The Best Personal Finance Summaries – 8 July 2019

As one of our main values is to make sure the best information is available to you, we release a weekly newsletter that summarises the best personal finance blogs around the world.

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've finished adding all the content but it's still a little messy.

Which one do you want to learn more about?

More Money Malaysia Facebook Group

Money in Daily Life

Should I Buy or Rent My Personal Residence?

In this article, I’ll share 4 key factors where Lisa can consider before making her final decision to buy her own house or rent it.

#1: Affordability

  • To afford a unit at the Waterfront which is now priced at RM 500,000, Lisa may need to prepare RM119,850 for Initial Capital Outlay.

  • Personally, it is safer to cap your DSR at 30%. Thus, if Lisa does not have any outstanding debt, the minimum amount of income needed is RM 7,100.

  • In brief, if Lisa does not earn at least, RM 7,000 a month and does not have RM 150,000 in spare cash-in-hand, then, Lisa has no choice but to rent the unit.

#2: Life Goals …

  • Supposedly, Lisa has RM 150,000 in savings and she will be leaving behind RM 30,000 after buying the house (RM150,000 – RM120,000).

  • If her expenses had grown to RM 5,000 per month (inclusive of the mortgage payment), then, her RM 30,000 would only last her for 6 months if she is to lose her source of income.

  • In other words, Lisa cannot afford to stop working after buying her home.

  • But, if Lisa chooses to rent the unit at RM 1,700 a month, she would retain a big chunk of her RM 150,000. If Lisa’s monthly expenses is RM 5,000 (inclusive of rent), the amount will be sufficient to last her for 2.5 years if Lisa loses her source of income.

  • Thus, Lisa will be more flexible to take a break, make a career switch, kickstart a business, or even to invest in stocks if she chooses to rent instead of buy.

#3: How Many Properties Do You Want to Have in Your Lifetime?

  • If Lisa sees herself to be an investor with a portfolio of properties, then, renting is more practical than buying.

  • This is because your personal residence is not an income-producing asset. Thus, it does not improve your eligibility to a higher loan amount which is a source of financing to your investments into the second, third or fourth property.

  • Lisa will find it easier to afford her second property if she chooses to rent and invest her money into a tenanted investment property.

#4: Capital Appreciation

  • I was informed, perhaps you too, that property prices, in general, will double every 10 years if they are well-located.

  • So, let us assume that Lisa’s wishes turn out to be true. Her Waterfront property did appreciated in price to RM 1 million in 10 years.

  • The question is: ‘Who can buy?’

  • Do you believe that, in 10 years time, the locals are able to grow their monthly income to above RM 10,000 and save up as much as RM 200,000 in cash to buy your million-ringgit real estate?

  • If the answer is yes, you may consider buying the property. If not, you may consider renting it instead.

  • After all, growth in property price is greatly dependent on the local population’s ability to increase their wealth over the long-term.

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What is Cash Flow? Cash Flow is Queen!

The vast majority of Americans live paycheck to paycheck, rack up credit card debt, and don’t have any savings to speak of. Robert and I were in this position ourselves many years ago. So how did we turn things around? Through the power of a magical concept called cash flow.

Why is cash flow the way to go?

  • Cash flow investing is what most buy-and-hold real estate investors are after.

  • Is it possible to have a negative cash flow? Absolutely.

  • That’s why having a strong financial foundation is so important, so that your investments generate positive cash flow.

  • Advantages of cash flow investing:

    • Financial freedom. You simply need to build up your monthly cash flow to be greater than your living expenses.

    • Carefree retirement. By accumulating assets that provide a monthly cash flow, money comes in every month until you decide to sell the asset(s). It eliminates the fear of running out of money.

    • Control. With cash-flow investing, my success is not dictated by the daily fluctuations of the market. I cannot control the markets, but I can control my rental properties/business.

How to start cash flowing

  • My first cash-flow investment was a small house in Portland, Oregon, in 1989. My monthly cash flow averaged a whopping $50 per month.

  • No, it wasn’t a lot, but it was a start.

  • My goal at the time was to acquire two rental units per year for 10 years. And guess what? It didn’t take me 10 years to reach that goal — it only took 18 months.

  • When Robert and I “retired” in 1994, we did not have millions stashed aside. What we had was $10,000 in cash flow coming in every month from our investments, primarily real estate.

  • Today, we have roughly 14,000 real estate investment units and each one not only pays for the next, but keeps the cash flowing into our bank accounts.

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.