Saving Money The Islamic Way

6/30/2013 12:41:00 am


Savings? I'm sure without doubt, everyone knows how to save money. Each individual have their own unique way of saving their money. I have met some clients who have approached me to help them solve their problem of managing their money.

The most common problem I have observed:
1) Spent too much on shopping.
2) Excessive spending on food and beverage.

In my opinion, it is not wrong for an individual to spend their money on the above mentioned, but it is best to limit yourself. How to set limit? Well, check out the example below:

As you can see from the diagram above, there is Initial Savings of 10% of monthly income before expenses, this is to encourage yourself to save the minimum required.

HP Bills , Transportation, Entertainment and Donation are noted as adjustable according to usage. The next few points are the explanations.

HP Bills, use within the limit of the subscription. Avoid excessive downloading of mobile data, use wireless internet connection (wi-fi) instead. I am sure most of us are tech savvy, we tend to download applications for communication which is for video calling and text messaging such as Tango, Whatsapp, KakaoTalk, Skype etc., make full use of them to avoid excessive calls per minute billing and per text message billing.

Transportation can be reduced if you travel to work or school with your friends by car pooling or take the company transport(if your company provides). This helps saves our Earth that we are living in by reducing the air pollution and to also reduce traffic congestion and the number of people taking the public transport.

Entertainment can be reduced by eating less outside, bring food from home (definitely it is much more healthy and cheaper). Shopping, an individual can shop for clothes, shoes or accessories once a month or once every two months with a budget limit which does not exceed their monthly income. Limit yourself to just 1 or 2 set of outfit which is within your budget limit. Buy clothes for its good quality and not for the brand. Good quality clothing last longer and you can also try to mix and match with the clothes you already have at home.

Donation is included into the expenses as it is advisable to do so depending on how much each individual would like to contribute to the Masjid or Organizations, as to donate a portion of your monthly income, insyaallah, the money you earn will be filled with barakah (blessing from Allah). Amin.

So, after having explain each portion, the next important part will be "Where do I save my money the Islamic way?". Basically there's two types of banks that we have currently, which is the Conventional Banks (POSB, DBS, HSBC, Standard Chartered etc.) and also Islamic Banks (CIMB Islamic Group, OCBC Islamic Group and also Maybank Islamic Group). The following diagram shows the difference between the two different types of banks.

It is understood that I have explained in my previous post that interest or riba' is not permissible for contribution or consumption and therefore, we as Muslims are obligated to have Islamic savings account so as to enjoy the dividends or hibah which is being awarded upon maintaining your savings, as dividends or hibah, is being generated from profits made by the bank who uses your money to invest in Syariah Compliant investments. 

Not only that you avoid interest, you receive higher dividends(subject to the various Islamic Banks discretionary) as compared to interest earned from conventional banks of as low as 0.05%. 

Of course you would not want to earn less on your savings right? Well, Islamic Banking is the way. Why wait? Come approach me so that I can provide you with Islamic Wealth Management Services. Just drop me an email or FB message me, and I will contact you as soon as possible.


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My objective of creating this page is to reach out to more people, to educate about Islamic Finance and Individual Finance, share tips on financial planning and also be able to answer to everyone's queries. So, feel free to share this page and ask me questions. Let's share the knowledge and practice them together. In syaa Allah. Aamiin.