Tuesday, October 27, 2009

MYR 300 FREE money for self employed

Budget 2010 has been around for a while now, but I wonder why many have not made a big deal about this yet. If you are a Self Employed in Malaysia, you can open an EPF account yourself and save MYR 100 into it every month. In return, Government will add MYR 5 into your saving too. This is expected to start next year and 5% top up will continue for the next 5 years.

Although $60 a year is a small money but are you sure you want to pass on any FREE money ?

Assuming EPF declare a dividend of 4%, you will get more than MYR 10,670 5 years down the road out of the MYR 6,000 you have been saving. MYR 100 x 12 months x 5 years.

If you save the same MYR 100 monthly else where, it will need 22.01% interest rate to obtain the same return 5 years down the road.

22% passive return is not something available readily anywhere in the market. The only con side of this offer is its limit of MYR 300 contribution from the govertment in the next 5 years. Which is pathetically little. Then again, it also means it doesn't hurt at all to save the extra MYR 100.

Comes to think of it, is Someone intentionally trying NOT to pay out this FREE money by NOT promoting it as it deserves ? So they may declare a good policy change but keep things quiet and then at the end they can say, "it's you who didn't take our offer!"

Proceed with care and patient, EPF department does NOT know how to handle this yet ... their typical responses are, "Come back next year ..."

Zero Sum = Nothing ?

Zero Sum theory says that if one earns an amount of money, there MUST BE another one lost exactly the same amount of money. Bundle with Buddhism (空, 无), one shall NOT care about money ... as all will go back to dust eventually, anyway.

Malpf would like to introduce this sign "=", an EQUAL sign.

Basically an equal sign separates out the left and right sides. The sum of left side IS EXACTLY the SAME as the sum of right side. For example,

0=0, A=A, $=$

So when you were born, you had nothing, its 0=0 .... when you die, you will have nothing left ... its again 0=0.

So you begin with Nothing and you end with Nothing. But does that necessary means you should have Nothing in between ?

One of the rules to keep this equal sign functional is that whenever you add or subtracts something from the left side, you HAVE TO do the same on the right side. For example;

(1) + 0 = 0 + (1)
so its
1 = 1

If you spend some effort (+1 left side) on something, you will always get something (+1 right side) back.

Some people's life can stay 0=0 their entire lives. Some goes up to 10=10 before getting back to 0=0. Some lazy bumps goes down to -10=-10. Some extraordinary folks reach their 100=100 targets.

When you dig deeper, there are always some stories. some are

1 + 2 + 7 = 5 + 5

while others are

2 + 5 + 3 = 1 + 9

different paths, different methods but either way, they are 10 = 10

The thing is ... it doesn't really matter or more correctly speaking, it doesn't really bother the Universe. As long as it is kept balance; the left side equals the right side, the Universe allows it to happen.

Guess what ? It is REALLY UP TO YOU what you want the equation to be. Just work on one side, the other side will automatically equal out.

So do you want to believe in Zero Sum, 空 and do nothing
or do you want to decide what to put on the left side of your equation ?

Monday, October 26, 2009

MYR 50 credit card fee - Solve debt with more debt !?

Seeing that credit card debt has reached a serious and dangerous level, Malaysia government will start imposing MYR 50 fee on each credit card hoping people will reduce the use of credit cards and therefore reduce debt.

Although it may sound rational to some people, but its actually somehow a bit funny ...

For those who keep credit cards in closet, they actually use the cards as emergency loan facility. Admitting to hospital will go through smoother with a gold card etc. These people did not owe any credit card debt, they were NOT part of the problems to start with. But now they are affected and has to cut off some of these FREE loan facilities. Credit card debt NOT reduced, good people's personal finance affected.

Some pay off their credit cards in full every month. They use card so that they don't have to bring lumps of cash around. They were NOT part of the debt problem but now they need to take more risk bringing more cash with them. Credit card debt NOT reduced, good people's personal finance affected.

Then there are those who owe money - who have long winding credit card debt. They just can't pay off the debt. They are the target group to be help with this policy. How can adding MYR 50 on top of their debt help them ? They can't just simply stop the card, they will have to pay their debt. As long as they haven't finished paying their debt, the account is running and MYR 50 will be added every year ... as an encouragement fee to 'help' them reduce debt !? Credit card debt INCREASED, bad people's personal finance PENALIZED.

