A new level of Frugality

Frugality in Kuala Lumpur has just gone one level deeper.  A saving of about $550 monthly, a 2 hours exercise sessions for FREE and an opportunity to explore natures within the city has just been proven recently with just ONE simple ACT !  As everything goes, there is some trade off or 'risk' too ...

Its Cycling To Work !

Mathew was a guy who suffers from a terrible 24.3% inflation in 2009.  After he started to follow this blog, he has learned a trick or two to keep things going smoother.  Today he is working as a top executive in a public company but situation hasn't changed much.  He is still in middle level income group.  After his 5 figures income divided by the number of people he has to support, his actual cash-at-hand per person monthly is much less than average personal income ie. $1,500.

Many staffs who worked for Mathew always complains about how tough their lives are and demand a salary increment without extra performance to the company ( while their single income is about $1,500 as well).  Mathew thinks it was obvious his staffs weren't educated well enough in personal finance so he decided to role model to show a point - live frugally.

He used to drive about an hour to work, commute about 22 km and then spent about $10+ for parking fee.  Now instead of doing all that, now

He cycles to work

After the decision was made, he first bought a huge term insurance to cover this temporary needs.  After all, he doesn't want his teaching to his staff to affect his even more important loves to his families.

Once the insurance is approved, he started cycling to work.  It wasn't easy.  He first followed his driving route.  It was dangerous as cars and motorbikes are cruising fast by, ignoring his existence.  But the good thing about cycling . . . is that its both a pedestrian and a driver.  So very soon he found a much shorter and safer path, only 12.1km instead of driving 22 km away.

It took him about one hour to cycle to work.  ( Above 2.5 hours was for walking time )  So practically this doesn't affect any of his schedule at all.  As a matter of fact, this improve the stability of his schedule.  Even when there is an unexpected traffic jam which would cause a normal 1 hour driving to 2-3 hours, his cycling time remains the same as 1 hour.

Mathew also lost 6-8kgs since then, has a much tougher built body now.  He used to pay a lot joining fitness centers etc. but never got the time to actually exercise because he is a workaholic.  Now he HAS TO exercise 2 hours a day.

Mathew also started a health diet to eat more veggie and fruits even before this cycling idea.  Thanks to this cycling exercise, his cycling route passed by a local market at Chow Kit ( one of the oldest and largest wet market in Kuala Lumpur ), he now manages to buy 5 star fruits for only $1, which fuel his breakfast and lunch.

There are much more indirect benefits he received since he started cycling to work.  But as everything goes, there must be some Cons that comes with the Pros.  Should one accident happens during his cycling commute, it would most probably cost him his life.  While he was well aware of the risk, he took action to insure against that rick and he also find ways to improve his own skills and awareness to maximize his own safety.

There are quite a lot of tips and tricks he has developed since he cycles to work.  If you were moved by this article and wanted to try this too . . . be warn ahead, there is some risks involved.  Do spend some time to buy me a cup of coffee so I can share with you whatever those tips and tricks are so that you can minimize your risk and maximize your return / saving / investment.

	Driving	Cycling
Time	1 hour	1 hour
Petrol	$10 per day	$0
Parking	$5 - $10 per day	$0

I am just glad living frugally in a city like Kuala Lumpur has just gone one level deeper.  With tons of other extra benefits and with only ONE major risk that a person who really cares can mitigate easily with skills and experience.

Have you managed to find any innovative ways to cut your expenditure or increase your saving by 25% !?

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the sides of GST

Actually GST is good, at least in theory. In practice, it could really go either way. And either way could mean good or bad for somebody and not everybody. This has already been proven in many countries who has adopted GST for ages. But one thing for sure, GST gives the government full Flexibility.

Now or in the past, it started with "I will tax this and that". So sales tax, service tax, government tax, custom tax etc. were introduced. With GST, it started with "I will tax everything" except those I give exceptions.

So system wise, GST is also better. Or in another word, GST is more systematic.

Most people may have known the devil of GST from many blog posts by now, but seriously if you look at the topic with a clear mind and NOT just from consumer point of view, you may realize those are really just purely speculation. However, it may still happen but when it does, it is because the consumers ourselves are making it happen. By thinking it might happen.

