Showing posts with label personal finance. Show all posts
Showing posts with label personal finance. Show all posts

Saturday, 17 May 2014

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The truth about owning a car

Posted by Unknown at 10:23 pm No comments :
This is a very controversial topic, I would say. A simple question to raise to everybody. 

Is it good to own a car? Yes or no? 
My answer a is big NO.


 Can you believe it if I tell you, ever since graduated for more than half a decade...I have not own a car yet. 

Yes, I know I know....you probably reason out saying that you need car because you need it to travel to work. You need it because its more convenient. You need it because its part of life. 

I understand, and I have to agree some people were forced to own a car because of travel distance to work. Thanks to our atrociously, shamelessly poor Malaysian public transport infrastructure. Now many of us need to own a car and owe for debt. A very bad debt.

My piece of advice, if you do not need to own a car, never buy (ohh....i mean borrow loan) for a car! NEVER!  

If you were meant to enjoy life and have car for fun and life, then this post isnt for you anyway, because its all about cost saving. 

Here's my 5 reasons why you should not own a car:-

  1. Car is a bad debt. The moment you bought your very first car, the price of the car immediately drop.
  2. You don't just pay for car instalment. You pay for your car insurance, car petrol, and car maintenance.
  3. If government raises petrol price again, your expenses gradually increase, because your car needs to feed!
  4. Car instalment loan interest rate is fixed. No matter how much more outstanding you owe the bank, they still charge you the same interest rate. Means bank already earn your money very beginning.
  5. Tendency to hangout is higher. What is the point if you own a car and you don't drive out? So it means hangout more, spend more, and save less money. 
I don't mean that forever you should take lrt or bus anywhere else. It sucks if you were forced into such situation your whole life. (Neither would I do that).

Here are 3 reasons when you should own a car:
  1. When you are able to pay a lot more downpayment or pay by cash. The lesser you owe the bank the better, because interest rate is fixed. You don't want to let bank take your money away!
  2. Your car helps you to earn MORE money. Yes is true. Own a car if it helps you to earn more money despite car insurance, petrol and maintenance.
  3. Your lifetime commitment is lesser. You own a house, paid off clean, or rented out for passive income. Your business is taken care of. You have very little commitment...then car is no problem for you.
Yes some people can have many other reasons to own a car. A status, glamour, show off, reputation, etc, etc. Common isn't it? Not unfamilliar. 

No wonder Malaysia's car ownership is the THIRD highest in the world. 

Feel proud? Hold on...you should read this one below. 

It says that Malaysian car is second most expensive in the world. Its ashamed if somebody wants to own a car because they want glamour and willingly spend so much money for a high-end car. And struggling to dig his/her pocket to pay off loan.

"My advise, PLEASE don't buy a car if you can't afford or do not need one. "

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Thursday, 8 May 2014

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Two types of safe and low risk investment you can find

Posted by Unknown at 12:23 pm No comments :
Let me try to illustrate out two types of people that should be reading this one.

FIRST PERSON, you do not like investment because is risky. You don't know what investment is out there you can earn money from. You rather save it under Fixed Deposit (FD), safe and sound. Or even worst, you prefer not to do anything and leave it in the bank!  

SECOND PERSON, you want to invest. But you still have fear of the risk. And you don't know where to start, and what kind of investment suitable for you. 

I am going to show you no-brainer guide to choosing low risk investment.

*However if you are so good at it, please ignore this post because you probably have better alternative to earn bigger chunk of cash. 

2 TYPES OF SAFE AND LOW RISK INVESTMENT
1. Mutual fund/Unit trust. 
Probably you have heard of it somewhere. This type of investment doesn't work like a single stock/share. 
Unit trust is basically controlled by fund manager who will allocate your money to invest in various sector/industry and companies. 

- WHY INVEST IN UNIT TRUST???
Because, if money is allocate to different sectors, your risk is diversify. If Company A is losing money (share price drop) your money is covered back by Company B or C which is still earning money. If you invest in this over the long-term, the chances of your unit trust rate of return is higher compare to normal stock market investment.

