The Best Personal Finance Summaries – 20 January 2019
What's better than having returns better than the average person? Getting those returns without putting any work in.
That's what happens when you use a robo advisor like Stashaway.
In fact, if you sign up and fund your account (can even be RM1), we will give you RM10.
So if starting to invest is one of your goals for this year, check it off by opening and funding your Stashaway account (and yes, it's completely free).
[VIDEO] Book Summary: The Automatic Millionaire
Did you know that it's possible to create a system that will automatically make you a millionaire over time? We have summarised the most important parts of this great book so that you don't have to read it all.
Reply to this email to let us know what you think or what you would like us to summarise in the future!
Money in Daily Life
After years of increases, auto insurance has become a budget pain point for many. But experts say there are ways to keep your rates down.
Average automobile insurance rates per annum in the United States increased by 2% in 2019 – compared to that of 2018. This is on par with the annual inflation rate.
The increment of insurance rates cannot be attributed to a single cause only. Thanks to the incorporation of advanced technologies in the vehicles’ design, automobiles are now safer on-road – albeit costlier to repair after an accident. Insurers are to be blamed for the increase in premiums as well. Insurers use multiple criteria to set auto rates such as driving behaviour, location, age, vehicle’s condition or even credit score.
Thus, to drive down the premiums, experts suggest one should compare quotes from different insurers periodically. Besides, one could try to increase the policy’s deductible – which translates to a lower monthly premium (approximately 18% difference). As subscribing to a new policy might trigger a substantial increase in price, one should not let the policy lapse. Below are some commonly asked questions and answers about car insurance:
1. Are some cars more expensive to insure than others?
Yes. Old cars are generally cheaper to insure.
2. Am I required to insure my car?
In the United States, all states except New Hampshire require minimal insurance to cover incurred expenses during an accident. However, other types of additional coverage are optional.
3. Are driver discounts available?
In many states, yes. In general, insurance bundle and auto-credit payment system are two ways to get a lower insurance rate.
Setting your financial objectives and take full control of your money is an important step to cut down or remove the worry.
Having goals can enable you to remain focused. At the same time, specific and tangible targets will be more likely to be accomplished. Some people might think financial goals seem overwhelming. However, it is simple and straightforward. Check out the steps below!
1. Brainstorm – Identify what you want to achieve and why.
Plan a rough draft financial plan. Record your every financial target – be it your wants or your needs. After listing down the goals, write the “why” beside each goal. Give yourself some time to think of the “why” and re-evaluate the goals.
2. Transform your “unpolished” financial goals to SMART financial goals.
Take the finalised list of goals from Stage 1 and transform it into SMART goals. In essence, SMART is:
- Specific – the goal must be explicit and precise.
- Measurable – the progress must be able to be monitored correctly.
- Achievable – set a realistic target.
- Relevant – the goal shall align with your expertise.
- Time-dependent – put a timeline to quantify your goal.
While having too many goals is commendable, but it might stress you out. Analyse the importance of each goal and set its priority accordingly.
3. How much money do you have? – Get a grip on your current income, expenses, assets, and liabilities.
Examine your revenue, liabilities and expenditures critically. Be honest with yourself. All of this data will serve as the basis of your budget.
4. Prioritise your completed SMART financial goals.
Take some time to think and work to see which financial areas need more focus. For example:
- Debt required to be taken care of first compared to financing kids’ education.
- Prioritising your retirement.
- Get the right insurance coverage.
- Having a backup stash.
5. Achieving your goal – Create an action plan to accomplish each of the financial goals.
The goal remains just a dream if you take no concrete actions. Chart every move that needed for you to achieve your goal. Keep in mind, one step at a time – even if you are just taking baby steps.
6. Tracking your progress.
To determine the level of success that you achieve you must be able to measure your progress. A reality check can often motivate you to make more goals.
“What’s your best money tip for Malaysians so we can do well this year?”
this year I’ve got 20: some are CEOs, others are certified financial planners, and I’m always honoured to have Malaysian Twitterati join in.
