The Best Personal Finance Summaries – 5 May 2019
The first one is that our goal is to give you insights that really help you with how you use / invest your money. Whether that’s breaking down the things to look for in the perfect insurance plan or how to grow your wealth far faster than the typical investment, you will definitely find information here that only seem to be talked about by the super rich.
The second thing you can expect from us is to not only get you out of your frustrations, but to help make your money fuel your aspirations. That means we will help you get clear on what you want your money to be able to help you do and then help you create a plan to make it happen.
The third? We’ll cover it next week.
Question of the week
How do you define the perfect life?
Let us know in the Facebook group
Why Even The Best Investment Won’t Beat This
We feel like all the personal finance blogs out there talk about stocks, real estate or P2P lending as the way to get rich. But in order to make all that work, you have to do a lot of research (which can take months) AND you’re still susceptible to it not going your way.
However, there is something that always gets overlooked. But that something will give you a return superior to any of those traditional advice AND have close to no risk.
In fact, it would kind of be normal for you to be able to make 100%+ in one year’s time.
Money in Daily Life
If you are used to getting a loan to solve your money woes, you should be aware that there are 10 issues that you need to fix ASAP:
- Not having a budget. By creating a budget, you allocate your money and it will help enabling your dreams!
- Not tracking spending. Add up the cost of those non-essentials, and ask yourself if you could do better.
- Keeping up with the Joneses. Do not let other people determine your spendings.
- Wanting your kids to have things you didn’t. There is nothing wrong with this, but do not let this noble impulse bust your budget.
- Automatic upgrades. Do you really need a new phone or car every single year?
- Shopping mindlessly. Buying something that “looks cute” on you may not be really useful.
- Always buying retail. Consider other options when you want to buy something: Yard sales, Flash sales or eBay!
- Overdoing it on special occasions. Maybe it is time to tone down by celebrating sensibly.
- Overbuying for grandchildren. Save the money instead and it can go to their education funds.
- Giving more than you can afford. Charity should be something you do after you have taken care of your emergency fund, debt and saving for retirement.
If you are struggling to find a balance between spending on your needs and wants, you should probably look at the balanced money formula here, which advised you to allocate your after-tax spending like this:
- At least 20% should go to Saving (which includes debt reduction).
- No more than 50% should be allocated to Needs (which includes housing, utilities, healthcare, basic food, and basic clothing).
- The rest — around 30% — should go to Wants (which is everything else).
Robert Kiyosaki and his wife Kim Kiyosaki shared their point of views on assets and liabilities:
- Ask yourself “How?” instead of saying “No”. Find a way to turn your liabilities into assets.
- Blur the line between asset and liabilities by merging them! Rent the vacation house that you don’t often live in, rent the sailboat that you only use two months in a year. You get to enjoy the boat and the house whenever you need to and they are paid by the rental income.
- Change your mindset. Instead of telling yourself that you can’t afford it, ask yourself: “How can I afford this?”
- The key between assets and liabilities is whether the cashflow they generate is positive or negative
Robert further explained why he thinks most of the assets that people own are fake. In short, he thinks the 401(k), government pension, a house as primary residence and mutual funds are fake assets because these instruments take money out of your pocket instead of putting cash into your pocket. The fees and the charges come with the instruments made the rich richer and the poor poorer.
However, he suggested a few things that we can do to get out of the rat race, which is to learn about:
- How to use taxes to acquire assets.
- How to use debt to acquire assets.
- How to reinvest gains without paying taxes.
- Why it makes sense to save gold and silver, not fake money.
Trent Hamm, a financial planner argued that regardless of your financial state, you only need five things to achieve your financial goals:
- Self Evaluation. It is important for you to set aside some time to think through the questions such as: What do you have? What does your life situation really look like? What do you want out of life? How does all of that translate into some powerful goals that you can actually achieve that will equate to a better life?
- Planning. Planning helps to address the question of how do you get from what you have to what you want. For instance, ask yourself to come up with three things that you can do to make your goals a reality. Do a review every week and set new goals for next week.
- Self-Control. You need to stop yourself from fulfilling your desire. It is hard yet possible to achieve. Try to evaluate everything you spend money on and ask yourself: Did I really need that thing?
- Grit. Grit is a willingness to recognize your mistake and learn from them, it is also the willingness to get back to your plan when something knocks you off of it. It is almost inevitable that you will be frustrated and tempted to give up your goals, but grit is what you need to keep moving forward.
- Patience. Personal financial goal is a marathon rather than sprint. To help yourself to be more patient, focus on little successes, constantly refresh your long-term vision and automate your financial plan as much as you can.
Want To Have Your Money Accelerate Your Goals?
Grow Your Wealth (Investment Related)
A new research in United States sheds light on trends of income growth in the country and there are some surprising results:
- Almost all income growth takes place in the first 10 years of your career
- When workers start their first job on lower salaries, they receive smaller raise than those who start with higher salaries
- The research identified a bigger dispersion in incomes between top 10% earners and everyone else
It seems that your economic fate may be settled much earlier than you think.
Alden Wicker wrote a detailed analysis and exposed the dark side of LulaRoe, a clothing company that offers self-employment opportunities to American women by joining as a MLM Consultant.
If you are considering to be in MLM (or “direct-sales”) business as well, you might want to check out the cruel facts behind it:
- According to a report that studied 350 MLMs in United States, 99% of people who join multilevel-marketing companies lose money.
- Your valued customers, neighbours, cousins or friends could easily sign up to be a MLM consultant and become your competitor.
- For most MLMs, the real money isn’t in selling inventory: It’s in signing up consultants and get commision on the inventory their downlines bought.
- Restricted by Laluroe’s policies, many consultants stock up inventory and face difficulties in selling them, especially when they lack passion.
Have you ever been interested in real estate investing? If so, here is a great guide to learn about cap rates.
CAP rate, also known as the capitalization rate is a crucial data for investors interested in real estate. The formula to compute the CAP rate is CAP Rate = NOI / Value of the Property. The NOI is basically your rental and other income less expenses incurred in the property.
This guide will teach you the following:
- What is the Un-leveraged Yield on Your Property
- How do We Compute the CAP Rate of a Specific Property?
- Using the CAP Rate in Valuation
- Does CAP Rate Account for the Growth Component in a Property?
- How can do You Make Money from This?
- Other Factors that Impact the CAP Rates
We’d love to try summarising, but it would take dozens of paragraphs to do so. However, in short, for investors, it is an opportunity for them to make a profit from market inefficiency by analyzing CAP rate. Investors should invest in the ones with high CAP rate and maximum growth rate to cover the expected yield of the property and its compounded growth rate. However, other factors such as quality of property, tenants, location are also something you need to evaluate.
KC Lau compared the new Robo-advisors and traditional funds. Generally, KC favored StashAway over traditional funds for its low management fees, FX conversion rate and also the absence of sales charge. He also added that investing in StashAway can help to diversify your holdings beyond Malaysia and thus offset and complement your Malaysia stock portfolio.
You’re awesome 🙂
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.