 - HOW DO I START?
Simple, start doing your homework. Go to Google to look for 'what is mutual fund?' to understand it better.
And then, you can look for banks who offer unit trust services. Notable one in Malaysia would be Public Mutual. They have won multiple awards for being best Malaysia Unit Trust player in the market.
Call them, they will arrange a unit trust consultant to look for you. (THEY ARE MORE THAN HAPPY TO LOOK FOR YOU! ITS AGENT'S COMMISSION)

 - WHAT SHOULD I LOOK OUT FOR UNIT TRUST?
Do take note that invest in unit trust is quite expensive. They charge you a fee of 5.5% every time you invest (you're paying fund manager to invest for you anyway). 
Which means - you invest RM 1,000. They will take RM55 as service charge.
And disadvantage is that you cannot control what they have invested. So please constantly look at your investment, if it is not earning as much within a 5 years' time. Start looking at other fund that is performing better. 

2. Exchange- Traded Fund (ETF). 
It works slightly similar to unit trust. But instead of controlled by fund manager, they track the KLCI index. Its very technical, probably you need to Google again to understand further.

- WHY INVEST IN ETF???
Here is the sexy part. ETF is cheap! Low risk, and cheap. It doesn't charged a service fee like unit trust. It only charge normal broker fee just like normal stock (broker fee ranges from 0.25% to 0.5%). And they look at index, meaning if the index has a total of 100 companies, its share price is diversify too. Its advisable to invest in it long term because in a short period of time you can't see much differences. BUT in long term, the reward is there. 
"The younger you invest the better its value is!"
 - HOW DO I START?
In order to invest in ETF, you need a broker account. The link below has a list of available service in Malaysia as well as their charges. 
The best thing, you can start investing online. If you don't know where to start...choose a broker from the list and call them up. They will arrange a broker to serve your account.

 - WHAT SHOULD I LOOK OUT FOR ETF?
There is a drawback, ETF in Malaysia is still not matured. They just started not long ago, unlike countries like US which have started ETF more than 10 years ago. So you need to really study carefully what is the potential ETF, and what index/company they are referring at. 
A better plan is to invest to developed market for example US. Although their broker fee to invest in overseas is extremely high, but, is safer and more profitable in the long run comparing to Malaysia's ETF. 
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As a conclusion, you now know where to start, so delay no further. Even if you think it is not suitable for you, but at least understand them. You never know when you may need it. 

Its better than putting your money in FD. Our Malaysia inflation rate was 3.48% as of March 2014. Do you think FD can earn you money? I don't think so, moreover FD doesn't not allow you to withdraw money out without charging you penalty or not giving back interest. So which is better? 
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Wednesday, 30 April 2014

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Does cutting expenses and save money mean that you're stingy?

Posted by Unknown at 10:00 am No comments :
Here's the deal. You go to work, hanging out with colleagues in the workplace. And right after 1pm your colleagues asked you out for lunch together.

"Let's go to this Japanese restaurant down the road, I feel like eating Ramen" one of them said.

For your info, that Japanese Ramen noodle soup cost RM18.90 (excluding government tax & service charge of 16%).


You told them, nahhh....you'll just 'tapao' (pack) from the food stall nearby the office.

"C'mon you have to eat something nice, don't be so stingy."
*******************

Frugality means, I love to spend my money elsewhere rather than to spend just for a Japanese Ramen. I save up my money for a greater future. If I eat a cheaper lunch meal, I could have save a little bit more for my savings. With extra savings, I could've dump in more for investment. With higher investment returns I am one step ahead to being wealthier. 

Which is why I have been mentioning in my earlier post that we should always record down our expenses, pinpoint any unnecessary expenses. And AVOID it at all times. This is not stingy, this is frugal. 
"Take note of this, frugal people have much better chance to be successful than a stingy people"

Recently, I've read this book by Ramit Sethi, self-proclaimed personal finance advisor. He pointed out the distinctive traits of STINGY vs FRUGAL.


*You can find out more about Ramit Sethi from his website:http://www.iwillteachyoutoberich.com/

 So which one are you? Stingy? Frugal?

If you are neither both that's fine. But PLEASE don't be a mindless money-spender. Its much worst than being stingy. 'Nuff said!
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Thursday, 24 April 2014

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How much do you save? A guide to budgeting - PART 2

Posted by Unknown at 7:00 am No comments :
If you have read my previous post, you would have the idea of cutting expenses in order to save more. And that is the core 'essence' of budgeting.

 So the next question would be: How to do budgeting? Where should I start? 