The tips are best summarised as follows:
1. General Personal Finance
|Lee Ching Wei||Executive Director and Chief Innovation Officer Of iMoney||Set your top priorities to clear debts and improve financial standing. Also, try to improve your credit score, which is helpful in the future.|
|KC Lau||Founder of KCLau.com||Real passive income comes from owning assets such as real estate, cash-flow businesses and royalty-earning intellectual properties.|
|Suzardi Maulan||IFP a.k.a. Pakdi, Investor, Financial Planner and Trainer||In 2020, check out the fintech in Malaysia. They are cheaper, have better choices and more opportunities.|
|Roshan Kanesan||Producer of BFM’s Ringgit & Sense Show||Start investing earlier to enjoy the power of compounding interest. Make use of various interesting platforms, such as ETFs or Robo-advisors. Consider automating in your investing too.|
|Julian Ng||CEO and Co-founder of Akru||Try to get the right mixture of assets and ramp up your active employment/ freelance income. Also, think about how your non-financial factors can impact you financially.|
|Stev Yong||Founder and CEO of MyPF||Consider the global unpredictable economic and political landscape. Focus on asset allocation.|
|Divvy||Founder of Dividend Magic||2020 would be a good time to continue saving up while waiting for buy opportunities. Stay invested and keep a cool head always.|
|Eza Ezamie||Co-founder of Majalah Labur||2020 is the time for you to take full control of your investments. Read books, go to seminars and open yourself up to many kinds of available investment vehicles.|
|Wong Wai Ken||Country Manager at StashAway||2020 is a challenging year due to various volatile events. However, stay invested. Focus on diversification, dynamic allocation and long-term target.|
|Charles Tan||Founder of kopiandproperty||No recession is observed for the year 2020. However, property overhand is still high. Just remember property investment is a long-term decision.|
|David Mawer||General Manager of iProperty||Research before you buy. Don’t financially overextended. Think long term.|
3. For Women
|Suraya Zainudin||Founder of Ringgit Oh Ringgit||Stop being self-sacrificing in doing unpaid work at home or in the workplace. Spend the extra time to upgrade yourself.|
|CJ Ong||Founder of Small Change||Don’t use the money to make yourself feel good. Combat emotional spending by applying the 48-hour rule.|
|Dawn||Founder of SG Budget Babe||Lots of uncertainty are observed in the markets for 2020. Look out for buy opportunities. Also, focus on building up a side income-generating gig.|
|Suyin Ong||Founder of Suyin Invests||Focus on building great habits. Upgrade yourself to increase your earning potential.|
|Anna Haotanto||Founder and Advisor of The New Savvy||Invest for the long term. Also, invest in yourself.|
4. For Young People
|Farid Bahrudin||Guru to Young Graduates||While ASB pays lesser return this year, it is still essentially risk-less. For unit trusts, consider using Robo-advisors.|
|Faiz Wahab||Licensed Financial Planner, Speaker, Writer||2020 is a challenging year – but, it is a good time for youngsters to enter the market. Opt for less-risky investments – making less money is better than losing money.|
|Chin Yi Xuan||Founder of No Money Lah||Be consistent in good financial habits. Starting small makes it easy to sustain.|
|Mohd. Kauthar Rozmal||Editor, Researcher, Writer||Young Malaysians should use fintech as they charge a lesser fee. Explore, save and invest more.|
I’ve done a ton of research on how all this works, putting my best tips and best practices in this guide to get a great deal on the perfect vehicle for you.
Here are the curated tips on how to get a great deal on the perfect vehicle for you:
Make a List of Priorities
Start your list with “must-have” features that you can’t live without for your car. This, ultimately, depends on your lifestyle. Just keep this in mind, ‘Every dollar you don’t spend on your vehicle is one extra dollar you can spend on an area of your life that brings you pure joy.’
