The Best Personal Finance Summaries – 1 July 2019

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The different types of investment options in Malaysia
Ever wondered what investment options you have here in Malaysia? Well, here is the most comprehensive list available for you!

We've finished adding all the content but it's still a little messy.

Which one do you want to learn more about?

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Money in Daily Life

What You Need to Know Before You Buy a Used Car

Is buying a pre-loved vehicle worth it? Are you worried about buying a lemon? Learn how to get the best car for your buck.

A Wise Choice, Maybe

  • Average folks pay for a new car in terms of monthly installments at RM1,000 above, for five to seven years.

  • In contrast, if you can buy a used vehicle outright at less than RM30,000 less than 100,000 km, and less than ten years old, it’s a steal.

  • By going the used route, you save yourself the massive depreciation costs from the first few years of the car. You can get a much better vehicle at a lower price. Also, you can change a used car more often without a dent in your wallet.

Getting the Best Buck on your Car

  • US has sites like while Malaysia has which help you to get the story on almost any car.

  • Set yourself parameters. The sweet spot is between 50,000 and 100,000 km

  • At about 100,000 km, belts go out, brake cylinders go out, and a bunch of other nickel-and-dime charges that’ll cost you on average RM500 to RM1,000 per repair/replacement.

  • These costs are still ultimately less than your monthly expenses if you’re financing. Still, knowing what you’re in for helps you narrow things down.

Putting A Potential New Vehicle Through Her Paces

  • Google the cars you have found for known issues and common errors. Once you have done that, meet with a seller informed on the sort of issues the vehicle will likely have. Do a walk around and a test drive without the radio on.

  • Don’t worry if the person selling it gets nervous, that just means you can under-cut him on the price, and use your savings to fix whatever problem he’s trying to hide.

  • Lastly, ask him the history of the vehicle – why exactly is it being sold? This will tell you a lot about the unit, and whether it’s right for you.

7 Areas to Think About when Planning for Retirement as a Single Person

If you are doing some planning for your finances going forward, some aspects that you will think about as a single will be whether there are things that I didn’t realize I need, just because I am single.

Build a team

  • You need to build your supporting cast of: Family, Trusted Friends and Paid Professionals.

  • They are there to:

    • Help with the finances
    • Make medical decisions if you are incapacitated
    • Prevent isolation at old age
    • Need people to run errands and drive you to appointments.
  • How to get started:

    • Take time to talk to them
    • Find out what they are willing to do
    • Outline your relevant plans and wishes
    • Revisit the plans often

Create an Income Safety Net

  • Have enough income for major illness or other calamity

  • Instead of the usual 3 to 6 months emergency fund, have 9 to 12 months of emergency funds

  • When planning for retirement, use the cash buffer strategy to mitigate sequence of return risk. Have roughly 2 years of expenses for that

  • If you are working, disability insurance is more important than if you are a couple

Funding your Retirement

  • Save 15% of your take home pay for retirement

  • For those whose company give you an employee match, contribute enough to get that employee match

  • Even if you started late at 55 years old, putting more into building wealth will make your retirement a higher reality than not doing anything at all.

Dealing with Government Pension Plan

  • Singles have less complications compared to married folks. For context, married folks need to consider:

    • Married seniors are encouraged to postpone claiming benefits. This will leave a larger survivor benefits to a lower earning spouse.

    • Delay claiming is bad if you have health concerns and family history that you do not live past mid 80s. If your family have history of great longevity, then delaying might be worth it.

Long term care

  • Nearly 70% of seniors will eventually need some form of long-term care.

  • Estimate 20% of seniors need this amount for more than 5 years.

  • Women typically need it for longer periods than men.

  • Long term care insurance covers the health care costs that are not covered by your standard health insurance.

  • They are not cheap. Premiums increase as you age!

Estate Planning

  • Most childless singles find friends and family to carry out their wishes. Find backup (called a successor) in case first person chosen is not available.

  • Durable power of attorney. Give someone the authority to manage your wealth if you are unable to do so. Or you simply need help

  • Living will or health care proxy (LPA). Find someone to make medical decisions for you.

