The Best Personal Finance Summaries – 25 November 2019
Last week we asked you what you would like to see for the end of the year giveaway and many of you said you would like staycation vouchers, spa vouchers, and giftcards for shoppee and lazada.
We will be adding those into the giveaway and give you a glimpse into what will be offered next week. So if there's anything else you would like to see, let us know!
[VIDEO] Book Summary: Rich Dad Poor Dad
Rich Dad Poor Dad is one of the most popular books out there and has been one of the most powerful books that people have cited to help them become successful. So instead of reading the whole thing, we have broke down the main points here in this video.
What is Compound Interest
We are starting a mini series called fundamentals 101 where you can learn all the basics to money. By going through this blog posts (videos will come in the future), you will definitely be better off than 50% of the population.
This week's episode is around compound interest, what it is, and why people call this the 8th wonder in the world. In fact, if you take advantage of this, you will definitely have enough to retire.
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
As part of an outreach campaign, members of the financial media – including personal finance bloggers like yours truly – were invited to the office of Life Insurance Association Malaysia and treated to a first-hand presentation of the latest update within the investment-linked products industry.
Recently, Suraya from Ringgit Oh Ringgit attended an outreach campaign regarding Life Insurance Association Malaysia. Therefore, she is excited to share about what she learnt that day – which is, the investment-linked products.
Investment-Linked Products explained using Nasi Lemak
Investment-linked products or ILPs, in short, is like a pack of nasi lemak. You get coconut rice + sambal in a basic nasi lemak; for basic ILPs, you get protection (life insurance) + investment. Similarly, a comprehensive ILPs provides you with more add-ons – similar to that of a wholesome nasi lemak, at an additional cost!
There are two types of ILPs: conventional and takaful. They are both similar, but only the takaful ILPs are Syariah-compliant.
ILP – the investment part
For investments, different insurance providers/ Takaful operators offer various funds selection. While there is no limit to the conventional insurance provider, Takaful operators will only offer Syariah-compliant investment options.
It is essential to know that fund’s performance can go up or down over the years and it may affect your fund value. Apart from that, factors such as irregular contributions schedule, making withdrawals and choosing not to increase premiums (protection cover will increase over time) can cause the ILPs being unsustainable.
New Development for Investment-Linked Products in 2019: Sustainability report
As mandated by Bank Negara Malaysia (BNM), sustainability reports must be provided to policyholders. As a result, ILPs will inform you about the performance of its investments in plain English.
Why do insurance/ Takaful products expire? Are newer products better?
The simple answer is no. Insurance/ Takaful landscape evolves based on consumer demand. New does not mean better! If you are thinking to terminate your ILP to a newer product, consider the following:
- The premium. At an older age, you might need to pay a higher monthly premium if you choose a new plan.
- Its contestability period. The contestability period starts all over again for another 2 years!
- The coverage. While the newer program might offer a specific coverage you wanted, you can always try to negotiate with your existing insurance company to request for amendments instead of switching to a new one!
Though turning 18 may mark the beginning of adulthood; individual adult goals still seem far off: buying a house, getting a car, or taking out a loan. Yet even if you aren’t planning on owning a home of your own anytime soon, building the credit, it requires to make these large purchases has to start at 18.
Favourable credit history is not built overnight. However, there are ways designed to assist you in starting slowly!
1. Understand How Credit is Built
Your credit score is a representation of how trustworthy you are with borrowed money. Here are some factors which are essential to your credit score:
- Payment history. Record of on-time payment.
- Age of Credit and Type of Credit. The types of credit you have.
- Credit Utilization Ratio. Your available credit.
- Total Balances and Debt. The total amount that you owe.
- Recent Credit Inquiries. Fewer inquiries about your credit represent responsible use of loan.
- Available Credit. Unused credit.
2. Get Your First Credit Card
Acquire your credit card can help you build credit and practice responsible credit card use. While at 18, you might not have many choices, be strategic with your credit card applications. Get the following:
- Secured Credit Card. It requires a deposit and must be paid off in full each month.
- Student Credit Card. They are designed for students, but they often have higher interest rates and penalties.
3. Become an Authorised User
Becoming an authorised user on someone else’s credit card will allow you to make purchases and get positive history when they make payments on their card.
4. Take out a Credit Builder Loan
Credit Builder Loan helps you build credit by dispersing the funds only after you made payments on your loan. You must make your payments on time every month, or face penalties.
5. Take out a Student Loan
If you are a student, consider applying for a student loan. Repaying student loan will count towards a positive credit history. However, you shouldn’t take one out just for the sake of building credit as a student loan is unable to help that much!
6. Manage your Credit wisely
Time is the most significant factor in building a positive credit history! While loans or credit cards can help a little, remember always to make payments on time, keep balances low, and check up on your credit score as well as credit report yearly to catch errors or fraud.
To find success, you first have to define what that looks like for you. Many great achievements begin as far-off goals, that seem impossible until it’s done. Though you may not need a goal to succeed, research still shows that those who set goals are 10 times more successful than those without goals.
1. Figure out your Driving Purpose
Fitting your small goals into overall motivations can help you stay on track. Understand how your goals relate to what you value. For instance, cooking at home can mean spending more time with kids or saving money on travel!