Interestingly however, not many people know the official GST info. What is the government thinking with regard to GST ?

• Tax payers will pay less tax
• Industries will save money
• Government can earn more money ( diversify income actually )
• GST will not impact inflation etc.

Got it ?

People who buy will pay less,

people who sell will pay less and

government will have more money.

Interesting or not ? its MAGIC !!

At the end, it really doesn't matter what the big boys are doing. What really matter is what affects you. So forget about agreeing or disagreeing with GST. IT WILL HAPPEN ! You may as well start thinking how to make use of this GST to turn yourself into a part of the HIGH INCOME GROUP.

For that, you may want to check out .... Exempted stuffs


This article was suppose to be read in this sequence.

Malaysia's GST - a MAGIC !

Secrect of the MAGIC revealed !

a Perfect World !

What can we do ?

Budgeting and Financial Management

Budget is one of the very first topics in Personal Finance.

Many may think budget is about control expenses but the true meaning of budget is to PLAN AHEAD. Although they may mean the same thing but actually it will leave a very different psychological effect.

At one hand, one is focusing on 'expenses'. Controlling implicitly mean NOT to over spend it. This creates an internal conflict of "I want it but I can't have it". Whenever a control fails, its due to lack of discipline. The resolution is to control it better which is enforcing discipline. Enforcing discipline on a person who naturally does not have discipline is the internal conflict mentioned earlier.

On the other hand, PLAN AHEAD would simply imply "I want it and I will get it". This is more target oriented and positive minded. Whenever a plan didn't materialize, one would have to plan better; as in "how else can I get what I want". This may further enhance one's creativity.

To control or to plan ahead,

its your choice of words.

If budgeting is the beginning of personal finance, the other end would be Financial Management; as in fine tuning her very own portfolio.

At a personal finance level, financial management would typically focus on increasing cash flow and net worth. However, there are 1001 finance tools out there. So there is really no one single portfolio that suits all. Everyone will have his own skills and preferences.

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.

Says you are 25 years old, you will need a sum of money at 35 years old. Hence you can invest into equity. However, you must learn something about the equity market you are entering into. For example, you know that for every 10 years in your equity market, there will be a peak and a bottom. So perhaps by 3-4 years before your maturity date, ie. 31-32 years old. You should start considering withdrawing your equity investment and keep them in a money market or bond fund. This will preserve your capital and secure you from unexpected last minute change, ie. a sudden equity collapse.

for example;

age 25 : 90% equity, 10% bond

age 27 : 80% equity, 20% bond

age 32 : 40% equity, 60% bond

age 34 : 10% equity, 90% bond

Keeping a non dynamic portfolio expose you to risk the whole time. If bad luck hits you, you may lost all your 9 years of earning in the 10th year. So one must keep ones personal finance portfolio dynamic.

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.

Linear model of V4M is basically thinking all features are alike. Hence for every feature the person is looking for, he would be willing to pay some price for it. But if a particular feature is substantially higher price, he would think its NOT worth it.

For example, a person is looking for a phone that has Wifi feature and cool-look feature. A typical wifi phone may cost him $500, a cool looking wifi phone may cost $2,000. A linear V4M guy will go for the typical Wifi phone.

Exponential type of V4M model describes a person who values most on perfection. He understands that many providers can easily give an average services / products but it is very rare for a provider to provide a perfect solution. Hence he is willing to pay any price for one particular feature especially when such feature is not easily available elsewhere.

An exponential V4M guy would have go for the cool looking wifi phone as per above example.

One will always find Linear V4M guy a FRUGAL person. He analyses well before making a purchase. He may go for 2nd hand goods as long as they still work well. Such a person is always the next door millionaires whom you never knew.

Exponential V4M guy on the other hand is the high society type of person. The only way he can sustain his life style is by being filthy rich. His perception on values is also the main driving force for him to stay rich. Such a person is always a very high cash flow fellow but often unable to retain a net profit.

There is no right or wrong in either V4M models. But it is important for you to recognize your own V4M model and then focus on living that life. Problems arise when an exponential V4M model guy thinks he is frugal OR when a linear v4M model guy keeps over pay.

What is your V4M model ?

