The Best Personal Finance Summaries – 27 May 2019

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From Us

The different types of investment options in Malaysia
Ever wondered what investment options you have here in Malaysia? Well, here is the most comprehensive list available for you!

We're still writing this piece, but we figured that the ones that are done can be shared right away 🙂

Which one do you want to learn more about?

More Money Malaysia Facebook Group

Money in Daily Life

The Seven Factors: Behaviors That Lead to Wealth

In the book The Millionaire Next Door, the authors efficiently boil down the differences in financial behavior between those who are able to accumulate wealth and those who do not down to seven key factors.

Factor #1 – They live well below their means.

  • Spend less than you earn and do something worthwhile with the difference.
  • How do you do this? Here’s a list of strategies that you can use:

    • Understand your needs versus your wants. There are some things in life that you need – basic food, basic shelter, basic clothing. Almost everything else is a want.

    • Be selective about fulfilling wants. People who end up spending everything they earn are often in a cycle of drowning themselves in want fulfillment.

    • Look at the big expenses first. Cutting a big expense can make a difference of hundreds of dollars a month.

    • Try out some basic frugal strategies. Here are a few ideas: prepare all meals at home without eating out; take leftovers to work every day; avoid the coffee shop and make your own; don’t watch television and see if you really need cable.

Factor #2 – They allocate their time, energy, and money efficiently, in ways conducive to building wealth.

  • They tend to indulge in hobbies that don’t have much upkeep cost and they put their money to work by investing it in things that will grow in value or produce more income.

  • More importantly, they tend to avoid spending their resources on things that consistently drain money from their accounts.

  • Here are some practical ways to do this:

    • Get interested in your own financial state and financial planning. Make an effort to understand where your money is invested, why it’s invested there, and whether it’s making a good return. Know your budget inside out and how to stick to it.

    • Practice hobbies that require active mental or physical involvement and don’t require much financial upkeep. There are very low-cost hobbies out there such as reading and hiking. Golfing, on the other hand, isn’t one, nor is shopping.

    • Avoid media sources and people who mostly just encourage you to buy stuff. Skip social media unless you’re actively looking to contact someone. You’ll be better off for it.

Factor #3 – They believe that financial independence is more important than displaying high social status.

  • The good things are things that you do to lift yourself up, not to attract or impress others.

  • People who accumulate wealth have decided that good things are more important than things like dressing up or driving nice cars.

  • Here are some strategies to move toward that mindset:

    • Question your thinking, especially when you’re about to buy something. Are you thinking of impressing other people with the item you’re purchasing?

    • Cultivate friendships with people who appear to be like who you really are inside, rather than the image you want to portray. If you’re constantly worrying about what your friends will think of you, reboot your social circle. Don’t live your life based on what your friends might think.

    • Stop trying to be perfect. Perfection can never be attained and the journey to try to get there is self-destructive. Rather, just try to be a better person than you were yesterday.

Factor #4 – Their parents did not provide economic outpatient care.

  • In other words, people who tend to accumulate wealth typically did not receive money from their parents once they reached adulthood and had a job.

  • What can you do if this is your situation?

    • Spend less than YOU earn. This does not include what your parents are handing you. You have to learn to live on less than your paycheck.

    • Remember that the money is theirs, not yours. This is a gift and should be deeply appreciated. It’s not a right to be demanded.

    • Use the money that’s being given to you to eliminate debt and supercharge savings. The money from your parents should go to making extra debt payments. If you don’t have any debts, this money should go into savings and investment.

Factor #5 – Their adult children are economically self-sufficient.

  • People who accumulate wealth with ease raise children who are financially and emotionally independent from them and then do not hand them additional money to inflate their lifestyle.

  • Following this step is pretty straightforward:

    • If you have younger children, make it clear as they grow older that you expect them to be fully independent as early as possible. As soon as they graduate, they should plan to choose a career path that can sustain the lifestyle they want.

    • If you have children who already have a full time job after school, start weaning them off of any financial assistance you’re providing them. Don’t make it abrupt, as that can cause financial hardship, but start moving gently in that direction by slowly turning off the spigot.

