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Thursday, December 27, 2012

Summary on FY2012

We are just less than a week to 2013 and I guess it is time for us to reflect on our annual financial goal and how are we doing or whether we are still in on track to achieve our financial goal, or whether we are lagging behind.

We should always check our financial goal quarterly, and I always check, just to ensure that the goal that I set earlier is achievable and on track to achieve it. If not, then what is the problem until we are side track or off target. Always reviewing this will ensure that we set a more realistic goal in the future, achieving financial goal will give us a feel of fulfillment.

Anyway, back to my financial goal, I usually set a very basic and generic financial goals which is to grow the stocks portfolio by about certain percentage, tithing and to clear certain percentage of debt. This year, it will not be any different as well - the only different being that I forgotten to blog it out.

The stocks portfolio growth by about 24%, with about 29% of the growth coming from the dividend itself. Unfortunately the dividend that I get still far from what I need in order to retire, or at least retire partially. It still stood at about 10% from how much I aim in order to retire or semi-retire. Tithing, is just as usual, 10% from my income while I believe I able to reduce my debt to more than 10% this year, by leveraging some cash which all will be fully paid by June next year.

Saturday, November 24, 2012

Ways to Cut Food Bills

As we all know, food is very important part in our budgeting. We cannot be too stingy on our food, allocating too few, we might end up starving end of the month while over allocation and we might ended up gaining few pounds end of the month - which is not something that we wanted.

Anyway, we need to make sure we have sufficient allocation on food, and while for some of us who are renting room near to our working area and do not have the luxury to make our own food, there are some who are able to do so - which is good, as you can spend time doing something useful and at the same time reducing the food cost and finally bring down the monthly food allocation which can in turn make the savings or investment allocation higher.

For the next few blog post, I will try to post the details of few of the ways to cut the food bills. The following are the brief summary of how you can cut the food bills whenever you are thinking to save for annual vacation, or just trying to cut the amount you allocate for food or just being frugal:-
  • cook from scratch
  • reduce meat intake
  • stewing meat
  • buy in bulk
  • take a list
  • ignore the list
  • buy in-season vegetable
  • find a local market
  • shop/dine at closing times
  • don't forget about the frozen produce
  • reduce portion size
  • avoid fancy packages
  • invest in water filter
  • get creative with spices
  • grow your own
  • avoid "lite" food

Saturday, November 10, 2012

Rich or wealthy - which are you?

IN recent years, the level of household debt among Malaysians has been a matter of growing concern, as the statistics show that the average person is way over his head in debt.

Based on Bank Negara figures, the typical household borrowing is a shocking 140% of disposable income.

That's something to think about, as it means that at least half of Malaysians are struggling desperately with their finances. So, they probably have very little idea of how they can become financially free, let alone wealthy.

Incredible, isn't it? Most people we know would like to be free of financial worries and to enjoy a high standard of living, but so few seem to get it right.

The journey towards financial success begins by first knowing where you are. Strangely, many people in the middle class find it difficult to answer this question: are you middle class, financially free or rich?

In my latest book, Set Yourself Free: How To Optimise Money and Become Wealthy With Minimum Effort and Risk, I have talked about the money matrix, an intellectual tool that I have developed to help you understand the state of your finances and how you can move towards financial freedom, and eventually wealth. (see chart)

Think about the various elements in the money matrix for a while, and let the ideas being discussed here get absorbed into the way you look at money. How you view these situations will determine what you do to achieve your goals.

The vertical axis denotes your ability to generate an active income, which is described as your money-making ability. The higher your money-making ability, the more income you generate. You can take steps to increase your money-making ability by focusing your time, resources and effort on the area that you do best.

Compared to a general practitioner, a heart specialist is able to generate a higher income. Likewise, if you are a small business owner, you could concentrate on becoming a market leader in your industry.

Most people find it relatively easy to increase their money-making ability. In fact, some people become absolutely driven by it, thinking that it is the only way to resolve all their financial concerns. If you are wondering why so many people are constantly chasing their financial goals, but never seem to reach them, that's because they are focusing on making more money but not on optimising what they have!

People who adopt this mentality will always be stuck in the “rat race”. They cannot afford to stop working for fear that they cannot maintain their present lifestyle. If you are one of these people, it may be time to re-evaluate your priorities.

Money optimisation, as measured on the horizontal axis of the money matrix, reflects your ability to turn your active income into assets and then using those assets to support your lifestyle in the optimal manner. In other words, money optimisation is about making your accumulated assets work for you. The higher your money optimisation ability, the more assets you will accumulate and preserve.

To achieve financial success, you must fully understand how money making and money optimisation interact with each other. Let us look at the various sections in the money matrix:

Poor: You are in this group if you have low money-making ability and low money optimisation ability. Your income is low and you spend most of it on your living expenses. If you lose your current source of income, you risk being unable to look after your basic living needs.

Middle Class: In this group, you have medium money-making ability and low money-optimisation ability. Your income is above average but you spend most of it on a comfortable lifestyle. If you lose your current active income, you risk being unable to maintain your lifestyle.

Rich: You have high money-making ability but low money-optimisation ability. Your income is very high but you spend most of it on a luxurious lifestyle and your financial resources are not optimised. You will not be able to maintain this lifestyle if a financial disaster strikes and you lose your current active income.

When we understand the behaviour that puts us into one of these three categories, we will be able to take the right steps to optimise our money. Now, let us look at the column on the right, which shows the financial health status that a person can work towards:

Self-Sufficient: If you have low money-making ability but high money-optimisation ability, you can be in this category. You may have a low income but you manage your finances very carefully. You may live a simple life, but you do not have to depend on anyone else for your survival.

Financially Free: If you have medium money-making ability but high money-optimisation ability, you can be in this group. You control your expenses so that they do not grow in tandem with your increasing income. Instead, you focus on saving or investing your extra income and as a result, you manage to accumulate a reasonable size of assets to maintain your current living standard.

Wealthy: If you have high money-making ability and high money-optimisation ability, you are in the wealthy group. You have an extremely high income and enjoy a comfortable, but not luxurious lifestyle. You turn a very high percentage of your income into savings and invest it wisely. As a result, you generate a huge passive income which is more than sufficient for your living expenses. In addition, you have taken the necessary measures to ensure that your wealth can potentially last for generations.

The money matrix is, therefore, a guide to help you find out if you need to increase your money optimisation ability or money-making ability to improve your financial position. Without fully comprehending these two elements, many people feel lost and focus on the wrong things in their journey to seek wealth.

Let us take the case of Michael, who has identified himself as belonging to the middle-class section in the money matrix. Michael wants to get out of the rat race and be financially free. However, he makes the mistake of focusing solely on his money-making ability to generate more income, and ignores all aspects of money optimisation. Michael will end up in the rich section.

Along the way, if something were to happen to Michael and he stopped working, Michael may find himself back at being middle class, or worse, in the poor category.

If there's one thing which could help you achieve financial freedom, and eventually become wealthy, it would be this: you must not just focus on making more money, but must optimise what you have.


Monday, October 22, 2012

So, The Gold Bug Still Bugs You

A very interesting article that I read last weekend regarding gold and the monetary system. It's quite long winded, but very informative and I think it's appropriate to share it here since we have been monitoring the gold price for quite some time already.

It gives us the insight of gold and how gold are ties to the money value, even how often countries stray away from Gold Standard and then coming back to it, and then moving away from Gold Standard again and back and forth. The writer gives advice that if we do really want to hold physical gold, we should not do it in a rush, gold bug or not.

The article is as follow:-

KEYNES called it a “barbaric relic” in 1924. Scarce, attractive, malleable and immune to corrosion – gold used to be ideal money before the advent of modern paper money. Today, just like diamonds, gold is also a girl’s best friend.

In Asia, it is the masses’ darling. Most Asians are showered with gold when they are born; gold is figuratively given away during Chinese New Year; blessed with it when they get married; and even when they die – gold paper is burnt to accompany them to wherever. Money aside, gold plays an important part in the social lives of most people in Asia.

Monetary gold

Britain went off the gold standard in September 1931 in the midst of the Great Depression (1929-32). Two groups of European “gold bloc” nations (including Germany and France) held on and did not abandon the gold link until 1936.