 Here's how I will show to you:-

 STEP 1:
Create a monthly budget planner. 
    • Inside this monthly planner, you will include all your expenses and how much do you save. 
    • I will illustrate a simple table for your reference:-




















    • Why do I need budget planner? Of course you do! So that you know how much you spend. And be aware of the unnecessary spending you made every month. See it with your naked eyes only you'll take action.

 STEP 2:
Set a target how much you should spend every month. 
If you can do better, track it by weekly or daily. So that you can take control of your spending.

We can start by daily food expenses:-
  1. Monday - RM 15 (breakfast + lunch + dinner)
  2. Tuesday - RM 15 (breakfast + lunch + dinner)
  3. Wednesday - RM 15 (breakfast + lunch + dinner)
  4. Thursday - RM 15 (breakfast + lunch + dinner)
  5. Friday - RM 30 (breakfast + lunch + dinner). Since we love TGIF, you may set a higher expenses on Friday.
  6. Saturday - RM 100 (food + entertainment)
  7. Sunday - RM 50 (family day)
That makes up to RM 960 a month for food. At least you know where you will spend, you can control your budget more carefully.

*********************

So here you go, a simple step to budgeting. 

Yes I know, I know. Looks simple, but its tougher to get it done.

Isn't it the same to everyone of us? Steps are simple, but the process is the hardest. 

"The only way to do this is to start doing it now! If you wait, you gonna forget about it the next minute."




Do not delay. Do it today, do it right now, after you finish reading this. 

You do this, you are doing better than 90% of fellow Malaysians.

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Wednesday, 16 April 2014

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How much do you save? A guide to budgeting - PART I

Posted by Unknown at 10:30 pm No comments :
Most people earns their income working for a monthly pay. Meaning to say, you only earn your income every end/middle of the month in the form of 'salary'.

Let's assume a scenario of Joshua, 36 years old, staying with his wife and a 3-year old son. At the end of the month, he'll receive a salary of RM 15,000. Table below shows how much net amount he'll receive after all deduction (unwillingly deducted!).


See how much we pay for tax??? Perhaps with this net salary of RM 10,772.75, he'll use it to pay for all his regular expenses. 

*If you want to find out more on your net salary, refer to this site:
http://www1.malaysiasalary.com/salary/salary-calculation-for-2014-in-malaysia.html 

Our local self-help books always assume small amount when they list out table like this. Forget it! Let's make this as realistic as possible. Expenses will be high in real life. 

Here's a summary of what he's gonna pay. 

TABLE A:


This poor fella Joshua will only have RM152.75 left for the month. And this happens every month. You might think this is an extreme case, but are you sure? This is happening to many people without them realizing! 

If Joshua did not calculate his expenses every month, he will never realize why he can't make any savings. All he does is to work and pay for expenses to make ends meet. He can't save more without knowing why...
What if rainy days do occur that he needs certain amount of cash immediately, where can he get those dough? Not from the sky of course.

Its a very sad case. But we can save this guy. How??

Its just a simple solution. Start budgeting. 

Based on what we can see from the table, there are certain variable cost we can reduce. (We can't reduce fixed cost like insurance, house & car loan since its been pre-determined). By reducing all these variable cost we can reduce the expenses after the equation. 
Let's reduce the variable cost according to Table A.
  1. Internet - degrade the Unifi plan to 5mbps - RM149
  2. Telephone bill - downgrade the plan. If he has an expensive data plan, reduce it - RM100
  3. Utility - less hour of air-conditioning, switch off lights that are not in use, etc - RM150
  4. Gym membership -  if he got a gym in his condominium, use it!  - RM 0
  5. Weekend entertainment - reduce the entertainment cost. Maybe outing every fortnight instead of every week - RM800
  6. Weekday food expenses - if he spend RM30 every day. Cut it to RM20 - RM400
  7. Divide a 30% of house loan repayment with his wife - RM1540.70
Good gracious. After going through all this. let's recalculate how much he spend:


TABLE B:

Cutting down his expenses he can save an amount of RM1913.05 exponentially! 

Normally we don't see how much we spend until we point it out clearly in paper. This is why most of us do not have enough savings!

 "If we just spend a little bit of time to plan for monthly expenses. It helps us more than we can imagine."
Next topic will be on 'how to do no-brainer budgeting' every month. 

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