Widget : How Much Tax Can I Save ?

Half of year 2011 has already passed. Have you ever thought of your next tax filing yet ? If you only take a look by next year, then it may be too late for you to optimize anything anymore. Try below widget and see how much the impact may be for you ! Just enter your total annual income and see how much tax you can save simply by planning early !!

This is a FREE widget provided at http://howMuchTaxCanIsave.co.cc/

Malaysia Best Rates 2011 July 25 Update

Fix Deposit

Affin Bank still offers the highest 3.6% for 12 months. 3.1% to 3.35% is common with all other banks. 1 month FD is mostly at 3% to 3.05%. Most of the foreign banks continue to offer lower FD rates.

Base Lending Rate

Most banks offers 6.6% now except JP Morgan Chase offers the lowest at 6.2%.

Saving Accounts

The Bank of Nova Scotia offers 2.05% while Bangkok Bank and Bank of Tokyo offers 2%

CIMB Air Asia Saver Account offers 1.6%

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

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%. Alliance bank on the other hand offers 2.8% to 3% which may be a better deal in general sense.

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

CIMB offers 3.25% for used cars.

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

There are too many factors in considering a good house loan, so we don't think its fair to simply summarize them here.

Our advice is to source for at least 3 offers, preferably a mix of local and foreign banks.

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.

The titles in above newspaper read:

1. you don't need much during retirement, coz your liability has reduced
2. living frugal is not hard, mentality is the key
3. you don't need to prepare to retire ?

By the time you retire, you probably don't have any more house loan or car loan to serve. Your body does not allow you to earn that much anymore. Chicks don't get attracted even if you sit in a Porsche. The bigger house you live in the harder it is for you to take care of it. In short, many people plan to 'maintain' their CURRENT lifestyle when they play for their retirement. The fact is you WILL NOT live the SAME lifestyle even if you are financially able to.

Basically the idea of save or accumulate enough so that you can STOP WORKING one day is solely base on the assumption you don't really LIKE what you are doing. You are just doing it for the sake of money or future retirement. Hence when you no longer need that money, you will want to stop working. But what if you REALLY LIKE what you do for a living ? Would you stop even if you have enough money for the rest of your life ? Be it Bill Gates, Warren Buffet or that happy old man by the street ... the answer is obvious. You will keep on doing what you like even if you retire or don't HAVE TO DO IT.

And if you have been doing something that you like for so long, the chance is that you don't really need to worry about living expenses since a long time ago. Incoming cash flow will persist and hence you don't really need to worry or prepare for a retirement. Coz you don't want to retire !!

What do you think about this easy retirement methods ? In contrast to the fundamental of save, invest and accumulate until you have enough to fight against the inflation etc. ?

Which do you prefer ?

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.

Malaysia Best Rates 2010 March 11 update

1 month Fix Deposit

Most banks offer 2.25% now except a few ones. Most of the ones who are still stuck at 2.0% are international banks like Bank of China, JP Morgan, Bank of Nova Scotia and Alliance banks.

1 year Fix Deposit

Highest offered rates is 2.75% by Affin Bank, AmBank, Bangkok Bank, Bank of Tokyo-Mitsubishi UFJ, Deutsche Bank, Hong Leong Bank, Malayan Bank.

Base Lending Rate

Most local banks stand at 5.8% now with Affin offers the lowest at 5.75%. International banks offer lower rate starting from 5.50% by Royal Bank of Scotland.

Saving Accounts

Kuwait Finance House continues to offer highest saving interest rate in its KFH Savings Account-i at 1.5%. This account is also very simple and straight forward.

Other than that, Standard Chartered's Al-Wadiah Savings Account-i offer 1.0% for up to RM 10,000 savings.

CIMB's Air Asia Savers Account and Mudharabah Saving Account-i also offers 1.0%.

Other accounts who seems like offering high interest rate but require high amount of saving are excluded. Some special accounts like OCBC's iQ Saving is also excluded because their offer rate may seems high at 3.28% but their effective rate is hard to simplify for general public. In short, for those accounts, if you use up the benefits they offer then it would be a great deal but if you do not use any of those stuff then its better you stick to a lower but 'real' rate, simpler and more straight forward saving account.

