The Best Personal Finance Summaries – 16 September 2019
There are a lot of exciting things happening at MMM. From new partnerships to help break down the complexities of insurance, to us working on a project that will be able to map out your whole financial life for you.
One of the newest things we've introduced a Facebook messenger on our website.
This messenger will give you a quick overview of everything we have on our site that you can take advantage of. From ways to save money, to ways to make more money (though this one is still in the works). Check it out!
More on that in the future!
Have you ever wondered if you are on track to reach your financial goals? Well, now you can find out with the new goal app we created. Simply answer a few basic questions and you will find out if you will be able to reach your goal or not!
And let us know what you think. We're working on improving it so any feedback on what you'd like to see is possible to make happen!
Never be Taken Advantage of Again by Insurance Agents (5 Ways to Reduce Your Medical Premiums by 50%+)
As part of our goal of making personal finance easier to understand, we created a video with one of our partners to break down everything you need to know about buying a medical card.
We're proud to have over 1000 people view the video and so we'd like to share it with you as well.
What other videos would you like to see from us in the future?
Money in Daily Life
When we see a great deal, we are inclined to think that we are "saving money."
However, in many cases, you might be overspending when you feel you are getting a good deal.
Here are 3 reasons why!
1. Buying Bulk Items
Albeit buying in bulk can save money because the per-unit cost is low, you are likely to consume more if you have more! You feel safe to use these items liberally. One quick tip is that you could repackage bulk items – smaller containers encourage slower consumption!
2. Clearance and Sale Items
Sometimes, even if something is on sale, you might end up overspending because it is the money you were not planning to spend! You should evaluate the purchase – is it something you need? If you don't need them – don't buy them!
3. Using a Credit Card
The main reason is that when you swipe your credit card, you aren't watching the money disappear. It is more abstract – therefore more comfortable to overspend. Reduce your spending by keeping track of your expenditure. Hold yourself accountable to prevent overspending!
Is anyone else depending on your income to maintain their quality of life? If you disappeared, would the void of a lack of income create hardship in the lives of people that you love? If the answer is no, then you (probably) don't need life insurance. If the answer is yes, then you should probably get a policy.
The author suggested that life insurance is about having a good grasp as to where you're trying to go with your life as well as having a sense of responsibility for those choices. That being said, it depends on life choices. The specifics are best summarised as follows:
|Single, no plans for children.||Life insurance is not a high priority. Debt repayment and retirement savings (personal financial obligations) are much more important.|
|Consider having a child in the next 10 years.||Get a 30-years term policy. Getting life insurance early at the stage of life where you are healthy will lower the overall risk of the policy – clinching you a lower price.|
|Partner is financially unstable. No plans to have children.||Consider a shorter term policy. Possible to cover your partner's financial difficulty.|
|People with children.||The term of policy should last into adulthood of your children. Safeguard your partner and children financially.|
The rule of thumb is, if you are in a stage of life where life insurance is essential, get it now rather than later. The younger you are (healthier), the cheaper the life insurance it will be!
Last but not least, The Simple Dollar also provided a handy guide for you to decide which life insurance companies you should choose if you happened to need one. Always remember, life insurance is merely a tool that takes care of people who depend on you in the event of your death. Also, having a good life insurance policy that will take care of my wife and children is a notable stress reliever.
If I were to recommend five books in an appropriate category for The Simple Dollar, probably "Financial and Life Improvement," what five books would they be?
1. Your Money or Your Life by Joe Dominguez and Vicki Robin
The book is about the relationship between your finances and other aspects of your life that you are about, particularly your time. There are two unique concepts mentioned in this book:
- The real hourly wage, where you should calculate how much money you get to keep in exchange of money you make per hour. This includes taking your work-related expenses and the extra work hours spent into consideration.
- The fulfilment curve, which says there is a peak where you get most pleasure for your dollar. It is essential to know it – because when you overshoot it, you will get a diminished degree of enjoyment!
2. The Total Money Makeover by Dave Ramsey
Ramsey's work centres around 7 'baby steps' to manage your debts. They are:
- Save $1,000 to start an emergency fund
- Pay off all debts using the Debt Snowball
- 3 to 6 months of expenses in savings
- Invest 15% of household income into Roth IRAs and tax-advantaged retirement accounts
- College funding for children
- Pay off your house early
- Build wealth and give!
