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Wednesday, August 20, 2014

How to save for your home down payment?


Have you ever wonder if you could ever got yourself a place you could call your own...a place call home?

If you have this dream of owning a home and finding it difficult to believe you can achieve it, you're absolutely normal, given the current economy in our country. But like many, it's possible to save for your home downpayment.



Some of you may opt to withdraw from your Employees Provident Fund (EPF) account number 2 to fund your house downpayment, but EPF is your retirement savings and you should really consider the possibility of it not being enough. For example, a property selling at RM400,000 with 90% loan comes with a down payment of RM40,000 (10%) and an additional of about RM20,000 in fees and charges. This would approximately come up to an initial payment of RM60,000 in cash.

It may seem overwhelming to save up that much, but by drawing a strict and realistic savings plan for this purpose, you will be able to afford your first home in no time.

1) CREATE A BUDGET....STICK WITH IT

I think most people don't have problem creating a budget...the problem is they forgot the need to stick with it. Start by deducting a certain portion for savings, say 10% to 30%, depending on your own preference. 

A clear budget is important because it helps to identify where you spend the most, whether it's on food, leisure, entertainment, family, social etc.

With a clear direction, it's only easier to cut and change certain habit that is wasteful and expensive. You will also learn to plan your activities like going for a cinema, exclusive food or clothing to a certain limit to ensure you stick with the BUDGET.

2) AFFORDABLE ALTERNATIVES

I think this is important for everyone of us. Most people, like myself are too lazy to compare clothes with different shops because we are rushing. We don't look for afforable alternatvies, when they are plenty.

  • For example, I replace my gym membership to going for running and workout at my condo's gym. 
  • Occasionally, I would eat at home for dinner instead of going out for my meal. (it's also healthier)
  • Substitute drinking session at club or bar to mamak session or kopitiam session. You maintain your social life, but at different places. You may also invite your friends over for a drink at home, instead of drinking at places that serve expensive drinks.
  • I change my internet from TM's UniFi to TIME Broadband. TM's UniFi cheapest at RM149 for 5Mbps while TIME's cheapest at RM129 for 8Mbps.
  • Instead of driving to work (where you pay for petrol, toll and parking), why not consider taking the public transport? The LRT is good in the country and in Klang Valley, there are also a lot of buses at a frequency that is acceptable. Maybe you have to wait the extra 10 minutes, but sometimes you skip the jam and you save so much more....
You may not believe it but the little from all these do great wonders in the long run.

3) TAKE ADVANTAGE OF TAX EXCEMPT RELIEFS

Once you start to compare and look for affordable alternatives, it's also time to take note of the tax deductible items. By making simple efforts to understand the tax relief and rebates when you file for your tax yearly, you can drastically reduce your taxable income and pay less taxes.

4) EARN EXTRA INCOME FROM HOBBY, SKILL, TIME & EVEN JUNK

If you think your earnings are not sufficient at the moment, consider earning extra income from your hobby, skill, time and even junk.

  • If you are good at writing, why not make full use of that? Start a blog, get nuffnang, or you may even offer your services to local newspaper, magazines, or websites. Websites like asiaparttime.com offers some freelance role at this.
  • If you love art and painting, consider selling it online. Paintings and craft souvenirs could earn you some extra cash. Some of the ways to sell is is via Facebook, eBay, Lelong.my, Mudah.my etc.
  • If you are good in a particular subject or are good at studies, consider offering tutor. Tutoring school students is a great way to earn extra income. I did this when I was in my university.
There are a lot of ways to do it...you just got to spend a bit of time and effort to think and understand how it works.

5) LET MONEY MAKE MONEY

I think this is the most important part. If you are in your mid 20s or early 30s and still don't know about investment, perhaps it's time to learn some basic rules of it. If stock market seems like a high risk investment for you, there are others with lower risk such as high-yield fixed deposits, bonds, Amanah Saham or unit trusts. These investments will bear returns which can be reinvested to earn more returns on our investments.

Once you figured out how you can save and invest your savings to generate returns, you need to be motivated and disciplined to keep going until you achieve your goal.

Well, if you have just started, it will feel difficult. You might be demotivated to continue, looking at the difference of the targeted amount and your current standing, but keep it up. After all, Rome was not built in a day, my friend.

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Tuesday, July 29, 2014

Costly Financial Planning Mistakes to Avoid





A lot of us think that financial planning is difficult, and thus relying on financial planners to plan on our behalf, but financial planning is something that is different from one individual to another individual depending on age, risk tolerance, plans and many more; thus relying on financial planners who usually have certain templates of financial plans for financial planning is one of the costliest financial planning mistakes that one should avoid - although getting the advice from financial planners as reference is strongly advisable.

The next costly financial planning that one should avoid is to treat retirement fund like EPF in Malaysia or CPF in Singapore as savings. I come across many who told me that they do have savings and give the example like EPF which is a financial planning blunder. Retirement fund should be treated as the fund for retirement (as the name already suggested), and one should somehow allocate a portion of the income as savings for rainy days. IF this is not do-able, it just mean that he or she is not supposed to commit more to loans or other fixed expenses and should come out with a plan to have fixed savings. Without savings, one will not have free cash flow (FCF) which will enable him or her to invest or grow the savings to at least combat inflation.


Not revising financial plan according to the environment and situation is also another financial planning mistake which one should really avoid. We tend to think that financial planning is a one time thing, but if we were to fully utilized the tax benefits and economy news, we stand a better chance to have higher returns. Also as we gets older, we need to reduce exposure to risky investment and go for fixed-income investment like REITS, dividend counters or even higher rate fixed deposit by becoming premier banking customers. 


Finally, having too many accounts doesn't seems to be an issue for most people, but having too many accounts actually be one of the costliest mistake that one have in financial planning. As mentioned previously, by becoming premier banking customers, we stand a better chance to have better fixed deposit rates; which doesn't seems much but as time goes, the extra compounded value can make a different. Having too many accounts also makes planning more difficult and the limited resources will end up in different accounts; thus harder for one to become premier banking customer and to make use of all the benefits of becoming one. Having more than one account is advisable, but certainly not to the extend of 10 to 20 accounts where monitoring becoming more difficult.

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