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

CIMB offers the lowest 3.25% used car loan rate.

Most of other best used car loan rates offer are 3.75% by Affin, Hong Leong Bank, Alliance, EON and RHB.

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%

Most banks offers are BLR - 1.8%.

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.

HLA Guarantee 12.5% saving plan

Hong Leong Assurance offers a plan that guarantees 12.5% return. Basically you only need to save $3,932 for 6 years and you are guaranteed to receive $500 every year starting from the 1st year for 35 years.

So 500 out of 3,932 is more than 12.5%

$500 x 35 years would give a guarantee amount of $17,500. If you do not withdraw this money, it will accumulate more interest. On the 35th year, you will get $50,126 instead of just the $17,500.

In addition, there is a dividend payout where the minimum is expected to be $200. Not guarantee but pretty guaranteed as in insurance layman terms. With the most conservative assumptions etc. you will get more than $105,000+ at the end of 35 years.

Most of the older readers should know this trick by now. There is no such thing as insurance saving that gives guarantee and higher than Fix Deposit return in normal circumstances.

If you save the same $3,932 in a bank account that gives you 1.72%, it will give you a total $41,082 on the 35th year; equivalent to the guarantee yearly $500 plus capital preservation. So the guaranteed return you are really getting is less than 1.72%. Because your capital is NOT guaranteed in this plan.

If you keep the $500 and go for the guarantee $50,126 return at the end, that is equivalent to 2.35% return. Currently bank is offering 2.5% FD rate for annual renewal.

Lastly if you are really getting back $105,862 at the end, that is equivalent to 4.72% annual return.

Consumers need to know what the effective rate is when comparing plans. For crying out loud, insurance field agents please upgrade yourself and calculate what the real effective rate is. May be you don't need to tell everyone about it but when some personal finance savvy consumers asked about it, it is more reputable if you can give some valid figures.

4.72% is NOT a bad return at all. But 35 years is too long.

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.

BEST rates in Malaysia - update 2009 12 26

Although Fix Deposit rate stays at 2% for 1 month and 2.5% for 12 months but generally FD interests are 'starting' to rise. This is inline with the speculation that interest rates will be raised by Bank Negara ... and its just a matter of time. This trend will affect both FD rate and BLR.

Three Banks have the lowest BLR since mid 2009 : 5.25%

The Royal Bank of Scotland Berhad

Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad

J.P.Morgan Chase Bank Berhad

But most loans come in terms like BLR + or - another numbers. Remember to compare your own true and effective loan rate including fee++ before deciding on a loan package. Usually these lowest BLR banks also offer less attractive effective final rates ie. BLR - a lower number. Some other deals that follow strictly on BLR on the other hand, would be great to deal with these banks.

The highest saving account interest is 1.88%

Mudharabah Basic Savings Account-i by CIMB Bank Berhad

minimum deposit RM 20

interest calculated daily, compounded monthly

The actual rate may only be 1% now. I suspect that they haven't update their marketing system yet. The actual rate payment is on a profit share bases, so the rate is not really as 'guaranteed' as other saving accounts. But historically, statistically and even politically you will most probably be getting back slightly higher interest than promised. For how long no one knows ...

However, this is still the best choice for a saving account. Other banks' Al-wadiah or Mudharabah accounts are ok too.

Some offers 1.5%

J.P.Morgan Chase Bank Berhad - Saving Account, calculated daily,compound every 6 months

Bank of America - BBS Saving Account, calculated daily,compound every 6 months

Bangkok Bank - Basic Savings Account, calculated daily,compound every 6 months

The other high interest accounts 1% are

The Bank of Nova Scotia Berhad - Basic Savings Account, calculated daily,compound every 6 months

Bank of Tokyo-Mitsubishi UFJ - Savings Account, min RM200, calculated daily,compound every 6 months

Best Car Loan rate for New Car is 2.7% by Maybank

Bank Muamalat offers 2.85% but its effective rate could be lower than Maybank. But it has a RM600 admin charge. Both banks can have up to 90% margin and 9 years tenure.

Bank Muamalat offers the same rate for Used Cars. That makes it the BEST rate for used car loan. Late payment charge in Bank Muamalat is only 1%, compares to the normal practice 8% in all other banks.