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 smart rich. Whatever they have now, they can continuously have it at anytime. Hence it doesn't really matter if they give anything away tonight, they will have it again tomorrow morning.

That would be the ultimate power of passive income, or smart income.

Once you know how much you 'really' need, you 'find a way' to keep your needs fulfilled without doing anything much. Then whatever extra comes in is the one you can easily donate away without filling any pinch. Yet many will feel much appreciated because it means the whole world to them.

So in short, you can really see which rich man has smart income in him and which rich man is barely surviving with his active income, by seeing the way they donate.

Now, let me ask .... do you think USA rich men is smarter or China's rich men ?

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, as if they were the gurus as well. Except the 'passive income' they refer to is barely promoting their own original same old products. The personal finance market has become so competitive that even some real gurus have no choice but to go beyond the line in their marketing effort - Robert Kiyosaki is no exception in spreading "Saving is bad".

Although passive income is very well defined here using income ratio 1:100 but is there really such thing as Passive income ? When I looked up dictionary, these words come up

PASSIVE : not participating, inactive, not reacting, inert or quiescent.

None of these words correctly describe a well implemented passive income. I use my best judgement to find a good location, a value property and a pay master tenant. I setup a profit take target and an exit strategy in my investments before I leave and let them auto pilot. All of these are very participating, actively applying my knowledge and experience, reacting appropriately when necessary etc.

The word "Passive" also gives people a psychology of No Need To Do Anything; As if an easy to get rich scheme with a better cover.

Hence this article wants to pursue all readers to stay away from the term Passive Income. Its negative, misleading and now abusive by the over-stress marketing effect. Instead, think of Smart Income !

There is no hard and fast rules for Smart Income. Any income can be earned the regular way or the Smart way !

An employee can use minimum of his time effectively to earn the highest salary or benefits. A self employ can easily leverage on Internet to earn income repeatedly. A business owner can employ a system to run his business. An investor can setup an autopilot mechanism.

So no matter which income quadrant you are in, it is possible for you to turn that income into a smart one. Its a matter of HOW you earn your income, NOT WHAT you do.

Are you pursuing smart income ?

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.

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.

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 ?

Do NOT Leverage EVERYTHING

There are certain fundamental stuffs that you should do even before you fully understand what they are. That will at least keep you afloat at a certain stage, also often used as resting stage or jumping stone to higher level. Usually this stage is also adequate for young adult to retire early. What goes beyond however will require clear target and solid methods. Some of the easier methods shared before are ;

Stock Investment : When to Buy at What Price

... Why Use EPS and PE

... Where to get these data ?

... Management, the Qualitative side

Guaranteed Property Investment method

One common element to do great thing is the use of Leverage. Unfortunately, a lot of people learn about leveraging before they learn the right method. As a result they simply leverage everything they had.

Leverage is basically maximizing result, no matter what direction it goes. If you have a good investment system, leveraging it would result a bigger profit. Likewise, if you have a bad or no system at all, leveraging on it would only give unknown result if not just worse.

Leverage amplifies both the rewards and the risks. Hence if the risk was not properly mitigated before hand, then the result is always disastrous.

Make sure you have found a good method that you like and have proven working well for you, ie. your cup of tea. Then only apply Leveraging technique on that particular system. Else just DON'T Leverage at all !

One of the most common wrongly leverage stories come from property investment.

What can I do when bully by the Big Boys ?

Some of the most read articles here is when some of the big finance institutions' bad intentions are exposed.

Credit Card companies will charge interest on the expenses you haven't even made yet

EPF does not really take good care of your money, not all the time

Bank can charge you 2200% interest in 1 month

Malaysia government try to solve credit card debt by adding more debt to it

Bursa Malaysia tells you NOT to invest long term

How Banks call center abuse users

Government allows citizen to reduce EPF and then use Tax to take away even more of people's money

Like wise, Robert's "Conspiracy" and a few other gurus who talked about how sick today's finance systems are, also receive major big hits. Its just fun, eye opening and jaw dropping to learn these news!

So what can we do about it ? Robert's suggestion is to join the big boys playing the debt game and his instrument is property investment. Obviously that is not the 'solution'. That is just him sharing what he does best. Unfortunately property investment is NOT an instrument that can be used by mass market ( everyone ). Just take a statistic of all Robert's subscribers and see how many get what they want. Do pay attention to his early franchisees results.