Determine Your Budget
Experts suggest the car should take up a maximum of 15% of your take-home pay. There’s a big difference between how much you can spend on a vehicle and how much you should spend on a car. Despite the advice, try your best to find something that’s below your budget. Also, remember to factor in the hidden costs associated with buying a car, such as insurance and maintenance.
Buying vs Leasing
In short, don’t do leasing. Leasing only makes sense if you are rich and would like to buy a new car every couple of years. But, economically, purchasing a vehicle would be a conscious choice.
New vs Used
A car depreciates fast. Thus, to maximise your dollar, get a used car. If you plan to get the used car route, check out the certified pre-owned vehicles (CPO) as they are inspected and include a warranty from the original manufacturer.
What to Know About Auto Loans
You should shop around for the best loan option. Often, the offer from the car dealership does not have the best rate. Get your financing pre-qualified from a third-party lender and know your budget. Then, work on your credit score to negotiate a better interest rate.
For buying a new car, do your research to find the best year, make and model. Make sure to review vehicle safety reports and consumer reports. Also, check out the maintenance ratings.
If you’re buying a used car, make sure you know the full history. Get a pre-purchase inspection by an independent mechanic as well.
What to Expect with Dealerships
When you’re at the dealership, don’t show that you are in a hurry to buy. Remember to complete your due diligence before you make any decision.
Negotiating the Best Deal
Time is on your side when it comes to negotiating. Learn to spot high-pressure sales tactics. Also, the best time to buy a car is at the end of the year or the end of the quarter (as sales staff is trying to meet their quota). Negotiate when you have leverage.
Here are some tips you can do:
- Mention a lower price you spotted elsewhere.
- Get rid of unnecessary add-ons.
- Research any manufacturer incentives.
Want To Have Your Money Accelerate Your Goals?
Grow Your Wealth
If you are an office worker, you are forced to work for a paycheck which would pay for what your family needs. In financial independence, your stability will be taken away from you.
Anxiety plagues those that have greater financial awareness and those whose situation is borderline
The most significant anxiety usually occurs when you are in the middle. In some scenarios, you are safe. However, in another situation, you are not so reliable. There are people who are blissfully unaware of their financial standing, but because you are self-aware – thus, you are haunted by anxiety.
We may need a new way to determine levels of our wealth
Ultimately, being rich or not is more of a state of mind. Real wealth can free us from worries. Therefore, the ladder of wealth stages can be useful to track our journey to financial independence. At a higher level, you will feel less worried.
|10||Abundance. More than #9. More than you ever need.|
|9||Freedom. More than #8. Achieved more life goals.|
|8||Independence. Cash flow > Annual Current Expenses.|
|7||Security. Cash Flow > Annual Basic Survival Expenses.|
|6||10-year Annual Expenses.|
|5||5-year Annual Expenses.|
|4||1-year Annual Expenses.|
|3||Freedom. Paid off high-interest debts.|
|2||Stability. Built-up an Emergency Fund.|
|1||Solvency. Current on all debt payments.|
|0||Dependent. Debt payments > own income.|
Distinguishing levels of wealth based on mental freedoms
Stewart Butterfield, who founded Slack, has listed what he considers as 3 levels of wealth:
|3||I don’t care what a vacation cost.|
|2||I don’t care what stuff costs in restaurants.|
|1||I’m not stressed out about debt.|
In short, Stewart’s levels of wealth do not quantify the wealth but focus on quantifying the financial freedom that it provides.
Nick Maggiulli from Of Dollars and Data expanded on this beautifully:
|Level||Status||Range of Decision ($)||Wealth Required (0.01% of Spending, $)|
|5||House freedom.||1000 to 9999||100,000,000|
|4||Travel freedom.||100 to 999||10,000,000|
|3||Restaurant freedom.||10 to 99||1,000,000|
|2||Grocery freedom.||1 to 9||100,000|
|1||Paycheck-to-paycheck.||0 to 0.99||10,000|
You should try to spend well according to your level
In conclusion, you should know your spending limit and make your conscious spending decisions. To do so, Nick’s table is an excellent guide!
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!