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 ..."

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.

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.

How does Best Rate make its choice

How to use this Best Rate on your own web site

How to Find all the latest rates yourself

Automatic Save First case study

A case study was raised in Automated Saving article

this is the practice I implement for myself with CIMB bank:
1. open one Basic Saving account type2 as "income account"
2. open one Air Asia Saving account as "budget account"
3. open one Basic Saving account type2 as "expense account"

income acct is my receive the $$$ I earn
budget acct is where I keep my 3-6 mth emergency fund and budget for any annual expense.
every month, the standing instruction from income to budget and from budget to expense is automated.
and I only keep expense ATM card with me, so my spending capability is limited to what I have in the expense acct.
whatever left in the income acct will be used for investment purpose.
if I ever want to buy something in future, I just add the SI into the flow I had above.

would my practice contradict to "pay yourself first" idea? what is the loophole/drawback in my practice?
thanks:)

Analysis is in progress now ..... What do you think about this ?

Pardon the delay in reply. When I first read this, my first thought was Great, Superb, Excellent ! But that was only as a comparison to others who do not save at all. So the discipline of setting this up is worth congratulating !!

The reason I didn't respond immediately that way thou ... was because I felt something wrong too but I couldn't identify what it was. Now that I sit down and look it through ... the only small potential pit fall is the investment part. You were saying you will use your "Income" money to do investment. Now investment usually comes with risk and it could earn as well as lose you money. Losing money from your #1 income account is not a soothing idea. So its best to allocate aside some money for investment purpose. I am guessing you haven't really started any big time investment yet, that's why you were just briefly thought of it. So its ok, not that big a deal.

Basic Saving Account in CIMB pays 0.25% interest which is relatively better than others account which pays 0%. However Mudharabah pays around 1%. Although not a fix rate scheme but it evidently will continue to pay higher interest than other saving accounts.

So one of the ways to improve an ASS or automated saving system is to keep the saving at the highest interest account. This may not be feasible now since your salary is already paid into the Basic Saving Account. You can change now or wait till next career change or major promotion.

Air Asia account on the other hand, although seems pretty attractive now, but I personally do not like this kind of marketing account as my 'saving' accounts. It is designed mainly for frequent flyer and it should be roll under expense category. I live long enough to see this kind of accounts come and go not lasting very long. This Air Asia account is also tight to Tune Money and a Visa card. In short, this account will tempt you to spend money a lot in months to come. Then in a couple of years, this account will be de-prioritized when CIMB partners with another merchant. By then the interest will drop to Zero etc.

If you are sure you wouldn't use the ATM, Tune Money, Visa Card and online features that comes with Air Asia Account, you may keep it to enjoy the higher than BSA interest now. But I DO NOT recommend keeping emergency fund and annual expense in this account.

Ok, generally this is my recommendation:

1. Keep your 6 months emergency fund and annual expense in your "Income" account.

2. Use your Air Asia account as your "Expense" account

This way you reduce one SI and keep more money in your "Income" account. So if you also move your "Income" account to higher interest at one shot you also earn more effective money too.

3. If investment is still needed, setup a dedicated account for that.

As for the investment account, you can use existing "expense" account for that purpose. If you are serious about investment ie. investment is more important than expenses or investment is the door to your future etc. then you should SI from your Income account to the Invest account. Otherwise, if it is still too early to talk about investment, ie. I don't mind invest some when I don't use up my expense money. Then you can transfer investment money from your left over expense account from time to time ( no need SI ).

However in real life, usually once you fix an investment method, they will have an 'account' for you too. So in general you just transfer the money straight to that investment account and not to another saving account. For example, I open an account to invest in stock market with Jupiter, so I transfer my investment money from my bank saving account straight to Jupiter's account. This is why I was guessing you haven't really started investing yet.

Using bank account to save first before actually investing is ok too. In that case, you may also consider Fix Deposit which gives much higher interest and you are not sure when you will use the money yet.

The rest of the recommendation are optional;

4. Use a higher interest account like Mudharabah as your 'income' account

5. Or keep your 'income' account but SI your saving into Mudharabah to store your 6 months emergency. Leave annual expenses in 'income' account.