Lastly there are these group of people who haven't had credit cards yet. So when they apply for one, they will think twice. But these people are NOT part of the debt problem to be solved to start with ! Credit card debt NOT reduced, good people's personal finance instilled.

Call me dump and crazy, how can this MYR 50 fee help reduce credit card debt again !? There may be some good points identified but NONE will reduce Today's credit card debts !!

After all, do you think a credit card debt person wouldn't pay a small fee of MYR 50 to get a new card from this lady ? After all, he can pay off this MYR 50 in his next 30 years which is only less than $1 a month.

Friday, October 23, 2009

Case Study : How to use Money ?

Starting at age 24, Daniel can save $1,000 a month. Plan to buy a $30,000 car at age 30, get married at 29 and buy a house at age 30.

He is also repaying $150 monthly to a $48,000 study loan. Only 10 more months left to pay for a $300 motorcycle loan. The $1,000 is net saving after deducting all these debt repayment.

"How to use money after I save them ?" Daniel asked.

Daniel has some goals to start with, so its best to draw a life line first.

Then Daniel should learn Future-Present Value finance formula. (He may also check out Rule of 72) With that he can come up with these figures. With $1,000 a month at age 24;

1. He can save in 2% fix deposit, he will have about $24,500 at age 26
2. In order to get $30,000 at age 26, his target investment return has to be 22%
3. If he didn't use the saving at age 26, it will accumulate to $76,400 at age 30 using 2% FD return
4. If he buy a car with $24,500, he will have $50,000 at age 30 using 2% FD return

So overall there is not much Daniel needs to worry about because

1. An used car of $25,000 or $30,000 are within similar range
2. Marriage may cost a few thousands typically
3. $30 to $50 thousand is enough for down payment for a typical home

Within the next 2 years, Daniel should mainly focus on cash flow control,

1. $300 motorcycle loan will end in 10 months time, by then he "should" save more every month i.e $1,300
2. He may spent only $350 for food as a student, but a working employee generally may spend more. He needs to watch that in order to achieve the $1,000 saving a month as the target he sets for himself.
3. Phone bill may increase too.
4. New spending category may also be added like entertainment, broadband, bad habits like smoking and drinking etc. Watch the friends you make, the girls you like, the bosses you kiss ass to ... make a good judgement if it is worth doing so.

After that if Daniel really buy a car, that will significantly change his personal finance;

1. Road Tax
2. Car Insurance
3. Petrol increase, usually by 4x from his previous motorcycle usage
4. Maintenance fee - a bad purchased used car may need frequent foreman visit

With only a target salary of $3,000 to $5,000 .... the car he will own may be his First biggest challenge.

Overall, this is the recommendation for Daniel,

2. He has 2 years before buying the used car, learn more about car mechanic, how to buy an used car, make more friends in car businesses etc. so that he can target buying an used car worth $X but he only pays $X - $Y for it. High Value for Money. Also read about other ways to get cars.

3. Learn Wealth Pyramid as tools to achieve MeM (Money earns Money) concepts. Goes up level by level from FD to Bond Fund to Mutual Funds to direct stock market investment.

4. While increasing investment return, understand that risk is something you don't know or you thought you know but didn't. So ability to learn, learn accurate and learn fast is your biggest asset now.

5. Marriage is not necessary a liability, it can be a happy event that earns positive cash flow sometimes. Daniel has 5 years from now to start explore what marriage ideas that can achieve such goals.

6. Daniel has 6 years to learn about property investment before buying his first home.

Track Back: forum

Tuesday, October 20, 2009

I have earned 67% in a day !! can it be TRUE ?

Have you ever heard people said he made a profit of 67% in a day ? And then continue to show a few more 'proof' that he often earned incredible profits all the times. Then in order to be more realistic, he shows you a few small lost he made. Do you think he tells truth ?

Well, yesterday was a good day. I earned 67% in a day! Not just paper gain, I actually initiate and end the transactions on the same day to realize the 67% profit. No kidding ! But can it be TRUE ?

While the 67% could be true. Most people would be able to catch the first pitfall.

