The Best Personal Finance Summaries – 11 February 2019
WHO’S BETTER: ROBOTS OR HUMANS?
Would you bet your life savings on your answer?
Warren Buffet (the world's most successful investor) made a stand and said that passive investing through index funds would beat mutual funds (the US equivalent of unit trust) and made a bet of over $500,000 USD (that's over RM2 million!) that passive investing would beat his competitors choice of mutual funds over 10 years.
By year 8, it was already very clear that he had won.
So how do everyday people like us get access to the US index fund? We use a robo advisor like Stashaway.
Signing up for Stashaway takes less than 30 minutes and after doing it, you too, would be doing better than most unit trusts over the long run.
And if you sign up through us, you will get bonuses not found anywhere else including:
- 50% off in fees for the first 6 months
- RM10 from us so we can invest in your success
From Us
[VIDEO] Book Summary: The Intelligent Investor
Have you ever heard of the concept that price and value are not the same? If not, you must watch this summary as it can really help you in your investing journey
Would you Rather
We're planning to hold a giveaway in the near future and we want to know what you prefer.
Would you rather get RM10 guaranteed or the chance to win RM500?
Money in Daily Life
How Much Should I Save For Emergencies?
Understand your expenses to identify how much you need for your emergency fund.
In life, emergencies happen – thus, it’s always good to be prepared! But how much is enough? Well, the rule of thumb is having 3 months of living expenses for those who are single; and 6 to 9 months’ worth for families. Check out the table below to know more!
| Lifestyle | If you live by yourself | If you’re married | If you have a child | If you have children |
|---|---|---|---|---|
| Food | 550 | 870 | 1300 | 1550 |
| Housing | 300 | 870 | 870 | 8780 |
| Transport | 770 | 1020 | 1030 | 1040 |
| Utilities | 100 | 290 | 300 | 310 |
| Childcare | 0 | 0 | 650 | 1150 |
| Healthcare | 30 | 70 | 100 | 120 |
| Personal Care | 70 | 100 | 120 | 140 |
| Social Participation | 150 | 200 | 240 | 250 |
| Discretionary Expenses | 130 | 300 | 380 | 390 |
| Annual Expenses | 140 | 300 | 340 | 400 |
| Savings | 250 | 400 | 400 | 400 |
| Total | 2490 | 4420 | 5730 | 6620 |
| Multiplier | 3 | 3 – 6 | 6 – 9 | 6 – 9 |
| Emergency Savings | 7470 | 13260 – 26520 | 34380 – 51570 | 39720 – 59580 |
7 Powerful Financial Habits to Make Life Easier
Almost every year, many families can’t hit their financial goals, and a big reason is that they don’t have a system in place.
The blog author of MintLife, Elle Martinez have interviewed couples and families who have a successful experience in managing their finance a little while back. Thus, here are the 7 habits which were concluded from the interview!
- #1: Set a Defined Goal. Take some moments to sit down and discuss your goals. Giving meanings and significance to your goals can motivate you to pursue them.
- #2: Keep a Visual Reminder of Your Why. Having a reminder can get you over when you get discouraged at times. Tip: always keep a visual reminder at apparent places.
- #3: Focus on One Key Step at a Time. Working on one piece at a time can allow you to be effective and efficient in tackling financial goals. Start by setting up an emergency fund and then clearing your debts.
- #4: Review Your Accounts. Always review your accounts to gauge your current standing – net worth and cash flow. By studying, you can know how you’re doing and make the necessary changes.
- #5: Create a Budget that Reflects Your Goals and Values. Like defining your goals at #1, #5 implies that you should then create a well-suited budget for it. Prioritise what’s necessary such as savings and investing in your budget planning.
- #6: Automate Your Finances. Automating your bill and debt payments can effectively create a sound financial habit. Also, you will have more time to spend with your loved one as well.
- #7: Have Regular Check-Ins. In life, the unexpected can happen and affect your financial goals. Keep in mind it’s reasonable to let a few things slide. Just stay in sync with your partner and work out any hiccups.
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Grow Your Wealth
5 Savings Alternatives to Fixed Deposits in Malaysia
What are the alternatives to fixed deposits in Malaysia? Can you keep risks low while returning adequate levels of returns?