6. Once you achieve 6 months emergency fund, move them into a monthly re-invested FD.

Annual expense is another topic worth mentioning. Basically this year you are saving for your next year annual expense. Then by this year end, the fund is moved to the 'expense' account for next year use.

MalPF's method was simpler and cover less categorization ... all it says is once you get your income ( time1:salary ), save a FIX portion up immediately ( ie. time2:using SI ). Then its up to you what you do with the rest of your money.

Remember this is just a blog post in Internet, I do not know you and your real condition. Use your own best judgement what to agree and what not. Afterall a paid consultants will always say, "Lets meet up" and spend 8 hours asking all about your ancestors before giving you advice - "Yes! You did good and now you should also open this and that accounts too with my partners."

Hope this helps some ...

Getting Rich is NOT part of Personal Finance

One of the hottest topics in personal finance is to get rich, and usually to get rich fast! Its human nature that we pay attention to what other pay attention to. Some love to follow blindly on get rich fast scheme, some make big money out of it and some others hate it. Either ways, get rich fast scheme is part of our lives now.

The only thing MalPF asked everyone to do is to setup an automated saving system. On the other hand a hot sexy attractive person asked you to follow the 'method' and you shall be RICH. There is no doubt which choice is more appealing to make; a dull saving idea vs an exciting venture.

The fact is that no matter how rich you become, it has NOTHING to do with your personal finance. Getting Rich is to increase Income substancially. And Income is a Pre-requisite of Personal Finance but NOT a part in it. This understanding may not bring much difference to most but for some who spend their whole life pursuing richness, it may just be a live and dead switch; As showcase in Why the Rich suicide.

There is nothing wrong with wanting to get rich. It is even OK to get rich FAST! After all, in income generation, the key factors are creativity and innovations, where no rules apply except your own. But if you think getting rich will solve all the other problems, then the problem starts to root in you. All effort put into getting rich is ONLY to increase income. Without a system on how to use it and retain it at a personal level, you haven't achieve your optimum yet.

Getting Rich itself may carry this deadly inherited problem, however Getting Rich has a superb by product - Positive Attitude and Self Confidence. Even after a long haul journey and ended with no success, people who focus on these by products rather than the money itself, will always stay happy and content. Which eventually give them energy to do the whole cycle again. Until they get what they want. These by products, however, do not exsit in get rich FAST.

It is BEST if a person has a solid personal finance while she is pursuing the Rich. Each of the success and failure add values to her personal finance. The journey to become Rich and stay Rich is usually the most steady for this kind of people.

However, the good thing is, you don't have to have personal finance before acquiring your Richness. You just need it right before you lose your Richness. Acquiring personal finance while you are Rich is, honestly, faster and easier. The only contradiction is if you have acquired rich without personal finance in mind, it is most likely you wouldn't emphasize on it while you are enjoying your rich.

FREE info on BEST Rates in Malaysia

Its been a while since I start sharing the latest BEST rates in Malaysia including Saving Accounts, Fix Deposit, Car and House Loan, BLR etc. The orange color bar start with wordings "Best Rates..." at the top right angle on this page is an example. Or you can see one below here too ...

Since then it has been made into a widget and anyone can include this info at their own blog / web site by following some simple instruction here.

It is NOT easy to simply pick a number out of the long list of available choices and call it Best rate. Furthermore, there are so many considerations and factors that it is almost imposible for other people to 'decide' which rate is the BEST rate for you. Hence, lets review why and how malpf makes its list.

Fix Deposit is a finance tool you use when you have a sum of money that you will NOT be using for a while and you can gain Higher saving interest than normal saving account. So the higher the rate the better it is. Hence the interest rate is mark in blue color.

One of the greatest pit fall in FD is that if you withdraw before its maturity date, you may lose your interest or even have to pay penalty to it - liquidity problem. On another aspect, its best to increase the frequency of 'taking' the interest and put in back into the FD itself to enjoy the power of compounding interest. Hence keeping these 2 in mind (liquidity and compound interest), 1 month FD is the better choice compare to other longer term FD even if longer term FD may give higher return. Choosing compound more frequent with lower rate is better than locking the fund with a rate that seems high today.