  1. One day earning doesn't really mean much. As shown in this article, another day of 67% lost would not only not break even but actually making you some loses. The average return for the whole year is more important so that it is comparable with other rates like BLR and fix deposit interest rate etc. Persistency over the years would also become more important as time goes. Be reminded that Warren Buffet average annual return is 15.6% ( details in Greatest Investors of all time ).
  2. It is also not too hard to catch the 2nd pitfall. Actual amount matters. Earning 67% from $1,000 is very different than earning 67% from an investment of $100,000. I can easily turn $1 to $2 earning 100% return but I would be happy if I can get 10% return from my $1 million investment. This is the part that says size does matter and a big percentage number is only exciting when it works together with another big number.
  3. Another pitfall is one that some may overlook. Investment return should be calculated based on total capital, not the transaction amount itself. For example, I have allocated $1 million for a particular investment. In one particular transaction, I invested $100,000 and earned 67% return while the rest of the $900,000 sits somewhere doing nothing. My overall return is actually 6.7% only. Meaning I have earned $67,000 with $1 million. This is particularly important when judging fund managers performance.
So while it may be TRUE I earn 67%, but it may NOT be THE ENTIRE TRUTH on the perception of making such statements.

Track Back: ruumz

Monday, October 19, 2009

Case Study : Property Investment Opportunities are Rare ?

Tammy achieves his financial freedom through property investment. Recently he bought over a property that looks too good to be true.
Purchase Price : $4 millions
Bank Loan : 100%
Loan Rate : 6%
Monthly Rental : $30,000
The property is sold at $ 3.8 millions but he lumps all the other fees in to make it $4 millions as his total cost. His net asset is way more than $4 millions so there is no problem to obtain that amount of bank loan. Loan interest is actually 5.XX but we round it up to 6% for this article. There are only 3 tenants, all are national and listed companies.

His monthly repayment is $23,982, fully paid by collected $30,000 rental, with a net cash flow of $6,018 every month. He didn't fork a single cent out because his bank is fully behind him in his deal.

Lucky him, just another rich guy gets richer, it has nothing to do with me, you may think ?

Well, every story is a lesson to someone. Its just a matter of what you get out of it. This opportunity did not just knock on his door and call it a deal with no reason.

It started around mid last year when the seller approached Tammy. Tammy made an offer but seller thought he had a better buyer and didn't take it. Then by last year end, seller took Tammy's offer but Tammy's offer has already expired. And Tammy met other better sellers. After beating around bushes and some silences, finally the deal is made this mid year. The whole process took around a year.

Can you imagine an opportunity of $6,000 net cash flow floating around in the market for one whole year and no one grab it like a crazy dog ? Well, that is the fact of life.
  • Many people want to buy it but not all of them have 4 millions
  • Many people do not qualify for a 4 millions loan
  • Some people CAN buy this but this may NOT be their only choice
  • Some people WANT to take this kind of opportunity but NEVER found this particular one!
  • Both seller and buyer may have personal preferences ... etc.
Yes the 1st two points may rule out almost 90% of the people, the Rich does get Richer easier. But that is because they have built their fortune faster and ahead of others. Not because it was taken for granted.

Don't forget this mentioned opportunity has been floating around publicly for one whole year, you and I didn't really know it until the deal was done. So it wasn't a matter of how rich other people are, its a matter of what you have done so that you can get what you really want.

Yes, again this is in Australia.

Other related articles

Monday, October 12, 2009

The Biggest Chunk of Insurance Cost

Every time you buy an insurance, some ones get their commissions and that is usually considered the largest part taken away from your money. In life insurance, this fee may start at 20-50% and slowly drop to 0% in 6 to 10 years time.

This fee structure turns out to be the most crucial part why Insurance becomes the most dedicated finance tool for personals. The whole agency and distribution forces have made insurance well accepted by general public because they are paid well. In addition, it becomes one of their most solid passive income streams.

It is really hard to sum this up in a word of good or bad. No one will like to be taken away $400 from their $1,000 savings or investment what ever you call it. But then again, if such commissions scheme did not exist, many people may still be under-insured and even more people did not save anything at all.

Although it starts at a HUGE chunk, it does reduce over time. Generally the total payout is within the range of 160% to 200% over a 10 years period. So the longer you keep your insurance policy, the less effect it has on you ;
10 years old policy has an effective commission cost of 20% = 2 / 10
20 years : 10% = 2/20
40 years : 5%

It is really hard to sum this up in a word of good or bad FOR YOU.

