The Best Personal Finance Summaries – 12 August 2019
We're exploring other ways for you to learn besides reading a blog. The first one we're doing is holding a live webinar with one of our partners. Did you know that there were new legislation that came into effect starting 1 July 2019? If you didn't have medical insurance before then, your premiums are going to be higher going forward.
However, our partner was sharing with us ways to actually reduce your premium by over 50%. Many of these things aren't widely known so we invited him to hold a webinar to share that information with you.
If you're interested in the free webinar, sign up here!
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?
Money in Daily Life
Can you explain what the difference between stocks and bonds are? Tried to read up on this on Wikipedia and other sites but it’s not clicking.
What Are Stocks?
Stocks are tiny slivers of ownership of a company.
- Give dividend based on the company's profits.
- Grant you voting rights and the ability to attend the company’s annual meeting.
- Companies may buy back their stocks; therefore, shareholders will get paid for each share they own.
What Are Bonds?
A bond is like a small loan that you give to a business or a government entity. It has a principle, the end date and the interest payment plan.
- Principle – the amount that the bond is issued for and paid by those who buy the bond.
- End date – the date the amount will be repaid.
- Interest payment plan – the dates and amounts where interest will be paid.
So, Which Are Better?
- Bonds carry a fixed rate of interest and backed by a promise of future funds. Stocks have a dividend, but there's no guarantee.
- Bonds will eventually pay out their face value. One could only get money out of a stock by selling it to someone else or buybacks from the companies.
- Bonds are graded, but stocks are not.
- Bonds are stable and reliable, but stocks have a much more variable worth.
- Stocks can drop rapidly in value during an economic downturn, whereas bonds will keep paying out.
- Over the long run, stocks have significantly outperformed bonds throughout their history.
Therefore, stocks are riskier, but have a better long term return than bonds!
How do you decide if a membership will save you money or cost you more? Here are some things to consider.
- Know your break-even point.
Do a quick calculation of the break-even point in mind. Divide the full price of the membership by the price per entry to know the break-even point. Having a break-even point in mind can also spur you to visit more often and save more!
- Base your decision on facts, not intentions.
To make sure you're not basing your membership decision on unrealistic intentions, plan to visit as often as you like, paying per visit each time. If you don't visit again for six months after permitting yourself to go as often as you like, then you know that membership is probably not going to save you money.
- Consider the perks.
For instance, some pools, gyms, and community centres will offer members a discount on food. You might also enjoy free parking, a discount in the gift shop, or even access to members-only services or events by purchasing a membership.
I started my life in the adult world without good financial practices and principles, and that quickly led to a difficult financial situation.
This is a list of eighteen simple things I’d change.
This piece by Trent Hamm explained what the 18 things he wishes he had done when he graduated from college are.
- Sign up for a 401(k) (or similar account) with a generous automatic contribution.
The author noted that he did sign up for a 401(k), and it was a right decision. As quoted by the author, "it did not have any negative impact on my standard of living, but what it did do is add a whole lot to my sense of financial stability now (fifteen years later or so) and going forward for the rest of my life."
- Cook almost all my meals at home.
Meals eaten outside the home are incredibly expensive. The author suggested that one should cook at home to cut down on financial expenses.
- Shop for groceries with discount meats and vegetables as the starting point for my grocery list and meal plan.
By making a grocery list and meal plan, the author could ignore the other stuff on the shelves and spend less money as well as time. Unnecessary purchases could be prevented.
- Establish healthy normal dietary patterns.
Eat mostly vegetables and fruits, and make meat and diary as "treats" or "special occasion" meals. Plant-based meals are not only less expensive, but they also have excellent health outcomes for us as well!
- Take leftovers to work each typical day.
This is just an extension of the previous idea of making low-cost meals based around fruits and vegetables in the centre of your life. This will save you money and will almost always be healthier than what you might otherwise eat.
- Intentionally put aside a portion of my workday for skill and knowledge building and another part for professional network building.
Skill and knowledge building is all about building the skills you need to stay up to date with your field at your current position as well as acquiring knowledge and skills required at your next few posts. Know what you need to know and be able to do for your next job or two and start learning that stuff now. This may end up eating more than an hour a day if you need certifications and additional classes. But, do make time for this.
There are still 12 tips shared by the author in his article, check it out if you have time!
it is not that the pursuit of financial independence will increase the chances of these events from happening. These events are likely to occur to most of us, regardless of whether we pursue this odd and niche lifestyle goal.
Financial independence is a journey. Here is the typical process:
- Try to earn more
- Know what makes you happy in life. Spend enough to get you that
- For the rest, mercilessly cut down on the expenses that mean less to you
- With the usually high savings rate, build wealth well with them
- Check-in once in a while to see if you are there
How do we address these uncertainties that the detractors talked about in financial independence?
In financial planning, this can be solved by baking in more cash flow requirement. On a present value basis, baked in 30-40% more to what you think you need.
To address uncertainties, the author's stance is as followed:
- The insurance covers those low probability but high-cost impact situations. Do your best to get them cover within your abilities.