By then, rigid adherence to the gold standard had made the Depression worse. Between 1934 and 1940, some US$16bil of gold flowed into the US, giving it ¾’s of global official gold holdings. By the end of World War II (WWII), it was clear that the US dollar was as good as gold. Indeed, it was even better since US dollar holdings earned a regular return.

After WWII, the Bretton woods system was put into place. The original system worked well for 25 years mainly because the US dollar was convertible into gold at a fixed price (US$35 an ounce). The International Monetary Fund (IMF) served as administrator for this gold-anchored monetary system of fixed (but adjustable) exchange rates among currencies.

However, in August 1971, President Nixon closed the vestigial gold window and the world off this gold-exchange standard. So, for the past 38 years, the world has been engaged in an experimental monetary system based essentially on a single reserve (the US dollar) with no link to gold.

This new arrangement of flexible (and managed) exchange rates worked flauntingly in the early years of the 1970s; and passably well in the next two decades.

Lately, however, the dollar exchange standard has been blamed for everything from promoting global imbalances to the recent economic crisis – and a future of rampant inflation yet to come. For more, read my Aug 8, 2009 column, “The Dollar Quagmire”.

The gold bugs are having a field day since. A Canadian gold-watcher friend talks enthusiastically of “gold being the only currency central banks can’t print” and “gold as an attractive new pillar of the global monetary system since it is not beholden to national politics, nor dependent on the whims of any central bank.”

World running out of gold?

The continuing interest in gold by commodity investors, central bankers, savers, speculators and consumers make it unique among commodities. Indeed, contrary to recent talk of “peak gold”, the world is not running out of gold.

Rising prices and faltering mines do not imply scarcity. Gold is constantly mined, bought, held and sold. Every year, over four times as much gold is mined and over twice as much recycled as is needed by industry.

Contrast this with say, oil. Annual crude oil supply more or less matches demand. Global oil stockpiles satisfy up to 40 days of crude demand.

The World Gold Council estimates that gold above ground today amounts to 163,000 tonnes, which would last 375 years, or nearly 3,000 times longer. Of this, holdings by central banks, IMF and governments (i.e. monetary gold) aggregated about 25,000 tonnes (15% of global) of which, the largest hoard is in the US – 8,100 tonnes. China, the world’s largest gold producer, holds only 1,054 tonnes (up 76% since 2003).

Even so, the very threat of any scarcity triggers off substitution. The 1970 price spike boosted porcelain in dentistry. Jewellery demand may possibly be more price inelastic.

But that’s also a matter of fashion, as recent slide in sales suggests. What’s more, psychology rather than supply and demand, remains critical.

Man’s addiction to gold

Gold and its mystique are deeply rooted in our human psyche. What’s clear is the absence of any rationale to tie money to gold; it is an anachronism of our modern world. Why hold gold then?

The context is revealing. The US$1 bill (its current basic design was from 1957) has since lost 87% of its purchasing power against the US consumer price index-CPI (average annual rate of 4%, as against 2% in Europe).

According to Harvard economic historian Prof Neil Ferguson, if you exchanged US$1,000 of savings for gold before the window was slammed shut in 1971, you would have received 26.6 troy oz of gold. Sold at even US$1,000/oz, the savings would have been worth US$26,596 today! But that’s history.

Is gold a good store of value? No. On the surface, it seems so. Look at the facts. In 1980, gold price was US$400. By 1990, the US CPI had risen more than 60% but the gold price stayed at US$400.

By 2000, the gold price fell back to US$300, while the CPI more than doubled! Even when the gold price peaked to US$850 in 2008, it fell back quickly in the face of falling demand.

So, over 20 years, gold prices had failed to keep up with the rise in CPI. When investors are scared – about inflation, political turmoil, financial crises, deflation – they run for cover to gold. Its price trend has been tracked and labelled the “index of anxiety.” But, clear as day, when things calm down, gold price always retracts.

Is gold a good hedge against the weak US dollar? Again, no. History shows gold does not hold its value against the euro or yen when the US dollar depreciates.

In 1980, US$1=200 yen. And, 25 years later, US$1=110 yen. The price of gold had remained during this period at about the 1980 level, i.e. US$400. So holding gold did not offset the fall in the value of the US dollar.

Surely, there is more to just “flight to safety” in gold. Recent experience shows that gold had performed well. Admittedly, gold is no slouch; it can have legs. But the future is changing.

In 2009, the gold price averaged US$972, 10% higher than what the London Bullion Market Association (LBMA) analysts and traders had predicted early in 2009.

The median forecast for 2010 is an average US$1,100. Gold reached a record US$1,226 on Dec 3, 2009 – best ever since 1948; by year end, it was US$1,096.2. Gold stood at US$1,121 when I last checked. So gold did have a good run in 2009 – up by about 35% to its all time high.

Is gold looking less barbaric?

Several reasons account for the bullion’s price rally. They also suggest gold to be a high risk and highly volatile investment as an asset class with other commodities.

First, there has been (and still is) unprecedented investor interest, prompted by continuing uncertainties of all sorts, including doubts about the US dollar’s long-term role as a reserve currency.

Second, the shift by many central banks to be net buyers of gold (net sellers since 1988). Recent buying by China and India excites the market.

Third, worries that continuing government stimuli to counter the credit crunch could well be inflating another round of asset price bubble. I already hear LBMA traders complaining that gold is trading above “fair value”, as reflected by the current state of the fragile and anaemic global economy.

Fourth, rising sovereign risk (Dubai, Greece, Ireland and Spain) is raising doubts about the political will of the US and European governments in putting a credible back-stop on the “too-big-to-save” financial system.

Fifth, rapid changes have taken place in the mechanics of investing in gold (including more complex modes of investing in gold mining stocks and exchange-traded funds – ETFs) to effectively own gold without the hassle of actually owning physical gold.

Sixth, there is the ever present herding behaviour and “momentum trading” by ever bullish traders, reaching for new highs. Overhanging the market is the unravelling of the US dollar funded carry-trade.

Finally, instability of the current gold-free international monetary system poses new risks of price volatility that cannot be readily identified nor easily explained.

Last year’s financial implosion had led to great loss of confidence in paper assets. There is now a definite shift to holding tangible assets.

Gold’s uncertain future

I don’t see how gold can become a really attractive investment. Over its very long run since 1971, the yield on gold averaged 2% annually. Stocks were up 8% per annum by contrast. I do know some who look at buying gold as an insurance policy. As I see it, investors in gold are in it for the excitement of making money. The recent increasing involvement of commodity traders and private investors in gold points to continuing volatility and speculation.

So, expect boom-and-bust-like movements in gold prices. The new players providing any element of stability are the rich emerging countries’ central banks, that are essentially long-term players. If nothing else, they have staying power. The IMF will remain, in the short run, at least – a net seller through its limited gold sales programme (403.3 tonnes).

In the end, I share the views of my Harvard mentor Martin Feldstein and the ever pessimistic Columbia Prof Nouriel Roubini that gold is just not a good hedge, period.

It must be remembered that gold really has no intrinsic value. It is sterile. Hence, there is the ever present danger and risk of constant downside corrections. Indeed, I can see gold going back to previous peaks of US$750-US$800 with ease.

So if you want to hold some gold, there is no reason why you should do it in a rush – gold bug or not.


Half of self-made women billionaires from China

HALF of the 22 women on a list of self-made billionaires released last Friday by Shanghai-based Hurun Research Institute are from China.
According to the 2012 Global Self-Made Rich Women List, 48-year-old Longfor Properties Co Ltd chairman Wu Yajun is ranked No. 1 with a fortune of 38 billion yuan (RM18.2bil), followed by 71-year-old Chan Lai Wa of Fu Wah International Group (No. 2), Zhang Yin of Nine Dragons Paper Holdings (No. 4) and Zhang Xin of SOHO China (No. 5).
These four billionaires maintained their top five ranking from last year.
The other top 10 richest women are Spain’s Rosalia Mera of Zara (No. 3), US celebrity Oprah Winfrey (No. 6), American clothing giant The Gap co-founder Doris Fisher (No. 7), Huabao Group chairman Chu Lam Yiu (No. 7), mum-and-daughter pair of Lv Hui and Diana Chen Ningning (No. 9), China Orient Landscape chairman He Qiaonv and Specsavers founder Mary Perkins from Britain (both No. 10).