Hence when comparing FD rate, 1 month FD is used and the higher the rate is the better.

BLR or Base Lending Rate is another important number where most of the variable loan will use as the reference loan rate. The lower this number is, the better it is. Hence the rate is marked with RED color. Just to add a note that business loan can benefit more from lower BLR than housing loan.

Saving account is one of the hardest ones to compare due to its large variation in future. There are junior and senior accounts, ordinary and islamic accounts etc. However, if we focus on the fundamental of saving account, it is a finance tool to 'temporary' keep our money to maintain our cash flow, ie. day to day liquidity. So the ease of interest calculation is important and we shall focus mainly on working adults ( Not Junior Nor Senior accounts ). For ease of calculation, multi-tier rates are less welcome. Certain accounts who impose minimum amount before paying interest is also less welcome. After considering these factors, we can pick the highest interest rate as the Best Rate (in blue).

Car Loan is usually fix loan rate. Car loan for used car and new car is very different. However, use car's selling price is very largely different as well. So when used car loan rate is too high, simply shop around more looking for a cheaper car will do. Hence back to the Best rates consideration, it is more reliable to consider NEW car loan rate where the car price is pretty much standard. In this case, the lower the number the better it is. ( red )

Lastly is House Loan, which is also a very tough call for Best Rate. However, borrowing principals from saving accounts, multi-tier rates are less favorable here. Getting 1-2 years of Zero interest by committing to potentially high rate in future is NOT exactly a great way to go. Therefore malpf only concentrates on the simplest BLR-X% where the Higher the X is the Better it is, ( blue )

Among all other best rates, house loan best rate may be the least influencing one because all other considerations like Zero Moving Cost and the most recent flexi all in one account, overdraft without the overdraft rate feature makes it really tough to generalize their good and bad.

Alright, thats the start of why and how these rates are choosen.

Check out below on some of the new Best Rates too, some of them may be useful to some people too ... ie.

FD12mth : 12 months Fix Deposit for those who are really sure will not touch those money for a year

Save1mil : Saving account that has MORE than 1 million in it

Save15k : Saving account thas has MORE than RM 15,000 in it

iSave : Islamic Saving account

UsedCarL : Car Loan rate for used cars

Personal Finance in 1Picture

I started this Blog with very fundamental talks on personal finance on lay man write up. I have to apologize if recent posts have become quite cryptic and speculative. So let’s get back to some of the unfinished fundamentals on personal finance.

First you must have an income. Income can be any form of received money including pocket money for kids, household money received from bread earner, begged etc.

No matter how you get your income, you must setup an automated system to save part of your incom; BEFORE you do anything else ! Remember you need your ASS - Automated Saving System.

In today standard, this automated saving system should give you some interest, preferably matching fix deposit rate.

No matter if your income makes you a Rich, Average or Poor person, if you don't have an ASS you may find yourself in trouble one day. Some even cost them their lives.

Once you have enough money in your ASS, ie. can substain your lifestyle for 3, 6 or 9 months. You will need to start thinking about Money Earns Money - MeM. 'Passive' is the keyword. Something that you do once now and enjoy a life long extra income in future.

There are standard methods or PF tools to achieve MeM. Each level up the pyramid requires more learning. Entering into any of this with the wrong preception or knowledge may bring negative MeM.

At this stage, many will tell you high risk high return, low risk low return. While they are not wrong, but that concept is not entirely helpful to your personal finance. In order to focus on what can helps, you may need 21st century understanding on Risk.

Further in future, you may see that MalPF will preach that

1) Personal Risk is what you know, the more you know the better it is, irrelevant to what PF tool it is

2) PF Tool Risk is fixed no matter who invest in it, irrelevan to who you are

Bundle together that 2 concepts result one simple action to position yourself well in MeM - keep learning ( the easy part ) and learn the right stuff ( the harder part - due to Rich Conspiracy ).

There are 2 BIG parts in MeM. The part mentioned above is Earn 2 with 1 or Doubling your money - MeMx2 The crucial part left out here on purpose is Time - which is also the variable for individuals.

We use Rule of 72 to quickly calculate this variable. For example, it takes 6 years to double my money if I get 12% return from my investment.