3. The Bogleheads' Guide to Investing (2nd Edition) by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf
Bogleheads recommend investing in index funds – as a way of passive investment, without requiring financial advisor and obsessive study of finances. The book is useful to guide you through the mechanics setting up your financial plans and objectives in a clear language that the average person can understand.
4. Atomic Habits by James Clear
Atomic Habits is an excellent reading material which provides tools to apply useful ideas in managing your personal finance. The core idea is you should use a systems-based approach to propel yourself towards your big goals. Be wary of your tiny habits and routines because they are the ultimate determinant in evaluating whether or not you would be financially successful.
5. Man's Search for Meaning by Victor Frankl
Most people don't know themselves, yet they want to be successful in personal finance. In reality, inner contentment is the core for financial success – financial state (own choices and spending decisions) is just reflecting who you are. The book is useful in communicating the idea of the path as a whole. Only after we're surer of what we want, we could be on the way toward contentment that we can get our finances in line with what we want.
Want To Have Your Money Accelerate Your Goals?
Grow Your Wealth
I believe the stock market offers a secure channel for us to invest in shares of great businesses to build sustainable long-term wealth.
But, with that being said, there are many pitfalls which might ensnare investors and thus, hindering them from making real wealth from the stock market.
Pitfall #1: Having No System
Having a system is the key to enable you to generate money sustainably in the stock market. A system is essential to sift out good stocks from bad ones – so that, consistent results could be obtained!
Pitfall #2: Chasing Hot Stocks
New investors are prone to stock tips, rumours and news sourced from friends, families, brokers, analysts or even gurus! Many retail investors ignore information such as Annual Reports, Quarterly Reports, Press Releases and Investors' Presentations which are the essential read for value investors. Even if you don't know about them, at least start learning today!
Pitfall #3: Buying Expensive Stocks assuming they are cheap
Stock prices alone don't tell you whether a stock is cheap or expensive. You must find out stocks' true worth by knowing the earnings and determine whether it is undervalued or overvalued.
Pitfall #4: 'Fairy Tale' Investing
It is usual for the price of a stock to go up, sideways or even dropdown. You must have your game plan to face them financially and mentally.
Pitfall #5: Not Learning from Mistakes
We all make mistakes in unwise investments. Learn about it and grow from it. A post-mortem is necessary to help us grow as an investor. Study your mistakes and don't repeat them in the future.
In investing, things are, most of the time, not definite.
Not sure if others feel the same way, but in the active investing world, seldom do you get a feeling an investment feels permanently safe.
The Limitations of Relying just on Numbers
The author started off his article by briefly mentioning a short anecdote of Bob Henderson in 2008 financial crisis. Bob has been developing and improvising his success-proven model for 10 years before 2008. He was extra careful and rational. However, this did not prevent him from losing ultimately $200 million in the financial crash.
Historical Data Gives Us an Illusion of Control
Our models, based on historical data, make us feel safe. Perhaps, it gives us an illusion of control. Bob thought he had reasonable control for 10 years until this one event showed him that maybe it is an illusion.
Guessing in a Forward-Looking Uncertain World
Bob's model failed because it tried to derive probabilities. The answer to his failed model lies in Bayesian Networks, which evaluate the relative likelihood of events happening or a best-informed guess.
Guessing has a Cost to It
The cost of guessing is that unless we are very sophisticated, we cannot always get it right. To guess well, you got to be very in tune with the company to make that guess. As quoted by the author, "folks cannot outguess the market well over time".
Dealing with the Weakness of Using Historical Data in Retirement Planning
The reality is that… the future is uncertain:
- The banks where your fixed deposit are in, have every chance of blowing up
- Your property's future growth rate might be very different from in the past, on a secular basis
- Your unit trust dividend income is based on the earnings and capital appreciation of the fund. If the performances lag, dividend income goes down. If you need $1000 a month in dividend income and the fund gives you exactly $1000 a month, and you cannot live on less, you are screwed
But, some safer alternatives are:
- Build a bond ladder of high-quality bonds or a bond fund with high quality
- Use Inflation-Protected Bonds
- Use a less than 2% initial withdrawal rate
Whether it is investing, or retirement, there are no ultimate investment, super safe stock or safest retirement strategy. You need to get better at understanding and living with these things. Understand very well how things work, mitigate, transfer or accept the risks that come with it.
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.