    • If you have a child on the verge of independence, don’t start financial support. This is a moment where you must let the young bird spread their wings and fly on their own.

Factor #6 – They are proficient in targeting market opportunities.

  • They frequently look for opportunities to make money with relative ease, usually through investing money they’ve put aside just for this purpose.

  • It boils down to two ingredients: knowledge in a certain area and money on hand.

  • There are many ways to do this. Here are a few:

    • Watch Craigslist, estate sales, and yard sales for enormous bargains on items you know you can easily flip. This takes advantage of particular domain knowledge that you have and uses cash you’ve accumulated to turn a quick profit.

    • Cultivate a hobby in which you make things that you can use (at a lower cost than buying them), sell, or inexpensively gift. For example, I love home brewing and making fermented foods, and I have given both away as gifts in the recent past.

    • Invest in something that can become your hobby that you can eventually turn around for a profit. I have a few family members that do this with junk cars – they’ll buy an old junker and completely rework the body, then sell it for a tidy profit. It’s a hobby that happens to line their pockets a little.

Factor #7 – They chose the right occupation.

  • They chose an occupation that pays well that also aligns with their natural skills and is something they don’t mind doing.

  • Finding this career path and finding it early in life seems to be the key for many people in terms of finding financial success.

  • Here are some strategies for this, even if you’re already on a career path:

    • Gain some awareness of what your skills and strengths actually are. Consider what classes came easy for you when you were in school. These are the things you want to lean into when choosing a career.

    • Look for jobs you can reasonably enjoy that match up with those skills and strengths (and, ideally, pay well, too). Once you have a good idea of where your strengths lie, start looking for jobs that utilize those strengths.

    • Always look for career situations that let you lean in to your strengths. It’s never bad to try to work on your shortcomings, but you’ll generally be most highly rewarded when your skills line up with your job, because you’ll be a top performer in that specific field.

Why Having a Positive Money Mindset Can Help You Become Wealthy

One piece that is often forgotten when it comes to building wealth is the impact an optimistic money mindset can have on your financial success.

  • What is a Money Mindset?

    • Your money mindset is the attitude and beliefs with which you approach money.

    • Generally, there are two basic money mindsets: abundance mindset or scarcity mindset.

  • Abundance Mindset

    • When you have an abundance mindset, you believe there are plenty of resources (i.e. money) to go around.

    • You’re optimistic about your financial future.

    • You’re generous with your money, but you’re also diligent about saving to reach your financial goals.

  • Scarcity Mindset

    • When you have a scarcity mindset, you believe there aren’t enough resources to go around.

    • You’re pessimistic about your financial future.

    • You’re selfish with your money, but don’t seem to hold onto it for long.

  • Abundance Mindset VS Scarcity Mindset

    • Those with an optimistic money mindset are more likely to take financial risks, because they really believe they will reach financial success.

    • Someone who lives with a scarcity mindset feels that no matter what actions they take, financial success is not coming their way.

    • Scarcity mindset can take a toll on our relationships with our friends and family members who are financially better off than us when we are jealous of them.

How to Develop an Optimistic Money Mindset

  1. Identify Your Current Beliefs About Money

    • Try to write down all of your beliefs about money, and the role that money has played in your life so far.
  2. Rewrite Your Money Money Beliefs

    • Once you’ve identified your current beliefs, it’s important to challenge and rewrite those beliefs.
    • Take each of your biggest money blocks and write a new, positive money affirmation to challenge it.
  3. Show Gratitude for the Money You Have

    • By showing gratitude for your money and by increasing your optimism around money, you’ll be able to boost your money mindset.
  4. Set Financial Goals

    • Setting and sticking to your long-term financial goals will force you to reevaluate and rework your current money habits, having a long-term impact on both your bank account and your mindset.

Don’t Make These Seven Car Insurance Mistakes

Each year there are millions of vehicle crashes in the United States. With such figures in mind, here’s a look at some mistakes to avoid when searching for a car insurance policy.

Mistake No. 1: Carrying Too Much or Too Little Coverage

  • Finding the right balance between purchasing too much and too little coverage is an important part of the process when signing on for a new policy.