  • Information release. Give the doctors permission to share information with selected people you choose.

  • Will. Having a will allows you to have some control over how your wealth is divided.

Housing Options

  • You might need to make structural changes to your current home to make the home safer and more accessible:

    • Home sharing. Think of my favorite sitcom growing up in The Golden Girls.

    • Continuing care retirement communities. Range from independent living to skilled nursing.

    • Co-housing. Pay monthly membership dues to be part of community. Common area for meals, socializing and events.
      The Path to Financial Independence in Detail

When I talk about financial independence, I’m referring to a situation in which your living expenses are fully covered by your investments for the rest of your life.

Your Target Number and Your Lifestyle

  • Your total income = your living expenses + money you can put aside for the future

  • In order to achieve financial independence, you need to be putting a lot aside for the future. That means maximizing total income and minimizing living expenses so that you save as much as possible.

  • The first thing to consider is what kind of lifestyle you want to establish.

  • You need to find the minimal expense lifestyle that’s still comfortable for you and actually live that lifestyle.

  • The cost of that lifestyle sets your target number, and it also sets how much you need to get there.

Don’t Forget Your Career

  • If you can start doing something that improves your income a few years from now, it’s going to significantly improve your savings as long as you don’t alter your spending along the way.

  • So career improvements play a big role, even if they’re career choices that won’t directly pay off immediately.

  • Thus, if you’re serious about financial independence, you should take a strong career-focused approach to your job with an aim to improve your income as much as possible over the next decade or two.

  • That means doing things like getting certifications, getting a better degree, building lots of professional relationships and so on.

Getting From Here To There

  • Once you’ve done what you can to maximize total income and minimize living expenses, what exactly do you do with that money left over that you’re putting aside for the future?

  • The first thing is to pay off your debts. Eliminate your high interest debts – everything with an interest rate of about 8% or so.

  • The second thing is to build an emergency fund and start saving for irregular expenses. An emergency fund is a pool of cash that you use to deal with major unexpected events such as car repairs, home repairs, appliance replacements.

  • Then, start putting money aside for the future. My general recommendation is to follow these steps in order:

    1. Contribute to your workplace’s retirement savings plan up to whatever amount you need to get every drop of matching funds from your employer. If your employer doesn’t offer a plan or doesn’t offer any matching, skip this step.

    2. If your income is low enough, open up a Roth IRA and fully fund it. If it’s too high for that, open a Traditional IRA and fully fund it.

    3. Go back to your workplace’s retirement savings plan and contribute up to their limit.

    4. Start investing in a broad-based index fund like the Vanguard Total Stock Market Index. If you’re at this point, it probably makes sense to start learning more about investing.

What Happens When I Get There?

  • My view is that if you can meet your living expenses for the year solely by withdrawing 3.5% or less of your investments, then you’re financially independent.

  • At that point, you have a lot of freedom to decide what to do with your life.

  • You no longer have to work to earn an income, so your sole motivations for continuing to work are either because the work fulfills you in some way, you want to slowly increase your standard of living, or you want to do something else with that income (like make charitable gifts).

  • Being financially independent doesn’t mean you have to retire and sit at home and do nothing going forward.

What Happens If I Change My Mind Along the Way?

  • Many people start down this path and, after several years, realize it’s not what they want. What happens then?

  • Usually, people who make that decision after years of saving heavily have a very, very nice retirement nest egg built up, so even if they dial back their retirement savings significantly, they’re still going to have a very nice retirement when they reach typical retirement age.

  • In other words, chasing financial independence is a goal that, even if you decide to switch to another goal, you’re not going to regret the progress you made along that path.

What is Cash Flow?

Stop stressing about money and learn how you can receive an ongoing stream of income

What is Cash Flow?

  • There are primarily two things people invest for: capital gains and cash flow. What’s the difference?

    • Capital Gains. Capital gains is the one-time profit you make on the sale of an investment.

    • You buy a house for $100,000 and sell it for $140,000. Your $40,000 profit when you sell the house is capital gains.

    • Cash flow. Cash Flow is an ongoing stream of income you receive from an investment. You may receive this money on a monthly, quarterly or annual basis, depending on the investment.

