It's Back: The Best Personal Finance Summaries (for Malaysians) - 25 February 2019
It's been awhile but I'm back with our weekly personal finance summaries. So let's get right to it!
The Best Personal Finance Summaries - 25 February 2019
Do you know the reason why investing seems hard is because 'professionals' want to make it look hard so that they can make money off you?
The truth is investing can be very very easy.
In fact, if you were to open up an account with Stashaway (which is free), you can actually be doing better than most 'professionals' out there.
And it only takes 30 minutes to set up. Meaning you can literally forget about it until you're ready to retire.
So if you want easy, sign up for Stashaway today.
And if you want a halal version, sign up for Wahed.
From Us
[VIDEO] Book Summary: Money Master the Game
Tony Robbines interviews the top 50 investors in the US and asks them what the normal person should do. We think the answer will surprise you...
What's stopping you?
We believe the biggest obstacle between where you are today and where you want to be is taking action. So we want to help make it easier for you to take the actions you need in order to get where you want to go.
That said, what do you think stops you from taking action? How do you think we can help you?
Money in Daily Life
Money In Daily Life
12 Travel Hacks for Budget Travelling
Planning for travel, especially on a budget, can be a daunting task. But, fear not, we have the right tips for you!
Summarised below is the list of 12 travel hacks recommended to travel on a budget:
| Travel Hacks | Descriptions |
|---|---|
| Try Couchsurfing. | Couchsurfing means getting free lodging. Besides, Couchsurfing also offers guests to experience the local culture. |
| Pick up your phone and start contacting overseas friends. | Similar to Couchsurfing, your friends can provide you with a place to stay and show you around. |
| Plan at least one year in advance. | Do your due diligence and start planning earlier to save time, effort, and money. |
| Keep track of the latest flights’ promotion. | Flights can eat up a big part of your travel budget. Use Google Flights to track and get notified for any promotions. |
| Invest in a set of travel essentials. | Reuse or borrow travel essentials if possible. If you travel often, it is important to invest in durable items. |
| Keep track of places you have explored. | Use applications to assist you in planning and discovering travel destinations. |
| Practice self-control. | Always be mindful when you are planning your trips. Know your budget and do the necessary research. |
| Calculate your travel budget. | Set your travel budget beforehand and record every expense during your trip. This can reduce the chances of overspending. |
| Money matters. | Keep a currency exchange app on your phone. To avoid confusion, convert your money with local currency as early as possible. |
| Familiarize with local languages. | Local language can help you greatly in a foreign country. Alternatively, you can download and use translation apps. |
| Book yourself a free local walking tour. | Walking tours are one of the best ways to meet new friends and know the city. |
| Get some advice. | Consult experienced travel and financial planners to ensure a smooth and successful trip. |
Guide: 7 Steps to Achieve Financial Freedom in Malaysia
In this article, I’d like to give you my version of 7 Baby Steps. Call it Suraya’s 7 Baby Steps to Financial Freedom in Malaysia. The original version is already good (see above pic), but what I’m doing here is tweaking it so that (1) it’s more relevant for Malaysians, and (2) it suits more life aspirations.
Deriving aspirations from Dave Ramsey’s 7 Baby Steps to Financial Freedom, Suraya from the Ringgit Oh Ringgit shared her version of the “7 Steps” with her fellow Malaysian readers. Below is the curated list proposed by her:
Step 1 – Have RM1000 in emergency fund
First, take a few weeks to a few months to set up your emergency fund. It acts as a financial buffer against life’s unexpected expenses. While it is acceptable for you to suffer for a little bit to get started, don’t sacrifice your physical and mental health for too long – just temporarily.
Step 2 – Pay off debt
Next, spend the next few months to years to settle your debts. Use the Debt Snowball Method to pay them off. Focus on (1) cutting back on expenses and (2) increasing income to get out of bad debt(s).
Step 3 – Build up 3 – 6 months of emergency savings
After clearing off your high-interest debt(s), start growing your emergency savings to 3 – 6 months of monthly expenses. Do it at your own pace – slow progress is better than none. Also, remember to keep your emergency savings in an accessible account.
Step 4 – Invest your money
Do not skip Step 1 or 2 to get here! Consider investing after you improve your financial standing. Choose your investment vehicle wisely because an investment is often lifelong or at least up until retirement.
Step 5 – Save for children’s college/ another big life goal & Step 6 – Pay off house/ another big life goal
According to Suraya, Malaysia’s education and housing systems are way accessible and affordable compared to that of the United States. Hence, while Dave Ramsey sees # 5 and 6 as necessary steps, fellow Malaysians can choose his/ her own life goals.
Step 7 – Give back
While ‘give back’ is placed as the 7th step, this doesn’t mean you should avoid donations until you reach this step. In short, you should not hoard wealth and contribute to wealth inequality. Choose the causes you care about and make donations within your reach.
The biggest truth in personal finance
Sure, frugality is an integral part of personal finance. And if you’re in a tight spot and/ or have a high income and still struggle, then cutting expenses is an excellent choice. But the reality is, you won’t get rich — slowly or otherwise — by pinching pennies alone.
The Biggest Lie in Personal Finance
As shared by Nick Maggiulli, the author at Of Dollars and Data, the biggest lie in personal finance is that you can be wealthy if you just cut your spending. Armed with statistics, Nick demonstrates that practicing thrift is unable to get low-income earners out of poverty.
- If you’re poor, you should focus on increasing income – not cutting costs, because your expenses are likely already meagre!