The Overnight Policy Rate (OPR) cut by Bank Negara Malaysia (BNM) has led to reduced fixed deposits (FD) rates. However, fret not; there are 5 alternatives which you could consider!
| Alternatives | Description | Examples | Pros | Cons | Annual Returns |
|---|---|---|---|---|---|
| Money Market Funds | Short-term investments with high liquidity. | Fixed income securities, certificates of deposits etc. | Liquid tax-free income. | Rates are variable. | 3 to 4% |
| High Yield Savings Accounts | Savings account with a higher return. | – | Higher returns protected by PIDM. | Might have additional conditions to earn interest. | 1 to 4% |
| Property Loan Account | Flexible property loan account to repay capital owing. | – | Reduces capital owing and interest. | Might incur fees for withdrawal. | 4 to 5% |
| Endowment | An insurance product with substantial returns. | – | Might be better than FD. | Longer maturity periods. | 2 to 5% |
| Fixed Price/ Fixed Income Funds | Funds which guarantee the capital. | Amanah Saham Bumiputera (ASB) | Higher returns, capital guaranteed. | Volatile returns. | 4 to 6% |
5 Different Types of Income & How They Contribute to One’s Financial Wealth
I realised that these incomes could be grouped into 5 categories. They each have their unique attributes, requirements, and usages to build wealth for the long term.
In a recent post on KCLau.com, one of the authors, Ian Tai has shared about the 5 categories of income. The pros and cons of the revenues are extensively discussed, as well.
#1: Active Linear Income
This is the most common income. One exchange his/ her physical labour and time for money. While this income is suitable for those who just start working, ultimately it is capped because it depends solely on the physical effort. Some examples are conventional jobs and freelancing gigs.
#2: Active Scalable Income
Like #1, but #2 has a network of paymasters (customers). Either by building a system or team, he/ she now can systematically scale his/ her income exponentially. However, to create the vehicle; one must first invest time, effort and money to perfect his/ her craft. For instance, selling services to many clients and earning commission from team’s sales.
#3: Passive Income
#3 is a recurring income derived from ownership of profitable assets. The main difference of #3 from both #1 and #2 is that one doesn’t have to use physical labour. Earning passive income is making time. The examples can be dividends, rentals and royalties.
#4: Portfolio Income
This income is derived from the capital gain of your assets. One earns money from the stock or property market in terms of portfolio income when the market value of the assets appreciates.
#5: Phantom Income
In essence, #5 derived from the leverage of tax benefits, corporate entities and debts. It is an income of the rich, albeit the income itself is not receivable via cash. For instance, one could hire a team of advisors to help him/ her to optimise his/ her financial standing.
The 6 Best Ways to Invest Just $100 Per Month This Year
If you have an extra $100 per month to spare, there’s more than one way to build wealth and finally, get ahead.
…
We reached out to financial advisors to find out how they would invest an extra $100 per month in the new year, and here’s what they said.
1. Bump up your 401(k) contributions
If you can qualify for an employer match in your workplace 401(k), deposit your $100 into it. Money in a 401(k) plan is tax-free and generates compound over time. To funnel an extra $100 into your account monthly, try to negotiate and boost the percentage of your 401(k) contributions and if your plan allows; simply set aside a flat $100 in your funds every month.
2. Save $100 per month in a Roth IRA
You can consider contributing to a Roth IRA using your taxed money. The contributions in a Roth IRA are tax-free and compoundable as in a 401(k). However, do note that contributing to a Roth IRA has both age and income limits.
3. Save for emergencies
If you have yet to set up your emergency fund, do allocate at least three-months’ worth living expenses for it. Also, keep your emergency fund in a high-yield savings account which you could access easily. Having a fully-funded emergency fund can also help you avoid charging up credit card balances with exorbitant interest rates.
4. Save for future healthcare expenses in an HSA
Assuming you have already set up your emergency fund and paid off your high-interest debt, consider putting extra cash in Health Savings Account (HSA) to enjoy triple tax advantages. Enough money should be kept in your HAS to pay your insurance’s annual deductible in case of unexpected health costs.
5. Pay off high-interest credit card debt
While debt repayment is not strictly an investment, its financial return works similarly. With average APR for a credit card is as high as over 17%, it is equivalent to 18% return on your investment per annum.
6. Invest in yourself
Dedicating the extra $100 to invest in yourself can pay off in a big way too. Use the money to buy materials, courses, training and certifications to prepare yourself for the upcoming opportunities – both personal and professional.
Cool Opportunities
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!
Learn how you can be paying 50% less for medical insurance
Figure out investing in 30 minutes and do better than unit trusts