Personal Finance Portfolio should be dynamic

We often hear experts said

if you are young, you can take more risk, hence put your investment in equity.

then

if you are old, you should keep your capital in safer vehicle like bond etc.

But one important strategy they miss out is ... the dynamic of personal finance portfolio.

value for money - linear or exponential ?

Value for Money ( short for V4M ) is basically how much values you get from the money you paid. It is often irrelevant how much is the price of an item or service. Whether or not a person pay for something is simply because of how he perceives the values he is getting.

If a person perceive values more than its price, he would paid for it !

If a person perceive values less than the price, he would NOT paid for it.

There are 3 types of V4M perceptions. This article will cover 2.

The Right Truth behind Donation

From time to time we hear about how rich people donate their wealth away. Some donate whole of their wealth, some half and some donate just enough to optimize their tax planning.

Most people would think that the rich has too much, hence they want to give some away since they can't use it anyway. That ... would be 20th century mind set.

The fact is ... the rich who donates, is not only rich, but also

Easy Retirement

This is an extract of what I read in today's newspaper. More and more people start to carry this type of alternative concepts about retirement especially in this 21st century. You can't say its wrong. As a matter of fact, its a rather SMART way to go. But lie within is a huge hidden risk.

There is NO such thing as Passive Income !?

21st century personal finance is moving away from saving and focus into the income arena. In short, the gurus are now educating public that saving is NOT good enough, hence sourcing for passive incomes on the another hand is a BETTER solution, than just saving alone.

While the concept is definitely true and correct but unfortunately as the hypes go bigger and bigger, the idea of passive income has been abused and more scams started to appear in the market,

21st century Economy Politic Quadrant

The Economy-Political Quadrant may seems like telling where to keep or invest your money despite good or bad time.

It indeed works very well during 20th century. Unfortunately comes to 21st century, not only has the year changed, personal finance arena has changed drastically as well.

Gold has been speculated so much that it MAY no longer be the standard of money.

There used to be only 'property' in the city. Now there are satellite towns, suburbs ... agriculture lands and even dust bins ( recycle ) have become valuable estates too. While property remains the right category to invest into whenever economy is booming, but predict the right future seems like tougher than buying lottery.

Government bonds used to be de-Facto action when a country is stable. But in today's world, a country is as smart as a taicon's finance. One day they are the LARGEST, the next day they are GONE.

Stock market used to be the back bone of a country's economy. However, the market of derivatives has become so HUGE that the REAL and PHYSICAL is NO LONGER more real than VIRTUAL

So in 21st century, the element of Stock-Property-Funds-Gold is really questionable. However, one fundamental that doesn't change is that

you will have to identify what to do at what time that is BEST for YOU !

Hope you will find your own very best Economy-Political Quadrant soon !

East will take over West in ... 2020 ?

G7 are the 7 countries who have been dominating world finance since 20th century. Most of them are from Europe and North America, plus Japan.

However, most would have known by now that some of them are no longer as great as they used to be in this 21st century.

So E7 comes about where generally people think a new economical forces will emerge out taking over G7, they are (China, India, Brazil, Russia, Mexico, Indonesia and Turkey).

According to chart below, E7 will take over G7 in 2020.

There are also stories that says this will happen in 2050. Either way, generally people expect E7 to take over G7 in due time.

However, the fact is that will NEVER happen.

What will happen instead is that 1-2 G7 members may drop out from the list because they fail to make a come back despite how hard they try. Like wise 2-3 E7 members never make it to the bar, hence E7 will NEVER be formed.

At the end, there may be a G11 formed, which has nothing to do with G7, G8 and G10.

G11 is seamlessly integrated among themselves with latest technology. Forex and logistic are no longer issues a small business owner need to worry about among these G11 member countries.