- If you have an average household income, you might want to include frugality and income enhancement in building your wealth.
- If you have a high salary, you should focus on cutting costs.
In his opinion, frugality is perennially popular only due to its simplicity to apply. It is easy – and it doesn’t offer any real solutions.
Real-Life Examples of the Biggest Lie in Action
While optimizing menial tasks can save you little money, you should not expect it to make you rich. Because it won’t. Many personal finance writers focus on just one aspect of the wealth equation and rarely mention their income. One should always remember while frugality helps to accumulate wealth; boosting income is essential as well.
The Biggest Truth in Personal Finance
In short, big wins are the quickest way to wealth. The best way to spend less is to cut back on the big stuff – such as housing and transportation expenditures. If you belong to a low- or middle-income group, you should be trying to increase your income by:
- Become better educated. The more you learn, the more you earn.
- Become a better employee. Focus on productive works, which can translate into more significant rewards.
- Negotiate your salary. Failing to negotiate your salary can cost you over half a million dollars during a typical career.
What Do You Want Out of Financial Success?
When you think about the financial success that you want, what exactly does it change in your life? What does your life look like if you achieve financial success you’re striving for?
…
I encourage you to spend a bit of time thinking about that question. For now, I’ll just share my answer.
In an interesting post by Trent Hamm at The Simple Dollar, he talked about the importance of asking yourself “what do you want out of financial success?”
For the author, financial success means that he will be having more leisure time for his hobbies and other interests. Also, he can play his role as a parent effectively – understanding that he can provide for his children. By achieving financial independence, he will be able to allocate more quality time and effort to his wife. He can accompany his wife in many life adventures. He will also be able to enjoy life with minimal stress and anxiety – as he doesn’t have to worry about the money anymore.
Rather than starting with the problem and working forward, begin with the solution and work backwards.
The author argued that we should focus on the reasons why you wanted to achieve, instead of the financial path to get there. Sooner or later, you will realize that the financial success you desired is simply a means for you to support these life goals – financial success itself is not a goal.
The life you want likely has little to do with not having debts or having money in the bank; instead, those financial goals make those things possible.
Rather than thinking about account balances, think instead about how you’re using your money. When you envision that great life that you hope finances will make possible, it’s not the hefty bank account that you’re thinking about. Instead, you’re thinking about relationships and life changes that are mostly made easier by greater financial responsibility.
Thus, ask yourself: “What do you want out of financial success?” Fill in that picture and consider what it is made up of. You’ll find quickly that, although finances aren’t a direct, meaningful part of the equation, they’re vital in supporting a lot of those elements and making that life you want.
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Grow Your Wealth
EPF declares 2019 dividends of 5.45% for EPF Conventional and 5.00% for Simpanan Shariah.
For the year 2019, EPF performs
| Dividends | Growth |
|---|---|
| Conventional Savings: 5.45% | Assets grew to RM924.75 b. |
| Simpanan Shariah: 5.00% | 70% funds invested in Malaysia. |
| Total payout: RM45.82 b | - |
| 3-year average: 4.33% | - |
| Dividend purification: 71% (for Muslims who are not in Simpanan Shariah) | - |
Possible factors affecting the performance
- US Federal Reserve 3 rate cuts
- US-China trade spat.
- Brexit.
- Prolonged Hong Kong protests.
- COVID-19.
Other EPF Statistics
- EPF membership: 14.6m (+2.8%)
- Registered employer base: 522,300 employers (+3%)
- i-Akaun subscribers: 7.6m (+24.6%)
- i-Invest subscribers: 10k
- i-Saraan subscribers: 137k
- i-Suri subscribers: 88.5k
Passive income ideas you can try today
Legit sources of passive income can be a great way to make more money.
What is Passive Income?
First up, Actual passive “passive income” is a lie. Passive income is about making minimal money (recurring) with minimal effort (without significant time investment). It is often a supplement to your primary salary.
Passive Income Ideas You Can Try Today
Listed below are some of the passive income ideas:
| Passive Income Ideas | Description |
|---|---|
| Pay Down Your Debt | Start by totaling up your debt and pay it down quickly. |
| Invest in a High-Interest Savings Account | Instead of having cash sitting in a checking account, keep them in a savings account. |
| Invest in Certificates of Deposit (CD) | It is an alternative to a savings account – locked for a fixed period. |
| Earn income in a Checking Account | Some checking accounts pay you some yield on your balance. |
| Robo-Advisor Investing | Manage your investment using AI technology. |
| Invest in Dividend Stocks | Getting dividend is a steady source of passive income. |
| Invest in Real Estate Investment Trusts (REITs) | It is more affordable compared to diversified real estate investment portfolio. |
| Peer-to-Peer (P2P) Lending | Provides better than average returns for investors. |
| Use a Rewards Credit Card | Use your rewards credit card on all your spending to earn reward points. |
| Buy Vending Machines | It requires little to no work and a perfect location to get started. |
Apart from the 10 ideas above, the author also listed another 30 working passive income strategies which one could learn and apply in real life. Interested? Do check out the original post from the link above!
Cool Opportunities
A way for females to get free insurance
We were talking to our super humble financial advisor friend one day and she started talking about some insurance product for females that provides coverage for all these female related illnesses. But more importantly, the contract also states that all the premiums will be returned at the end of the contract.
Seriously something for all females to consider!
Learn how you can be paying 50% less for medical insurance
Figure out investing in 30 minutes and never deal with it again