If you bought other products that have similar features but paid lower commission, then you are alright.
If you ended up NOT saving any money anywhere else, its bad for you.
If you have to pay high medical fee later, then it could have been better if ...
If your loved ones have cash flow problem after you die, perhaps the 40% 30 years ago doesn't seem like that much after all.

It is good we keep on searching for better solution all our lives. But before we find better ones, its crucial we engage with whatever available at the time.

Commission fee structure is the biggest chunk in insurance cost. There is probably NOT much we can do to change that in near future. What we have full control in, is to assess the value we receive in return. As long as we receive services and advices that is worth more than we pay, its a lesson well learn.

After reading this, will you

(1) be more eager to buy insurance,
(2) hate insurance more now or
(3) doesn't change much of your opinion on insurance ?

Sunday, October 11, 2009

What happen after Automatic Saving ?

Once you have Automated Saving System or ASS setup and running for a while. ( I bet not many of you yet ) You may wonder, "What a crap! I am not financially free yet!"

Thanks to a case study reminding me to move on after ASS is setup. Also inspired by a silent guru - Meshio - somehow some reason I started scratching on a piece of paper when I review that case study. So in short, this may represent what happens after ASS ...

  1. Choose an account that gives highest interest you can find for your ASS account
  2. Decide how much emergency fund you need in your ASS ( usually in number of months or years of your monthly expenses )
  3. Once achieve the emergency fund amount, the overflow should goes into investment
  4. Your investment potential return should be significantly higher than your ASS return
  5. move the emergency fund to FD, Bond Fund or Money Market Fund if interest is higher than your ASS account.
  6. Continue looking, learning, categorizing and revising until your investment return is Passive and higher than your active income.
Finally the most important one #7, comes buy me a bottle of wine and tell me how MalPF can be improved based on your experience.

God did rest on Sunday didn't he ?

30% LOST is MORE than 30% profit ?

Have it ever occurred to you that 30% profit is NOT magnitude-wise the same as 30% lost ?

When your $100 investment earns a 30% profit, it goes up to $130 = 100 x 1.3. Pretty straight forward, no problem there. Then it makes a 30% lost. Instead of going back to $100, it actually drops to $91.

130 x ( 1 - 0.3 ) = 91

The calculation above is not deceiving. A 30% discount on any market item is actually calculated the same way.

So you have just made a lost of $9 !

Sounds tricky ? Lets see what if it moves the other way round.

This time you lost 30% from your $100 investment, it become $70 = 100 x ( 1 - 0.3 ). No problem here. Then it earns back 30%. This time you got 70 x 1.3 = $91. Again you lost $9 !!

There you go, sometimes 30% earning is NOT necessary the same as 30% loses. Get your numbers right in both your business and investment, 9% strategical lost due to a not-so-well-setup strategy could be killing.

Married : Combine or Seperate Account ?

One of the common questions asked by recently married couple is "should we combine our bank accounts or keep them separate ?"

The quick answer is to have combined accounts when you are newlywed. Later down the marriage path, you may want to keep them separates. As jokingly as it may sound, you may eventually find it very truthful too.

The longer or more philosophical answer is to keep some accounts private and some other accounts joint.
Your account is Yours,
My account is Mine,
Our account is Ours.
All 3 are DIFFERENT ENTITIES, they are NOT suppose to get mix up. Suppose each person already has her own account before marriage. So yours is yours and mine is mine, there shouldn't be any confusion there to start with. After marriage, each individual just add a new Automated Saving Stream into the newly created joint account. Thats about it.

Saturday, October 10, 2009

Web statistic - a different era for MalPF

MalPF goes global, 1st step ... http://malpf.savingadvice.com/

MalPF is ranked the no. 27 million-th most visited site. Or in layman term, one of those sites that no one knows and will never find out about.

Malaysia Personal Finance blogspot is slightly better rank at 2.6 million-th and 47,902th in Malaysia.

There are a lot of NEW and great Malaysian personal finance blogs setup recently but kclau and meshio still top the list as covering all rounder topics

kclau - 378,988th most visited in the world or 5,290th in Malaysia.
meshio - 664,893th

( in ranking, the lower the number the better it is )

A few other bloggers who may not cover traditional full range personal finance topics but has been providing great tips and latest news, hence rank quite well within Malaysia visitors. One of them is AlanTan, rank 5,133th and DavidLee, 2,414th in Malaysia.