Individual Income Tax Relief 2010

List of Tax Relief for Resident Individual 2010

No.	Individual Relief Types	Amount (RM)
1	Self and Dependent	9,000
2	Medical expenses for parents	5,000 (Limited)
3	Basic supporting equipment	5,000 (Limited)
4	Disabled Individual	6,000
5	Education Fees (Individual)	5,000 (Limited)
6	Medical expenses for serious diseases	5,000 (Limited)
7	Complete medical examination	5,00 (Limited)
8	Purchase of books, journals and magazines	1,000 (Limited)
9	Purchase of personal computer	3,000 (Limited)
10	Net saving in SSPN's scheme	3,000 (Limited)
11	Purchase of sport equipment for sport activities	300 (Limited)
12	Subscription fees for broadband registered in the name of the individual.	500 (Limited)
13	Interest expended to finance purchase of residential property. Relief of up to RM10000 a year for three consecutive years from the first year the interest is paid. Subject to the following conditions: (i) the taxpayer is a Malaysian citizen and a resident; (ii) limited to one residential unit; (iii) the sale and purchase agreement is signed between 10th March 2009 and 31st December 2010; and (iv) the residential property is not rented out. Where: (a) 2 or more individuals are eligible to claim relief for the same property ; and (b) total interest expended by those individuals exceeds the allowable amount for that year , Each individual is allowed an amount of relief for each year based on the following formula: A x B C where; A = total interest allowable in the relevant year; B = total interest expended by the relevant individual in the relevant year; C = total interest expended by all the individuals.	10,000 (Limited)
14	Husband/Wife/Alimony Payments	3,000 (Limited)
15	Disable Wife/Husband	3,500
16	Ordinary Child relief	1,000
17	Child age 18 years old and above, not married and receiving full-time tertiary education	1,000
18	Child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities	4,000
19	Disabled child Additional exemption of RM4,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities	5,000
20	Life insurance dan EPF	6,000 (Limited)
21	Premium on new annuity scheme or additional premium paid on existing annuity scheme commencing payment from 01/01/2010 (amount exceeding RM1000 can be claimed together with life insurance premium)	1,000 (Limited)
22	Insurance premium for education or medical benefit	3,000 (Limited)

Should I buy that nice little dress/gadget ?

You may think the $1 spent is the same $1 earned. Its really NOT ! One of the fundamental flaws human cannot control their own spending habits is because they DO NOT UNDERSTAND the value of money at the first place. The $1 spent could be equivalent to as much as $7-$10 earning !!

For example if you earn $4,000 a month and you manage to save $400 every month. By year end you would have saved aside $4,800. This money is intended to be put aside earning interest as part of the MeM (Money earns Money) mechanism. So its not just $4,800. It will be more than that as time goes. The longer it is kept there the more powerful compounding factor is working for you.

Says you take out $1,000 from this saving at year end for an unplanned luxury expense. Its not just $1,000 you have used. You have actually dug a hole in your saving - a 21% hole. If you saving return is 3%, it will take more than 7 years for this hole to be refilled back to its original amount. So you have practically used up your future 7 years on this saving for this unplanned expense.

On the other hand, if it took you 2.5 months to save that $1,000; Out of your equivalent earning of $10,000. For every $1 you use from your saving, you will have to earn $10 to get that $1 back. So when you use that $1,000 its not just $1,000 you have to replace but actually a $10,000 worth of your earning.

Does this particular unplanned luxury expense really worth your future 7 years and/or your $10,000 earning power ?

They money you get in ( earn ) does not necessary carry the same meaning to you as the ones you get out ( use ). Especially when there are so many deductions and taxes in this modern world.

It is best to put aside another $100 saving every month for 'unplanned luxury expense' category. That way if you really have to use it, you will still have $200 left ( after a year of saving ). More if somehow you are able to put that aside and go for a better future good.

If you have no such ability for this new saving category, try to increase your income or else settle with NOT use beyond your means.

At the end, this is the ONLY concept that determine if a person is an investor or a consumer all his life. Everyone want to buy Porsche and LV bags, some did it diligently, some others cost in their lives.

Economy Politic Finance Quadrant

There are 2 BIG main external factors affecting our investment decisions

• Economy
• Politic

When the time is really bad (economy downturn and politically unstable), its best to park your money under something that is really stable, ie Gold. Which is by definition usable anywhere you go in anytime.