So far MalPF model works well without the need of setting goals. However MeMx2 is the part where you may see a distinctive difference between a person do it with goals and another without.

Should one still find it hard to find own goals, simply follow the magic number - 7. Setup 7 MeMx2 accounts for the following:

1. Car

2. House

3. Family

4. Education

5. Retirement

6. Charity

7. Holiday and Travels

The good thing about none goal specific MeMx2 is that they are flexible and interchangable. You should start all 7 accounts at once even if you think you don't need it. Even putting in 1 cent a month into each account is better than putting 10 cent into one investment account only. ( No, this is NOT diversification, this is just broaden your availability when you don't have a target, like spreading a fish net when you don't have a hook/bait )

The second part of MeM is to Buy 100 with 1 or Secure Future Money - MeM100. Also commonly treated as insurance. While MeMx2 urges us to learn more, gain more knowledge but there are always something we haven't learned yet or will never able to 'finish' learning. Hence for all the stuff we don't know, we apply MeM100 to it.

This is especially useful when you have goals in MeMx2. For example, I want to save $100 a month for 20 years with 12% return so that I can get my $100,000 for my retirement. So I can buy a $100,000 insurance just incase if I lost my ability to save that $100, I will still get my $100,000 regardless.

There are 5 big areas in MeM100:

1. Die Early

2. Living Dead

3. Fail to Die

4. Accident

5. Income Replacement

If you still don't have clear goals in life up to this stage. Then you will not be able to have an optimized Personal finance plan ie. Buy Term Invest The Rest. You would probably go for something traditional called Whole Life Plan. Its not bad at all for someone who cann't even figure out a single goal after 20+ years of life. Try This ...

and this is what this picture is all about ... ( may be not All but the nutshell yes )

Medium Income Retire Successfully

Gabriel Pang is 68 years old.  He is one of my most favorite personal finance friends.  As much as I am helping with his personal finance, I learn much more from his experience.

He started earning his first $100 at age 12.  That was $100 for the whole year washing cars for neighbours.  At that time he saved all his $100.  At age 16, he got a part time job earning $1,800 that year.  He saved $1,440 that year.  Later he could save less when he went to college.  For example, at age 20 he earned $1,100 but save only $550.

He got a proper job at age 23 earning $29,700 that year.  He managed to save $8.019 that year, about 30% of his income.  Then when he got married, he can only save 20% instead of 30%.

He started his own business at age 28.  At that year, his salary was $87,600 and side income $12,000.  He managed to save $12,312 that year.  Finally he quited his job at age 31 and worked full time on his own.  His total earning is less than his old salary but he also pay less tax so he ended up with similar NET income.

One thing he does consistently is his saving range from 5% to 30% of his income.  According to his past historical results, his saving has been giving him 5% to 12% return yearly.

At age 42, he retired.  But after resting for 3 years, some opportunities showed up and he earned another $30,000 to $80,000 incidentally a couple of times.  Then he retired for good at age 53.  He finished paying all his loan at age 58.

His last year expenses is $53,915, taken out from his $555,105 saving.

Below is his cash flow chart.  It may be a bit confusing but basically it shows his total income, the taxes and loan he has been paying and a cumulative saving with return.  Top part purple color is the one when he made a lost in his own business or when he retired, then he needs to withdraw money out from his saving in order to survive which happened at age 36, 39 for business lost and then since age 42 for retirement.

Some of the high lights of his life are shown in chart below.

It seems like curently he has half a million saving for his retirement.  His personal inflation for the past 20 over years average is 3% and also for the past 20 years his saving has been giving him an average of 12% return consistently.  So using these 2 figures, I helped him projected that he can live on his saving until he is 98 years old.

This calculation excludes the EPF he didn't take out at age 55 which he has left there by itself.  He stopped contributing to EPF at age 30 with about $50,000 insdie.  Right now there are about $928,849 in there.

(correction 25 March 2009 : $50k was his own contribution only, total balance at age 30 was $115,823.11)

So he can safely enjoy his retirement as the way he has been for the last 20 years.

He only worked for less than 10 years and his own business only lasts 13 years with some years making losts.  His average annual income is about $50,000.  

What has he done that he can retire the way he wanted so easily ?

( part 1, part 2 ,part 3)