Malaysia's Weekly Personal Finance Summary - March 24 2019

Intro

It's been another exciting few weeks. We're partnering with more and more professionals to help break down the confusion surrounding so many things. I don't want to give anything away yet as it's not set in stone, but do keep an eye out!

Question of the week

How much do you think you need to survive living in Malaysia for one month?

Let us know in the Facebook group

From More Money Malaysia

During one of my conversations with my independent financial advisor friend, she briefly mentioned how there was this product called Prulady. After learning more about it, I couldn't believe that something like this exists! I mean, it's like being able to get free insurance for the majority of your life and at the end of the policy term, you get all your money back.

Definitely something I highly suggest you check out (especially if you are a female).

Money in Daily Life

How Much You Should Spend on Rent
Here are the little tips and tricks in finding the amount that is manageable in your current income without sacrificing the things you love.

*Find an Fixed Income to Rent Ratio. *

• Allocate 30 percent of your income towards rent. Remember to factor in the total household income, as you need to consider the rent range if you are living with a roommate or a partner.

*Consider the 50/20/30 Rule. *

• Place 50 percent of your income to your essentials (rent, utilities, food and transportation), 20 percent goes to savings, and the remaining 30 percent goes to non-essential, personal expenses.

• Remember to Budget for Additional Expenses.*

• Furniture falls under the 30 percent of personal, non-essential expenses. Plan ahead before a move and saving for home goods so that you don't go into major debt when it comes time to move out.

24 Malaysians Share Their Uncommon Unexpected Expenses

A blogger asked the Malaysian community online about their unexpected expenses and here are some of their response:

*Medical expenses of loved ones and pets. *

• A lady mentioned that her daughter had to be sent to various hospitals and doctors because of a discomfort on her throat that she paid RM700+
• One sender had to spend a whopping almost 6k for surgery when her little cat fell from Level 3.

*Pressured into paying more meals. *

• Some had the misfortune to eat in food places that would have been much more cheaper elsewhere.
• An unfortunate lady had a date with a guy who made her pay for their meals. Luckily, she got it back by asking for it. Whew.

*Broken Gadgets. *

• One unlucky gal had to repair her washing machine, not once but twice in a week. Talk about bad luck.
• Three people suffered the same fate when their phone suddenly stopped working, and they have no choice but to buy another one.

*Sudden Travel Expenses. *

• A generous brother had to go to Kelantan to accompany his sister for her uni registration and had to go back next day to Subang for work. That sucks!
• Meanwhile, a traveller had to check-in his backpack at Ho Chi Minh Airport because he exceeded the 7kg allowance.

*Theft and Lost Item. *

• A guy had his shoes stolen when some delinquents climbed over the gate and took all the shoes on the rack.
• A man simply lost his wallet and learned a very expensive lesson from that experience.

*A Sudden Celebration. *

• Someone had to buy a Versace perfume for his 24 year old niece on her birthday. That is one lucky niece.
• A Dad had to buy a Superhero costume for his kid's birthday party.

*Paying back debt. *

• One guy had some friend coming over and demanding to be paid back his old debts.
• Someone was doing the honorable thing of settling the debt of his late Dad for a loan of RM50k.

Does any of these unexpected expenses sound familiar?

5 tips on Traveling on a Budget

Here are the five things you can do when traveling on a dime:

*Set a Budget and Savings Goal. *

• Know where you stand financially so you can set attainable goals on where you want to be.
• Set a savings goal by asking yourself "How much can you put away daily, weekly, monthly to get you to your dream location".

*Visit during Off-Peak Season. *

• You can save much more if you go when the place has a low peak season.
• Just be on the lookout for activities on your bucket list that are still open to visitors, as some might be closed because of the weather conditions or costs of operating with no visitors.

*Flights: The 8-Week Rule and Tuesday Finds. *

• For international flights, the sooner you book, the better.
• For domestic flights, 8 weeks prior to your trip is the best time to find the best fares.
  Another trick is to sign on and check fares on Tuesdays, and save almost 15 percent on flight deals.

*Hostels, Hotels and House Sharing. *

• Hostels are usually the cheapest around the globe, but you might end up sharing with strangers.
• Airbnb is a popular source for shared homes, though sometime you might miss out on the amenities that comes from a hotel.
• Finally, while hotels are the most expensive, it's usually a guaranteed private and safe place to stay.

*Find Fixed-Cost Trips. *

• If you have a budget but don't want much planning for the trip, you can try the fixed-cost trips by using Kayak, Living Social, Groupon, etc.
• If you're feeling more spontaneous, there are sites like Pack Up + Go which offer "surprise" trips for a fixed cost.