When its good time, invest direct to the stock market would yield very good return.

When the economy is not so good in a strong country, the government bonds or related money market would be able to yield higher return than just gold.

However, the most dispute solution in good economy unstable country is investment in property. This is mainly due to easier rental and higher chance of capital gain.

By simply moving money around depends on the political and economy situation, one was able to achieve more than 12% compound return for the past 20 years. That is equivalent to a 10X return.

But by no mean this is easily done. Some of the concerns include;

• how would one know exactly when economy/politic turns good/bad ?
• is Gold the ONLY option ?
• property may not easily liquidated
• how to choose which property or stock market ?

. . . which can be explored further.

21st century trick ...

Once upon a time, there was a gasoline called 97. The cost of this item was $1.80. One day, the governing body wanted to increase the price to $2.10. However, the governing body knows that if they simply increase price, that will affect their popularity. Which in turn affect their eligibility to continue to be governing body in next election.

Hence they come up with a perfect idea. They first introduce another brand called 95. Actually this is a much lower quality product than 97. In short, 97 simply means there is at least 97% of pure petrol in the gasoline. On the other hand, 95 only has 95% purity. However, they push out 95 as if it is a better quality product. They even add some 'addictive' into 95 to justify their claim its a better product. It was presented in a way that 95 will replace 97, and stay at the same price at $1.80

More than 90% of the consumer fall for it. Hence the transition of 97 to 95 went through smoothly. Majority of the consumers pay the same price for a lower quality gasoline while thinking they enjoy a great quality petrol. This is the power of marketing ...

A few more months pass by, its about time to gain even more profit. Hence 97 is released to the market again. It was released silently and the price of 97 is $2.10. Now this time they leave it to individual vendor to tell consumer how 97 is better than 95.

16.7% of profit has been gained without a single complain from the public. You have to admit this is a fantastic marketing gimme. Even if you see it coming like I did, even if you wrote letter into the authority request for action taken .... but the majority of the consumers were falling for it, hence there is really nothing you can do about it, like I was, no matter how hard I tried. We just have to admit ... it was a gimme well played.

I waited more than 6 months to release this article. What do you think ? Do you still think this governing body has taken good care of your interest ? Or do you believe this article has some truth ?

Recession over, what's NeXT ?

Sometimes I feel very depress when my prediction comes TRUE.

For those who don't know yet, Malaysia is going through a transition where political power could potentially shared between 2 parties; instead of just one-side-say-it-all like the past 50 years. Unfortunately, the initial phase of this transition has ended in a way when our new Prime Minister has strategically resolved it.

At the moment New Economy Model was presented, I immediately sensed the game err they plan to play. Because exactly the same game plan has been played in USA before. While it is true that Malaysia CAN become a developed nation by adopting those moves but it has also been proven that such finance structure is NOT sustainable. Just see what has happened in USA and what is happening in Europe.

Although as if recession is over now, actual effective inflation experience the SHARPEST rise in last 2 months, as high as 25% to 50% if you visit hypermarket often. That is not the worst. What is happening now is that major manufacturers are deceiving consumers in large scale openly. While their products have inflated severely, they run advertisements and promotions as if their products are ON OFFER ! All these are done as part of the exercise to smoothen the transition into a developed nation, hence they have government support behind the scene at all cost. Ahem ... at consumer's cost that is. While these are nothing new to those who have seen it all, but sadly ... there are more consumers falling into it than realizing it at all.

As mentioned in what can we do when bully by the big boys, there is probably nothing much we can do to STOP anything now. So there are just a few things we can probably watch carefully and ride on so that we can get a piece of the pie too ...

• Property will rise drastically. Wherever you are staying right now and despite how much you like it, it may become more worth while to sell it off in the next 10 years. So do plan ahead where you may want to stay 5-15 years later. This may become your LAST and ONLY ticket when the nation is developed and you are still under developing.

