
I explain this further in Asset Rich and Cash Poor.
Which of these situations looks familiar to you
The first client had a large portion of his salary going towards debt repayments. The second was still carrying borrowing from a failed business. The third situation involved investments absorbing more cash than the person could sustain.
The starting point was to identify where the money was going.
Take your own income and work through the ICE JAR workbook. Put the actual amounts into Investment, Commitment and Expenses. Include the irregular bills you need to fund over the year, so they do not disappear just because they are not due this month.
Compare the jars with the one-third reference, then compare the total outflows with your income. A jar above its reference tells you where to investigate. The overall total tells you whether you have a surplus or a deficit.
If repayments are the main pressure, read how I use IBR to identify the most burdening loan.
If you cannot put one-third towards investments yet, show that reality. The next step is to work out what needs to change, rather than borrow more to make the allocation look right.
Start with the numbers you have
Are you overinvesting, overcommitting or overspending?
You do not need to guess. Download the ICE JAR workbook and start putting your own picture together.
If you recognise yourself in one of these stories and want me to help you understand where to begin, start with Money X-Ray.
The aim is to become happy and confident with money, starting with a clearer understanding of what is happening today.
These are actual historical cases. Identifying details have been protected. The arrangements and outcomes were specific to those individuals and will not be the same for everyone.
P.S. AKPK offers financial counselling and debt-management support. My approach starts with diagnosing your full financial picture through ICE JAR, your debts and your assets, then assessing an appropriate direction through Money X-Ray. This may include education, coaching or DCS4U support and, where suitable, recovery options outside AKPK’s debt-management programme. We first need to see what is workable for you.
From my original articles
Adapted from my article first published on 28 September 2020. The dated rate comparison is retained as part of the historical case. The original ICE JAR one-third method is preserved.