One of the concepts preached by this site is Scoping. For example;

It is important to understand that Income is a pre-requisite of Personal Finance but NOT a part of it. Hence it does NOT matter how much you earn, you should have a good Personal Finance Profile.

Following that same scope, it doesn't matter how RICH a person is, he may lost everything if he does not have a solid personal finance concept.

Personal Finance is personal, its NOT economy, its NOT company finance etc. Its just You.

So no matter what is happening around you, if it didn't affect you. You just read, learn and have some fun cursing them. If some of the big boys did bully you, stay cool, play victim contacting them and minimize damage as soon as possible before stay away for good.

It may sound sad or passive but its really not. Its just about being smart and get things done. When the big boy forces you to pay RM50 credit card fee, you can stop the credit cards. When EPF wants to scam your home loan money, you can choose lump sum payment. When government tricks your EPF, you can submit request to continue contribute maximum. It is as straight forward as that.

Get the scope right that your personal finance is all about you. Do something for yourself first. Then when you still feel like wanting to do more for the greater self. Then by all mean, gather a group, sign a petition, run a parade whatever etc. But that is NOT your personal finance duty. Its the greater you. Don't let the greater you ruin your personal finance. Because the journey of greater you is long and tedious. You will need multiple recharges before you reach the end of the journey. And keeping the scope clear will allow your personal finance to comfort and pamper you along the journey.

Monopoly - Why NOT Property in PF ?

Monopoly is one of the most popular board games. When Charles lost his job, he played The Landlord's Game and then created his own version of the game which later became Monopoly. Originally he was trying to include all the dynamics of property investment into the game but as time goes people find those are too complicated. Hence today's Monopoly is simplified until its a 8 years old game. Now new board games are developed everyday by adding back those left out rules - including Robert's Rich Dad.

Some who followed this blog long enough may already know that Property Investment is NOT a suitable personal finance tool.

Although there are ways to obtain guarantee income through property investment at personal finance level, but those who have never done it would think such method is ridiculous, impossible and paper talk only. Then when they use other approaches, they miss interpret active income as passive income. As a result they would do great at times but when the big boys swing another direction, they may get knocked so hard that they not only fell off the chair but they may enter a never return land. Even at this 21st century, generally people are still NOT able to digest stuff like strategy cost, personal finance scoping etc. Hence its just too 'risky' for anyone to simply use property investment as their personal finance tool.

We may get some resonances from some of the important key concepts which are still in Monopoly :

"Your goal is not just to get rich, you HAVE TO Bankrupt everyone else !"

In 21st century personal finance, we want to revert the 20-80 rule. We want most of the people to achieve finance freedom without bringing harms to the others. We want MOST of us to get what we want, we no longer want to just follow the big boys just for the sake of it-used-to-be-like-that. We may want to be rich but we have no interest to bankrupt anyone else in the process.

The nature of property investment is an active income. So its really a business. In business world, we do have to limit the ability of our opponents in order to grow big, stay big and be successful. But in "personal" finance, we don't have to.

But guess what, "Banks never run out of Money, they just print on plain paper ... " So you will NEVER able to bankrupt banks and banks will always be the winner.

On the more positive side, such problems only exist if the play ground is limited. ie. There are only so many lands, so many buildings, 4 stations and 2 utilities companies in Monopoly. In real world, New play ground is created all the time. As long as there are more play grounds created than the number of bankrupts, theoretically people who went bankrupt at one game can simply jump to another new game and play again.

Now do you understand why governments all over the world are creating Mega Projects all the time ?

Although Charles started Monopoly but now his whole thing has been "monopolized" by Parkers Brother where Charles was only one of the developers and Parkers Brother is the official owner. So much about monopoly huh ?

Malaysia Personal Finance - Part 2 Amanah Saham

It was mentioned before that EPF in Malaysia is one of the best things that happens to ones personal finance, because it saves automatically even before you can lay a hand on your money - the main principal of Automated Saving System - ASS.

