The Best Personal Finance Summaries – 27 January 2019

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From Us

[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!

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Money in Daily Life

Payday Loans: Why They’re Bad and Good Alternatives

We’ve all had times when we’re a little short on cash.

You may consider trying a payday loan. I get it, desperate times call for drastic measures. But this option usually makes things worse.

Understanding a Payday Loan and How it Works

A payday loan is a specific type of short-term loan. It will be due in a few days – thus suitable for those who have a financial emergency. Also, you do not borrow it through a traditional bank – the borrower doesn’t need a good credit score or significant collateral.

Not As Good As It Sounds

Payday loan has an incredibly high fee structure. Coupled with its short loan duration, payday loan can be compounded with an endless cycle of debt and extra fees.

Methods of Getting a Payday Loan

You could apply online or visit a payday loan store. The application takes 10 to 20 minutes in person and 8 to 24 hours if you apply online.

What Do I Need to Qualify?

Typically, you need to show proof of a bank account and recent pay stub. You will also need to write the lender a check for the due date of the loan. The due date is synced to your next payday.

Understanding The Math: What’s The Cost of a Payday Loan?

1. Calculating a Payday Loan’s True Cost

Most payday loans are made for between $300 and $1000. At an interest rate of 12%, a $500 payday loan will have a $60 as the premium fee.

2. Understanding APR on a Payday Loan

If we were to annualise the percentage of payday loan’s interest, it would account to an outrageous 313%. For comparisons, credit card charges 15 to 25%; an auto loan has 4 to 7% APR and mortgage loan’s APR is 3 to 4%.

3. Why the Fee Rate So High?

Granted, the borrower is taking on a high risk with a payday loan. You’re paying for the privilege of not needing a credit score or collateral for the loan.

Why Payday Loans Are Inherently Bad?

Those who take payday loans can’t afford to use it. They are being exploited blatantly by the loan companies.

Good Payday Loan Alternatives

There are many alternatives to payday loans with a much less punitive fee structure.

  • Borrow from someone.
  • Credit card advance. It has a much lower APR when compared to payday loans.
  • Negotiate.
  • Payroll advance.
  • Peer-to-peer loan.
  • Personal instalment loan.
  • A personal line of credit.
  • Personal loan for bad credit borrowers.
  • Refinancing.
  • Sell something.

In short, avoid payday loans at all cost. Only take it if you have an emergency payment and already depleted all other possibilities.

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Grow Your Wealth

Guide: How to Make Money with Social Media Skills

You all like using social media. Companies are LOOKING for people who are good at social media management

Do you want to know how to 'package' your social media skills so you can offer it as a skill, to do as a side hustle?

Suraya from Ringgit Oh Ringgit recently wrote an article on how you could potentially monetise your social media skills.

Responsibilities of a social media manager

Generally, the responsibilities are:

  • Managing social media calendar.
  • Knows optimisation using analytics.
  • Provides campaign idea consultation.
  • Able to collaborate with online talents.
  • Engages and maintains an online community.

The bottom line is you don’t have to be a jack of all trades – but you could define your most specialised platform(s). You should be able to make excellent posts, dissect the best practices and incorporate them into your execution.

What social media skills companies are looking for

According to Suraya, companies are looking for those who could manage their social media portfolios. However, you have to explain the benefits of focusing on a particular platform and ultimately, seal the collaboration.

How to package your social media skills

Social media marketing packages can have many variants. Some companies offer audience targeting, market research, content creation, direction consultation, account management and many more. It’s up to you to decide what you can do and what rates are you charging.

How to get clients and customers

#1 – Manage your platform and offer it to inquiring customers

Managing a personal or hobby page is a great way to showcase your skills in social media management.

#2 – Start selling something

If you don’t prefer to get involved in social media management, you could also do e-commerce or seal some affiliate offers as your side hustles.

How to make money fast (make up to $100-$500+ today and $1000-$5000 this month)

If you need to learn how to make money fast, the last thing you want is to do meaningless tasks for low pay, learn a new skill that could take months or spend money out of pocket to make your first dollar.

According to Ramit Sethi, there are many ways to make money fast. In his recent article, he categorised the money-making methods according to ‘how fast you need to make money’. The strategies are best summarised in a table.

How to make $100 – $500+ TODAY (without leaving your couch)

Strategies Description
Negotiate your bills You could negotiate almost all fixed costs you pay each month – from credit card rates to car insurance. Simply ring up their number and state your requests. Ask leading questions and invoke customer-acquisition cost to get the best deal.
Negotiate your rent Offer advance payments or extended lease to cut down your rent. Also, adhere to the rules and regulations set by the landlords and use this to negotiate your rent.
Make money fast selling on eBay, Craigslist, Facebook Marketplace (or whatever site you want) Sell all your unused or under-utilised items. To maximise your selling price, do your due diligence to research the market then market your listing optimally.

How to make $1,000 – $5,000 THIS MONTH

Strategies Description
Negotiate your salary To do so, do some proper research on conventional pay range. Let your boss know earlier and use the briefcase technique. However, keep in mind that you should first thrive on being amongst the top performers.
Change your job Use Bezos Regret Minimization Framework – will you regret if you stay at your job or trying something new and failing. Remember, the more responsibility you have, the more money you can command.
Find your first freelance client There is a limit to how much you can save, but there is no limit to how much you can earn. Get a side hustle and earn side income. Identify your skill sets and monetise them accordingly.

How to make $10,000+ THIS YEAR

Strategies Description
Start an online business If you have a worthwhile idea, consider entrepreneurship. Identifying profitable business ideas is a skill itself.

Got a Raise? It’s Time to Bump Up Your Savings, Too)

A new analysis finds that people who don’t increase their savings rate when their pay goes up will have a harder time in retirement.

Getting a raise is significant. But chances are – you will increase your spending at the same time. According to experts, a fatter paycheck makes people feel wealthier, so they feel empowered to spend more money. This is also known as lifestyle “creep”. As they spend more, they might need a fancier retirement lifestyle.

A statistic has shown people don’t necessarily save more when they earn more. While there are other sources of retirement income such as Social Security, the amount is generally fixed and don’t fluctuate with the earnings. That’s being said; younger people can spend more of the raise because they have more time for wealth compounding.

Rule of thumb is each time you get a raise, spend a percentage of it that’s twice the number of years to retirement — and save the rest. That means if you expect to retire in 10 years, you can spend 20 % of the raise, guilt-free.

What if this rule of thumb for saving a portion of my raise is a stretch for me?

Another plausible guideline is save your age as a percentage of raise. If you’re 30, save 30% of the raise. Alternatively, keep at least 33% of your raise.

What if I don’t have a workplace retirement plan?

If you only have an individual retirement account, establish regular transfers. Essentially, time your deposits. And also, increase the size of your transfers when you get a raise.

Money is tight, and I don’t get regular raises. What can I do?

Save as much as you reasonably can, and don’t worry even if you start small. When you got extra cash – bonus or reimbursements, consider contributing towards your retirement funds. Besides, you could consider taking up a part-time job as well. If you’re disciplined, find a cash-back credit card.

Cool Opportunities

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!

Learn how you can be paying 50% less for medical insurance

Figure out investing in 30 minutes and never deal with it again