• Double your salary in the next 2-3 years. If you wait till the wave carries you, you will always stay behind. You salary WILL increase AFTER the effect of inflation fully kick in. But by then, your increased salary will mean much less. So you really have to think for yourself now. If you are really royal to your employer, your employer should have seen this coming too and take care of you but did it ?

Other than that, derived finance products like futures, options and forex will over shine proper financial planning so much that a lot of weird and ad-hoc theories will surface out. Most people will no longer be able to differentiate what the real proper investment is. On the other hand, that is due to more and more improper investments will actually obtain real returns for the new few years. So if all you care is to get more money, then it should fine temporary.

Hence, MalPF only has one advice to all. Be deviated all you want, just remember to engage an exit strategy and keep yourself in high cash flow condition.

Malaysia Best Rates 2010 May 26 update

1 month Fix Deposit

Generally now banks are offering 2.50%. Affin bank offers highest rate at 2.55%. However, there are still a few banks offer lower rate than 2.5%. JP Morgan is still offering the lowest at 2.0%

1 year Fix Deposit

Highest offered rates is 3.05% by Affin Bank; followed by 3.0% from AmBank, Bank of Tokyo-Mitsubishi UFJ and RHB Bank.

Base Lending Rate

Most local banks stand at 6.05% now with JP Morgan offers the lowest at 5.65%.

Saving Accounts

Bank Islam offers 1.35% through its Mudharabah and Pewani ( for women above 18 years old ). Women can enjoy up to 1.58% in Pewani saving account if saving is more than RM 5,000.

CIMB's Air Asia Savers Account offers 1.2%.

Don't forget you can get a simple widget

like above to show on your blog / web site.

Just visit here to see how.

Car Loan : NEW Car

Maybank continues to offer the lowest car loan rate starting from 2.7%. However, this is NOT a standard rate apply to all applicants. The actual rate can range up to 4.3%.

Bank Muamalat offers 2.85% for both New and Used cars but it requires an admin charges of RM600.

Most other banks rates offer are 3.25% for New cars.

Car Loan : Used Car

Bank Muamalat offers 2.85% but requires admin charges of RM600.

CIMB offers 3.25% used car loan rate.

Don't forget Car Loan rate is Fix Term Rate

which is effectively a MUCH HIGHER

than variable term rate

like House Loan and Fix Deposit.

House Loan

Affin remains as the best house loan offer at BLR - 2.3%.

Standard Chartered offers BLR - 2.25%

Multi-tiers house loan offers are excluded because it would be impossible to simplify their pro and cons without knowing the actual details of your particular loan details. Hence, only simple and straight forward house loan offers are compared.

Individual Tax exemption in Malaysia

Below shows an extraction from Malaysia Income Tax department. Some of the highlights are;

1. maternity expenses, traditional medicines exemption are UNLIMITED !
2. if you were terminated with compensation, some are exempted !
3. Scholarship is exempted, so study Hard !
4. Income derived and remitted from oversea is exempted, so globalize your business !

Do take time and go through below details, I am sure it will spark some innovative ideas if you are in the midst of optimizing your tax plans.

source

Leave passage

Leave passage within Malaysia not exceeding three times in a year and one leave passage outside Malaysia not exceeding RM3000.

Medical and dental benefit

With effect from the year of assessment 2008, medical benefits exempted from tax is expanded to include maternity expenses and traditional medicine like ayurvedic and acupuncture without limit.

Retirement gratuity

The full amount of gratuity received by an employee on retirement from employment is exempt if:

i. The Director General of Inland Revenue is satisfied that the retirement is due to ill health;

ii. Retirement on or after reaching the age of 55 years/compulsory age of retirement and the individual has worked 10 years continuously with the same employer or companies within the same group

iii. The retirement takes place on reaching the compulsory age of retirement pursuant to a contract of employment or collective agreement at the age of 50 but before 55 and that employment has lasted for 10 years with the same employer or with companies in the same group.

Gratuity paid out of public funds

Gratuity paid out of public funds on retirement from an employment under any written law.

Gratuity paid to a contract officer

Gratuity paid out of public funds to a contract officer on termination of a contract of employment regardless of whether the contract is renewed or not.