The minimum wealth requirement for this year’s list is US$1bil (RM3.05bil) and the number of rich women on the list dropped from 28 to 22 with an average wealth of 13.7 billion yuan (RM6.6bil), which was a 6.8% decline from last year.
Rupert Hoogewerf, who is the chairman and chief researcher of Hurun Report, which has published the list and several other rich men lists equivalent to Forbes dedicated to China over the past decade, said the most interesting feature of the Global Self-Made Rich Women List was the dominance of wealthy Chinese women.
“The numbers are overwhelming. Chinese women in business, are like the Chinese table tennis team, at the moment, unbeatable.
“Today people are talking about the internationalisation of Chinese business. What is completely international is the women in business,” he said in a statement.
Fortunes of most of the Chinese female billionaires declined due to the weakening of the global economy and China’s sluggish property market.
Wu Yajun’s wealth decreased 10% from last year’s 42 billion yuan (RM20.2bil) while the assets of Zhang Yin and Zhang Xin slumped 28.6% to 20 billion yuan (RM9.6bil) and 19% to 17 billion yuan (RM8.2bil), respectively.
Only Chan Lai Wa, Lv Hui-Diana Chen and He Qiaonv saw increases in their fortunes to 34 billion yuan (RM16bil), 12 billion yuan (RM5.8bil) and 10 billion yuan (RM4.8bil), respectively.
Around 30% of the rich women in the world listed in the Hurun Report are engaged in property development, 20% in manufacturing and 14% in the apparel industry.
Eight of the 11 Chinese women are deputies of the National People’s Congress (NPC) and representatives of the Chinese People’s Political Consultative Conference (CPPCC). NPC is China’s top legislative body and CPPCC is its foremost political advisory body.
Also noteworthy is that Wu Yajun and Chan Lai Wa made it to the top 10 of the 2012 China Rich List (for both men and women) released last month.
In its past 14-year history, two women have topped the China Rich List. Zhang Yin was ranked China’s richest person in 2006 with a fortune of US$3bil (RM9bil) while Yang Huiyan inherited US$18bil (RM54bil) in assets from her father at the age of 25 to become the richest the following year.
This year, a total of 251 male and female billionaires in China made the list, albeit down 20 from last year, it was still up by leaps and bounds when there were only 15 billionaires six years ago.

Monday, October 1, 2012

Can you retire with 1 Million?

A very interesting article that I read from the Star newspaper last Saturday on whether we can retire with RM1 million since it officially makes one a millionaire. But will one million enough for one to retire?

A MILLION ringgit is a lot of money. In the past, it was always considered “the benchmark” in terms of a person's success. After all, having RM1mil officially makes you a millionaire.
However, realistically, is RM1mil big enough to survive on today, especially once you retire?

According to official statistics, the average Malaysian male has a life expectancy of up to 75 years, while for females its up to 77 years. This means that a retiree aged 55 has to support hinself or herself for another 20 years or more.
But let's be a little bit conservative for the purpose of this article, let's put the average life expectancy at 80 years old. With RM1mil at 55 years old, you would need to divide that money to last you another 25 years, which comes to an average of RM3,333 a month.
Dwindling value: With the high cost of living and rising inflation on an annual basis, RM1mil won’t be sufficient to retire for long. Dwindling value: With the high cost of living and rising inflation on an annual basis, RM1mil won’t be sufficient to retire for long.
Is that enough to sustain you?
“It really depends on your living standards,” says Whitman Independent Advisors Sdn Bhd managing director Yap Ming Hui.
“With rising inflation on an annual basis, that monthly sum (of RM3,333) will be worth a lot less as the months and years go by, so it's definitely not enough to sustain you for 25 years,” he tells StarBizWeek.
Yap nevertheless believes that a person is able to “make do” with RM1mil once he or she retires.
“You would definitely need to readjust your lifestyle,” he says, adding that a person without financial obligations, such as a pending house or car loan can still survive on RM3,333 a month.
“Of course, if you have a posh lifestyle, especially when you're living in Kuala Lumpur, then that amount won't be enough. But if you live outside Kuala Lumpur and live within your means, then it's still possible.”
MyFP Services Sdn Bhd managing director Robert Foo says living for 25 years with RM1mil in today's environment “would be tough.”
“If you're married and have a few children and ongoing commitments such as a loan, it's tough. If you're not generating any more money after 55, it will definitely run out.
“By the time most people are 55, their children are probably working but some of them might still depend on their parents. They could be living under the same roof or might need financial help to buy their first car, for instance.”
CTLA Financial Planners Sdn Bhd managing director Mike Lee also feels that RM1mil would only sustain a person for a limited period of time.
“RM1mil might be enough for the first few years. However, with the high cost of living and rising inflation on an annual basis, that sum won't be sufficient.”
Foo maintains that it is ultimately up to how the individual manages his or her lifestyle.
“It truly depends. For some people, RM1mil might not be enough to even last them 10 years.”
He says RM1mil might not be sufficient for a bachelor with no commitments to retire on.
“As a bachelor, you're probably going to want to go out with your friends and see the world. You're unlikely to be cooking your own food, staying at home everyday and living hand-to-mouth every month.
“That's not considered living, that's existing!”
How to retire with RM1mil
While RM1mil might not be enough to retire with, it's still a lot of money, which can be used for investment purposes and to grow your wealth even further.
Foo believes the best thing to do is to continue working well into your retirement years if health permits,.
“Don't retire! We advise our clients that if it's possible, they should continue working. At 55, you're still young enough to generate more income for yourself. Even if it's just half of the amount that you used to earn, it's still money coming in,” he says.
Yap says readjusting your living standards would also help, adding that an individual could further invest his or her money in shares, unit trust or even property.
In terms of shares, Lee says a retiree should put some of his money in stocks that provide good dividend returns.
“Real estate investment trusts also give good dividends. Have a mixture of investments and don't just leave everything in your fixed deposit account.
“Leaving all your money in the bank is not a good idea, as it won't generate good interest rates. With the inflation rate growing at an even faster rate, you'll just end up losing out.”
Foo says it's also a good idea to start your own business.
“By the time you retire, you would have acquired valuable skills that still make you marketable,” he says, adding however that starting your own business can be either a rewarding or risky endeavour.
“Starting your own business can generate high returns. But you can either make it or lose everything.”

Sunday, September 23, 2012

Trick your mind into SPENDING less

I am probably not the right person to be blogging about this because spending is really one of my weaknesses. But here are some of the ways that I find effective in helping me to spend less.

1) Think it through and search for more information...
With the growing infomercials that are designed to give simple information while promoting certain products, the brain could be pressured and tricked into buying. Thus, it is important to give it a thought and think through. It is also advisable to search for more information on the internet....most of the time, you might realize that you don't actually need it anyway. 

2) Search for cheap and discount goods...
One might probably find it difficult to search for cheap and discounted goods but if you start take note of the prices, it is not long before you could identify the goods that have a good discount. Buy during festive seasons are good but one must be careful not to fall into the trap of spending more from the advertisement and promotions in the shopping mall.

3) Saving money is all relative!
Human beings are actually bad in making comparison at times. We may readily pay $3,000 to upgrade to leather seats in a new $25,000 car because it's a relatively small percentage of the total price, but we'd think a lot longer about paying $3,000 for a new sofa that we might use it every night. So, one must start to think beyond the percentage (%)'s important to consider the reason of buying and the functionality of it as well.

4) Automate everything
I always believe in the importance of automate when it comes to work but I find it difficult to do it with my own life. Probably there are things that we want to look at first. But the truth is, by automate everything, bills etc, you will avoid the fine of late payments.

5) Do a little bit everytime
Sometimes, our brains are like that...given an overwhelming choices of workload to do, it might totally shut off due to the "impossible mission" mentality. Instead of trying to save a little bit on everything, focus on one or two things...for example, if you love to eat out, maybe it's time to start eating at home...slowly cutting it down and it will eventually become a habit.