Here's Why a Rainy Day Fund Should Be in Your Forecast

Rainy Day Fund vs. Emergency Savings Fund:

• A rainy day fund is an amount of money set aside for small expenditures that are outside of your normal living expenses. The idea is to use a rainy day fund for one-off expenses, such as a car or home repair.
• An emergency fund is a larger financial safety net - usually equal to three to six months of living expenses. The idea is that you can pay for surprise situations without digging into funds set aside for normal expenses.

How Much Money to Keep in a Rainy Day Fund:

• The right amount of money in a rainy day fund is different for everyone, but experts suggest $1,000 as a starting point. Ideally, how much you keep in your rainy day fund should equal the highest amount you can expect to pay for a rainy day need.

How to Save for a Rainy Day Fund:

• Set up a direct deposit: Create a separate direct deposit so that some of your paycheck goes straight to your rainy day fund.
• Download an app: Sign up for an app that saves for you.
• Transfer cash monthly: Set up an automatic transfer that occurs once a month.
• Create a rainy day fund jar: Every time you have spare change, throw it in a jar or piggy bank. * While your fund will start out small, it will build over time.
• Replace some discretionary spending: If you normally have a latte in the morning or shop for new clothes every month, consider scaling back. Instead, place that money in your rainy day fund.

Should You Lease or Finance a Car?

How much should you spend on a vehicle?

• Ideally, you want your total transportation costs to be less than 15% of your net income. This means your car payment, as well as insurance, gas, maintenance, tires, parking fees, and so on.
• Whether you choose to lease or finance a car, one of the determining factors for the amount you qualify for is your credit score.

What does it mean to lease a car?

• Leasing a car is more or less a form of renting and you're not responsible for maintaining the vehicle. You pay a monthly fee to drive the vehicle for a fixed term, usually two to three years, then you turn it in for a new one.
  .
  What does it mean to finance a car?
• Financing a car means to buy it with a loan. You often put down a down payment and then amortize the remainder of the cost plus sales tax and dealership fees over the lifetime of the loan.
• At the end of the loan term, you own the car outright. However, you're also responsible for all the maintenance and repairs.

Pros and Cons of leasing vs. financing a car

Pros of leasing

• No down payment required.
• Lower monthly car payment.
• You get to drive a new vehicle every few years.
• A good option if the car belongs to a business.

Cons of leasing

• There are mileage restrictions and additional charges for going over.
• Leased vehicles typically have higher car insurance premiums.
• There is a balloon payment at the end of the lease if you want to buy out the car.
• You always have a car payment since you never actually own the vehicle.
• You must return the car in showroom condition, minus general wear and tear. There is a financial penalty for additional wear and tear.
• There are often expensive termination fees if you want to get out of your lease early.

Pros of financing

• The equity in the car is a financial asset.
• You can drive the car until it is paid off, so you will eventually have no car payment.
• Lower car insurance premiums.
• No mileage restrictions.

Cons of financing a car

• Down payment typically required.
• Higher monthly payment.
• Many people are typically "underwater" on their car loan for the first few years they own their car, meaning they owe more on the debt than the vehicle is worth.
• You are responsible for all maintenance.

As a general rule of thumb, it's better to own a vehicle that costs less than $60,000 and lease a vehicle that costs more than $60,000.

Simple Living, Big Ambitions

How can a person try to balance the idea of simple and frugal living with living an ambitious life? Here are some tips and tricks that a blogger and his wife learned thru the years:

• Frugality, means maximizing the value of one's dollar. It means spending as little as possible in the areas you don't care about so that you always have money for the things that you do care about.
• Having a strong grip on what's actually important to you and what isn't, you'll realize that the number of things you actually really cared about in the long term of your life was rather small.
• Spend minimal time and energy on the portions of your life that you don't care about so that you have plenty of time and energy for the portions of your life that you do care about.
• If you try to succeed strongly at everything, you're going to fail. Instead, consider your life as a whole and focus on the three things you want to be known about, above all else.
• Aim for simple routines in terms of your basic life requirements.
• Avoid spending time on anything that's either not in line with those key roles or isn't re-charging you to be maximally effective at those key roles. This is applicable to your hobbies or even what you do on your free time.
• Regularly put aside time to rethink the big goals of your life. Spend a few hours really reflecting on your life as a whole.
• Focus on a few areas of your life that really matter to you and simplify everything else in terms of money, time, focus, and energy.

You can't have everything in life. Choose a few areas of your life where you really want to hit a grand slam, make them the focus, and then go super simple in all of the other areas.

Advantage of Stealth Wealth

What is Stealth Wealth you ask? If in your daily life, you don't really do anything at all to give off any signs of financial security or wealth. The core underlying principle behind this is to stop worrying about what other people think. Simply aim to be comfortable around others and encourage them to be comfortable around you.

