YOUR MONEY - 10 factors to financial freedom

MOST people think that the Return on Investment (ROI) is the most important, if not only, factor for them to manage in order to achieve their financial freedom.

To them, they have a higher chance of achieving financial freedom if they can get good ROI for their investment. A good and high ROI will help to increase their investment fast to achieve whatever financial goals they have.

If they do not get a good ROI, then they think that they will have little chance of achieving their financial freedom.

As a result people focus too much on ROI in their financial freedom plan and neglect other equally important factors.

In my opinion, the importance of ROI in achieving one's financial freedom has been over-rated. ROI is not the only important factor. There are another nine factors that you can manage to achieve financial freedom.

The nine factors

The other unknown or under-rated factors in achieving financial freedom are:

- The time you start taking action

The earlier in life you start to take action to achieve your financial freedom, the better position you will be in achieving your financial freedom.

Someone who starts planning and acting on his financial freedom plan at age 30, put himself in better position than someone who starts at age 50. The earlier you start investing, the lower ROI you will need to achieve the same wealth accumulation goal.

However, many people just ignore this and do not use it to their best advantage in achieving financial freedom.

- The amount you save

The more you save from your income, the more money you will have to fund your financial goals. As a result, you can achieve your financial freedom easier.

In addition, the more you save, the less ROI is needed to generate to achieve the same accumulation goal.

- Your family income

The more income you have, the more money you can save. As a result, you will have more money to fund your financial goals. When we talk about your family income, it includes your spouse's income. Having extra sources of income is definitely better than having only one source of income.

- Children's education expenses

The more you spend on your children's education, the less money you will have for your other financial goals. So, someone who spends less on children's education or has fewer children is in a better position than someone who spends more on children's education or has many children.

- Your dream home

If you want to have an expensive dream home, you will have less money for your other financial goals. Someone who wants to have a RM2 million bungalow will definitely put himself in a more challenging position to achieve financial freedom than someone whose dream home only cost RM500,000.

- Your vacation expenses

The more you spend on your vacation, the less money you will have for your other financial goals. Someone who spends RM20,000 a year on vacation is in a better position to achieve financial freedom than someone who spends RM50,000 a year on vacation.

- Your retirement age

When you retire, you stop having active income. So, the later you retire, the more income you generate to fund your financial freedom. Someone who chooses to retire at age 65 will need a lower ROI to maintain his retirement life style than if he were to retire at age 55.

- Your living expenses during retirement

The more you intend to spend on your retirement living expenses, the more money you will need to fund your retirement. Therefore, you will need to achieve a higher ROI. On the other hand, if you intend to spend less on your retirement living expenses, you will need a lower ROI for your investment.

- Your medical fund provision

The more you need to provide for your medical fund, the less money you have to fund other financial goals. You can reduce your medical fund provision by transferring your risk to insurance company. You can also choose to use public healthcare service rather than private healthcare.

After going through the nine factors, you may think that they are nothing new. However, in the journey to achieve your financial freedom, what you know is not important. What matters more is what you do with what you know.

When you are able to manage your financial freedom plan using all the 10 factors, you will be able to place the importance of ROI in the right context and let other factors play their roles.

As a result, you will be able to exploit the compounding and synergistic power of the 10 factors to attain financial freedom.

Without considering nine factors, your financial freedom car is only powered by one horsepower engine rather than 10 horsepower engines. And that's a great waste.

In fact, there's another angle to consider when using the other nine factors: your ability to control a particular factor. The more control you have on one factor, the easier it is to manage that factor to achieve financial freedom.

Out of the 10 factors, ROI is the one that you have the least control.

You will never be able to guarantee your ROI no matter how much effort and knowledge you put into it. The truth is that no one in this world has an absolute control on ROI. Not even a great investor like Warren Buffett. Therefore, it is an illusion if you believe you can control ROI by putting in great effort.

However, you will find that you can have better control on the other nine factors. You can control when you want to start taking action, the amount you want to save, what your dream home should be, how much to spend on your vacation, when you want to retire, how much to spend on your children's tertiary education and how much money to set aside for your medical expenses.

You can also control on how much to spend on living expenses during your retirement and your much income to generate if you really want to.

I must agree that you can't completely control all these factors. However, you definitely have better control on these factors than the ROI factor.

Therefore, the wiser way to achieve financial freedom is to understand that ROI is only one of the 10 factors to achieve your financial freedom and the least controllable one.

If you are serious about achieving your financial freedom, start exploring the other nine financial freedom factors and put them to good and full use.

To do that effectively and efficiently, a tool that comes in handy is the Roadmap to Financial Freedom.

In fact, the roadmap has been designed in such a way that you can manage all the 10 financial freedom factors easily.

source: NST online

How to invest in gold

HISTORICALLY, gold is perceived to be a safe haven during uncertainties and economic crises as it is considered more stable than other asset classes. It is generally an effective hedge against inflation and fluctuations in the US dollars.

Gold is an investment tool for preservation of wealth and a store of value in times of market volatility. It is an asset diversifier that could lower the overall risk in an investment portfolio.

In the previous article, we discussed the benefits of investing in precious metals and particularly gold. This article will focus on different ways to invest in gold.

Gold and gold-related funds

Gold and gold-related funds are unit trust funds that allow individuals, corporations and institutions with common investment objectives to pool their money for investment in gold and other precious metals. Professional fund managers then use the pooled money to acquire assets which will help meet those objectives.

Generally, a gold fund invests in gold mining equities and/or gold bullion accounts, while a gold-related fund invests in gold and other precious metals including platinum, silver, rhodium and palladium.

"By investing in such funds, investors benefit from diversification in their investments as fund managers buy stocks in more than one gold mining company or more than one type of precious metal," said Datin Maznah Mahbob, chief executive officer, Funds Management Division of AmInvestment Bank Group.

