Have a Great Thanksgiving

Not much to say. Still bullish, but slightly less frenetic action in the market. We will have to wait for all assets to correct to see significant softening, since they all seem connected at present..gold, $CAD, stocks, RE, oil and commodities.

BTW here is the bubble graph I have posted before and Larry Yatter's graph of Vancouver average prices. As you can see it looks like make or break time!

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 ?

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.

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 ?

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.