Compensation for Loss of Employment

This is payment made by an employer to his employee as compensation for loss of employment either before or after the date of termination.

This compensation is exempted from tax

1. If compensation received is due to ill health
2. Compensation received in other cases:
1. Termination before 1st July 2008 - exemption of RM6000 for every completed year of service with the same employer or with companies in the same group
2. Termination on or after 1st July 2008 - exemption of RM10000 for every completed year of service with the same employer or with companies in the same group

Compensation received by a director (not service director) of a Control Company is fully taxable.

Pensions

Pensions received by an individual are exempt under the following conditions:

1. He retires at the age of 55 or at the compulsory age of retirement under any written law; or

2. If the retirement is due to ill health and the pension is received from the government or from an approved pension scheme.
   

For an employee in the public sector who elects for optional retirement, his pension will be taxed until he attains the age of 55 or the compulsory age of retirement under any written law. Where an individual receives more than one pension, the exemption is restricted to the highest pension received.

Death gratuities

Monies received as death gratuity is fully exempted from income tax.

Scholarships

Any monies paid by way of scholarship to an individual whether or not in connection with an employment of that individual is exempted from income tax.

Income of an individual resident in Malaysia in respect of his appearances in cultural performances approved by the Minister

Money received under this category is exempted from tax on condition it is approved by the Minister.

Interest

Income in respect of interest received by individuals resident in Malaysia from money deposited with the following institutions is tax exempt with effect from 30 August 2008:

1. A bank or a finance company licensed or deemed to be licensed under the Banking and Financial Institutions Act 1989;

2. A bank licensed under the Islamic Banking Act 1983;

3. A development financial institution prescribed under the Development Financial Institutions Act 2002;

4. The Lembaga Tabung Haji established under the Tabung Haji Act 1995;

5. The Malaysia Building Society Berhad incorporated under the Companies Act 1965;

6. The Borneo Housing Finance Berhad incorporated under the Companies Act 1965

Dividend

The following dividends are exempt form tax:

1. Dividends received from exempt accounts of companies.

2. Dividends received from co-operative societies.

3. Dividends received from a unit trust approved by the Minister of Finance such as Amanah Saham Bumiputra.

4. Dividends received from a unit trust approved by the Minister of Finance where 90% or more of the investment is in government securities.

Royalty

Royalties received in respect of the use of copyrights/patents are taxable if they exceed the following exemption limits:

No.	Types of Royalty	Exemption (RM)
1	Publication of artistic works/recording discs/tapes	10,000
2	Translation of books/literary works of Education or Attomey or General Chambers	12,000
3	Publication of literary works/original paintings/musical compositions	20,000

However, the exemption stated above does not apply, if the payment received forms part of his emoluments in the exercise of the individual's official duties.

Income Remitted from Outside Malaysia

With effect from the year of assessment 2004, income derived from outside Malaysia and received in Malaysia by resident individual is exempted from tax.

Fees or Honorarium for Expert Services

With effect from the year of assessment 2004, fees or honorarium received by an individual in respect of services provided for purposes of validation, moderation or accreditation of franchised education programmes in higher educational institutions is exempted.

The services provided by an individual concerned have to be verified and acknowledged by the Malaysian Qualifications Agency (MQA). However, the exemption does not apply if the payment received forms part of his emoluments in the exercise of his official duties.

Income Derived from Research Findings

With effect from the year of assessment 2004, income received by an individual from the commercialization of the scientific research finding is given tax exemption of 50% on the statutory income in the basis year for a year of assessment for 5 years from the date the payment is made.

The individual scientist who received the said payment must be a citizen and a resident in Malaysia. The commercialized research findings must be verified by the Ministry of Science, Technology and Environment.

When to go beyond "Salary" ?

When your personal income increases, you start to pay more taxes too. It was mentioned before there are certain income Stepping that one should watch out for to optimize tax planning. For example, as your total annual income is approaching MYR 100,000 in Malaysia, you are most likely to be paying maximum taxes like a company's ie. 27%.

