The Best Personal Finance Summaries – 13 May 2019
The first one is that our goal is to give you insights that really help you with how you use / invest your money. Whether that’s breaking down the things to look for in the perfect insurance plan or how to grow your wealth far faster than the typical investment, you will definitely find information here that only seem to be talked about by the super rich.
The second thing you can expect from us is to not only get you out of your frustrations, but to help make your money fuel your aspirations. That means we will help you get clear on what you want your money to be able to help you do and then help you create a plan to make it happen.
The third thing you can expect us to help with is getting you high quality information and opportunities that we have negotiated on your behalf. This means that instead of paying RM888 for a financial roadmap session with a professional advisor, you can get it for RM88. It also means that you have the ability to get your questions answered by a community of people who are also on a similar journey as you.
Next week we’ll share the final thing you can expect from us 🙂
Question of the week
What are some money apps that you use regularly?
Let us know in the Facebook group
Why Even The Best Investment Won’t Beat This
We feel like all the personal finance blogs out there talk about stocks, real estate or P2P lending as the way to get rich. But in order to make all that work, you have to do a lot of research (which can take months) AND you’re still susceptible to it not going your way.
However, there is something that always gets overlooked. But that something will give you a return superior to any of those traditional advice AND have close to no risk.
In fact, it would kind of be normal for you to be able to make 100%+ in one year’s time.
Money in Daily Life
Robert Kiyosaki pointed out the differences between four types of people, namely Employee, Self-employed, Business Owner and Investor.
Employees and Self-employed:
- Trade their times for money
- Low financial intelligence
- Pay the most in taxes
Business owners and investors:
- Earn passive income
- High financial intelligence
- Pay the least in taxes
Robert also identified three determining factor to move from poverty to wealth:
- Maintain a long-term vision and plan
- Believe in delayed gratification
- Use the power of compounding in their favor
If you’re new to frugality, you might overlook these big financial moves:
- Moving to a smaller home/apartment. For a renter, monthly rental will be reduced significantly; for a house owner, mortgage payment will be lower with lower interest payment.
- Moving closer to work. This can help to save the length of commute, gas and wear and tear on the car. The expenses of driving such as fuel, toll, maintenance and depreciation will be lower.
- Commuting via bike or mass transit. This avoids all the expenses of driving and additional cost such as car insurance.
- Eliminating cable or satellite TV. You can save thousands if you simply cut out the service and find something else to watch.
- Shopping around for all bills such as phone, internet, insurance and credit card. You can either switch services when there is better rate or use that rate to negotiate with current service provider. On a side note, we’ve written about the best broadband plan in the past
- Preparing meals exclusively at home, except for special occasions. On average, it is almost 5 times cheaper to eat at home than eat similar food in restaurant.
- Switching (almost) exclusively to store brands. Shifting from name-brand to store-brand may save hundreds a year.
- Restructure debt. Finding ways to reduce interest rates on debts such as home mortgage refinancing and balance transfer offers from credit card companies.
Suraya, a local blogger recently discussed about how much should you spend on a car:
How many % of monthly salary should go towards car payment?
The audiences are of the opinions to spend 8-33% of their monthly salary on car payments.
Car ownership costs much more than you think!
Paying for road tax, insurance, maintenance, car service, petrol, tolls and unexpected expenses may easily double or triple the installment amount.
The lower the cost of car ownership, the better.
Buy a basic car with minimal cosmetic add-ons
Buy a secondhand car and pay in full
What if your dream car is out of your budget?
The simple solution is delayed gratification.
Save up a huge down payment and delay the purchase for a few years
KC Lau explained the five areas that will affect your credit scores:
- Payment History
- Have you been paying your bills, loans, PTPTN on time?
- You also need to ensure your lenders to report accurate info to CCRIS.
- Legal History Trace
- Do you have any record of legal history or bankruptcy?
- If the answer is yes, you should get it resolved first before applying for loans.
- Length of Credit History
- If you never use any credit at all, you might be identified as high-risk individual because banks are unable to assess your creditworthiness.
- Credit Limit Utilisation
- Having a higher percentage of unused credit limit helps your score.
- New Credit Application
- More inquiries on your credit report is not a good thing and will lower your score.
- Only applies to hard inquiry by financial institutions.
Jackie Lam discussed about the money lessons that she wish she taught her younger self throughout the years
1: The importance of savings
- Try to spend half of allowance, save the other half.
- Savings added up can buy larger items.
2: Learn how a debit card works
- Set up own checking account for older children and a debit card allows them to manage their own money and build skills, with less risk.
3: Know what you’re getting into with student loans
- Know the details: interest rate, loan duration, when to start the payment, and the commitment
4: Don’t judge a credit card by its shiny exterior
- Look at the details: credit card terms, fees, credit scores
5: Open an IRA
- Make regular money contribution to the IRA account
- Know the power of compounding of interest
6: Get in the habit of giving
- Make cash donations a priority, others who are less fortunate need our help.
7: Explore your relationship with money
- Parents should clear about why the money is important and how they are using the money to express their values as to pass on positive lessons to children.
- Parents should have money conversations with children, allowing them to make good decisions when time comes.
J.D. Roth discussed about painless ways to build effective budget:
- Invest 20% of your income and live on the remaining 80%. Destroy your credit cards. (The Only Investment Guide You’ll Ever Need, Andrew Tobias)
- Spend 60% of your income on committed expenses, 10% each on retirement, irregular expenses, long term savings and entertainment. (The 60% rule, Richard Jenkins)
- Spend 50% of your income on your needs, 30% on your wants and 20% on savings. (The Balanced Money Formula, Elizabeth Warren)
- Automating budgeting with the help from apps. By limiting on how much you can spend, it’s easier to achieve your goal.
- Envelope budgeting. This idea is similar to other methods: Set a limit on how much to spend on each category then strictly follow it.
The author also offered a few tips on how to build a better budget:
- Don’t worry about perfection.
- The big stuff makes bigger difference than small stuff.
- Plan according to your real life, not how you wish your life to be.
- Keep your budget simple!
The 70-10-10-10 budgeting model could be a solid framework for people to start with.
Basically, the framework suggests that you live on 70% of your income and allocate 10% each for active investing, passive investing and charity.
Living on 70% of income could be challenging for most people and they might need to change their lifestyle. The 10% allocated for active investing can be used for emergency funds and opportunity funds.
People are welcomed to adjust the framework according to their own goals and needs, the author added.
Trent Hamm shared his personal story on the pain of changing now versus the pain of not changing later.
After realising the need of changing his lifestyle, he quitted costly hobbies such as golfing and stopped unnecessary spendings.
After clearing his debts, the author said the pain of changing now is almost always far less than the pain you’ll soon feel from not changing.
Want To Have Your Money Accelerate Your Goals?
Grow Your Wealth (Investment Related)
Ian Tai shared his view on the #1 investment that you cannot lose. The author concluded that acquiring a skill that is tradable for money is less riskier than all other instruments such as stocks, real properties and businesses.
Tai also explained the 80/20 rule in investing:
- The 20% thinks, do, and achieve different results as compared to the 80%.
- The 20% has Mentors as Guides. The 80% (for most) may not have one.
- The 20% is willing to invest the 10,000 Hours to Achieve a Desired Result.
You’re awesome 🙂
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.