The funds also provide investment opportunities that allow investors to benefit from the investment expertise of fund managers who manage the funds.

In Malaysia, the only gold fund is opened to high-net-worth individuals with the minimum investment set at US$150,000 (RM513,000). For gold-related funds, investors can invest as little as RM1,000 to enjoy diversification in their investments and take advantage of professional fund management.

Gold exchange traded fund

An ETF is a unit trust, listed and traded on a stock exchange. It is an open-ended fund that tracks or follows the performance of a benchmark index.

An index is made up by a basket of securities and usually reflects the movement of an entire market. This gives ETF investors the opportunity to invest in a pre-packaged basket of securities of an index rather than just an individual security.

"Gold ETFs allow investors to buy and sell gold ETF units just like how they trade stocks on a stock exchange. Generally, gold ETFs track gold indexes or the price of gold. The ETFs invest in gold mining stocks to track the gold index," she added.

Gold ETFs, which track the price performance of the gold bullion, enable investors to participate in the gold market without taking physical delivery of gold. This is because it is 100 per cent backed by physical gold held mainly in allocated form. Allocated gold refers to the gold kept in a vault under a safekeeping or custody arrangement and the investor has total ownership to it.

The first gold exchange-traded fund Gold Bullion Securities listed on the Australian Stock Exchange since March 2003 is fully backed by gold, which is deposited and insured.

For SPDR Gold Shares listed on the Singapore Stock Exchange, the underlying gold is stored in the form of 400 ounces London Good Delivery bars in a bank vault.

"Gold ETFs are considered a passive investment. This means that upward movement of gold prices or gold indexes will be followed by the appreciation of ETF unit prices," said Maznah.

There is no gold ETF offered in Malaysia yet, but local investors can invest in Singapore-listed SPDR Gold Shares which are available closer to home. They need to have a foreign trading account offered by a local securities firm to trade the ETF. On top of that, their investment is subject to currency risk since the gold price is quoted in US dollars while the ETF is in Singapore dollars.

Physical gold investment

Some investors prefer to invest in physical gold including jewellery, gold bars and coins to have physical possession of the assets. Gold is an asset appreciated for its intrinsic qualities and beauty.

Investors have the option to buy gold bars in a variety of weights and sizes, ranging from one troy ounce to 400 troy ounces from some banks and jewellery shops. For instance, a local gold trading company offers gold bars and coins of 20 grams at RM2,415, 50 grams at RM6,010, 100 grams at RM11,964 and 1 kilogram at RM119,644 as at September 15 2009.

Investors can also invest in bullion coins offered in different weights of 1/20, 1/10, 1/4, 1/2, and one ounce. The actual value of bullion coins is based on the daily gold price and the gold content. They can buy bullion coins including the American Eagle, Australian Kangaroo Nugget and the Canadian Maple Leaf.

"To make direct investment in physical gold, investors need to set aside a bigger sum of investment compared to buying units in gold funds and gold ETFs. It is not as convenient as they have to think about safe storage and insurance for the precious assets," added Maznah.

Mining stocks

Mining stocks or equities are shares of ownership of a precious metals mining company. The stocks entitle the investor to receive profits from the operations of the company, usually by payment of a dividend, and to any voting rights attached to the stocks. Factors affecting the appreciation potential of a gold mining stock include market expectations of the future gold price, the future earnings and growth potential of the company, mining costs, and the likelihood of additional gold discoveries.

In general, prices of gold mining equities are more volatile than gold prices, thus some gold mining company equities decline when gold prices increase. The short-term volatility of the equity prices could be due to some gold mining companies hedging their future output using gold futures contracts. In the long-term, generally prices of gold mining equities could match the longer-term price trends of gold bullion.

"Investors do not enjoy diversification in their investments when they buy stocks of one gold mining company. They need to allocate more money to buy stocks of different companies to diversify their holdings," explained Maznah.

Gold passbook account

Another option is investors can buy gold in 999.9 fineness using a gold passbook account. Whenever they buy and sell gold, the transactions will be recorded in a passbook provided to the account holders. With the account, they can buy and sell gold at daily quoted gold prices for 1 gram in Malaysian ringgit. The account is normally backed by physical gold.

There are banks in Malaysia that require investors to deposit and trade a minimum of 5 gram of gold. The bank allows investors to make withdrawal in either physical gold or cash credited to their deposit accounts. They will incur a conversion charge inclusive of the shipping and insurance for the physical withdrawal.

One of the disadvantages for this type of investment is account holders do not get any interest or dividend for their investment. They generate profits only if they sell the gold at a higher price compared to their initial investment. The banks normally impose a charge of up to 5 per cent based on the gap between the selling and buying prices to cover administrative and storage expenses.

Conclusion

Now that you have understood the different ways of investing in gold, you need to compare them in terms of diversification, affordability and the advantage of professional management. On top of that, you should consider and select the investment options based on your risk tolerance as well as investment goals and objectives.

source: Business Times

Shopping for medical cards!

Health insurance a.k.a medical card is an extreme necessity that most of us don't realise until we experience the pain ourselves. My brother was admitted to one of the private medical centre here. And since it was an emergency admission, we just used credit card to swipe in for the deposit. After all, how much could it cost, we thought. The next day, the specialist came to inform that we needed to top up our deposit as it had crossed 7K. Just 2 days and it had crossed 7K!!!

And even though my brother had a medical card covered by his work place, the limit was up to 12K only. So, we are most likely to foot the total bill that would probably hit the 20-25K mark.And that's a LOT of money!