So you pay about MYR 15,000 taxes so your net income become MYR 85,000 ( exclude other deductions for the purpose of this article ). Then you will proceed paying your due diligences like house loan, car loan and all your other expenses etc. Lets say those total up to MYR 73,000 so you would have a remaining income of MYR 12,000; Or MYR 1,000 a month.

As mentioned before, if the taxation laid upon a business is similar ie. 27%, then perhaps you can create a business of your own. Then sell yourself back to your current employer doing exactly the same stuff so that it has no impact what so ever to your employer's operation (*1).

As a business owner, you should deduct all costs incurred in order to perform your business (job) before you come up with a profit, which is then taxable. Lets say MYR 50,000 of your expenses can be qualified as business expenses. Then you may end up with paying less tax ie. MYR 13,500

$100,000 - $50,000 = $50,000 x 27% = $ 13,500

There are still MYR 23,000 expenses that are not classified as business expenses, hence you will end up with a remaining income of $13,500; instead of just $12,000 if you keep your 'job'.

$50,000 - $13,500 (tax) - $23,000 (non biz expenses) = $13,500

In this scenario simply by changing the 'mode' of how things work can save you a thousand or two. As you may have noticed, the difference is not that big. Hence, if you have been working whole your life; Annual income of MYR 100,000 is the magic number where you should start thinking if you want to continue working a job or start building something of your own.

This difference will become significant as your salary increases beyond MYR 100,000.

However, there are quite a handful of knowledge and skills you will need before you can make a switch like this successfully.

• setting and maintaining a business will cost money
• no employer means no one pays your EPF
• security, liability, risk and reward will have different meanings
• classifying business expenses is an important skill
• all business expenses should help the business grows
• pay yourself maximum non taxable salary, pay yourself EPF ...

In real and practical world, a smart guy doing this would NOT only save a thousand or two. But the actual tax saving should be 50%-80%, ie. from $15,000 to $3,500.

(*1) There WILL BE some impacts to the company especially account and human resource wise. In short, the company saves money by not paying you EPF and other cost to maintain an employee. Hence in practical world, one would ask for more than $100,000 when converting from an employment to a contract staff.

Most of you will think it is NOT possible to switch from an employment to a contractual staff without affecting the operation and yourself, only a few of you will start to think how to make that happen. Like wise, I can assure you that some has already made that switch successfully, although just a handful. But none of them were given any guideline or magic numbers like this article. So you are now equipped better than them. Hope you can get something out of this ...

Financial Freedom with Dependents

It has already been shown that it is not that hard to retire young. If the person you marry is also adopting similar lifestyle then it is also easy for both of you to retire young together. But what if you have people who are financially depending on you ? How would you achieve financial freedom with dependents ?

Before I go on, I have to apologize first I don't have an easy to follow solution for this; not like Wealth Pyramid or Personal Finance in 1 picture. Because the answer was already given before this question is asked. And the ability to achieve financial freedom with dependents is really within you yourself as a person, not really a finance issue to start with. Give me a chance to explain ... because most people will not like this.

Through out the whole personal finance concept promoted in MalPF, it has never questioned you how you spent your money. As a matter of fact, the very first thing is to put aside some money systematically and then its up to you what you want to do; But you can only use up to what you have left. MalPF never question you buying that car, phone, liquor, smoke etc. MalPF just want you to do all those things within your means.

So systematically it doesn't really matter how you use your money, not even if they are for your dependents which is a much better cause than above examples. As long as you stay within your ability ( left over after saving ), your personal finance system should continue to work as is.

There are a few common mistakes we commit in practice ( real life );

1. We treat our dependents as separate entities. While of course we are different people but since financially they depend on us, their expenses are really our expenses. All combined expenses should not exceed what we have left.
   
   
2. We over reach our dependents needs. The fact that we 'allow' them to 'become' our dependents mean there are some emotion connection in between. This 'feeling' always get in to ways affecting our judgement what our dependents real needs are vs their wants.
   