But not everyone works for someone. Or if your employer does not contribute his part, it makes EPF so much less interesting. So a government's mutual fund is born - Amanah Saham Nasional. If you are not eligible for EPF, you can still save in Amanah Saham.

Despite many disputes and diverse understanding on what Amanah Saham is or should be, one cannot deny that our poverty rate has indeed improved. The gap between rich and poor did narrow down since 50 years ago. That's the power of mutual fund, despite how wrong or how right the reason is when one save in mutual fund, all will be sharing the same return.

A government supported fund is even better for those who don't know what it is. As long as the 'government' is there, your money is protected.

So as far as value growing is concerned, that is pretty much what Malaysia government has done for your personal finance. There is an EPF and there is an Amanah Saham. If you are not adopting any of these tools, you are pretty much all on your own.

Part 1 - EPF

Part 2 - Amanah Saham

Mortgage vs Loan

Very often the terms mortgage and home loan are used interchangeably. Although it might not cause big harms but understanding the difference may bring positive impact to your personal finance ie. in Property Investment.

In fact, mortgage is the opposite of loan.

When you need extra money, someone can lend you some and in return they gain profit when you repay them. The lender may ask for collateral like your house so that if you don't repay them, they can take possession of your house, sell it and still earn a profit by doing so. They give you a loan.

If you have something valuable and you want to exchange it temporary for some money, you can prove to people how valuable your possession is and why should they give you money for it. You get your money if the lenders are satisfied their interests will be taken care of. You have just mortgaged your belongings.

Loan is a lender's contract,

mortgage is a borrower's contract.

At one instance, it may seems the same. Its just a story told from different angles. But if you think for a moment as a borrower, do you want to follow your lender's contract or should you come up with your own's ?

If you start thinking the whole money borrowing thing from your own angle and for your own interest, you may just come up with some unique and interesting arrangements.

Items that can be mortgaged are not limited to your own properties. If you are holding some collaterals from other people, you can mortgage them to higher bidders.

You don't have to mortgage 100% of your property. Since it is really up to you, you can even split a single property to 4 different mortgages and borrow money from different sources. However, you would need some very good reasons why people still want to lend you the money. But if it is a 4 sections building, it wouldn't look that ridiculous anymore, would it ?

Item that can be mortgaged does not even need to be mortar. An idea or a method can be mortgaged too. As long as someone believe in your value judgement and their interests taken care of, they can lend you money. So you can literary mortgage your property for money without giving it out as a collateral at all. Especially applicable when you are earning revenue from such properties.

Loan or Mortgage ?

Borrower or Mortgagor ?

Lender or Mortgagee ?

As mentioned earlier, this is just a matter of how the story is told. Do you want others to control your story or do you want to tell your owns ?

http://homebuying.about.com/cs/mortgagearticles/a/deedoftrust.htm

5 cents Round Up mechanism

Most of the Malaysians are already used to the 5 cents round up despite how silly some of the transactions could become.

BNM has already clearly stated that this only apply to cash transactions where we are trying to get rid of 1 cent coins. But it is obvious that even if you are paying with credit card, check and online transfer, most of the retailers will still round the 5 cents up.

When you go to bank and make a payment of $9.98 over the counter. You may write down $9.98 in the bank in slip. Upon making payment, the cashier will have to get $10.00 from you. Which is fine since now the rule is to round it up. When the transaction is done and you get back your proof of payment, what do you think your paper work will say you paid ? Correct, $9.98 !

So be smart, round it up and write down $10.00 because that is the actual amount you pay.

What if the amount is $9.96, you would definitely have to pay $9.95 but should you write on the slip $9.95 or $9.96 ?

If you did write down $9.95 as in honestly you have just paid that exact amount and not 1 cent extra, you may face the risk of another funny finance scenario ... credit card forward interest calculation where your 1 cent ignorance could have cost you $15 !! Well, not that funny but its happening everyday ...

Guess what, with this GST coming soon ... we consumers may not see it how it comes at all, we may NOT even realize after many years ... but all these little things combined together are THE ONES that kill your personal finance, especially if you don't know.

Government and the big boys can do all kind of tricks to keep the national inflation number down but what really matter is your own REAL personal inflation rate!