Here are some benefits of stealth wealth strategy:

• Stealth wealth" means you're not spending much money at all on keeping up appearances. This means not buying expensive clothes, getting just the basic for personal grooming, keeping your hair short, driving a used car etc.
• Another factor for me is that "stealth wealth" means you spend a lot less time on such things, too. You don't spend more time shopping, not much time grooming and buying a car for reliability that will actually work.
• Another notable factor is that you'll find that you're most likely to actually be received well in social situations if you feel comfortable, and when you're aiming to impress, you don't feel comfortable.
• You don't appear to be a person with a lot of money, so you're not typically targeted for things like "investment opportunities, which are mostly scams.

Here are some of the principles you can live by when it comes to "stealth wealth.":

• First of all, buy items based entirely on what's genuinely useful to you, not what others might think of it.
• Have a wardrobe that consists mostly of clothes that are comfortable and well made. The goal is to wear comfortable clothes that wear very well so you can get lots of use out of them.
• Drive a used car, but not a rusty beater. Be smart in buying a car that is reliable, but not one that is also going to cost you a lot of repair bills in the future.
• Keep your appearance low maintenance, but clean.
• Live in a modest home, one that is just perfect for your needs, nothing fancy.
• Buy things that meet your own needs, and our only consideration of what others might think is in line with the "golden rule.

Using Your True Hourly Discretionary Income to Make Smarter Purchases

This is an interesting finance idea, what is your True Hourly Wage? Take your annual salary, subtract all of the extra work-related expenses, and then divide that resulting number by the total number of hours devoted to work, and voila, you get your true hourly wage.

How can you calculate your own true hourly discretionary income?

1. First, figure out how many hours you work during a given year.
2. To that number, add in how many hours you commute each year. How long does it take to get to work? Double it, then multiply that by the number of days you work each year.
3. You'll want to also add in things like time spent working at home, time spent traveling, time spent doing things like entertaining clients, and so on.
4. Now, turn to your salary. How much do you make in a year?
5. Subtract from that every single required expense. This doesn't just mean your costs for taxes and for commuting. It also includes things like work clothing, basic personal clothing, basic food and water, rent, basic utilities (like electricity), store brand household supplies, and so on. Include just the costs that are the minimal expense to get through life and keep working.
6. Think about all of your expenses and ask yourself whether they're required to maintain a basic existence and keep your job. (A nice side effect of this is that it will often unveil areas of your life where you could cut back.)
7. Total up all of those expenses over the course of a year and subtract that total from your salary. That's your annual discretionary income.
8. Then, divide that annual discretionary income by the number of hours devoted to work-related tasks in a year. That's your true hourly discretionary wage. That's how much discretionary income you get for each hour you devote to work or a work-related task.

Once you are able to compute your true hourly wage, it will give you a pretty powerful metric for determining if an item is worth buying or not. it quickly makes it clear how much of your life's energy is devoted to unnecessary expenses.

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Grow Your Wealth

I Lost RM 20+k in Unit Trust. What Should I do?

Question: Hi, I'm Mark. I've checked my unit trust accounts and found that they are worth a total of RM 77,500, when I have invested a little more than RM 100,000 into these funds. My question is: 'Should I continue to invest RM 1,000 a month into these two funds or should I dispose them and reinvest my proceeds into 'somewhere else'?

Here's a handful of tips to become a better investor:

1. There is a huge difference between cash flows and capital gains. Do not confound the two.
2. Investors would find out about an investment in great detail first before investing their money into it.
3. Investors can explain how their investments are capable of generating a regular stream of income (cash flows) into their bank accounts.
4. Investing involves a lot of studying, researching, and learning. If you are not interested in them, please do not 'invest' your hard-earned money.
5. Being a good investor is more important than asking 'where should I be investing my money?'

Cool Opportunities

BigPay - The Best Travel Credit Card for Malaysians?
If you ever travel out of Malaysia and use your credit card, then this is BIG (pun intended). AirAsia has released BigPay, a prepaid mastercard that you can easily top up through the BigPay app and be able to use instantly.

But more importantly, BigPay charges you at the real exchange rate (which means they charge no fees). This is something you won't get if you were to go to your bank or some exchange counter.

In fact, I've already saved over RM 10,000 using this card (you can read about it in our BigPay Review)

Anyway, if you don't have one yet, you can sign up for free and get RM10 free when you use referral code B7D3YNZPGO.

Talking to an Independent Financial Adviser
A big issue when you work with someone who calls themself a financial advisor is you do not know if they really have your best interest at heart. That's one of the main reasons why I never work with any (the other one is that most of them get trained to say what the company wants and thus, do not know of all the other cool opportunities out there).

However, I've been talking to an independent financial adviser the last few months and I do believe that not only is she knowledgeable, but also super open to sharing her knowledge.

If you're interested in talking to her, join our facebook group and ask your questions. She will definitely find time to pop by and answer them.