Well, you might not believe it, but the brain has a unique ability to make you spend and's important to know how to trick it. 

Friday, September 21, 2012

Gold Price Chart

Monday, August 20, 2012

Should you pay for gym?

Today, I'm going to discuss about something practical about spending...

Nowadays, almost everything revolve around money...and that includes your health and fitness. If you have money, you could easily pay for membership to join a gym, a yoga class etc.

But here is the question that we must ask before we spend...should we pay for gym? Should you pay for gym? Should you pay for your fitness and health?
I think that question depends on what is the purpose of joining a gym. A friend of mine who joined a gym membership was there to build muscles. That was the right move I believe as building muscles require the intensity in work out and it will be advisable to do it with a gym instructor.

But if you are going to a gym for the purpose of health and fitness, I think it is not worth to pay for a gym.

There are many people who went to the gym for running in the morning for the purpose of maitaining their health and fitness level, but this could be done for free in a lot of parks...

No more wasting cash in gym for the purpose of running...

Start running in a park...fresh air and with better environment...

Here are a few that you could go to:

  • Desa Hillpark
  • Taman Tasik Permaisuri
  • Tasik Varsiti inside University Malaya

I name these three places as I have been there for running could really save you a lot of money as a gym session in a month could cost about RM70 to RM100, depending on location, facilities and the services offered.

If you want to build muscles without going to extreme case, you could buy a dumb bell for that purpose.

These 2 dumb bells could cost about RM100 (usually cheaper).

So, if you are wondering if it is worthy to pay for gym, I would say it depends on your need. For the sake of fitness and health, there could be a lot of other alternatives to gym that require little or without money.

Joining a gym membership has been a lifestyle of modern society but whether it is worth the money or not, I think it really depends on the purpose of it. Don't simply join a gym for the sake of following the modern lifestyle. Think before you pay for your gym membership.

Tuesday, July 31, 2012

Avoiding Personal Financial Crisis

Two weeks ago, I posted an article on the survey that reveals many Malaysians do not settle their debt in full every month, so, I guess I need to keep the momentum in posting articles that will create the awareness on the importance of financial management in the adult life. This is even more important to many Malaysians as the purchasing power in Malaysia is not so high compare to even our neighboring countries like Singapore, so, every penny counts and important.

From the article, I found that there are a lot of the given examples are quite true and I can even find those among my circle of friends - mainly splurge to have holiday outside of Malaysia and using a big portion of the retirement fund to fund their children's education oversea.

The article is as follows:-

Avoiding Personal Financial Crisis

ANECDOTAL evidence seems to suggest that there are still many Malaysians, especially the young adults, who do not really practise sound financial management.

Consider the case of 28-year-old Albert Tan (not his real name). Having worked for only five years as a marketing executive, Tan has already amassed credit card debts amounting to RM50,000. He holds at least five credit cards from five different banks.

Tan does not see the importance of settling his credit card loans as soon as possible to avoid high interest payments. He prefers to repay only the minimum amount required each month for each of his credit cards. And thinking that personal loans can help ease his “financial burden”, Tan has taken up offers by his credit card banks for personal loans amounting to RM40,000.
Foo: ‘Sometimes people with low income have no choice.’

One might be thinking where has he been spending all those money? Well, besides using some to pay part of his debts that are due, Tan likes to spend it on the latest electronic gadgets, entertainment and leisure.

Tan draws a monthly salary of RM5,000. Not too bad for a person his age, and he is lucky he doesn't have to pay rent as he is staying with his parents in the suburb of Kuala Lumpur. But he has been living beyond his means, amassing big debts through credit cards and different types of loans, including personal and car loans.

Sujatha, a 26-year-old writer, also has credit debt problems. She owes two banks around RM20,000 after having splashed the money on traveling overseas last year.

But what sets Sujatha apart from Tan is her resolution to settle her credit card debts within the next 12 months through a disciplined installment programme, and she's not tempted by banks' offers of personal loans.

“I've learnt my lesson. It hurts to see a huge sum going to repayment of my loans, so next time, I'll be wiser,” Sujatha says.

Experts tell StarBizWeek that Tan and Sujatha's cases are common among many Malaysians. And for an unrepentant debtor like Tan, experts fear he is flirting with financial disaster.

Last month, the Insolvency Department recorded 116,379 bankruptcy cases in the country between 2005 and April 2012. Of that number, about 20% involved individuals below the age of 35, while 32% involved those between the ages of 35 and 44, and 18% involved those aged between 45 and 54.

Most of the bankruptcy cases were due to debts over vehicle loans (25%), personal loans (13%), housing loans (12%) and business loans (11%). Bankruptcy due to credit card debts was around 5%.

If Tan does not change his ways, experts say he will become part of statistics.

Consider what Prime Minister Datuk Seri Najib Tun Razak said over the week about managing the country's economy to prevent any form of financial crisis, and one could draw a parallel between the four main aspects that he highlighted and the basic principles of personal finance management.

Najib said the most basic thing to do to avoid a financial crisis in an economy was to ensure that expenditure did not exceed income (for an individual, it means not living beyond one's means).

Najib went on to say that an economy should have ample operating surplus to prevent any borrowings to finance management expenses (for an individual, think building one's wealth, and not simply take on unnecessary loans to finance personal and unproductive expenses).

The third rule that Najib highlighted was that a country's fiscal deficit should be on a progressive declining trajectory (for an individual, this means working towards reducing one's debts). And the last rule was to have a balance between revenue base, which ought to be large, and the capacity to provide incentives and stimulus to certain sectors or sub-sectors (for an individual, this sounds like proper planning and working towards one's ultimate financial objectives).

“Planning is important. Failing to plan is planning to fail,” AmBank wealth management head Joshua Lim asserts.

“You see, people always have unlimited wants, but the truth is, they only have limited resources, so they have to make choices, and proper financial planning is key,” Lim argues.

For a start, Lim advises individuals to assess their current financial situation, and then identify their objectives, and start to analyse ways and options to achieve those goals. He, however, stresses the importance of being practical and realistic about setting financial objectives based on one's projected financial standing.

Using a budget to manage one's inflow and outflow of money is important, according to financial planning experts, as it gives a clear idea of how one's money is spent.

“It is very important to track the usage of money, and to ensure that one does not use the wrong funds for the wrong purpose,” Lim says.

He points to using one's money in the Employees Provident Funds account that is meant for one's retirement being used to finance children's education as an example of using the wrong funds for the wrong purpose.

For MyFP Services Sdn Bhd managing director Robert Foo, the most basic principle for an individual is never to spend beyond one's earnings. In reality, though, Foo reckons it is very difficult for many Malaysians to observe this basic principle.

“Sometimes, people with low income have no choice. The tendency to overspend is because basic living expenses are rising faster than their income growth,” he explains.

“One should defer spending on discretionary items, for example, if one can't really afford it,” Foo says.

So, financial experts advise individuals to assess their needs objectively to evaluate whether it is necessary to take on debts to acquire goods and assets.

“Simply taking on debt will result in one not optimizing one's resources,” Foo points out.

Lim concurs, saying that taking on too much debt could result in one finding it difficult to meet one's financial obligations later on.

As for building one's wealth, experts say seeking new sources of income and making the right investment choices is the way to go.

Foo preaches “dual income. He says, “It is important to find ways to earn extra income. We live in an uncertain world, so one needs to have something to fall back on if one income stream was to be suddenly cut off.”

Financial experts also advocate having a diversified investment portfolio to build one's wealth.

Source: The Star BizWeek

Monday, July 16, 2012

How The Richest 400 People In America Got So Rich

It's been like a while since I last update this blog, but finally I intended to update this blog with an article that I found which suits the blog very very much. It is about how the richest 400 people in the United States of America got so rich, and basically the summary of the article is stocks will outperform any form of other investment.