So, my first priority now would be to ensure that my entire family is adequately insured. I have to hold back on my investment plans for the time being.What else can be more important than the welfare and well-being of your family? And that reminds me..I've to get a card for my wife as well. Earlier, when I got a medical card for my son, I did not take for her because her work place provided her with one.

So for all you guys out there, do not delay in insuring yourselves and your family. Yes, more expenses incurred, but it gives you a peace of mind.

How to Spend Like a Frugal Millionaire

Maybe we have all read about these tips before (you may even find the likes of some of them here, here and here) , but I still found that this article an interesting read...

Saving thousands while still spending.

Millionaires make up just 2 percent of the population. They get a bad rap during recessions for being wasteful with their money and are frequently used as examples of excess. It’s the millionaires that you don’t see that you can learn from in times like these. I call them the frugal millionaires and interviewed 70 of them to uncover ways we can all be smarter with money.

Nearly 70 percent of the economy is based on consumer spending. To keep the economy going we need to keep spending but not waste money in the process. This is where the frugal millionaires come in. They’ve been smart with their money all along and haven’t lost it all and had to remake it. These are the kind of people you want to learn from when it comes to spending your money.

Spending philosophy.

Frugal millionaires are unique thinkers when it comes to spending money: 1) they can easily delay their need for gratification when purchasing; 2) they are resourceful in getting what they want by carefully timing their consumer purchases; 3) they make living below their means painless; 4) they don’t like wasting anything (especially money); 5) their sense of “self-entitlement” is highly minimized: and 6) spending is OK with them…depending on what they are buying (think: appreciating vs. depreciating assets).

[For more, see, "10 Secrets of Millionaires' Money Management."]

Buying tips.

These millionaires keep more money than they spend, that’s why they are rich. Their tactics work for them so they’ll work even better for you. Key Point: They don’t view shopping as a sport. They shop efficiently and spend their time doing more important things with their lives. Here are their tips that will help you save while spending:

Cars: Buy used (or off lease) fuel-efficient cars, often with “certified pre-owned” warranties. This warranty can be better than a new car, plus the initial depreciation hit is avoided. Drive the car for a long time and never lease it.

Eating Out: Bring half of a meal home to eat later (this also saves the waistline). Eat at happy hours. Bring wine from home and skip dessert. Value food quality over expensive ambience.

Eating In: Eat better and less expensively by cooking at home. Make it a friends and family event. Get your kids involved. Bonus: You can have that extra drink without worrying about getting busted for driving under the influence. Also: buy day-old bread at the best bakery in town and freeze it. Eat oatmeal, because it’s the most cost-effective breakfast food. Get a supermarket “club card” and buy food on special. Play the game of trying to see how much of a discount can be saved off the total food bill.

Clothes: When you buy something new donate something used to charity. Buy traditional clothes, but wait for the off-season to acquire them. Go for high quality – not high price. Buy vintage clothing and avoid logo clothing and keep people guessing who the designer might be. Hint: There shouldn’t be one!

[For more, read: "Juggling Your Money in the Recession."]

Consumer Electronics: Buy low-end gear that has the basic functionality of the more expensive stuff. Don’t be the first to buy new technology. Wait at least one lifecycle so the bugs are worked out. Buy refurbished electronics whenever possible.

Computers: Buy more mainstream computers with proven technology. Select higher capacity hard drives, a decent amount of RAM (the memory that the program runs in) and a cost effective processor. Super fast doesn’t always equal super good…unless you are building airplanes or bridges. Laptops are a good compromise between desktops and netbooks. Don’t go through the pain of upgrading operating systems on existing computers, it’s not time efficient and you will probably go insane trying.

Going green: Being green and frugal go hand-in-hand. Yet frugal millionaires don’t readily fall for the trendy green hype machine. They typically buy green if it helps the environment and lowers their costs. They look at the timeframe when a product can pay for itself. They do use compact fluorescent lighting, turn off lights and equipment that isn’t being used, monitor AC and heat usage (with programmable thermostats), drive efficiently, live in “right-sized” homes and turn off the water when they aren’t brushing their teeth or washing dishes. Because they have trained themselves to not waste money they won’t waste anything else either. They get into good habits and keep them going. You can, too.

source

Why Athletes Go Broke

The “Real Deal” is broke.

Former Heavyweight champion Evander Holyfield is playing the real life game of Deal Or No Deal. It has been reported that his $10 million estate in suburban Atlanta is under foreclosure, the mother of one of his children is suing for unpaid child support, and a Utah consulting company has gone to court claiming the boxer failed to pay back more than a half million dollars for landscaping. Just one more high profile athlete having to scale back his lifestyle to the level to which you have I have been accustomed. Why is it that athletes who seem to have everything are often completely unable to control anything related to finances?

We all played our violins to death when we heard of Latrell Sprewell’s financial troubles. On Halloween 2004, Sprewell, who was in the final season of a $62-million five-year contract with the New York Knicks, said he was insulted by the Minnesota Timberwolve’s offer of a contract extension that was reportedly worth between $27 million and $30 million for three seasons. Sprewell stated, “I’ve got my family to feed.” That quote become a national moniker for the public perception of athletes as greedy, out of touch individuals. Apparently, Sprewell still can’t feed his family. His yacht was recently repossessed and his multi-million dollar mansion is about to be foreclosed on.

While there is certainly the stereotype of the financially irresponsible NBA athlete, no professional sport is immune.