In contrast to Personal Finance Malaysia, MalPF is lacking at 10% or in other words, needs to play a catch up game of 10X.

Out of finance topics, KennySia is rank 408th in Malaysia and 51,274th in the world. Liewcf is still the father of all bloggers, rank and stay high at 27,101th in the world.

On this comparison, MalPF needs to spend 100 times the effort to catch up from existing 1% of Malaysia's Internet pie.

Most of the world best personal finance sites are also ranking at liewef's level :

GRS - Get Rich Slowly @ 22,132th
SA - Saving Advice @ 33,576th

Sorry this post may be a bit geeky, random and irrelevant. But I guess this means its time for MalPF to do spell check, write in full sentences and start some internet marketing ...

or will that corrupt its originality ? What do you think ?

Friday, October 9, 2009

Non Money Oriented Personal Finance Style

A few real life stories were told before;
Gabriel is the one who is NOT that RICH but financially quite independent and freedom he has.
Ahmad fights inflation by growing his own needs
Ah Dung is the RICH guy who didn't really get hurt by inflation
Mathew is the typical Average guy who is shocked by an effective inflation of 24% !!
In promotion of successful personal finance without money or at least without MUCH money, here is the story of Ah Yung.

Ah Yung is almost 70 years old now. At first glance, she has been earning her daily income from her morning market stall all her life. She made noddles when she was young and now she is only reselling whatever items she can carry ie. not so heavy. She never went to school. She has no idea what personal finance is. She doesn't have much insurance, no investment and only 1 or 2 saving accounts. She couldn't even tell if her business is earning profit. She just knows she has been surviving fine with what she does so far.

Her daily revenue ranges from $30 to $300. With a profit from $5 to $20, she is able to keep her stomach filled. Sometimes friends drop by and invite her to varies gathering which has a lot of fun and .... food. Sponsored by varies society clubs and semi-political parties, most of these events are FREE.

She lives in a house left by her belated husband, where the $40,000 loan has been fully paid off. The house is worth $160,000 now but she insists the house is the LAST thing the family has so it is there to stay "no matter what".

She traveled to work, the market, with her 30 years old bike. Almost everything she needs are obtained from the market too - cloth, food, drinks, fun stuff, blankets and business materials.

Despite living expenses day to day, she thinks she is quite alright. Although sometimes complain about politics and unfair treatment from the authorities etc. generally she thinks she has what she needs.

She has many friends. She is very generous to all her friends. Whenever friends need help, she is there. Even when money is needed, she lends as much as she could. Sometimes until she has to skip a meal or two. At her age, she has gone through quite a large number of weddings, birthday parties and funerals etc. She always shows up and she always bring present or whatever suits the occasion, by using up whatever money she has at that time. She has many friends, who call her friend as well.

Once she was in finance trouble. She lend all her money out and sales were slow. She had been eating plain buns for days. On the 4th day, her friends knew and they came to cheer her up. They had breakfast together right next to her stall. 2 weeks later, Ah Yung was backed on her feet. All friends were happy too as it was quite a good reunion for a couple of them actually.

Another time, she faced a robbery, fell down and her bike was broken. News spread so the local people and neighborhood found and captured the criminal in less than an hour. A mechanic helped her fix her bike with a very small fee. The Chinese practitioner in the market helped cure her health condition.

When her husband passed away, she didn't know what to do but about 200 good friends showed up and helped. 1000 to 2000 people showed up the funeral and helped her through the financial tough time.

Ah Yung doesn't earn much, doesn't save much, doesn't have a clue about finance planning. But through out her life, she made friends. Her human network is as big as a marketing company out there. When needed, friends will come buy from her stall even if the price is slightly higher than Carrefour. When needed, helping hands are just around the corner. There is no need to ask, people will just come to help. The same way as she has been helping so many others in her past.

Ah Yung is actually financially independent. She doesn't really go to her stall everyday. Now she and her friends always go out to parks to work out, then they go to new places to try out new food. When she is not working at her stall, someone will rent her place automatically paying her a net profit of $10-$20. A very strange passive income, no contract, no agreement, it just happen and it has been happening like that for more than 10 years. From time to time, her friends and her travel locally and overseas. Most of the trips are sponsored, either with some marketing purposes or simply privileges given to golden years people. She has friend who can get the linkage to get all these FREE stuff. Some other times when she feels bored, she visits her friends in another state or even country. She just need to get on a bus or a plane, her friends will settle the rest. Like wise, sometimes her friends come visit her from neighboring countries and she will take very good care of her friends too.