   
3. We ourselves fulfill our own luxury wants before our dependents needs. We can pamper ourself in whatever way we want but we should do it within our means. If there is no money left after settling our expenses ( including your dependents'), then we need to venture into solutions without money. ( There have already been stories shared before how things get done without money )

It was hinted before that young people who has expensive hobby don't get retire early, those who are more creative with their hobbies do. The hobby itself may be the same. Its the way they think about the hobby and what they do about it. Some think they have to BUY, the others try to GET/TRADE/DEAL however way they can come up with. Indirectly, they learn new skills that they can apply in other aspects of their life. Directly they full fill their own wants within their means - and hence did not need to scarify their personal finance system.

Although hobby and dependents are TOTALLY different in all aspects. But our reaction to them are actually similar or relevant. We were 'attracted' to do things beyond our means. If we do that in our early years we will end with less. If we first do it within a control manner (left over money), then perhaps we can do it more often and longer through out the journey.

Its NOT a matter of right or wrong. Its just that you can only choose one. If you decided to go beyond your means NOW for whatever reason, you should also be very satisfy with the price you pay in future. Or else don't BUY it!

Lastly be reminded that income is a pre-requisite in MalPF system. So no matter how you setup your ASS ( Automated Saving System ), increasing your income will increase the chance you can full fill your dependents and your Wants. So instead of letting dependents to push you to go beyond your means, why don't channel those drives into making more income !? Then you may be able to get the best of both worlds.

Ok, I apologized before. Now I have to do it again because I lied earlier. There are actually easy to follow actions you can do to still achieve financial freedom with dependents. But this article is more important than that and further more those easy to follow stuff may only be applicable to some people - and time travel starts to get in MalPF. Yea crazy I know! Thats why I didn't want to tell that story.

Relates stories :

Gabriel had kids yet he retired rather young

Ah Yung has no money Nor is she NOT free from finance issues

if Your finance all about Money ?

How To Double salary in 10 years, country wise.

Malaysia is aiming to increase its average salary from $2,000 to $4,000 in the next 10 years. How can that be done ?

First of all, using rule of 72 you can estimate that doubling in 10 years would mean a continuous compound raise of 7% annually. Or a total of 72% increment within that 10 years. For example, it doesn't matter if the increment is from 2.72% to 11.72% adding 1% annually OR it went from 11.72% to 2.72%, either way will result a $4,000 monthly salary in 2010.

While it may sound tough to double a person's salary in 10 years but there are a number of ways this can be achieved rather easily country wide;

1. Increase Inflation

By decreasing supply on purpose, prices increase. Where does the extra money go to ? It goes to people who produce the supply. It may sound weird but when done properly, all the extra money collected from the consumers will be passed down to the workers themselves. This way, although items price increase, your salary increase as well. Nothing in life actually change, just that the numbers get bigger. This method work best with monopoly in place, as in all consumers are also the same workers for that few same companies.

How much inflation rate do we need in order to achieve this ? Properly 10% a year for the 1st 7 years (2011-2017) and then back to a very low figure in the last 3 years (2018-2020). It will take a while before the effect of inflation hike is brought over to salary increment. Furthermore, we can't have a high inflation rate approaching 2020.

Will this help us ? Well no, I have already said Nothing in life actually change, just that the numbers get bigger ... on everything.

2. Foreign Exchange

Believe it or not, it is entirely possible that by simply doing NOTHING, our country wide average salary can become double in the next 10 years. Notice that our finance minister is using USD as a benchmark for this target. Today 1 USD = 3.3 MYR. If USD continues to devalue and the exchange rate become 1:1.65 in 2010, then by having the same MYR 2,000 salary, we would have already doubled our salary from USD 606 to USD 1,212.

How possible it this ? Well, it is almost a certainty the trend IS CORRECT. The power switch from west to east has not only already occurred but it has been strengthening now. It is only a matter of how big a scale it will switch.

Will this help us ? Hell no. It would have helped if we BUY things from USA. But the fact is we BUY mostly from the EAST and we will buy MORE from within the EAST. A small currency rise on the EAST may knock us out of the game easily. We are anchoring on the wrong currency for our future planning.