  • Carrying coverage you don’t need is simply a waste of money, Carrying too little coverage is even more dangerous.

  • For example, in Florida, consumers can choose a policy with only $10,000 property damage liability. Those who opt for such minimal coverage may end up paying a significant amount of money out of pocket in the event of an accident.

Mistake No. 2: Not Shopping Around

  • The prices and the quality of insurance vary significantly based on the insurer.

  • Shopping around and requesting quotes from at least five insurers is paramount.”

Mistake No. 3: Buying Road Service Coverage

  • Unless it’s packaged with other coverages, experts often recommend skipping the road service coverage with your auto policy.

  • The savings may be minimal, but filing a road service claim on your car insurance shows up on your Comprehensive Loss Underwriting Exchange (CLUE) report.

  • Insurance companies are starting to look at the total number of “incidents” on your CLUE report, so you want to avoid making towing claims on your insurance policy if possible.

Mistake No. 4: Carrying Collision Coverage on an Old Car

  • It’s a good idea to measure the cost of your collision coverage against the value of your car.

  • If you determine that the cost to provide collision coverage is 20% or more of your car’s value, you may want to do away with the extra coverage.

Mistake No. 5: Not Updating Your Policy to Reflect Life Changes

  • Everything from moving to buying a home can impact the amount you pay for car insurance.

  • Yet many consumers forget to call their insurance provider and notify them of such updates.

  • Owning a home generally represents a better financial situation, which is why it can translate into a preferred rating and discount from insurance companies.

Mistake No. 6: Not Getting the Premium-Versus-Deductible Balance Right

  • To save money, consumers often opt for a policy that offers lower monthly premiums in exchange for a higher deductible in the event of an accident. This approach may not always be wise.

  • For example, if you frequently have less than $1,000 in savings, you probably wouldn’t want to have a $1,000 deductible.

  • Conversely, if you have a solid rainy-day fund, it’s more likely that you can afford to opt for the reduced monthly premiums and higher deductible.

Mistake No. 7: Paying for Gimmicks Like Accident Forgiveness

  • Some auto insurance providers offer a variety of gimmicky add-on coverage options for policies, and not all of these new products are necessarily worth the cost.

  • Some popular examples: deductible savings bank, accident forgiveness and deductible dividends.

6 Personal Finance Blog Ideas, Absolutely Free for You to Take

In this article, I’m going to compile some personal finance blog ideas. Take them, absolutely free of charge.

#1 – Anything food-related

  • Some personal finance blog ideas for food topic:

    • Recipes with the cost breakdown
    • Grocery hauls
    • Bargain bin hauls
    • Healthy eating – vegan, meat-free, organic etc
    • Eating lifestyles – intermittent fasting, keto, meal-prep
    • Restaurant hacking – vouchers, special deals, etc
  • Example: Sara Khong of Jewelpie

#2 – Anything accommodation-related

  • Some personal finance blog ideas for property topic:

    • Attending and reviewing open houses organised by developers
    • Building own house
    • Alternative housing
    • Adventures of a landlord/landlady/AirbnB owner
    • Hotel hacking – vouchers, special deals etc
    • Home organisation/Interior Design
  • Examples: Atiqah’s tiny home building series and Renovation Logs posted by Ringgit Velvet

#3 – Anything hobby-related

  • Some personal finance blog ideas for hobby topics:

    • Tech & Gadget – Setting up PCs, smart home-ing on a budget, etc
    • Fashion – thrift finds, sewing projects with cost breakdown, capsule wardrobe, etc
    • Beauty – DIY makeup and skincare with cost breakdown, etc
    • Travel – airline points hacking, etc
  • There are so many different types of hobbies that I can’t possibly list them all here. But you get the drift!

#4 – Debt-free journeys OR Financial Independence/Retire Early

  • Many highly successful international personal finance bloggers belong to this category too. Some personal finance blog ideas for debt-free journeys or FI/RE topic:

    • Frugal living
    • Earning side income / freelancing
    • Doing lifestyle changes
    • Investments
    • Minimalism
  • Examples: 21 Malaysia-Based Personal Finance Instagrammers You Should Follow

#5 – Business journeys

  • A whopping 98.5% of all companies in Malaysia are SMEs, but how come we never really hear about them?