The article is as follows:-

In 1992, the 400th richest person in America made $24 million.
In 2007, the 400th richest person in America made $138 million (or $87 million, inflation-adjusted).
Now, that almost certainly wasn't the same guy. There's a lot of churn at the top of the money pyramid. In all of the 1990s, only 25% of the Fortunate 400 made more than one appearance. But the overall message is the same. The rich keeping getting richer.
According to the IRS, which recently released 2009 data from the 400 richest individual income tax returns, the real runaway growth in wealth has come from capital gains. In the last years of the bubble, the "Fortunate 400" made nearly half their income from capital gains (a.k.a.: profit from the rising value of an investment, such as stocks or property) and less than 10% of their income from old-fashioned wages.
The average income of a top-400 earner grew by 650% between 1992 and 2007 to a whopping $344 million. Over that time, the average salary barely doubled. But the average capital gains haul increased by 1,200%. How do the richest get richer? Not from their wages. From their investments.
Here's a look at the average salary and average capital gains income of a top-400 earner since 1992. Y-axis is labeled in thousands of dollars and all-time highs are noted in the graph.

Three last things:
(1) Who are these people? As Tim Noah explained on our business page, a 2010 study studied the top 0.1 percent, who currently make at least $1.7 million. That's 45-times less than our Fortunate 400 group in 2009, but it's the closest we've got. Four in ten in this group were executives, managers, and supervisors at nonfinancial firms. Eighteen percent were financiers. Next came law (7 percent), medicine (6 percent), and real estate (4 percent). My guess is that the top 400 skews toward finance and chief exec even stronger. A lawyer/doctor making $2 million I can imagine. But $77 million?*
(2) Capital gains absolutely dictate the wealth of the richest Americans. As Matt O'Brien graphed for us, that's why the income of the top 0.1 percent hugs the S&P so closely.

(3) Remember that as this is happening, the long-term capital gains tax rate has fallen from 28 percent in 1990 to 20 percent for the latter half of the 1990s to 15 percent under George W. Bush.


Saturday, July 14, 2012

Survey reveals many Malaysian do not settle their debts in full every month

I just started to blog about the cons of using credit card in Credit Card - Friend or Foe (Part 3) and to my surprise, I read news that a survey done reveals many Malaysians do not settle their debts in full every month - the debt here meaning the credit card debt.

The news is as follow:-

PETALING JAYA: A global survey has revealed that Malaysians are among the worst credit card repayers in the Asia-Pacific region.

According to the survey, less than half of the local respondents polled online say they repay their credit card debts in full every month.

Given this, Malaysia has one of the lowest repayment rates among the developing markets that were surveyed.

About 15% repay more than the minimum requirement while 18% of Malaysians repay only the minimum amount required.

This is although two out of five Malaysians polled claimed to use credit cards for shopping, dining and entertainment.

In contrast, the highest repayment rate was in Taiwan, where 89% of respondents service their credit card bills in full followed by Japan (87%) and South Korea (85%).

Neighbours Singapore and Indonesia also fared much better with 80% and 59% respectively, while only Vietnam came off worse than Malaysia at 27%.

The Nielsen Global Survey of Investment Attitudes also showed Malaysians are generally one of the top 10 savers in the world, but 45% of the online respondents also have various loans and insurance payments.

Meanwhile, two out of five Malaysian consumers are investing their money via various channels.

“Of those investing, 67% prefer mutual fund/unit trusts, 49% prefer stocks, 27% invest in gold, silver and other precious metals, a quarter in structured investment products, 15% in foreign currencies, 10% in bonds and 8% in derivatives,” said Nielsen in a press release yesterday.

The survey also disclosed that less than 19% of respondents rely on financial planners or advisers when deciding on personal finance or wealth matters.

On the other hand, 43% of the respondents make their own choices without anyone's advice while 21% seek advice from friends, relatives and colleagues.

Just one in every 10 persons rely on investment tips from commentators, experts or spokesmen broadcast over television, radio or the Internet, and six per cent make investment decisions on impulse.

“Knowing consumers' attitudes towards wealth management while creating relevant opportunities to engage with consumers and manage their needs is still a challenging task for financial planners and investment institutions, especially when four in 10 consumers do not trust others when making financial decisions,” said Nielsen Malaysia's head of Customised Research Luca Griseri.

The Nielsen Global Survey of Investment Attitudes was conducted from Feb 10-27 this year and polled more than 28,000 online consumers in 56 countries throughout Asia Pacific, Europe, Latin America, North America, the Middle East and Africa.

Source: The Star

Sunday, July 1, 2012

Credit Card - Friend or Foe (Part 3)

My first two posts, Credit Card - Friend or Foe (Part 1) and Credit Card - Friend or Foe (Part 2) on credit card were slightly bias towards the pros of using credit card rather than the cons of doing so. While I can think of the many pros of using credit card, not every one can fully utilized the benefit of swiping this plastic without ever getting deeper into the pit of debt.

Credit card debt is one of the most feared debt as the interest charged by the financial institution is high, I'm not sure other countries, but in Malaysia the interest charged on credit card normal retail usage are range from 15% (up from previous 13%) to 18% per annum and the amount is accumulated until you fully paid off.

Aside from the high interest rate, there are quite a lot of hidden charges or so call penalty for not paying the credit card on time, or in full amount. There is a grace period of 20 days interest free after the statement closed for the previous month, but still there are a number of people who ignore it and finally pay the price of being ignorance.

See from the above examples, we can easily identify two cons of swiping this plastic money. There are more of the cons, but I will leave it on another post. As it stands, credit card can be friend, and at the same time it can turn against us. Use it wisely, you will find that there are more benefit in swiping credit cards.

Tuesday, June 19, 2012

Greed Is Good

I watched Wall Street: Money Never Sleeps and I found that one of the easily remembered quote by Gordon Gekko is "Greed is good" with the full context of "Greed, for lack of a better word, is good". It is not that I agree with Gordon Gekko that greed is really good, but without greed, I do feel like one will lose the competency to try strive for more and better quality life by earning more money.

In the movie Wall Street: Money Never Sleeps, Gordon Gekko was a "shark" as what we all call the fund managers and all the people with loads of money to control the stock price. Many terms are associated with these people as they have the capability to influence the global market movement. Anyway, back to the movie, as he was giving a talk on trading, he mentioned, "Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A."

Why I kinda agree with him? It is because I found that each of us should have a "controlled" greed in us so that we will continuously strive for better quality life for ourselves, as well as for our family - thus, it is "controlled" greed. With "controlled" greed, we will have determination to earn more, legally. We will learn how to optimize the capital that we have when we invest and and to have a life-long investment plan. Too greedy is not good in a sense we might be thinking of earning money as fast possible, and slowly the greed will overwhelm one and turn investment into gambling.

Many whom I know always challenge me that stocks investment is actually another kind of gambling, but I would disagree with the statement. While, yes, stock investment can turn into another kind of casino if the way of investment is not correct. In fact, any form of investment can easily become a form of gamble. One good way to identify whether we treat investment as a form of gamble is the understanding the risk and the nature of the investment. One easy example that I can give is the property investment where almost everyone around me is saying that property price can only go up without realizing that eventually there will be a correction in property prices once the price has grown out of control.

So, in conclusion, do I think that "Greed is good"? Yes and no. Yes, in a way it will drive one to work harder to achieve better quality of life. No, in a sense that if goes uncontrolled, it can easily bring one hard work and it also leads to a lot of financial crisis that has happened many times.

Saturday, May 12, 2012

Investing Basics

We all have heard time and time again about the importance of investment but most of us could not grasp it...myself included...

Anyway, here are a few basic categories of investment that one can consider:

1) Stocks

When you own stocks or shares in a company, you own part of that company. As a shareholder in the company, you are entitled to any dividends that the company pays out. There are usually two reasons for investors to buy stocks: dividends and capital appreciation. There are many factors that determine the price of a stock, but in general, the company's earnings...
From historically point of view, stocks have often done much better in comparison to bonds over the long term. In the short term, stocks are more volatile, where it can swing wildly compared to other types of investment. Stocks are the ones that will give the highest return as well but it comes with the highest risk.

2) Bonds

For those of you who buy a bond, you must realize what you really are buying. When you buy a bond, you are lending money to the bond issuer. Normally, these bond issuers are companies or governments, intending to borrow money from you, the bondholder, and promises to pay all of it back at a certain date. It comes with interest, known as the coupon, on the annual or semi-annual basis.
In comparison to other financial investments, bonds have a lower returns but it comes with the least risk...for those of you who are not fond of taking risk, bonds could be a suitable option.
Take note that bonds move in the opposite direction of interest rates. When interest rates rise, bond prices fall and vice versa. If you intend to hold the bond to maturity, these fluctuations should not bother you. However, one must take note that inflation is a bond's worst enermy. As bond interest payments are fixed, the inflation erodes their value. 