3. By making a few people even RICHER

This is an average game. Simply by making today's millionaires into billionaires, it will easily pull up the average and skew the figures. How is this done ? By issuing more mega projects to turn key contractors, hiring super consultants to tell us what common senses are, setup independent groups for special projects etc.

Will this help us? Well, some of us maybe. You just need to get on the bandwagon as front seat as possible.

4. By giving FREE money to VERY POOR people

Just like above, pulling the other end of the graph can bring up the average as well. Despite qualification and ability to perform, we just simply increase basic salary for all those who are earning below $2,000 a month now. For the others who really can't fit into this category or still has very low salary, put them OFF work completely. They will receive FREE support from the government on their daily needs. By knocking out these VERY LOW SALARY figures off the chart, the average will rise too.

Will this help us ? Oh yea, quite a lot of us I guess. But if you are already one of the average guy to start with, not too poor not too rich, you are pretty much still on yourself. Lets just hope by giving out FREE money, there will be less crime !?

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Now although all above may sound too extreme and may even be read as a joke, but I assure you 10 years later, we WILL achieve our 2020 goals and a combination of all 4 methods mentioned above WILL be used, partly or as a whole.

And here below I present you NEM fashion !!

2010 Inflation vs life style change

In 2009, Dung, Mat and Ahmad's personal inflation rates are 4%, 24% and 2.5% respectively representing the Rich, the Average and the Poor. Unfortunately this year we can't do a 1 to 1 comparison because Dung's business has expanded into main land China and his life style has drastically changed. Mat lost his job and now float between temporary freelance works. Ahmad on the other hand has ventured into politics and sort of get himself 'upgraded' into the Average arena. Unfortunately, none of their personal inflation rate can be used to represent our 'typical' experiences. All of them are going through a 'transition' in life rather than reflecting the general senses of inflation. But perhaps you are experiencing a transition in life too ?

When one is calculating his own personal inflation rate, it is important to differentiate value and cost. For example, a plate of used to be $1 fried mee is now $1.50; that would be a 50% increase as in it has inflated by as much as 50%. Like wise, if the $1 mee is now much smaller plate, it has inflated as well. But if you are no longer eating fried mee at a street stall, instead you pay $10 for a dish of mee in a nice deco restaurant nowadays, your inflation rate is NOT 10X ! You are merely having a change in life style.

The rise of cost on the same value is inflation. Inflation does not usually apply when you are comparing 2 different things with 2 different values.

2010 is an interesting year. While inflation was on the rise in 2009, inflation has finished rising in 2010 especially after March. If you do your grocery in hypermarkets, you may have already observed a rise of 15-30%. Certain goods haven't had an increase in price for the past 3 years, hence averaging out would annualized to a 6-9% inflation rate.

If you do your grocery in a wet market, the worst is over. Most of the stalls which haven't gone bankrupt yet have found new supplies. Most of the selling prices remain the same as last year. Generally the inflation remains stable at 3-5%.

Local or individual grocery stores on the other hand are still facing challenges. Some of them who manage to find wet market's supply chain manage to stay more competitive than hypermarkets. Others are struggling wondering if they should just close the store or relocate.

Night clubs, bars, restaurants and places for The Rich remains similar by large. Most of them face reduce in sales and therefore beef up their marketing and promotion deals to play catch up. There aren't much change in price. But one may find these service providers start to charge for all the little things that were used to be free last time.

There you go, 2010 is a year of stabilizing inflation. But the worst is NOT over yet. When the bail out funds end mid this year, the critical turning point would be if all those dump ass giants can stand on their own. Even if only ONE of them still collapse when the bail out fund withdraw, it will still tear down the whole economy creating the worst recession ever. But its unlikely. The old faulty finance system will most probably stay through out this decade, forex loop holes will continue etc. Perhaps it may crash in 2018 ... but for now, we are off the hook temporary.

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Inflation is an external factor, Living Standard is internal and is the one you have power over with.