    • When you buy a stock that pays you a dividend every year. That dividend is cash flow.

Why is Cash Flow the Way to Go?

  • Having a strong financial foundation is so important, so that the investments you make generate positive cash flow.

  • So why does cash flow investing get me so excited? Because it has numerous advantages, including creating:

    • Financial freedom. You simply need to build up your monthly cash flow to be greater than your living expenses. Once your life is no longer dictated by the constraints of money, your time is freed up to do whatever brings you joy.

    • Carefree retirement. One more advantage of focusing on cash flow is that it eliminates the fear of running out of money.

  • Control. With cash-flow investing, my success is not dictated by the daily fluctuations of the market. I cannot control the markets, but I can control my rental properties/business.

How to Start Cash Flowing

  • My first cash-flow investment was a small two-bedroom and my monthly cash flow averaged a whopping $50 per month. No, it wasn’t a lot, but it was a start.

  • I looked at that $50 as much more than a few extra bucks in my pocket — to me, it was the first building block toward the cash flow I enjoy today.

  • There comes a point in your investing life where cash flow from your investments supports not only your living expenses, but also your next investments.

  • Essentially, cash flow breeds new assets, which, in turn, breed more cash flow.

  • Today, we have roughly 14,000 real estate investment units and each one not only pays for the next, but keeps the cash flowing into our bank accounts.

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How to Create Your Investment Philosophy

Do you invest? If yes, do you have an investment philosophy?

What is Investment Philosophy?

  • An investment philosophy is a specific investing style. The successful investors create an investment philosophy to govern their decisions on investing.

  • Do not confuse investment philosophy with the investment strategy. When we put our investment philosophy into action, this is our investment strategy.

  • If a strategy no longer generates a profit, refer to our investment philosophy to find a new strategy.

Why is it important to define your Investment Philosophy?

  • The market is full of buzz with loads of information coming from all corners.

  • To cut through all these noises, successful investors acknowledge the importance of having an investment philosophy to keep them concentrated on the essentials, especially during tough market conditions.

  • Your investment philosophy is the pillar where you built upon your strategies.

Some examples of Investment Philosophy

  • Value Investing

    • Making money by buying undervalued securities. Many successful investors, such as Warren Buffet and Peter Lynch, are proponents of value investing.
  • Growth Investing

    • Concentrating on firms that demonstrate signs of above-average growth, even if the value of their stocks seems highly costly in the price to book ratio.
  • Socially Responsible Investing

    • Focused on investing in companies that uphold a set of moral/ethical principles, like better fuel efficiency, no cruelty to animals, reasonable salaries, etc.
  • Fundamental investment:

    • Look at growth, income, management team and the capital structure of a company before deciding whether to buy its shares. In other words, concentrating on companies with promising profitability.

Steps to take to create your Investment Philosophy

  1. Understand your own personal characteristics

    • Are you a patient person?
    • Are you a high, medium or risk-averse person?
    • How much time are you willing to spend on investing activities?
    • What is your age?
    • Are you an Individual or Group Thinker?

In short, your investment horizon and risk aversion will determine the investment philosophy that fits you.

  1. Understand your financial situation

    • Your investment philosophy preference is also influenced by your:

      • Employment stability. If you believe you can earn high income with plenty of balance to spare, you have far more degrees of liberty in choosing your investment philosophy.

      • Funds available for investment. As the financial resources at your disposal rise, your investment philosophy options expand.

* Cash requirements. The anticipated need for money reduces your investment time horizon and may eventually require you to embrace a short term pay-off investment philosophy.

* Tax status. Investors facing heavy income taxes should opt for investment plans that decrease or delayed taxes into the future.
  1. What are your views on the market?

    • Your opinions on how the market conduct itself and the results of your investment approaches will certainly change as time goes by. But for now, just make your decisions based on what you know currently.

    • Though consistency in applying your investment philosophy is important to your investing success, it would be insane to continue if evidence kept surfacing proving against the philosophy.

(At Least) 17 Money Calculations You’ll Make In Your Life

Throughout your personal finance journey, you’ll inevitably do some money calculations. I’ve compiled here some money calculations. Go through them, and tell me – how many are actually hard for you to do?