3) Unit Trusts

Unit trusts, which is also known as the mutual funds, are baskets of stocks, bonds, real estate and other investment instruments. When one buy unit trusts, they are actually purchasing a piece of that fund, a slice of the investment pie. Although the fund may own stocks and other assets, you do not actually own any of those asset themselves. The value of the unit trust is based on the value of the assets it owns. Hence, the unit trust's value rises and falls as the price of the stocks, bonds and such go up or down. 
One of the good thing about purchasing unit trusts is that the actively-managed unit trusts, is managed by dedicated professional, fund managers who decide what to buy and sell....thus, making unit trusts amazingly suitable for "working professionals who might be very busy and don't have a lot of time to spend looking at their investments." 
These unit trusts typically charge management fees and sales commissions, thus making it a lower return in comparison to individual stocks.

4) ETFs

Exchange traded funds are the new kids on the block. Basically, they are similar to index funds with one exception, they are listed and traded on a stock exchange. Simply put it: ETFs consist of similar assets as index funds but trading is being done in similar ways to stock exchange. There are ETFs for stocks, bonds as well as of the biggest ETFs in the world tracks the price of gold. 
It is considered to be much more cost effective than the mutual funds. Normally, one only needs to pay a transaction fee, just like when one did so when buying stocks. Typically, the charges are lower than those of mutual funds. As they are being traded like stocks, their price changes throughout the days as they are bought and sold much more easily than unit trusts, which is priced on a daily basis. In terms of risk, it is very much similar to index funds.

5) Foreign Currency Deposits

Well, you can know this from the name deposits in a foreign currency. Often, these are known as foreign currency fixed deposits as the money is kept in the account for a set period of time. The bank also promises to pay you a fixed interest rate for the duration of the deposit. Besides receiving the interest, you may also receive a foreign exchange gain. 

This is how it works: when you place the money into the account, the bank converts it into the foreign currency. At the end of the duration, the bank will convert it back into your local currency. If the foreign currency has risen in value against your own currency, you will get back more of your local currency in the conversion. However, if the investment currency depreciates in relation to your local currency, there is a loss. Thus, one can consider this as less risky than stocks but riskier than bonds. 

Monday, May 7, 2012

Ways to Cut Budget: Use Coupons

I have blogged about Ways to Cut Budget: Pay Yourself First and Ways to Cut Budget: Buy Only What You Need. These two blog posts are related on the ways to cut budget and to reduce the expenses. By reducing the expenses to get more value out of a dollar.

The next way to cut budget is to use coupons. This mean that before shopping, prior one going for shopping, he or she should plan first and accumulate coupons so that he or she can get bargain from shopping malls.

It only takes some extra effort for one to find coupons online or from magazines but because of the time needed to find the coupons, it actually allowed one to really think whether he or she really needs to buy something, which bring us back to buy only what you need way. This will help one who have problem with impulse buying to stop buying unnecessary or extra things.

Besides that, by using coupons, one can get the best out of a dollar that he or she has spent. Imagine, by using coupons, one can get branded goods at a bargain price which he or she might need to fork out a whole lot more, if the coupon is not used.

The problem with coupons is that some coupons might come with some terms and conditions like the coupon only valid if one spend a certain amount in the store which lead us to have spend on unnecessary stuff just to have the coupon valid. This can be overcome by really planning before shopping and by group shopping - this we have already discussed previously on how we can cope with inflation.

So, the next time that you are planning to go shopping, spend some time to plan the shopping list and accumulate coupons that can be use. It just takes about an hour or two to get it done, but in the long run, you are saving your money and instil good shopping attitude.

Friday, April 20, 2012

one direction coldplay phish

We all know the importance of enjoying ourselves while accumulating wealth. Most people fail to see that enjoying need not necessary means spending luxuriously.

If you are a fans of music concerts, you may go for the music band One Direction tickets. There are other bands that are available at an affordable prices in Tickets America for rock band, Phish and the popular coldplay.

The Phish tickets could easily be bought from here. There are plenty of offers for coldplay tickets as well to promote the concerts. Thus, if you spent at times such as this during the promotion or offer, you may still get to watch live concerts (for the music avid) at an affordable price.

Life is not just about accumulating wealth, but about enjoying wealth. Here is a smart way to do so.

Ticketamerica.,com has concert tickets for One Direction and Coldplay plus ticket options for the band called Phish.

Saturday, April 14, 2012

Ways to Cut Budget: Pay Yourself First

I have posted on the Ways to Cut Budget: Buy Only What You Need two months back and promised to come back with more ways to cut budget. The second way to cut budget in which I am going to write about is to pay yourself first.

When one mentioned about budgeting, what usually comes into mind is how much money is going to be allocated to personal expenses, loans and many other spending that one can really think off. In fact, what we usually forget in planning our budget is to plan how much we are going to save. One of the ways to actually cut budget is to pay yourself first, when you are planning the budget for the whole year or for the particular month.

Savings in fact is supposedly to be one of the major component in our budget, but nevertheless we will never see that in most of the budget - this include personal budgeting, companies or even countries.

Let us talk about the personal budgeting for individual. I remember previously I have written on the monthly spending guidelines, and one of the component inside the guidelines is savings.

It is obvious that if we plan our budget according to how much we are going to spend, we might ended up with less savings or no savings at all. In fact, budgeting planning based on spending is the easiest way to allocate the budget as it requires less or no planning at all.

However, budgeting based on how much we intend to save is not easy and requires discipline to do so. Warren Buffett most famous quote on savings - "Do not save what is left after spending, but spend what is left after saving", also teaches us to spend what is left after savings.

The most effective ways to do this is by doing a standing instruction to the salary account to transfer a sum of money to another savings account dedicated for savings purposes. To make it difficult for one to withdraw money from that savings account, it is best to have the savings account without ATM card or debit card.

Nevertheless, the financial and saving goals must be realistic and achievable. For example, a person earning RM3,000 will definitely can have higher saving percentage than a person earning half of his earning as majority of us would already have fixed expenses like food or transportation. Trying to save too much money ended up skipping meals and getting low quality products might end up having one to spend more for the side effects of the stressful financial goals.

Monday, February 20, 2012

EPF declares 6% payout

After a long wait, finally the EPF announced the dividend for the year 2011 and it comes to many surprises at 6% as global economy is too volatile throughout the whole year. Anyway, it is a good news to majority Malaysians as the payout is slightly 0.2% higher than the year before.

PETALING JAYA: The Employees Provident Fund (EPF) Board has declared a dividend of 6% for 2011 the highest in the last 10 years.

In a statement yesterday, EPF said the dividend, an increase of 20 basis points over the 5.8% paid out in 2010, translates to RM24.47bil being distributed to its members.

“2011 marks another commendable achievement for the EPF.

“Despite the challenging investment landscape, it was the strongest performance since 2001 that affirms our long term and prudent investment strategy combined with continuous efforts by our investment team,” said EPF chairman Tan Sri Samsudin Osman.

The dividend payout of the RM24.47bil was derived after deducting net impairment allowance on financial assets, investment expenses, operating expenditures, statutory charges and dividend on withdrawals, representing an increase of 13.23% compared to RM21.61bil recorded in 2010.

EPF also posted a gross investment income of RM27.24bil up 13.18% from 2010.

As of Dec 31 last year, EPF's total investment assets continued to register a healthy growth of 6.52% to RM469.22bil from RM440.52bil recorded in the previous year.

“This rise was primarily contributed by the positive net annual contributions from members and employers, and consistent and encouraging investment performance,” it added.

EPF said it continued to invest the bulk of its investment assets, which is 60.79%, including in equities, which represented 35.64% of total assets.

Equities were the largest income contributor at RM13.29bil representing 48.81% of total investment income.

“This is followed by loans and bonds, Malaysian government securities and money market instruments which contributed RM7.54bil, RM5.63bil and RM656.36mil respectively,” it said.