Let’s take a look at some high profile athlete financial sob stories over the years:

1. No one my age can forget Jack”The Ripper” Clark , star player for the Boston Red Sox who filed for bankruptcy in 1992 in the middle of his second year of a three-year, $8.7 million contract with Boston; he listed $6.7 million in debts. Jack was a master of financial planning and prudent asset acquisition. His bankruptcy petition listed assets such as 18 automobiles, including a 1990 Ferrari that cost $717,000 and three 1992 Mercedes Benz cars costing between $103,000 and $143,000. He owed money on 17 of the automobiles and was liable for about $400,000 in Federal and state taxes. He had also lost about $1 million in a drag-racing venture. Sounds like Jack would have been more at home in the NBA. You can read about it here

2. Johnny Unitas, Hall of Fame quarterback for the Baltimore Colts, filed for bankruptcy in 1991 citing numerous failed business ventures in his petition These failed bits included bowling alleys, land deals and restaurants. He filed for Chapter 11 bankruptcy in 1991.

3. Mike Tyson The name speaks for itself. Mike’s bankruptcy was highly publicized. Despite earning hundreds of millions during his boxing career, Mike kept it simple. His bankruptcy petition simply stated: ” I am unable to pay my bills”. According to federal court records, his liabilities totaled about $27 million. You can read that story here.

4. Dorothy Hamill, the women’s figure-skating gold medalist in the 1976 Winter Games, filed for bankruptcy after a series of financial setbacks. Hamill said she has experienced financial setbacks as a result of poor financial investment advice and management.

read more

source: http://www.briancuban.com/why-athletes-go-broke/

7 Ways to Save on Gas

by AnnaMaria Andriotis
Friday, June 19, 2009

That budget road trip you planned for the family this summer is starting to look a lot more expensive now that gas prices are on the rise.

Some of the spike is seasonal. Increased demand -- from all of those other families hitting the road -- tends to lift gas prices each summer, says Paul Hess, information analyst at the Energy Information Administration (EIA). Oil prices have also been creeping higher in recent weeks as optimism grows on Wall Street that demand for crude will rise worldwide once the global economy stabilizes, says Tom Kloza, chief information analyst at Oil Price Information Service, which monitors oil prices in North America. And further boosting prices at the pump is an Environmental Protection Agency requirement to add a fuel blend to gasoline in certain regions during the summer months that reduces ozone damage. This additive alone can add another five to 10 cents to the price per gallon, says Kloza.

More from SmartMoney.com: • 10 Things Gas Stations Won't Tell You • Cash for Clunkers: What You Need to Know • Car Shoppers: Should You Buy or Lease?

As a result, regular unleaded gas costs $2.67 a gallon, up 16% from $2.30 a month ago, according to AAA’s Fuel Gauge Report. According to the EIA, gas prices won’t begin declining significantly until fall.

In the meantime, drivers can lessen the pain at the pump by taking some inexpensive and easy steps.

Here are seven ways to save on gas this summer.

Shop Around

Sure, it’s convenient to visit the gas station closest to home, but it may not be the best place to fill up.

To find the cheapest gas prices, compare prices at stations near your home or along your commute. Price-comparison web sites like GasBuddy.com and BillShrink.com let you plug in your daily destinations to find the most affordable gas stations on those roads. The price difference per gallon can be up to 50 cents, says Samir Kothari, co-founder of BillShrink.com.

Pay Cash

More from Yahoo! Finance: • Popular Restaurant Chains on the Ropes • High Gas Prices Could Slow Recovery • What Your Dollar-Value Meal Really Costs the Restaurant Visit the Family & Home Center

Last summer, gas stations rolled out higher prices for consumers who paid with credit or debit cards (the idea was to pass along the merchant fees associated with such transactions). Many gas stations are still at it, which means those who pay in cash can often save. ARCO (a subsidiary of BP) stations, located in California, Washington, Oregon, Arizona and Nevada, for example, only accept cash and charge between five and 10 cents per gallon less than competing stations. (ARCO recently introduced a debit MasterCard which consumers can use to purchase gas at no extra charge. Other debit cards are accepted at these stations, but there’s a 45-cent fee.)

Cash discounts are popular in California, Connecticut, Florida, Michigan, New Jersey and New York, according to GasBuddy.com. (Discounts for cash-paying customers are legal in every state, as long as the gas station makes it clear that prices are different when you pay in cash vs. credit or debit, says Jason Toews, cofounder of GasBuddy.com.)

Fill Up at the Warehouse Club

In addition to frozen food, toiletries and appliances, Costco, BJ’s and Sam’s Club sell discounted gas at some of their locations.

“It depends on local market conditions but usually they sell it cheaply enough so that they’re beating out the competition,” says Toews. For example, at a BJ’s location in York, Pa., regular unleaded gas is selling for $2.59 a gallon. Local competitors there sell gas for $2.61 to $2.65 a gallon, according to GasBuddy.com.

Keep Your Car in Good Shape

Routine maintenance on your car’s tires and engine can increase its fuel efficiency (and even exptend its life). Plus, most of the things you need to do to maintain your car's health don’t even require pricey visits to the mechanic.

Just keeping your tires properly inflated can help save you cash. Underinflated tires require more energy to roll and decrease a car’s fuel efficiency, says Kothari. Driving with properly-inflated tires can improve fuel economy by 3% over a year, saving 20 gallons of gasoline and up to $45 annually, according to the Alliance to Save Energy. Check your car owner's manual to find out what the proper air pressure.

Also, be sure to regularly change your air filter. Clogged air filters can damage your engine and decrease fuel efficiency. A new air filter will improve gas mileage by 10%, according to the Department of Energy (DOE). Even better: Air filters are fairly cheap, ranging in price from $20 to $60.

Also, stick to the motor oil that’s recommended by your car's manufacturer, and buy one that states “energy-conserving” on the label, says Kateri Callahan, president of the Alliance to Save Energy. This can increase fuel efficiency by up to 2%, according to the Alliance to Save Energy.

Avoid Road Rage

Aggressive driving isn’t just dangerous. It also wastes a lot of fuel.