Different types of retirements

There are many ways to retire. Some are easier than others. And some still think there is no way they can retire at all :)

There are 2 main factors in retirement;

1. IN : how much do you have and

2. OUT : how much will you use during your retirement

So naturally if you have more IN than OUT then you can retire.

One of the ways is to calculate how much your OUT would be and then accumulate IN as fast as possible. You may have read that its rather simple for a single woman to retire at young age.

There are 2 main influence on the figure OUT;

1. if you live a luxury life, it may take longer to retire ... if ever ...

2. if you live frugally, you may retire sooner.

Some may think they live frugally but actually they may have been spending more than they should. A good way to quantify your OUT is to look at how you have been expensing for the past 10 years. It would most likely be how you will spend in future. The way we use our money is deeply embed in our subconscious. Its easier to discover it than to change it.

Once you have figured out how much you need to retire, you can work on the IN part. There are 2 ways to accumulate your IN;

1. Lump sum : save as much as possible until you reach the same amount as OUT, then retire.

2. Passive income : find a way to consistently receive your IN in smaller amount but continuously without doing much.

Now the key of successful retirement is you will need BOTH ways to accumulate your IN. Simply put, keep your day time job and start learning and building your passive income at the same time.

Problems come when some focus only on one Lump Sum to achieve retirement but a sudden expense surge in future may kick them out of their retirement. Some others only aim at luxury goals by only pursuing passive incomes neglecting the use of Lump Sum Saving method as a backup plan.

Best Retire Young ? How possible is it ?

Is it best retire young? Have you ever heard some people retire early at their 30s ? Do you think they got lucky or they must have own some businesses to become rich before they can retire ? Here are the stories of 2 persons who retired at their mid 30s and they only have worked for other people before.

( due to consent issues, the figures are generalized just to illustrate the concept )

They started working at their early 20s with starting salaries of $1,800 to $2,000. After more than 8 years of working, their monthly income were more than $6,000 and then it didn't increase any much further after that. Usually the salary big jump occurred during career move and they have changed career once or twice. Together with bonuses, they have earned a total of $800,000 in total after 12-15 years of working.

Through out those time, they have saved aside a total of $175,000. Initially they save their money in fix deposit getting about 2-3% return but very soon they move on the mutual fund and stock market. Over the years, their average return is 6.3%. So when they retire, their savings are more than $260,000.

Their monthly expenses is about $1,000 and their personal inflation rate for their life style is 2.8%. So with this saving alone, it can last them until age 75.

They also have an EPF ( like 401K ) that is more than $100,000 at their mid 30s. When they can withdraw it at their 55, they should get at least $200,000. With this, they will still have a $500,000 balance when they are 100 years old. Of course they don't plan to live that long but this is their surplus money.

At the time they retired, they also have a home and a vehicle that are already fully paid off. The property was worth $100,000. They ended up paying about $120,000 for it with their 10 years loan. Conservatively this property is expected to worth more than $200,000 when they are 60 years old, just in case and in time for them to enter old folks home where care and friends are around.

The first few years they retired, they literary sit around doing nothing. But very soon they got bored and started interacting with they industry they are used to. From time to time, they provide freelance consultancy to their friends and earn some extra income too, ie. $10,000 to $20,000 a year sometimes. With these incidental incomes, it pushes their 100-year-old left over to $3 millions !!

They may have lived frugally all along but they are enjoying life the luxury way more often now. They don't run any business, they didn't get any lucky in their investments but they must have been good at their jobs because someone actually paid for their services after they retired. But then again, a $10,000 yearly consultancy fee doesn't sound like a real consultancy at all, its more like a very small incidental assistance in one small project only. On the other hand, a $6,000 salary employee is a good employee but its no where near CxO positions neither. So there can be many good employees, this is not one of those only-one-man-scenario.

Some of the keys to their early retirement would be;

• Save First
• Live frugally first
• learn to invest
• bought a motorcycle - just to get around
• bought a small apartment - just enough for him and his visiting friends

There is really no trick here. If there has to be one, they are singles. Some of them may be married but with no dependencies, meaning no need to take care of parent and no kids.

It is really not that hard to retire young.

One last key difference between young retirees and others, their hobbies do not cost them money. As a matter of fact, some other young retirees actually make their hobbies their life time businesses after they retired.