Samsudin said that while the EPF could not guarantee that it could maintain this performance amid the global economic and market uncertainties, it was committed to safeguarding and adding value to members' retirement savings, particularly against inflation.

Members may check their EPF Account Statements for the crediting of the 2011 dividend, either through EPF Kiosks, counters or i-Akaun from today.

Wednesday, February 1, 2012

Calculating PCB or Schedular Tax Deduction (STD) for Salary and Bonus

Recently I have got a reader asking me on how to calculate PCB given the certain amount that he or she told me from my How To Calculate PCB or Schedular Tax Deduction (STD) for Salary and Bonus post that I have written in 2010. So, I guess it is time to refresh the blog post with the example that he or she gave me.

Ok. Here we go. We are about to calculate the PCB given the salary is RM2,000 and with allowance of RM300 and the bonus given is 2 months. So we have the total bonus of RM4,000. Again, I will be using the PCB rate for single.

The calculation is as follows:-
Salary = RM2,000
EPF deduction = RM220

Salary for PCB calculation
= Gross salary - EPF deduction
= RM2,000 - RM220
= RM1,780
(this is also your net_salary when you want to calculate the PCB rate for bonus)

(Again we need to take note: The maximum total EPF deduction allowed for PCB or STD calculation is RM500 (RM6,000 / 12 = RM500). If your salary is RM5,000 and above, just put RM500 under EPF deduction )

According to the PCB rate table, the PCB is 0. So you are not going to get any PCB deduction on monthly salary if your salary is RM2,000.

Ok. The following is the calculation for PCB for bonuses.
Bonus = RM4000 (2 x RM2,000)
EPF deduction = RM280

Here is the tricky part on how I get RM280 instead of RM440 for the EPF deduction. This EPF deduction is not the EPF deduction that we are going to have on our payslip. This is just for PCB calculation. Maximum available EPF deduction for PCB calculation = RM500, so the EPF deduction for bonus PCB calculation = RM500 - RM220 = RM280, instead of RM440.

Bonus for PCB calculation
= Gross Bonus - EPF deduction
= RM4,000 - RM280
= RM3,720
(take this as net_bonus when you calculate your PCB deduction)

The amount for bonus PCB calculation has a formula like the following:-
= (1/12 x net_bonus) + net_salary
= (1/12 x 3720) + 1780
= 310 + 1780
= RM2,090

According to the PCB rate table, the PCB for RM2,090 is RM0.

To finalized the calculation, you still need to take the (PCB for bonus month) - (PCB for salary month) x 12, which in this case is 0. So, you will not get any tax deduction when the bonus is out as well.

Anonymous, I hope, I answer your question with the above calculation.

Let us take RM3,500 as monthly salary as well as again 2 month of bonuses, at least we can see the calculation over here.

Salary = RM3,500
EPF deduction = RM385

Salary for PCB calculation (or we called it net_salary)
= RM3,500 - RM385
= RM3,115

So from the PCB rate table, the PCB is RM56 (this is also called PCB_for_salary.

Bonus = RM7,000 (2 x RM3,500)
EPF deduction is RM115

Salary for PCB calculation (or we called it net_bonus)
= RM7,000 - RM115
= RM6,885

The amount for bonus PCB calculation has a formula like the following:-
= (1/12 x net_bonus) + net_salary
= (1/12 x 6885) + 3115
= 573.75 + 3115
= RM3,688.75

From the PCB table, we will get RM128. (PCB_for_bonus)

So we will use the formula (PCB_for_bonus - PCB_for_salary) x 12 in order to calculate the PCB deduction for the bonus.
PCB deduction for bonus
= (RM128 - RM56) x 12
= RM864.

I just realized the LHDN website already remove the PCB rate table, so let me think of a way to get the complete one and then upload it and share it to everyone. As of now, just take my PCB rate as it is.

Saturday, January 28, 2012

Buy Insurance

Financial planning is probably the most important thing that we must be aware of. Most young adults find it difficult to plan for their financial condition because of the "yum cha" and cool cultures....most young adults are probably pampered way too much by their parents...their studies and everything are planned out so well....honestly, I am envied of those students who have their parents sponsored everything. Anyway, I appreciate what I have as well and I believe the first step to financial planning is protection. 

Some of my friends told me that they are going to buy insurance but now is not the right they are just starting out, they need more time. I am not an insurance agent but working in an insurance company, I come to realize that protection is probably the first thing that we get for ourselves. It is not about the profit from these insurance policies but the protection that comes with it. Of course, one should not buy too many insurance policies will be ridiculous to do that....don't trust that insurance agent if he or she persuade you to buy a few policies...haha!!

Anyway back to the basics...get a protection, something that covers your life and medical expenses should you have any critical illness. I have just bought one for myself (a month ago) and together with my sister, get one for my mom. (medical card purpose).

This is not a sales pitch but the first thing to financial planning for me is about protection. Protect yourself and then you can start looking at other things.

Tuesday, January 24, 2012

Ways to Cut Budget: Buy Only What You Need

In financial management, in order to keep our financial in healthy condition, growing money via investment or increment is not always the best solution. Many times we need to spend below our means rather than spending within our means. But then again, of course everyone is asking to increase income because by increasing income, you do not need to sacrifice a lot of things.

Well, I have been quite free the last few days that I managed to read Reader's Digest and find out one article which is very suitable for this. It also serves as a good reminder for myself as well, as I will be cash strapped throughout this year as big portion of the money will be used for house renovation as well as to pay the house down payment.

The following are the ways to cut budget:-

Buy only what you need
This one sounds obvious, but how many of us really buy what is truly necessary? A lot of us often buy in bulk in order to reduce our costs but sometimes we ended up wasting what we might not be using it after all. This happens a lot on products which have expiry such as food. Of course, if you intended to buy in bulk, make sure you share the cost with family or friends as this is part of the smart spending strategy to cope with the inflation.

Another thing is, majority of us usually buy expensive gadgets with additional features, although we seldom use the feature when we actually can get the same gadget with about all the feature that we wanted for a whole lot less money. In the end, we are actually paying for the research and development of the features that we might not be using it throughout the lifespan of the gadget. What I would suggest is, rather than getting the highest end segment of the product, why not look into the mid range? Of course I will not encourage getting the gadget from the lowest end segment as most of the time the replacement parts of the gadget might even end of life or we are staring at the product which might already not in production anymore and there is no support for the hardware or even the software.

Finally, we always buy something that we deemed cheap - actually I was one of the victim as well until I realized that last year I actually bought a lot of clothes for Chinese New Year, and the total of the whole purchase could be even more than thousands. The fact that I bought those clothes during cheap sales or buy one free one season made me think I actually save a lot, but in actual fact I am spending a whole lot for clothes that I might not even wear it throughout the year. Should I have not spend it, I will be having additional savings or cash for other purposes.

Guess that's all I have to share now. I will post more on ways to cut budget moving forward.

Saturday, January 21, 2012

2012 CLSA Feng Shui Chart

As we are entering the Chinese New Year season, let's look into what the Feng Shui master said about the overall market sentiment for the Water Dragon Year. Last year CLSA Feng Shui chart was not that accurate especially towards the end of the year, so we'll see what will happen this year. The Water Dragon is supposedly to be good for the stock market, it seems, but we will see what will happen. Anyway, the chart is just for reference and it is not for one to follow blindly.

Tuesday, January 17, 2012

The More You Trade The Less You Earn

After about a month since my last post, this will be my first blog post in this blog for the year 2012. Well, it has been like a crazy and busy weekends for me to keep following up on my house renovation back in Ipoh. Anyway, while I was reading some articles from the Internet related stocks trading, there is one article that really open up my mind. I mean the article is not about easy way to get rich with stocks or something like that. And if one is to notice my blog post title, one would realized that it is not about making money with stocks, but losing money with it.

While this blog is all about becoming the money master rather than to be the slave to the money, we need to know that earning money with money is not easy. In fact, it is easier to lose money if we are trying to earn money with money without some basic knowledge or skills. Even some of the most reputable fund managers in the world also lose big bucks in the stocks.

Back to the blog post, do you realized that the likelihood that we as retail investors or traders lose money is higher that profiting from it? The article from the following will explains the theory behind it.