Consumers pay an extra 24 cents per gallon for every five miles per hour (mph) over 60 mph they drive, according to the Alliance to Save Energy. Rapid acceleration, hard braking and speeding can lower a car’s gas mileage by 33% on the highway and 5% in the city, according to the Department of Energy (DOE).

Clean Out the Clutter

Golf clubs, bowling balls or that bag of salt from last winter -- any unnecessary equipment or baggage in a car can decrease its fuel efficiency. According to the DOE, gas mileage decreases by up to 2% for every 100 pounds.

Another helpful tip: On your next road trip, try to pack everything inside the car rather than piling it on the roof. Stashing stuff on top of the car increases drag and decreases fuel economy by 5% or more, according to the DOE.

Limit A/C Use

Whenever possible try to keep the air conditioner at the lowest level. Having it maxed out can reduce your fuel efficiency by up to 25% compared to having the A/C turned off, according to the Alliance to Save Energy.

Copyrighted, SmartMoney.com. All Rights Reserved.

source: http://finance.yahoo.com/family-home/article/107208/7-ways-save-gas.html?mod=family-travel

Pointers For Unit Trust Investments

Please understand that Unit Trust (U.T.)/Mutual Funds is for long term investment only. It not for getting rich quick, neither it is for getting huge returns. However, it can be used as a very good tool against inflation.

Below are few pointers that you should keep in mind before making your decision:

• never allow your emotions to control you when making investment, whether the market is doing very well or very badly.
• you should be prepared to wait for AT LEAST 5 years to see your returns from your investments.
• as the market now is quite volatile and many people are losing their jobs, make sure that you have at least 6 months of salary in savings,to prepare for rainy days (just in case..)
• always add in whatever amount you can afford on a regular basis into your investment to get a better average pricing of your units-also known as Dollar Cost Averaging (DCA).
  

Whether you are opting for the high risk or low risk fund depends on the duration you have for investment, objective of your investment, etc. Generally speaking, people who are nearing retirement should go for the lower risk fund as compared to younger investors. But still, this can change as each individual's risk appetite varies.

Want To Get-Rich-Quick? Think Again..

When talking about about good investment tools, I should not forget to mention the growing number of ponzi or get-rich-quick schemes that is coming in all sorts of forms. These masterminds that create them use different kinds of techniques and strategies to get people involved in it. Somehow, in between the legal investment machineries, these schemes manage to squeeze in and play with the emotions of its victims- GREED and FEAR.

For the last months, I've been hearing about some Gold Investment Scheme, supposedly backed up by some established goldsmith in town. They are giving 3% a month, which totals to 36% annually. You also get to keep the gold you purchased. But the catch seems to be they only give you the gold after 2-3 months.Why that long? Figure out yourself...

Then comes another scheme - with envelopes. You buy 5 postal money orders and send out to the company, and within a few weeks, you will get back more postal money orders that you can cash in.

Another version that I heard was even better. This guy used the idea of selling each pixel on his monitor (the idea that made the original person to be an instant millionaire from the use of Internet), but incorporated some get-rich-quick philosophies into it. So, you get to have a pixel on the company's website and then when you get downlines of your own, you are paid certain amount for your effort to bring in those victims!

And I'm sure more and more schemes such as these will be mushrooming soon as the economy is still in a daze and people are looking out for ways to make money. As I mentioned earlier, we succumb to our greed and fears, especially when we are in a desperate situation. Again, we have to discipline ourselves not to fall for any of these tricks. If you do, you are sure to lose your investments!

Passive Income Earning Jobs

Last weekend, unofficially, the topic of discussion at home with my wife and a couple of friends were "The Career Path of Their Children". Even though that seemed a long long way to go for me, the entire group had actually created a strong mental picture of what they wanted their children to become in the future.

No doubt that nowadays parents are more liberal in letting their kids to choose the career of their choice and it seemed that these young parents are eager to give their opinions and ideas or simply said- 'brainwashing sessions' - before they allowed their children to have the final say. But what was most surprising to me was the fact that the list of jobs that came up. And guess what? At the top most was the most prestigious career (still) according to them - DOCTORS.
And what am I (and most pf bloggers) doing here talking about passive income and early retirement? We (includes this particular group of friends) talk and preach till our mouths go dry about having income without working and yet when coming to their children's career planning ( or financial planning) they do the total opposite. Who does not know the long working hours of a doctor and the stress that they have to undergo. A consultant gynaecologist that I know of has really made it BIG that he even has built his own hospital. But the sad part is that he still has to come work because patients come to him because of HIM and not because of his hospital. In fact he is almost reaching his seventies now and he is highly appreciated for his skills and expertise in his field.

It certainly is nice to be appreciated, but the sad part is you've got to work till you drop dead!On the other hand, people who have built their careers on jobs like financial planners or insurance agents or even Multi-Level-Marketing (MLM) agents get to enjoy their lives as well as earn a good income to sustain it. What is the point of having tonnes of money when you can't enjoy it? I would definitely not choose studying medicine for my kid if given a choice.

Am I right in my decision? Or am I making a mistake here? I would love to get a feedback from you guys..

FD to My Rescue

Fixed Deposits (FD) has been an dull venue to make your money grow, as far as I am concerned. It is only to be used if you have some spare cash that you don't need to use in the near future. And it is also a tool that helps people in the near-retirement category, where they are not willing to take much risk in equities or other similar kind of investment vehicles.

So, what about me or others in my category, who prefer to take more risk with their money? Can't FD help us at all? Or so I thought, until recently. I found that the FD account can be renewed on a monthly basis. And in case the need arises for me to use the cash for emergency purposes, I still have the flexibility to do so.