  1. Home Loan Calculator. You do this calculation when you’re starting to shop around for a property, to find out the estimated mortgage / home loan repayments per month that you’ll have to make. There are many versions, one example is this

  2. Car Loan Calculator. Kind of similar to housing loan calculators, except it’s for car purchase and the maximum term is up to 9 years.

  3. Personal Loan Calculator. When you want to borrow money for personal reasons. Also kind of similar to house loan calculators but the terms can vary quite a bit – you could pay A LOT in interest if you’re not careful.

  4. Instalment Plans. Many credit cards offer the instalment feature – the ability to break down a larger purchase into 6-12 months instalments.

  5. Months until debt-free countdown. Calculate the number of months it’ll take to pay off your debt, and try to reduce the lengths by making larger payments.

  6. Rule of 72. This calculation is an easy way to find out how long your investment will double in size. All you have to do is divide 72 with the investment’s estimated annual ROI %, and you’ll find out the years.

  7. Your FI/RE number. Or the amount you need to be financially independent, without ever needing to work again. For example, Calculating the Amount I Need to FI/RE in Malaysia

  8. Taxes. The amount you owe the Malaysian government if you make over a certain amount per year.

  9. Zakat / Tithe. The amount you’re religiously obligated to give back to the community.

  10. Countdown until payday. The broke-r you are, the more you do the countdown until payday.

  11. Nett worth. Many people are surprised that their nett worth is a lot less than they thought, especially if they have a lot of debt. Remember, the Nett Worth is calculated as Total Assets minus Total Debt.

  12. Discounts & Sales. The mental calculations you do at the mall when you want to find out what’s 40% off RM269.

  13. Cost per use. Frugal people (like me) like this calculation. The cost-per-use calculation helps us become more aware of the quality and longevity of the item, instead of just looking at the price.

  14. Money In / Out. An idea of how much money you / your family is bringing in per month, and how much you / your family spends per month.

  15. Your average cost-per-meal. There are multiple versions of this calculation, but I made it simple: I just calculate the cost of my groceries divided by 100 meals per month.

  16. KMs you get out of a full tank of gas. I know of people who make a game out of it – they try to stretch out a full tank of gas.

  17. Time / Value Calculator. Let’s say an item you want costs RM20 in front of you but RM19 at another location. Some people would spend the extra hour to get there to save the RM1. Others would just get the RM20 because it’s there.

Cool Opportunities

BigPay – The Best Travel Credit Card for Malaysians?
If you ever travel out of Malaysia and use your credit card, then this is BIG (pun intended). AirAsia has released BigPay, a prepaid mastercard that you can easily top up through the BigPay app and be able to use instantly.

But more importantly, BigPay charges you at the real exchange rate (which means they charge no fees). This is something you won’t get if you were to go to your bank or some exchange counter.

In fact, I've already saved over RM 10,000 using this card (you can read about it in our BigPay Review)

Anyway, if you don’t have one yet, you can sign up for free and get RM10 free when you use referral code B7D3YNZPGO.

A way for females to get free insurance
We were talking to our super humble financial advisor friend one day and she started talking about some insurance product for females that provides coverage for all these female related illnesses. But more importantly, the contract also states that all the premiums will be returned at the end of the contract.

Seriously something for all females to consider!

Building a financial roadmap
For those who are lost when it comes to tracking your net worth and using it as a way to create the ideal life, this is something you should check out.

We have worked with a financial advisor to lead you through building your own financial roadmap by yourself online.

And if you want them to do it for you (at a huge discount), you can make the request as well.

Check it out here!

Talking to an Independent Financial Adviser
A big issue when you work with someone who calls themself a financial advisor is you do not know if they really have your best interest at heart. That’s one of the main reasons why I never work with any (the other one is that most of them get trained to say what the company wants and thus, do not know of all the other cool opportunities out there).

However, I’ve been talking to an independent financial adviser the last few months and I do believe that not only is she knowledgeable, but also super open to sharing her knowledge.

If you’re interested in talking to her, join our facebook group and ask your questions. She will definitely find time to pop by and answer them.