Behavioral finance researchers have studied the performance of stock market traders in both America and Asia. Interestingly, they discovered that traders in both countries under-perform the world’s broad markets by significant amounts. One study analyzed 66,400 accounts at a major Wall Street firm over a seven-year period. Another studied all the active traders on the Taiwan, China exchange.

In spite of the cultural differences, the results were virtually the same. Why? Due to the high transaction costs, taxes and bad decisions, the bottom line is simple: “The more you trade the less you earn.” In fact, about 80% of all day traders lose money. In researching the Americans, the study found that the active investors who turned over their portfolios 258% annually made less than 12% on their money. Passive investors who bought and held, with only 2% portfolio turnover, had average returns of roughly 18%, which is about fifty percent higher than the returns of the active investors. Still, investors believe they can “beat The Street,” simple because the Wall Street “Hype Machine” has programmed them to believe that myth.

It was billed as a “debate,” on a nationally syndicated show. Me, a buy’n’holder to the core, versus John Mauldin, author of the Bull’s Eye Investor and Millennium Wave Investments, a newsletter publisher and investment adviser. John’s a guy who’s not only pro-trading, he hates a buy’n’hold strategy with a passion. So why’s he against buy’n’hold? Well, a good part of the reason is he believes the market’s going nowhere for the rest of this decade, maybe longer. Volatile, risky, unpredictable. But, he ‘s convinced that by using active and aggressive strategies, you can beat the market.

Mauldin is so thoroughly convinced that if you don’t give up on a long-term buy’n’hold strategy and actively engage in alternative strategies (such as hedge funds, gold stocks and trading in value stocks), you’ll lose a lot of money and retire a pauper. So, who won the debate? Buy’n’hold or the hyper-active Bull’s Eye Investor? Nobody! In fact, nobody ever wins this debate. Nobody. Ever!

Different DNA? Then you better play a “different game”

Why? Probably because over ninety percent of American investors are born with a buy’n’hold gene. They are born as passive investors who instinctively tend toward well-diversified portfolios of low-cost index funds. They don’t have the time, or money or the interest in active portfolio management, nor do they trust in the market or in professional market experts.

Meanwhile, the DNA of other ten percent or less—those macho “Bull’s Eye Investors”—contains a rare over-confidence gene that pumps an “I’m-convinced-I-will-beat-the-market” drug directly into their veins and brains. Of course the odds are against them beating the averages, but that gene also contains a blocker that suppresses contrary negative information—even when they’re on a losing streak. The brain chemistry and psychological profiles of these two types of investors are world’s apart. If you listened to a debate between passive Main Street investors and Bull’s Eye Investors you’d think you were talking to two aliens, one from Mars, the other from Venus.

Warning, 82% of all day traders are losers! But deny it!

Moreover, never the twain shall meet. Each type of investor is as dogmatic as the other. DNA-based ideologies control each one, not rationality. Why? Their minds are made up in advance. Their opinions and beliefs were already cast in stone long ago. To each, facts about the other are totally irrelevant. Indeed, that was a given from the start, as I found out once again in our so-called debate. Here’s why: Just before this little debate we discovered some interesting new data from a BusinessWeek article.

The bottom line is simple—most traders are losers. Earlier, Forbes reported on a study that the “North American Securities Administrators found that 77% of day traders lost money.” Now comes more evidence, BusinessWeek was reporting that 82% of all day traders lose money. That data comes from a recent study by a couple professors at the University of Taipei working in conjunction with University of California behavioral finance professors Terry Odean and Brad Barber. And yes, that is the same Odean and Barber who researched 66,400 Wall Street investors a decade ago and concluded, “The more you trade the less you earn.”

In fact, their earlier study proved that the returns of passive buy’n’hold investors (with just two percent turnover) were a whopping 50 percent higher than the returns of the most active traders (averaging 258 percent annual turnover). Why? Very simple, transaction costs, commissions and taxes were killing returns.
In the new study four behavioral finance professors had access to all the records of the Taiwan Stock Exchange (TSE) for the 1995-1999 period. Not just 66,400 randomly selected accounts in Wall Street’s huge database of millions of clients, but all 100 percent of the traders on TSE, including their identities, a total of 925,000 investors. Assuming the DNA of a Taiwanese trader is essentially the same as the DNA of a trader at Goldman, Morgan or Merrill, the new Odean-Barber study results actually confirm what we already know, that market timing and day-trading are a loser’s game.

Dumb and dumber—and yet, they can’t stop losing

All this research also shows that the most active traders—a small group equaling about one percent of all traders—actually accounted for over half of all the exchange’s volume. However, while those guys did make money in their trading—after transaction costs were deducted they were net losers. The study actually went much deeper: Listen to this new bit of information about the strange self-sabotaging obsession traders have to lose money: The study separated the traders into six groups depending on their past successes. The researchers wanted to see if past winners repeated. The answer was yes, but at a very high cost:

– The average winning trader did in fact repeat as a winner, netting $251 a day after transaction costs. But overall, things were so bad that 82% of all the traders lost money, for an average loss of $45 a day.
– That’s right: Out of 925,000 traders in the study, about 750,000 of them were losers. And assuming 250 trading days a year, each trader lost roughly $11,250 a year for a total loss of about $8.4 billion annually.
– On the other hand, the 175,000 repeat winners each made an estimated $62,750 a year after transaction costs, for a total annual gain by the winners of roughly $11 billion. So even the small number of the top-performing traders made only $62,750 a year for all their risk-taking.

Big deal? It gets even worse. Remember, those study covered the manic trading days of the late nineties. Those were the heady go-go days of the great bull market when even 30 percent returns on funds were considered so-so. Those were the days when over a couple hundred funds generated returns in excess of 100 percent in 1999, many over 300 percent—the days when few lost money.

Chimp makes chump of best day-traders

Let me remind you of one very unique “competitor” in the trading world at the time: Raven the chimpanzee! Raven created a winning portfolio by throwing darts to pick stocks—regularly beating even hot portfolio managers returning 300% annually on the Monkeydex portfolio. So the joke’s on all of America’s hot-shot traders. And just in case you think this is just a cute joke, for several years The Wall Street Journal ran a regular contest pitting dart-throwing versus picks based on a comment made by Princeton Professor Burton Malkiel in his classic, A Random Walk Down Wall Street: “A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.”

In short, the new study is a huge embarrassment for the online discount trading firms, for example, who hype the payoffs from trading. Unfortunately, their trader-clients are not only big losers, the 82 percent who are repeat losers are so blind and dumb that they stay in this loser’s game, in denial, and just kept on losing. That’s the trader’s DNA at work!

Dumb, dumber … now the dumbest

Worse yet, the “winners” were the dumbest of all. The so-called winning traders were not only making less than Raven the monkey, they were making less than a buy’n’hold investor would have made from a portfolio with a thousands just sitting passively in tech funds and stocks in the 1995-1999 period. So once again our hat’s off to Odean and Barber, their two studies confirm the truth about trading, that … trading is a loser’s game.

The only people who really make money trading on a regular basis are the service professionals, especially the commission brokers. These pros make their commissions no matter how much investors and traders lose. Even in bear markets their ads paint a deceptive picture aimed at the wannabe trader’s super-confident but addictive and self-sabotaging genes—ads designed to convince na├»ve wannabe traders that the pros have some special secret that’ll beat the market—secrets they’re willing to share for a fee, naturally.

The truth is: They can’t … they never do … and they never will beat the market … no matter how long they try … trading’s a loser‘s game. But as I found out one more time in this “debate,” as I do in every “debate” with an expert who may be making a living selling trading secrets … I may as well have been trying to convince Raven the chimpanzee that eventually he too would lose, and lose big.

In that respect however, chimpanzees are superior to human traders. The trader’s DNA control their brains, they have no choice but to keep chasing the impossible dream that they can beat the market. The truth is, they’re addicted to losing. The pros know this, so they can take advantage of the wannabe traders never-ending delusional “winner’s fantasy.” And the game goes on ad infinitum, with the pros having a big laugh as they rake off big fees and commissions and get rich off the 82 percent of all traders who are repeat losers.