You see, the arrangement for my maid's salary is like this: I only have to pay her full 2 year's salary when she completes her contract. Until then, I'm allowed to put her monthly salary in a separate account (not necessarily under her name) in case the authorities request to show proof of me paying her salary.


Until I make the full payment to my maid who is going to be richer than me, I decided to bank in her monthly salary to a special FD account created for this purpose. I'll make some extra cash (even though its a very small amount), which I won't see if I just let the money lying in a savings account.

Best Ways to Utilise Your Credit Card

Though I don't usually promote the usage of credit cards, I would like to share some information on how we can benefit from it and not fall into its trap. Credit card debts can be killer, especially when the interest rates charged can be up to 18% or more!

When you pick a card, try to pick one that has no annual fee.Free for life.It is also common to see that these companies usually wave the fees if you are a good paymaster, but you have to ask! I found it out through my own experience with Citibank.

Just have one credit card at any one time - for any emergency purpose. Maybe one of your family members are admitted in the hospital and their insurance policy/medical card seems to give problems at that particular time. Or it just happened that you forgot to withdraw cash to make a payment for something that says "DEADLINE TODAY!!!".

Since credit cards nowadays come with promotions of free points and most of them are providing electronic service, sign up for the electronic billing system. The companies usually have promotions in terms of free gifts or free points to promote their internet billing facilities.

Talking about free points, what do you usually redeem them for? Some gadget that will be used for about five times maximum and then lie in the closet, collecting dust? Think about the items that you actually need, rather than what attracts you on the redemption catalogue. A simple guideline would be to choose an item that you would actually pay money to get it. Otherwise, just forget it.

You can also churn money using your credit card if you know what to do and have the right contacts. Credit cards usually offer cash advance with some interest charged. If you can spot an investment avenue that brings you a higher interest, why not use this cash for this purpose? When any friends need a short term loan from you, with some interest, of course, you can lend them the money. But be sure you have all this properly documented as you don't want to suffer from bad debts!

Make prompt payments.Do not delay even a single day. And pay in full, always. Don't make it a habit to make the minimum payment only. When you do that, all of a sudden you will find that you are surrounded by huge debts, thanks to the high interest rates charged.
Don't use your card to make purchases at merchants who charge an additional fee. Automatically the price of the goods become more expensive. Why pay extra when you can get it at some other place at a cheaper price? Or purchase with cash to avoid the additional charges?

When you need to make a big purchase such electronic goods, look out for promotions which allows you to make payment over a 12 month period, with 0% interest fee.This would actually free your cash flow a little, but always remember to pay on time.

Painless Way to Clear Your Debts

Just a few days back a friend of mine was complaining that his economic situation was bad and that he was under huge amounts of debt. He had his credit card debt and his car loan that he has not paid for a few months now, not forgetting his wife's car that has expired road tax and insurance.

While we were chatting on further, he revealed to me that just last month, both, he and his wife got a pay rise. Well, it is a very good thing to happen, since most other people are either retrenched or afraid of that happening to them soon with the economy showing no sign of major improvement. And yet they still find that they are almost penniless by the end of the month.

How can this happen, I wonder. You are used to live by almost 20% lesser income. Now that you have more, definitely you should be able to save more or pay off your debts.The answer lies in our own attitude. How much self control do we have? Are we disciplined enough to control our finances? Do we make a budget every month? Purchasing expensive items and gifts just to impress others or to show-off shouldn't be in our priority list at all.

If you are serious in clearing off your debts, I would suggest that you continue to live with the salary amount that you have been getting before this. The increment amount that you have now (the balance) should be used to pay your debts. You would not feel the pinch much when you apply this technique because you are not used (yet) to live with more money. So the additional money is channelled straight to whatever financial purpose you may have - clear debts, make investments, have savings, etc.

I am practising this method, and I can say that its really worth it!

Petrol vs Soda

The current petrol price is at RM1.90 per litre.It is displayed clearly at the station.And I do see it each time I fueled my car. And all this while I've been complaining about it.

However, yesterday as I went to the ATM to withdraw some cash before going to the counter, I picked my favourite soda drink - actually any iced soda drink can be voted as my favourite. I just can't let this addiction go. I paid the amount and walked to the car. As I was walking I noticed the price of this drink - RM 2.10 for a 500ml bottle. It's more than double the price of the petrol!

Let's face it. Petrol for the car becomes a basic need now, I have to pay for it whether I like it or not. Its the means of transportation for me and also it enables me to go to work and make a living.And yet I've been complaining.

On the other hand, I've been spending willingly and unconsciously at the same time for the sodas.And I've been very happy about it.What good does it do? Increase my chances of suffering from diabetes later.Weaken my set of teeth and strengthen the wallet of my dentist. Hmmm... looks like there are no benefits at all on my side.

Something is seriously wrong here. The priorities programmed in my brains is not right at all! All this while I was prepared to fork out money for my wants more than I'm willing to pay for my needs. After this, I should put in some additional effort to control my tastebuds. At the same time save some extra money.

What other things that can fall into this category? Do you have any experience to share? Please share your experience in the comments section.

Some Financial Mistakes You should Avoid As A Parent

It is easy to blame on other people's mistake. But this post is not about that. I love my parents and appreciate whatever sacrifices they have made to bring me up. And without any doubt, they love me too. Just that they loved me and my siblings too much that they unintentionally made some mistakes along the way.

For instance, they never allowed any one of us to work during the school holidays. Even until I was 17! The reason they had was if we earned our own income, we will be too comfortable with it that we would not concentrate on our studies anymore. The problem: we failed to understand the challenges of working life until very much later stages of our lives.