Ah Yung has ONE asset and no liability, a net worth of $160,000 and growing. She doesn't earn much but she doesn't spend any, resulting a long term positive cash flow. The only thing she has ever invested seriously is her time and dedication to the people she knows. And now she is receiving the return.

Ah Yung is a happy old lady. She has been having her financial freedom all this while.

Bursa Malaysia teaches Don't Buy And Hold

This is one of the Golden Rules from Bursa Malaysia teaching people how to trade Malaysia stock market.

This is the topic content and my highlight in RED.

The Malaysian stock market is one of the strongest and sometimes most dynamic markets in the world.

While the market has always recovered from falls, the same cannot be said for individual companies. Even during a booming market, some companies can suffer significant losses.

Trade only on an uptrend and sell the poor performers, this will make it impossible to experience a large loss. This is the secret to outperforming the market and achieving a consistently superior return.

Undertake some research on the Bursa Malaysia or in a local investment paper. List three shares that have showed decreased performance recently and three shares that have showed increased performance recently.

Did you get that ? "IMPOSSIBLE to LOSE A LOT" !! What a way to set GOAL in stock investment !! Furthermore, making MANY small loses is as bad as making ONE big lost. As a matter of fact, many small loses may actually be worse because you didn't feel the pain and didn't realize how much you have lost. As in Boiling Frog story.

Compares that with the Number 1 TOP stock investor in the world ...

What they should have said is to Employ A proper Stop Loss Strategy. Aim to be right and learn until you make more correct decisions, that is what the game is all about. But just in case you are wrong, preserve your capital allowing you to 'COME BACK' by adopting a stop loss strategy. When investing in a fundamentally strong business, it takes patience and sometimes ignorance to just buy and hold.

Why does even Bursa make such a bias education ? Well, buffett has said it above. Bursa needs brokers, brokers need money, so Bursa also wants you to buy and sell as much as possible so that you pay them more transaction fees.

Sell it ! Don't Hold ! Else Bursa will DIE !!

Ya right ! You may just as well donate your money to Bursa ....

Thursday, October 8, 2009

Guest Post: Student Loan As An Investment and Student Loan Debt Consolidation

Sharell Crawford is currently working for Debtconsolidationcare. Having a lower debt amount will mostly improve your chances of getting lower interest rates for most of the purchases you made.

A student loan is considered to be a good investment since it is taken out to establish the career of an individual that helps him earn his livelihood. However, sometimes it becomes impossible to prevent debt arising from student loans. Debt consolidation plays an important role over here. Student loan debt and mortgage loan debt are considered as “good debts” because of their positive aspects. On the other hand, credit card debt and car loans are regarded as “bad debts’” since they signify lavishness. You don’t acquire student loan debt by extravagance. These loans can be obtained more easily from federal sources than private lenders. You can get useful returns from utilizing a student loan. The more you become educated, the more is your earning capacity. However, you must not forget that you have got to pay it off.

The anxiety of paying back multiple student loans can be annoying on certain occasions. In addition to this, procrastination is a normal feature of the college life of a student. This does not spoil your results but not paying your loans when they become due for payment would certainly have a bad impact on your financial future. The most effective option for a student to drive away his financial concerns and get pleasure from his college life is a student debt consolidation loan. This type of a loan combines all your student loans into one loan that is simple to handle. You basically take out a bigger loan to manage your various smaller student loans. As a result of the affordable and competitive interest rates, you can save some money. By stretching out the repayment terms, your monthly payments are reduced considerably. You also have the opportunity of locking in an affordable rate.

At present, the last thing that you want to happen to your finances is piling up a huge amount of student loan debt. A student debt consolidation loan can be the right solution to conquer your debt problems. You have to keep in mind that private student loans cannot be consolidated with federal student loans. If you’re suffering from student loan debt, you have to consolidate your federal student loans and private student loans separately.

notet from Doroth, Financial Helpdesk.

Tuesday, October 6, 2009

BEST rates in Malaysia - update 2009 10 06

This is a comment update to FREE Info on Best Rates in Malaysia :

Car Loan
Maybank still tops the list after many months offering starting from 2.7%. The trick is that not everybody can get that rate and further more its mostly for national cars only. So the way they published their car loan rate has successfully made them the best choice over the past few months.

