Personal Finance 101

1. Go for quality

This will sound contrary to saving money but buying quality products will save you in the long run. Instead of opting for cheap items that require replacement every 2 years, go for quality items that will last for atleast 10 years. While it may cost slightly more during the initial purchase, it will be cheaper in the long run. One thing to remember in prolonging the life of any equipment – continuous maintenance is essential to keep any equipment running well in the long run.

2. Cut down on weekend entertainments

While we all need to chill out after a hard week’s of work on Friday, do we really need to spend Friday night, Saturday night and Sunday night at the pubs? Limit your weekend entertainment to a certain night and rest at home the rest of the weekend. You not only will get adequate rest but you stand to save some of your hard earned cash.

3. Exercise

Exercising helps reduce your overall health risk. Exercise makes you sweat and sweat cleans your skin and allows your body to ex foliate dead skin. Exercise also helps reduce your stress level, making you work and play better. Basically you’re more fun and sexier to be with. Exercise makes women glow and men tough, and reduce your visits to the doctor.

4. Buy Off Season

Buy you winter clothes in spring – stores will want to get rid of their inventory at a lower price rather than store them for another year (storage cost money too). Dont always go for the latest gadgets – electronic gadgets become outdated after a year or so, so be patient and wait for 12 months and you’ll be able to get the updated version the device at a much cheaper price.

5. Credit Cards

If I havent told you this before, I’m telling it to you now. Dont cancel your credit cards. Having more than one credit cards but not spending a single cent on it looks good on your FICO score. It shows the banks that you have a good line of credit without the associated debts.

But what you need to do is to decouple your card from Paypal or other online merchants. Having your credit card stored in these services makes it very easy to spend online and this is bad. So decouple them!

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Here are 10 more ways to save some money. I am not suggesting being a miser, but learn to be frugal.

1. Give personal gifts rather than splurging on an expensive gift. A handwritten card can mean a lot more than an expensive camera.

2.  Entertain wisely, rather than expensively. A quiet dinner at home with friends is much cheaper and more exciting than a $100 dinner at a fancy restaurant.

3. Always ask for a discount. You’ll never know when you might get one.

4. Experiment with “house brands”. Some of them are as good as the original brands, especially those for house cleaning.

5.  Spend paper money. This helps to rein in your expenditure. Spending on plastic is the classic way to kill yourself with un-necessary expenditure.

6.  Use cold water to wash your clothes and lower the temperature on your hot water shower. Your clothes will last longer, the colors wont fade and you’ll save a bit on electricity and heating.

7.  Want to save on long distance phone calls. Learn to use Skype. It’s free and all you need is a computer and an internet line, which you already have if you’re reading this.

8.  Opt for interest free bank accounts. Never go for accounts like HSBC’s Powervantage account which charges you a monthly fee of $10 when your balance goes below $2000.

9. Buy in bulk. Cereals, dish washing fluids, detergents and other house hold items can be bought in bulk from discount stores which add up to quite a bit of savings annually.

10. Switch all the lighting to energy saving bulbs. Energy saving bulbs, while they may be pricier than normal bulbs, will repay your investment after 18 months.

11. Inflate your car tires to their correct pressure and remove unnecessary items from your car booth. This makes your car lighter and consume lesser fuel.

Tags: budget, energy saving bulb, household management, save money, tips

1. Never go to the grocery when you’re hungry. You will always end up buying more than you’ve budgeted for, and more often than not, buy things you dont need. Get something light to eat before going to the super market.

2.  Buy items on Sale or during off season. For example, buy a winter jacket in June.

3.  SLEEP on all your purchases, whether big or small. This avoids impulse buying and helps you to know whether you really do need the purchase.

4. Eat out less often. Eating out daily is an expensive affair. “Take out” is cheaper than eating in a restaurent and “gourmet” frozen food is cheaper than take take-out. Of course, making your own lunch or dinner is the cheapest but if you’re like me and not into cooking, then order some take-out and save some money.

5.  Buy yourself a can of gourmet coffee from your local supermarket and save yourself the daily $3.95 Starbucks coffee. They taste the same, but comes with a cheaper price tag.

6. Use public transport whenever possible. It’s cheaper, environmentally friendlier and you might meet some interesting people. It also allows you to indulge in some music or in a good book.

7.  Buy used. Used items doesnt necessarily mean its bad. People sell things all the time, not only when its malfunctioning. People sell when they move or  when they want to keep up with the trend. Buying used saves you a lot of money. The time and effort spent in finding these offers are well worth it in the long run.

8.  Take a good look at your monthly magazine subscription and cancel any which you dont need. We always subscribe to more magazines than we need.

9.  Invest in quality. Spend the extra money to buy tools that will last a long time.

10. Make use of your local library, its a gem of a place for book worms like you and me.

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Tags: debt management, save money

Saving every single cent to pay off all your debts isnt really a good thing in the long run. Do you really want to spend the next 10 years diligently paying of your credit card bills and others, wihtout going out for a single vacation or taking the family out for a dinner every month?

Paying off your debt is very important as the interest charges alone is enough to kill your future. But I have been around enough to know that you can have a life while managing your debt.

It’s called Buckets. And it’s simple to set up.

When you get your pay check at the end of the week or end of the month, divide them into your buckets. For example, you could have the following buckets:

Myself – 10%
Rent and Utilities – 35%
Credit Card Debts – 20%
Vacation – 5%
Dinner – 5%
Misc – 25%

The 5% that you allocated monthly towards the vacation and dinner bucket will build up to a point where you can take yourself or your family to a dinner every month or two; or a vacation each year.