Another issue that I can clearly remember is that they never allowed us to spend our 'gift money' that we received during celebrations or birthdays from friends, relatives and even parents themselves as we like. We were told to put it into our savings. However, if we needed anything, we should ask our parents and if they were okay with it, they would get it for us. The problem: we failed to make our own choices and differentiate between the needs and wants.

They pampered us too much. They tried to provide us with all the comfort that they could. When my youngest brother got a job,my parents insisted that they should send and fetch him. Many times I've insisted that he should stand on his own feet and make use of public transport available, especially when he is 25!

Apart from that, my brother uses the car during the weekends just to go and meet friends and hang-out. I can see the problems arising:

• he doesn't learn budgeting, because he still gets free rides

• his time management skills are nil because he gets to tell parents when he is ready to leave and not the other way around

• once he is very comfortable with driving (parents-sponsored), it is difficult to use public transport.

How is he going to get by when he can't afford all these comforts with his small salary later on?

Funerals & Weddings In The Financial World

What a title! Some of you may even feel shocked that those two have anything in common at all. After all, they are like worlds apart. One is an occasion to be merry and remembered life long while the other is an occasion of gloominess and brings down tears even from the bravest of all..

Last week I had to attend a funeral and a wedding and I realised that as the world continue to grow economically, people are willing to spend lavishly. And in many customs, weddings and funerals are considered to be a very sensitive and placed in the highest order at the same time. It also represents their status in the community.

You know where I'm heading to, right? Yes. Weddings and funerals these days are becoming a very expensive affair. As to feed their ego, more and more people today spend more than they can afford for their weddings, and they defend their actions by saying, it is only once in a lifetime (and so are funerals!). Whether the parents or the couple to be married themselves are going to finance the wedding function, they seem to forget that life still goes on after the function and there would be more and more expenses coming along the way. Some even go to the extent of taking huge personal loans to cater for this 1-day event!

And if this is not shocking enough to you, nowadays you can even get a burial spot for yourself well in advance. Some people even invest in it and sell a few years later when they get good returns out of it. Funerals are held in pomp and splendour just to show off how what a big name the family has in the society. The longer they have the function and cater for a bigger crowd, it is assumed that their status is higher in the society.

All I want to say is this: whether it is going to be a wedding or a funeral, have it in the most moderate way you can think off.

Vital To Start Planning For Your Retirement Early

Since this blog talks much about retirement planning and saving for the future, I thought it would be good if I could also put in articles published in the papers. This article was published sometime last year. And I have to agree with the writer, Malaysians as a whole are not prepared for their retirement.
Can you imagine that the money saved for more than 30 years gone in 3 years?
Many young people feel that 'there is still long way to go', or 'let me enjoy my money first'. What they don't realise is that this attitude of theirs is going to cost them dearly in their future, especially when they don't have the earning capacity any more.


COMMENT BY V.K.CHIN

RETIREMENT is meant to be a rewarding experience when those who have toiled for decades to raise families and contribute towards nation-building can relax and take it easy.

Retirees are supposed to spend whatever time they have left to do the things they have always wanted to but did not have the time as they had to earn a living.

But the opposite is true in many cases as the majority of retirees are in fact facing a nightmare in just trying to support themselves with the basic things in life.

Their main torment is finance or lack of it. It is estimated that at least 70% of retirees and pensioners were just not prepared to stop work because they could not afford to.

Most of those in the private sector depend on their Employees Provident Fund (EPF) contributions for their retirement. This is almost the only money they have to look after themselves. Unfortunately, it has been proven by none other than the EPF that most of the money would be gone in three years after its withdrawal. This is indeed a very sad state of affairs and the workers have only themselves to blame for their plight.

Very few people have proper planning for retirement. They do not save enough for this purpose until too late. Though everyone starting work should be saving for this purpose as early as possible, they only realise the seriousness of their situation in their 40s or 50s.

Without their compulsory EPF contributions, many of them would have been even worse off with almost nothing to their name. Many have their own homes and if they are lucky, they would have settled their mortgage by then.

Life insurance is still frowned upon by some as not being urgent and in any case not many earn enough to put money into shares, bonds or other saving instruments.

Saving outside of the EPF is not a culture as people may have difficulty in coping with their monthly family and personal commitments financially. EPF contributions are also being drawn to meet the demand for funds for housing and health. This will further limit the money meant for retirement.

Too many are expecting their children to look after them when they retire.They are prepared to use whatever assets they have for their children’s education. Many of them would have been left penniless by the time their children complete their studies.They would then be completely at the mercy of their children. If the kids are filial, then the parents would have a comfortable retirement. If not, then the last few remaining years would be extremely difficult for the retiree.

Some children can be extremely selfish and may insist on going to study overseas though their parents may not be able to afford it. Parents may have to mortgage their house or borrow a sizeable loan for this purpose. They may end up bankrupt if their children refuse to repay the loan.

There are countless such sad stories and these are serious social issues where not much can be done to help. It is impossible to tell those nearing retirement that they should keep some money for themselves instead of using it all to educate their children.

Parents should be practical and realistic. If their children are not academically good enough for university, they should opt for vocational education where they would be able to obtain a skill to earn a decent living.

It is worth repeating this message so that hopefully the message will sink in and those approaching retirement would take measures to protect themselves financially.

source

Which option to take, 11% or 8%?

The most heated argument taking place among working Malaysians today is 'shall we agree to the option given by the government to reduce our contribution to the EPF from 11% of our salary to 8% for two years starting Jan 1, 2009 or not'.

EPF (Employee Provident Fund) is a fund created by the government as a retirement fund once the employees retire. It is made compulsory as for some people, it may be the only source of retirement fund. It is currently fixed at a minimum 11% reduction from the employee's salary and a minimum 12% contribution from the employer.