2nd runner up is Bank Muamalat whose car loan rate is only 2.85% but charges a RM 600 admin fee.

House Loan
Affin bank still top the list with BLR - 2.3%, the trick is that they don't approve many loans. They have this self image that they are the 'high quality' house loan processors ...

2nd runner up is Standard Chargered BLR - 2.25%, who is relatively more flexible and more marketing oriented. That means they may listen to what you need, try their best to request benefits on your behalf, with the hope of getting your business.

Fix Deposite
FD rates haven't changed since the recession staying at 2% which really puzzle me. If the recession is really over, why isn't the saving rate goes back up yet ?

BLR is generally staying at 5.55% with a few exception where foreign banks are offering slightly lower rate.

Monday, October 5, 2009

Malaysian Personal Finance Part 1 - EPF

If you earn a salary in Malaysia, 8% of your salary goes to EPF (2009-2010) - Employee Provident Fund - before you can ever see it. This saving scheme is enforced by law and happened automatically, so this makes it a perfect ASS - Automated Saving System.

Your employer will add another 12% to it making it a total of 20% contribution. If your monthly salary is RM 2,500, RM 200 of your money goes to EPF. Your company adds another RM 300 to it so you will have a total of RM 500 in your EPF account.

Effectively you only receive RM 2,300 cash before tax. But the value you are receiving every month is actually RM 2,800 and not your salary amount RM 2,500. A 20% enforced ASS is absolutely NOT a bad thing at all especially during your mid life.

The lowest dividend EPF can declare is 2.5%, generally higher than most bank saving accounts for such a small amount of money. Again makes it a great ASS.

Sounds too good to be true ?

Indeed government force saving scheme like this is one of the greatest thing happen to one's personal finance. Most of the poverty in this country, not by chance, turn out to be those who didn't contribute to EPF.

Are everyone off the hook then ? Well, not exactly. If you have been following this site long enough, one of the fundamentals of ASS is in R E L A T I V E. Most of the people are in debt today, so if you are not in debt and have some saving, you are better than others. That is what ASS is all about. It is the Minimum one HAVE TO DO for his own personal finance. And one of the biggest effects of ASS is its psychological stop on getting into bad debt.

ASS does not make you rich, ASS does not fight inflation, it just give you a good start.

So if everyone has ONE ASS account and you have ONE ASS account then you are just like everyone else. Still in rat race that is. The status quo in the beginning of 21st century, is to create another ASS account yourself without the help of government enforcement. If you are able to setup an ASS account yourself consistently through out the years, you have just strengthen your personal finance from a merely 10% to above 60% !! . . . . . simply because most people fail to do so now.

If you have this 2nd ASS, you have increased your chances of success by 6x ! Because this 2nd ASS account will psychologically tune you into a secure investment in future. So a real personal finance starts at RM 2,300 in above example, not RM 2,500 or RM 2,800. EPF has already been setup and we should just forget all about it, our jobs starts at RM 2,300 !!

What's wrong with EPF then ? Well basically other than above generalization of EPF, everything else doesn't seem too right.

You cannot access the money until you are old, ie. age 55. So practically they are NOT your money. If you die early, it would just be a high premium low sum assured life insurance, paying out to your beneficiary.

In a good ASS, you are supposed to setup the saving system up and forget about it. Let it accumulate by itself over the time. But in real life, everyone is trying their best to get money out from EPF. Why do people need to withdraw from EPF prior to age 55 ? Because they do not have their own ASS accounts !

While it is really arguable if one should or should not withdraw from EPF, but the psychological effect of relying on EPF money is seriously damaging your ability to earn the income you could have been. If you want a house, you setup an ASS for the down payment. When you want a bigger house, focus all energy to increase your income. When your personal finance is setup right, a small increase in your income streams can have double effect in your finance world.

Last but not least, although government setup such provident fund at the name of people, the real intention of such fund management is really questionable. The real target of EPF is to fight inflation. There are some well known inflation hedgers such as stock markets and properties but EPF has less than 25% exposure on these 2 areas while more than 60% are channel back into govertmental mega projects. Generally speaking securities, bonds and loans pay out higher than Fix Deposit rate but still lower than inflation.