  • Some personal finance blog ideas for business journey topic:

    • Behind the scenes of fund-raising processes
    • The highlights and lowlights of a particular month
    • Challenges in business operations

#6 – The finance professionals

  • Finance professionals exist for most types of financial tools or vehicles. Some personal finance blog ideas for finance professional:

    • Mutual funds and unit trusts – what is in each fund? Who is it for?
    • Margin-trading experiments
    • Forex entries
    • Anonymous banker/venture capital

Some examples in Malaysia:

  • only talks about properties
  • is known for credit card tips
  • PelhamBlue shares their warrants trading
  • DividendMagic writes about dividend investing
  • StockMonger analyses stocks

I like the above folks because their articles are a lot more easier to understand than the rest. That’s what we lack. The best experts are the ones who don’t have to rely on big words to carry their message across.

Why Spending Less Doesn’t Reduce Your Quality of Living

One of the biggest mental obstacles when it comes to turning around our financial life is the perception that if we cut into our spending, we’re going to reduce our quality of life.

  • Cutting back on your spending is really ineffective when you cut the core things you most care about, but it’s brutally effective if you aim it at everything else.

  • That’s the secret of frugality – cut back on the things you don’t care about, don’t expand your spending on the things you do care about, and the leftover money will make a huge difference in your financial state without reducing your quality of life one bit.

  • That sounds simple enough at a glance, but it’s actually got some pretty serious pitfalls:

    1. It requires a strong sense of what things you actually care about and which things you’re spending money on out of routine. The things that you really care about are worth spending money on, the things that you spend money on because you want your friends to be envious are not worth spending money on.

    2. Those things that aren’t worth spending money on often do give you a little momentary burst of pleasure. We end up associating that burst of pleasure with it being a “good” thing.

    3. That dividing line is different for everyone. The line between the things in my life that are really worth spending money on versus the things that really don’t matter to me is different than your line between those two groups.

How I figure out which items are on which side of the line

  • Cut certain types of spending out of my life entirely and see how I reacted to that. There were things that I felt pretty confident were “core” things that really mattered to me, but by cutting them out and finding a somewhat different life routine, I learned that they really didn’t matter that much.

  • Reorganize my schedule so I could spend more blocks of time on my hobbies. Giving blocks of focused time to my hobbies takes away that “substitute” impulse to spend hobby money.

  • Consciously go through your spending and trim spending on unimportant things. For example, I negotiated for better insurance rates and shopped around for better policies because my quality of life is not tied to what my insurance carrier is.

  • If you find yourself regretting something you cut out of your spending, don’t hesitate to bring it back. Don’t view this as a failure or a loss. Instead, view it for what it actually is: setting yourself up for sustainable long term success.

  • Recognize that not buying something is often more empowering than buying something. Spend the money and it’s often just a burst of joy that’s forgotten quickly. Keep the money and it actually becomes a piece of the life that you want to be leading.

Beyond wealth: What happens AFTER you achieve financial independence?

What happens when you achieve Financial Independence? What happens when you have enough — and then some? Many people reach this place only to find themselves wondering, “What next?”

  1. The Power of Purpose

    • When you're building your wealth, your goals and mission keep you focused on the future. Purpose is also important after you've obtained the wealth you desire.

    • After surveying 1350 retirees across 46 states, the number-one predictor of contentment is a sense of purpose.

    • You are encouraged to foster a handful of “core pursuits” — activities that excite you and bring you joy. By developing these core pursuits before reaching retirement or Financial Independence, you're better prepared for what comes next.

  2. Money Without a Mission

    • Money is only a tool. It's not a magic wand that will miraculously make you smart, fit, and kind.

    • You may win a billion dollars in the lottery, but that won't make a difference to your health and wealth if you elect to survive on a diet of donuts and vodka while lounging watching Friends re-runs on Hulu.

    • Money is important but a mission matters more.

  3. Fix Yourself First

    • After you achieve Financial Independence, you no longer have excuses not to become the best version of yourself, whatever that means to you.