2. Write out your Goals
Writing your goals down helps you to choose more specific purposes, imagine and anticipate hurdles, and helps cement them in your mind. It can also remind you what you are working towards. Make them specific and measurable. For example, write ‘lose 5 pounds in a month by working out 3 times a week’ instead of ‘lose weight’.
3. Break them into Manageable Pieces
Think about your goals by time or by the task. Work towards your goals by dedicating an amount of time for them regularly; or break them down into smaller milestones. Either way, you will move towards your targets – slowly, but surely.
4. Create a Realistic Schedule
An unrealistic schedule can be demotivating if one falls off track. When creating your plan, remember to consider external factors to allow rooms for flexibility. Include small rewards to keep you motivated!
5. Plan for Hurdles
When you’re just starting, there’s no way for you to know what you don’t know. Failure is inevitable – quitting is not. Understand there will be setbacks, learn from them and keep yourself going.
6. Create a Support Team
Your support team can be your friends, family or community. Tell them about your progress and goals so they can cheer for you, achieving what is known as an identity goal. Identity goal can give you the momentum to push towards the actual target.
7. Stay Positive
Celebrating small wins is an essential part of being successful. Remember, negative emotion is what set you back instead of failure. Reconnect to your driving purpose. Use the 5-second rule – when you feel an impulse to take action towards your goal, but don’t want to, count to five, then act.
There are also some tips about achieving your goals. They are best summarised as below:
|SMART-ER Goals||WOOP Method||HARD Goals|
|Specific. Say exactly what you want to achieve.||Wish. Figure out an exciting dream.||Heartfelt. Invest emotionally in your goal.|
|Measurable. Decide a metric to mark your success.||Outcome. Picture the best outcome vividly.||Animated. See yourself achieving the goal.|
|Achievable. Ensure your goal is realistic.||Obstacle. Anticipate obstacles.||Required. Find concrete reasons to complete your goal.|
|Relevant. Connect this goal to your overall vision.||Plan. Plan to overcome the obstacles.||Difficult. Check that your goal is difficult.|
|Time-bound. Set a deadline.||–||–|
|Evaluate. Track your progress.||–||–|
|Readjust. Make changes if necessary.||–||–|
What are the top 10 most common Malaysian tax relief for year assessment 2019 and filing in 2020? Have you maximise your available tax relief?
According to the post by MyPF, there are the 10 most common Malaysian Tax Relief, and they are summarised in the table below:
|Tax Relief||Maximum Amount (RM)||Criteria|
|EPF Contribution||4000||Total employee contribution capped at RM4000. A voluntary contribution is included, as well.|
|Life Insurance Premium||3000||For Life, 100% of premiums paid eligible for tax relief. For Education/ Life, 100% as education or life policy. For Medical/ Life, 60% as medical policy or 100% as a life policy. Accidental and automation premiums are not eligible.|
|Insurance Premium for Medical/ Education||3000||Similar to above.|
|Lifestyle Expenses||2500||Lifestyle expenses are grouped as one category. This includes the purchase of reading materials, electronic devices, sports equipment and gym memberships as well as internet subscription.|
|PRS/ Annuity||3000||The tax relief is until the year 2021 unless extended.|
|SOCSO Contribution||250||Total employee contribution to Social Security Organisation (PERKESO).|
|SSPN-i for Child||8000||Parents are eligible for tax relief up to RM8000 for each parent.|
|Child Care/ Kindergarten||1000||Eligible for registered, licensed Child Care Centre. Costs for private nannies are not eligible. Only one parent can qualify for this tax relief.|
|Complete Medical Examination||500||A full medical check-up as defined by the Malaysian Medical Council (MMC). A medical lab test is not applicable.|
|Medical Expenses for Parents||5000||Includes medical treatment, medical care, dental treatment and special needs expenditure. The claim must include a prescription from a certified medical practitioner. The parents must also be both living and treated in Malaysia.|
Want To Have Your Money Accelerate Your Goals?
Grow Your Wealth
If you’re someone who can carve out some time to take on additional work during the holidays, here’s how you can side hustle your way to some extra money during this busy time of year…
1. Take on a Temporary Gig
If you want to save the hassle of setting up a profile on side hustles website, you can consider taking on a temporary gig such as jobs in the retail or seasonal gig; they are easier to find and pay higher especially during the holidays!
2. Sign up for In-Demand Hustles
During the holiday season, a lot of services spike in demand. People are willing to pay more for convenience. Some examples would be babysitting, pet-sitting or even baking cookies!
3. Become an Amazon Mechanical Turk Worker
Many tasks require human intelligence which cannot be taken over entirely by machines. Amazon Mechanical Turk is a platform for companies to outsource the tasks their computers cannot do. While the functions can be tedious, the holidays mean fewer workers – you can earn some quick bucks!
4. Help Freelancers prep for Vacation
During the holidays, fellow freelancers might go on vacation, and they could need some help to complete their tasks. Try posting on freelancer groups, attending a meetup and looking in freelancer sites to find work.
5. Edit College Essays
If you are a wordsmith, consider signing up to help students who are applying for college. As the deadline for regular admissions falls between January and March, students might be scrambling to complete their applications at the end of the year. You could post your services online or reach out to the career centre of the local high school to help students with their essays in exchange for a small fee.
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!