By allocating your funds in this manner, while still reducing your debts, allows you to have a QUALITY life. Yes, reducing debts is your main priority but this shouldn’t stop you from living a life. By not over spending and diligently filling your buckets every month, you can live a good life while being on the path of financial freedom.

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Tags: bucket, budget, debt management, financial planning

Here are some simple ways to save some money.

1. The best way to save is to build a LIST of specific bargains that you find over time. This will save you a lot of TIME and MONEY.

2.  Turn off the power of unused items in your house. Do let let your TV or VCR to lay idle in Sleep mode because their still consuming power. Contrary to what manufacturers say, your TV.VCR, cooker, Hi-fi do not stop consuming power when their idle. They still consume 2/10 of their usual power. Compound this over the whole night of 12 hours and you’re paying for a lot of wasted electricity. So take out the plug from the wall.

3. Drink water instead of soft drinks. Not only is water cheaper but it is also healthier and will not make you FAT.

4.  Learn to trade or share with friends. Borrow a toaster, car pool whenever possible, borrow and lend books – all these little things help save money.

5.  Make your own lunch. While this sounds like a lot of work, making your lunch is cheaper and much healthier.

6. Pay off your credit card debt in full every month. The interest every month on the carry over balance will kill you if you let them compound. Compounding interest is good, when it works for you, not against you.

7.  Look for opportunities to switch credit cards when possible. A 0.25% lower interest can result in hundreds of saved dollars in a year – enough for for a vacation!

8. Switch to debit cards. Then you wont end up over spending.

9. Do not use your credit card. BUT do not cancel them. Having a credit limit but not using it helps build credibility when its time to get a home or car loan.

10.  Cut down on drinking and smoking. I am not asking you to eliminate the habit completely. But cutting down by 10% saves you 10%.

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Tags: credit card, debt reduction, home loan, interest rate, save money, savings

In current economic times, its always good to go through these age old money management tips.

1. Save a minimum of 10% of your monthly income

Saving a portion of your monthly income is the start of all debt management. Experts usually recommend 10% of your monthly income. The more the merrier but what if you cant save 10% every month. Then start with 2%. If you earn 3 thousand a month, 10% would be 300 and 2% would be 60 dollars. Can you save 60 dollars a month?

Don’t scoff and say that 60 dollars is too little and thus negligible. Every penny saved is not a foolish endeavour. 60 dollars a month is 720 dollars in a year and 7200 in 10 years.

The secret to doing this is to automate the process.

David Bach in his best seller, The Automatic Millionaire (one of the best books on getting out of debt that I’ve ever read), advocates automating your bill payments so that you never miss a payment and incur penalty charges.

Similarly, automate the saving of the 60 dollars into another savings account. They key to making this money grow is to make it difficult for you to withdraw the money. Don’t get an ATM card for the savings account. The more difficult it is to take the money, the higher its chances to grow for you.

2. Have at least four to six months of your monthly expenses in your emergency fund

Every one should have an emergency fund. How much money in the fund is based on your monthly expense and how long it would take you to find your next job. If you’re in a very niche market (which means you’re in demand because you have unique skill sets), then 1 or 2 months of savings should be fine.

But for the rest of us, we need around 4 – 6 months of savings.

Life always has its up and down. It’s nice to know that in severe emergencies, you wont lose your house when trying to save yourself.

3. Retirement expenditure at 70%~80% of last drawn income

Don’t take retirement lightly. remember how much you eat during the weekends when you don’t have much to do. Well, retirement is the same. Okay, you might not eat much, but you will require around 70~80% of your last drawn salary.

Retirees like to to travel, after all the years working. All this requires money.

Never take money out of your Employees Provident Fund (EPF) or your 401k except for emergencies or buying property. This money is for your retirement.

4. Your life insurance cover should be at least 7 to 10 times your annual income

While financial experts agree with this rule, the exception is that it depends on whether you can pay the premiums. Your life insurance depends on how many people depend on you for their livelihood.

A life insurance is meant to cover your earning potential. An example would be:

Assume you’re a 35 year old who earns Rm120,000 per year and your child is only 5 years old. Let’s assume he’ll be independent when he’s 25, so you realistically need money that will last him for another 20 years. That should be 120,000 x 20 = Rm2.4 million. At 10 times your annual salary, your life insurance should be for Rm1.2 million.

5. Your home loan payments should not exceed 33% of your monthly income

Most banks in Malaysia conducts credit checks and will usually set the borrowers limit to 33% of your monthly income. The rule of thumb for housing loan repayments is that when you’re buying the house to live in, then go for the shortest loan term possible while staying within the 33% limit.

But if the house is for investment purposes, then stretch the loan repayment period for as long as possible. This will allow you to have very low repayments. Why is this a  good thing? This is good during the times when you dont have tenants staying in your house and you have to fork out the loan repayment from your own pocket!

6. The percentage of your portfolio to be invested in equity should be 100 minus your age.

Take risks when you’re young because when you make mistakes, time is on your side. But when you’re aging, you have to wise in your dealings and as you age, you should lower your exposure to equities.

Always take into account your objectives, risk tolerance and investment timeline.

Identify what types of investments you’re comfortable with and determine its objectives and duration. Consider rainy days.

Then consider your attitude towards risks. How much risk can you take? As the stock market fluctuates, can you sleep well? If you cant, diversify your portfolio between equities and bonds and units trusts (mutual funds).

To close this topic, always track your portfolio. Always know their value and monitor their performance. This allows you to sleep better at night.

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Tags: financial planning, investment, manage money, Personal Finance, Real Estate, stock market, tips