    • For instance, Todd Tresidder says that after he achieved financial independence at age 35, he had a similar insight. He felt lost, directionless. It wasn't until he realized that only he could give himself direction that he found his way again.

    • If you're not sure what your purpose is, fix yourself first — then move on to other goals.

  4. Make the World a Better Place

    • After you've fixed yourself, you can turn your attention to making the world at large a better place.

    • Here, for instance, is the story of Jason Brown, a former professional football player who gave up millions of dollars to do something more meaningful for himself and the world:

      • In 2009, after four years as a pro, Brown signed a five-year $37.5 million contract with the St. Louis Rams. He was financially independent.

      • Three years later (at age 29), Brown quit his career to become a farmer and he isn’t growing the food for himself. His First Fruits Farm raises sweet potatoes to donate to local food pantries.

      • “When I think about a life of greatness, I think a life of service,” says Brown. He's found meaning through helping others.

    • You know what? You don't have to be a professional athlete to do good deeds once you've reached financial freedom.

  5. Work After Wealth

    • For many people who achieve Financial Independence, “what next?” is a new career. Or maybe even the same career.

    • Jacob, after reaching Financial Independence at age 33, spent four years pursuing hobbies like sailing, bicycle repair, and writing. Then, at age 37, Jacob un-retired for a few years.

    • When he received a job offer that involved solving impossible problems, he took it. It gave him meaning and purpose. It was the right choice for Jacob and his circumstances.

    • The lifestyle that Jacob have chosen is called “semi-retirement”. He is financially independent but opt to keep working.

    • Semi-retirement is also a great option for those who haven't yet achieved FI but are getting close. It's a way to scale back your career, to make a gradual transition from full-time employment to something more casual.

  6. What Next?

    • Most people have a vague understanding of what's important to them, but lack clear goals and purpose. That's why I like the following exercise, which is designed to help you discover meaning in your life.

      • First, you will need a pen and paper to answer the questions:

      • What are my lifetime goals?

      • How would I like to spend the next five years?
      • How would I live if I knew I'd be dead in six months?
      • My Most Important Goals.
      • What is my Mission?
    • You want a vision to give you a sense of purpose that drives you day-in and day-out, through good times and bad.

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Three Things to Look for in a Bank Stock

When evaluating a banking stock, Ian Tai will look at these three major areas:

  1. Stability

    • Does the bank has a strong balance sheet?
    • Solid fundamentals ensure that the bank can survive during the economic crisis, and have funding to grow their business over time.
  2. Profitability

    • Find banks that are profitable over 10-year.
    • You can better observe whether the bank can make money during both good time and bad time.
  3. Valuation

    • When the price is right — and it will come for some days — you can snap up the opportunity.

    • Ian Tai showed us more details on what to look for in the annual report, such as:

      • Loan, Advances & Financing Assets
      • Gross Impairment Loan Ratio (GILR)
      • Total Capital Ratio (TCR)
      • Loan Loss Coverage Ratio (LLCR)

The Opportunities of Real Estate

Successful entrepreneurs always see opportunity where others don’t. When you look at the rich, they often make their money through real estate investments.

  1. Tax Rewards

    • Tax laws are set up to reward entrepreneurs for stimulating economic growth and employment.

    • Tax laws offer benefits to real estate investors who provide housing for employees and invest in commercial buildings.

  2. Income from Real Estate

    • Most people don’t realize that you can actually earn four different types of income through real estate:

      • Your tenant’s rent – which we look at as cash flow (income – operating expenses)
      • Depreciation – which allows investors to write off the structure and improvements to a property over time
      • Amortization – (your tenant paying down your mortgage debt)
      • Appreciation (capital gain or increase in value of real estate over time)
    • The best way to leverage this?Find a building in a good area with job growth and pinpoint an underperforming property that you could add value to.

  3. Refinance and Reinvest

    • The overall value of the property is increased. Then I eventually refinance the property, pay back all my investors, and reinvest that money into a new property.

    • When I buy another property, I’m essentially getting it for free. I will use the equity from our other property to purchase it.

    • Because of the increased operating income of the previous property, we will still have cash flow.

Cool Opportunities

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.

Check it out here!

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.