- Keep your insurance cost in control.
- You do not wish to fall into these medical shit, so a lot of it comes from trying your best to live a life that reduces your chances of getting them. You cannot avoid them, but you could decide not to escalate it.
- Keep agile and flexible. A vibrant and fixed life would give you a more significant issue when these stuff hits.
In this article, the author concludes that in the journey of pursuing financial independence, one could learn a lot and be able to deal with uncertainties. There are many fascinating insights shared by the author in the work as well, do check it out!
While you probably won’t find lasting happiness based entirely on how much money you manage to amass, the way you spend your money can contribute a great deal to the amount of satisfaction and enjoyment you get out of life.
Here are 4 ways you should use your money.
- Spend it on what YOU like best.
A lot of dissatisfaction in life comes from spending on things that you don’t feel are important. Examine your values and financial priorities, and then spend money on what YOU like. If it’s your guilty pleasure, and you enjoy it for a relaxing escape from everyday life, it’s not a waste of money.
- Give it away.
Giving to charity, helping friends and family, and another spending that enables you to feel as though you are making a positive contribution triggers activity in areas of your brain associated with receiving rewards.
- Focus on experiences.
While buying things can give you a thrill because it’s something new, pretty soon that object becomes a regular part of life, fading into the background. An experience, though, is always extraordinary. Being able to spend your money to create these great memories gives you something to look back on, and creates a little bit of happiness each time.
- Indulge in small pleasures regularly.
A small indulgence regularly, though, always becomes something exciting to look forward to. As long as it’s affordable, it provides you with something new regularly.
Families are often reluctant to talk about wealth and inheritance with their children, but experts say that can create confusion and insecurity
Two-thirds of Americans who have at least $3 million in investable assets have not talked to their children about their wealth or never will, according to a Merrill Private Wealth Management study of 650 families. In a world of oversharing on social media, why does this restraint persist? It’s complicated. Here are 4 reasons parents avoid “the talk,” and what they can do about it.
- You Think Your Children Are Not Watching You.
As quoted by Dennis Jaffe, a psychologist who works with wealthy families, “values are set by everyday behaviours when you’re growing up, and kids are watching you.” Disengagement creates more problems, though, because it can create a perception that a family is more, or less wealthy than it is. Leaving children to guess can also create feelings of insecurity.
Therefore, parents should not shy away from talking about wealth with their children.
- You Are Anxious, and Talking Will Make It Worse.
Talking about wealth often increases parents’ anxiety. Unlike some other anxiety-filled talks, conversations about family wealth aren’t cued by a stage of life. Thus, advisers suggest starting when children are young but keeping the conversation age-appropriate. Talking in stages will produce less anxiety than trying to reveal everything all at once.
- You Don’t Know Because No One Ever Had The Talk With You.
Sometimes, parents avoid the discussion because they do not know the answers or even how much money they have. Parents describe that initiating the communication of wealth with their children as a valuable process. Also, by talking to them, parents can give their children essential financial skills.
- You Do Not Come From Generational Wealth.
Families that inherit wealth often continue to be wealthy because of the conversations they have. It’s what they have done for generations. Those who do not succeed in passing the money along successfully often have silence to blame. Thus, it is vital to talk about wealth!
Want To Have Your Money Accelerate Your Goals?
Grow Your Wealth (Investment Related)
[Pros and Cons of Investing in Stocks]https://www.richdad.com/pros-and-cons-of-investing-in-stocks)
Why investing in paper assets may (or may not) be best for you
The article by Kim Kiyosaki talks all about paper assets. First, it was revealed that there are a total of 4 main assets:
- Real estate
- Stocks (a.k.a. paper assets)
- Commodities (silver, gold and oil)
What is a paper asset?
Well, paper asset is just a fancy term for pieces of paper that define ownership of an asset. Stocks are only one form of hundreds of paper assets available today.
After a short introduction on the definition of a paper asset, Kim Kiyosaki continues by telling a story about how she first got into buying stocks. As the story goes, Kim bought Coca-Cola stocks only to take a loss after selling the stocks below her entry price. Kim realized the reality was that her losses were as much her fault as her broker’s. After the incident, she started to learn more about the stock market and regained her confidence to reinvest in it.
As Kim concluded, one should always find a trustworthy and knowledgeable stockbroker. She also shared various traits of a good broker, be sure to check out her article from the link above!
Finally, Kim also came out with the pros and cons of investing in stocks, which are:
|Liquid – easy to buy and sell.||No control – no direct say in how the company makes and spends money.|
|Easy entry – it does not take a lot of time to begin investing.||Volatility – stock prices can rise and fall dramatically.|
|Cash flow – certain stocks pay dividends periodically.||No leverage – an average investor cannot borrow money to purchase a mutual fund or shares of stock.|
|Tax advantages – gains, profits and dividends are taxed at a lower rate.||High fees and commissions – high fees and commissions are charged on trades.|
|Home-based business – provides an opportunity to educate your children financially.|
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.
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.