So generally we have a great system to start with in Malaysia, ASS is enforced using EPF. However, transparency and ability for EPF to function as it should, may take slightly longer to realize, if it happens at all. People's ability to use EPF in their favor, is still a long haul educational evolution.

Part 1 : EPF

Thursday, October 1, 2009

Guarantee Property Investment method

There are 2 embedded messages in this insurance article (1) and this financial freedom (2) talk.

(1) Build a passive income instead of thinking how to keep an active one
(2) You don't need Money if you have a solid finance plan

This article is about how to achieve both using property investment. But before we proceed, you must agree with a few pre-requisite concepts that were explained by this site before;
Income is a pre-requisite to Personal Finance but NOT a part of it, so amount of income is irrelevant to the strength of a personal finance plan.

Passive Income is achieved when you use 1/100 effort for an income.

Personal Finance is NOT the same as finance, Personal Finance is simple, straight forward and usually there is an obvious single best method.
Here are the 2 things to focus on; ( and these are strict requirements )
  1. Buy a property with Other People Money ( OPM )
  2. Rent the property out higher than repayment amount
By OPM this means using absolutely NO MONEY from your own pocket at all ! That's RIGHT ! You should get 100% or more loan in order to buy a property. If you can't get that, it only means 2 things; you don't have the right property OR you haven't used the right method yet. When you break this rule, you will also bear the consequences that this deal may NO longer be a personal finance tool.

If you borrow money, you have to pay it back. Your rental income must be more than your repayment amount. If you cannot ensure such a condition before the purchase, it is a NO DEAL ! When you break this rule, you will bear the consequences that this deal may NO longer be a passive income tool.

Remember this is all done at personal level, nothing fancy like real estate business world - which is earning much more but as an active income.

Impossible to get 100% loan and rent so high you say ? Then this is NOT your cup of tea. Period.

Both of these can be achieved by looking at only ONE factor - the actual buying price.

When you find a property, first identify its real worth. If it is a standard property then just refer to market price. Once you are convinced on the tenant-ability, then buy the property below its worth. For example,
A property worth $ 130,000 renting at $600 per month.

A 5% interest on $130,000 for 30 years may result a monthly repayment of $700 - which fail rule #2. Every month you are paying out $100 from your own pocket for someone else to use your property.

If you borrow less loan ie. $100,000 your monthly repayment is less than $550 which has positive monthly cash flow but this fails rule #1. In short, you have to fork out $30,000 now in order to get back $50 a month.
The rule of thumb is always buy a property 20-30% lower than its worth. So you buy above property at $ 91,000. Bank values the property at $130,000 and may finance you 80% or $100,000. After deducting all the fees, you may get $5,000 cash up front and then $50 every month. If the property price goes up in future, capital gain is to your advantage. If it goes the other way round, the risk is shared by the bank. A rock solid plan personal finance plan !

The lowest finance one should accept is 100% ( example above is 110% ) and the lowest net rental income is ZERO. It is ok if you have to pay some lawyer fee and stamp duty to buy a property. It is also ok to have your tenant pay your monthly repayment in full. Anything worse than that, is NOT a personal finance method.

But how often can you buy a rentable property 20-30% lower than its market price ? Not very often, not very often at all. There is only 1% chance of this will occur.

Can normal people like you and I get it ? Absolutely !

The funny thing is most property investors are Active Income chaser. They do NOT follow these rules strictly. Sometimes they don't care about 100% financing, other times they don't care about renting. Most of the time, they just have no patient. So they don't really bother this 1% of the pie. ( An example of property investment that is highly relying on capital gain alone )

Other non property investors simply DO NOT believe such things exist, hence they are not grabbing this pie neither.

In Kuala Lumpur I can be offered such opportunities 4-5 times a year.

Finding such opportunity should take more creativity than hard work. As of exactly how and all the methods of how to find them .... are whole new topics that are even more complicated than stock investment. Which is why not covered by malpf.

Stock investment is the highest level personal finance tool malpf promotes, Property investment is NOT within the 1Picture system. A good personal finance solution is straight forward, repeatable and practical. Property investment has too big a room to play about and most people get deviated and get into debt instead.

But if you follow this fundamental property investment method strictly, the most often said location factor is now secondary. Anyone anywhere can obtain unlimited passive income no matter how little money he has to start with.