Lowering the rate of employees’ contribution to the Employees Provident Fund (EPF) temporarily is part of the Government’s bag of tricks to stimulate the economy. The idea is to boost private consumption by putting more money in workers’ pockets.According to Government's estimates, RM4.8bil a year will be freed up for spending in the economy if all EPF contributors opt for the rate cut.

It is indeed a good strategy for the short term and good for the country's economy as a whole. More employees who fall under the lower income bracket welcome this move as they are struggling to make ends meet due to the current hike in essential goods after the petrol price shot up lately to its all time peak suddenly.A little more cash at their disposal would definitely ease their burden.

However, the rest of the group or the 'financially savvy' ones are crying foul over this move.Their reason is that it definitely means lesser retirement funds. Bad move in the long run.

For the past few years EPF has managed to give out dividends at around 5%. If you can really discipline yourself, even if you claim yourself to be in the financially savvy group, this move can be seen as an opportunity. How?

If you are earning RM4000, the reduction of 3% in EPF contribution will amount to RM120. That means an extra RM120 in your pocket. Don't spend it. Instead look for ways where you can save and invest this money so that it can give you a higher dividend than the one given by EPF. I believe an excellent investment instrument for this small amount in monthly basis would be the mutual funds/unit trust where you can do a Dollar Cost Averaging for 2 years with this extra cash. Or you can also pay off any outstanding credit card debts as the interest charged is usually very high.


So, now you have 3 options in front of you:
1. Reduce the deductions and spend the money.
2. Stick to the 11% deductions and leave the money to grow with EPF.
3. Opt for the 8% deductions and invest in places where higher dividends are being paid.

Make the right choice and have a comfortable retirement later!

What Can You Teach A One Year Old About Finance?

For a one year old who can barely speak, how can I share with him the knowledge that I'm gaining slowly nowadays about the financial world? My first challenge would be to make him understand what I'm trying to tell him. Then, the next challenge would be to get a response from him. But still, I'm just so eager to transfer him all that I've learnt.

Ok, I have to start somewhere. Maybe not on the compounding interest mentioned by Frugal Dad in How to Teach Compounding Interest to Kids or even the difference in needs and wants as mentioned by JLP in his post : Using Mashed Potatoes To Teach Kids About Money. Those are great ideas, but I'll think I'll save it till my boy is a little older.

For a start, I've decided to teach him that he needs to save money. So, how do I do that? My little boy has a habit of digging into my shirt pocket every day when I return from work, usually throwing off my pen and petrol receipts in the process. So, this time, I had on purpose, some coins in my pocket. Everyday, without fail, we dig into my pocket and discover those coins. And what do we do with that? We head for the elephant-shaped 'piggy-bank' and drop the coins into it. Initially, I was putting in the money. As he grew to hold the coins properly in his fist, I have trained him to 'bank in his savings'.

What do you think he would have learnt in the process? I'm sure he doesn't know what is compounding interest or the difference between needs and wants. Heck, I doubt he even understands what money is at the moment. But I'm very pretty sure he knows that the shiny round thing from his dad's pocket must end up in his 'piggy-bank'. That's sufficient for now, I think, don't you agree?

We have been religiously doing this activity for about 3 weeks now. The only concern is I have to be very careful and pay full attention to him as kids tend to put anything they find into their mouth. Otherwise, I think I have put him on a head-start on financial education!




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The Liberta Financial Freedom Challenge

Francois from Liberta has put up a challenge to everyone out there. It is called the Liberta Financial Freedom Challenge. He has also started the Liberta Financial Freedom Support Network, which focuses on Financial Freedom. The people in the network provide support and encouragement to each other so that each individual keeps going on and meets his/her goals of getting out of debt and achieving financial freedom.

Hopefully, I can settle my debts, achieve financial freedom and finally retire as a millionaire. As I've mentioned earlier, setting goals are very important and it becomes easier to achieve them when you have friends around you to give you support and encouragement. So, I'm taking up the challenge. What about you?

How Much Can I Save From The Current Reduction In Food Price?

How much do you think you can actually save from your daily food? Would you be surprised if I said that whatever little money that you saved from breakfast and lunch today could actually provide you with a comfortable retirement? Enjoy going places and relaxing in your own home after retirement with sufficient money for your daily needs. Isn't that wonderful?Maybe you can make use of the current situation. Read on.

Restaurant owners have agreed to reduce the price of 'roti canai' and 'teh tarik' by 10 sen and a plate of 'nasi kandar' by 20 sen, or at least that was what reported in The Star Online. (By the way, 'roti canai' is a Malaysian favourite pancake eaten with some curry and 'teh tarik' is actually a special concoction of tea, milk and sugar and stirred in a special way) This generosity arises from the reduction of petrol prices by the government, which business owners had used as an excuse earlier to hike up the price of almost everything under the sun.

For an average person who has been practising eating out for breakfast and lunch, it means a reduction of 30 sen for breakfast (assuming they have only 2 pieces of roti canai and a glass of teh tarik) and 20 sen for lunch, if he has nasi kandar for lunch. In total, savings for a day amounts to 50 sen.

If working days is considered 5 days a week, then in a month he'll be working 20 days. Therefore, using simple maths, 50x 20 = RM100. Not bad. I didn't realise it can reduce our expense by that much.

Some people are still wondering what to do with their money now. RM 100 savings can easily be used in an investment vehicle such as unit trust or mutual funds. They should make use of the opportunities given, especially now, because the market is all low and is good time to invest. Save a minimum of RM1000 for the initial investment and use the RM100 as the automatic deduction to do dollar cost averaging on your investment.

As for me, how much extra can I save in this particular case? The answer is none, because I usually pack my lunch & breakfast from home itself and I've been saving more all the while. Cheaper and healthier at the same time!