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Sunday, June 30, 2013

Thought of the Day #2


I was reading about an article and come across this quote....how many of you agree with this statement? I agreed with it to a certain extend....

"WHEN I WAS YOUNG, I THOUGHT THAT MONEY WAS THE MOST IMPORTANT THING IN LIFE. NOW THAT I AM OLDER, I KNOW THAT IT IS" 

A lot of people may tell you this is not true....while it might not be the entire truth, it holds a great deal of truth....without money, it is difficult to obtain good health. Without money, it is impossible to go for travel. Without money, it is hard to bless others. Without money, one will struggle to feed for the family, to provide the most basic necessity. So while money might not hold the key to happiness, it is one of the most fundamental part of our lives....

Wednesday, June 26, 2013

Thought of the Day #1


We all know the importance of money in life, which is why we look at ways to increase our earnings, income and also to make use of our money. However, let us not be deceived, because at the end of the day, "MONEY IS ONLY A TOOL. IT WILL TAKE YOU WHEREVER YOU WISH BUT IT WILL NOT REPLACE YOU AS THE DRIVER"

Monday, June 24, 2013

How to fill up W-8BEN form for Malaysian?

I just get an email from my US trading account stating that my W-8BEN form is not going to be valid after end of Dec 2013 and asked me to resend them a new copy of the W-8BEN form. While I was filling up the form, I found that it is quite troublesome, if you do not know how to fill it up, so I guess it is best for me to blog about it, as a reference for myself in the future, as well as for reference for other Malaysians.

What is W-8BEN form?

You need to fill up this form if you have a trading/brokerage account in the US. If you don't fill this up, the super efficient IRS (Internal Revenue Services) will hunt you down, just like there is a saying "There are 2 things that are certain; death and tax". Anyway, just kidding, basically, if you don't fill this up, the IRS can hold up to 30% of your dividend, interest, royalty, etc. Basically , this rate is what the IRS can withhold for a foreign person. If you filled this up, you are excluded from this withholding provided you are a non-resident alien. However, all my dividend are subjected to 30% tax after I submitted this form, but at least was not taxed for capital gain. US residents and permanent residents do not need to fill this form as they are always subject to taxes.

Non-resident alien - generally means person that is not staying for a US for a long duration and has permanent residency outside US.

Every 3 years you need to fill up and resubmit this W-8BEN form. I submitted mine when I open the trading account and it is not due for another submission. It is either thru electronically or using the manual way to sending the form to the US. (For my case, I need to send through postage)

Reading the W-8BEN FAQ spreadsheet can be confusing for 1st time as the language used is tax and accounting centric.

Here is a summary what to fill:

Part 1:

Line 1: Fill up your name according to your account. Note that US naming convention is "First Name , Last Name".

Line 2:  Leave it blank as you are filling it up as an individual

Line 3: Pick individual

Line 4: Your address where you claim to be resident and paying tax. Put your Malaysian address here.

Line 5: Fill it above if Line 4 is not your mailing address.

Line 6: Leave empty if you don't have social security number aka the identity card number for the US.

Line 7: Optional. Leave blank. No need to fill our LHDN info into it.

Line 8: Account number for your trading/brokerage account. I put down my name also to be more complete. The reason is that I have multiple US trading account hence they need to know which account that I am filling.

In theory , I believe that you only need to submit one W-8BEN for all your account you have since you are practically giving them the same duplicate info. But i think because the brokerage firms does not sync-up the W-8BEN forms between their rivals, hence the need to do multiple jobs.

Part II
Line 9a,b,c,d,e & Line 10 - Leave untick as Malaysia does not have a tax treaty with US. And the rest does not apply for a non-resident alien and individual account holders.

Part III
You don't need to tick this as you like the average foreign US stock buyer do not dabble in interest swaps aka "notional principal contract" (such a fancy name). Unless if you are a private hedge fund manager??

Part IV - Just sign your autograph at the bottom and affixed a date and that's about it.

Friday, June 21, 2013

A generation of "workers"

We all know the essential of using money to generate more income but how many of us could really said that? The other day I was reading an article about this man who retired at the age of 30.

According to this man, retirement means you no longer have to work for money.

No doubt bout that...easier said than done.

Recently a good friend of mine actually bought a new car....Toyota Vios....while it is nothing too big to shout about changing a car that is more reliable, I felt that my friend should practice a bit of proper planning. Since we were very close, I happened to know that his debts are quite a large sum to handle....not forgetting about the expenses on a monthly basis. Well, I guess this is what is happening to this generation, me included...that so often, we spend on an impulse, and in the long run, we become a generation of workers, because there are so many unnecessary commitments.

Maybe it is really time to consider about our culture of "spending madness"...something that Generation Y must learn to handle.

Tuesday, June 11, 2013

Do you know how to spot a millionaire?

I've read an interesting article on The Star regarding some tips on how to spot a millionaire, though I truly believe this kind of millionaire is the millionaire next door, which means, they are very frugal in their spending and they most likely try to buy something to reflect their millionaire status or lead an extravagant lifestyle.

While I did some rough calculation before and I understand that having RM1 million is not tough, but surely it is not easy, not to mentioned accumulating up to USD1 million in Malaysia - the number itself is already three times more.  It took roughly a savings of RM2.8K per month for the next 30 years to reach RM1 million milestone, and requires three times the effort to become a millionaire in US dollar.

Anyway, the purpose of this post is not to talk about how to get there, but merely on how we can spot millionaire among our friends. You never know, your neighbour might be a millionaire, yet, he looks even poorer than you.

According to the article in The Star titled Do you know how to spot a millionaire? Here are some tips., there are seven ways of spotting a millionaire and the ways are as below:-

  • He is only mildly impressed when you show off your Jaguar or your penthouse. He does not care what you think of him for buying a second hand car and living away from the city.
  • He has been stashing a large percentage of his savings away without thinking ever since he was in his early twenties. He knows that if you keep spending less than what you earn, you are going to be able to spend more when you no longer earn. 
  • He puts that savings to work in an investment which gives him a decent rate of return. His investments are in a simple portfolio in assets which he understands. 
  • He knows his financial standing or looks at it once in six months. Growing his net worth is his aim. 
  • He pays his credit card in full every month. He knows that if he can't afford to pay in full every month, he simply can't afford it. 
  • He keeps himself busy with getting a second income or spending more hours into his current job. Both will likely improve his cash flow as these will normally translate to a pay rise. Besides, being busy keeps him from spending.
  • He is relaxed as he is likely in a job he loves and has not much worry about money, as he has made a financial safety net for himself.

Do you agree with all the points? I only agree half of it - especially putting his savings to work through investment which give him a decent rate of return and paying credit card in full every month. I also agree that once a person has reached a financial freedom status, he or she will be more relaxed as the person only work because he or she loves the job, not because of needing the money to feed the family.

The first point might just be a sour grape, just because other people can afford doesn't make them less richer than the frugal millionaire. While spending less than what you earn in early days is a good habit, but it does not turn to be able to spend more when a person no longer earn, as the savings might just be swallowed by the inflation. Getting second income might good to improve cash flow, but spending extra hours in office will not necessary translate to a pay rise or promotion, but it does keep someone busy from spending.