Financial Freedom, Lifestyle and Loan Sharks

According to recent newspaper reports those borrowers who approach loan sharks are no longer confined to gamblers who are heavily in debt. Nowadays more and more professionals are going to them to get financial assistance. They are doctors, lawyers, and even company chief executive officers. As reported in the paper, they are desperate and they have no choice and they are fully aware of the consequences. They are hit by the financial meltdown.

The root of their problems is their lifestyle habit. The rich people work hard and they think long term. They invest their money to earn passive income. While poor people use their hard-earned money to invest in their current lifestyle because they think short term. The habit of managing money is more important than the amount of money that you have.

As long as they follow these tips they will never need to approach loan sharks or “Ah Long”, popularly known in Malaysia and Singapore.

* Save or pay yourself first 10% of your income for your retirement and children’s education fund.

* Do not spend more than what you earn by using your credit cards. Inadvertently you are building up debts that you can't settle later.

* Have a budget and always adhere to it. Your budget will cover your daily essential expenses as well as your monthly housing loan, insurance premiums, and others.

* Always set aside an amount to cover three to six months’ expenses just in case you are out of work. This is your emergency fund.

You can’t live without money, but money is not everything in your life. Your life is made up of your health, your family, your relationship with others, and most importantly, your happiness.

Source:http://www.allaboutlivingwithlife.blogspot.com/2008/11/financial-freedom-lifestyle-and-loan.html

Wise Transition from Debit Cards to Credit Cards

According to an article, Uh-oh: 63% of Millennials don't have credit cards, more than six in 10 people ages 18 to 29 don't have a single credit card in their wallets, reveals a survey conducted for Bankrate.com. 

They prefer to use debit cards. I think it is a good move to get involved with plastic cards, first a debit card, and then a credit card.

Advantages of debit cards

A debit card is linked to your bank account. Each time you use it to purchase an item; the amount is deducted from your account. It is straightforward and no credit is involved.  The most important thing is that no debt will be incurred.

It is a good learning process. You can’t use your card when there is no money in your account. In a way, it is effective to limit overspending. You spend only when you have the money. In the end, you develop a good habit to live within your means     

The bank only charge a nominal yearly fee for the issuance of a debit card

You use the card like cash and yet you don’t have to carry a large sum of money while travelling and reducing the risk of loss and theft.

By using a debit card it is easier to budget your expenses because whatever payment made it is deducted from your bank account immediately.

Like a credit card, a debit card is accepted worldwide.    

Advantages of credit cards

It is a good move to switch to a credit card after using a debit card for some time. After a while, a good habit has already established to use your credit card like a debit card only when there is a fund available in your bank account.  As you grow older you will be more mature to handle a credit card.       

A credit card is essential in your financial life. A credit card is an excellent tool to establish your creditworthiness and build credit scores.   

When you make a prompt payment you don’t incur late fees and interest charges. As a credit cardholder, you can earn cash back or reward points for each dollar you spent.

Furthermore, it is much safer to use a credit card because you can always dispute a transaction that is not in order.

Conclusion

Manage your finance by using a debit card first. Switch to a credit card when you are in control of your money by not spending impulsively. 

How to be a highly skilled individual and Earn Top Money

According to an article, “Study: US Wealth Gap Is ‘Unsustainable’",

A truly competitive U.S. economy would lift both firms and citizens. But our survey findings and other evidence reveal that that is not happening today in America. Instead, our “recovering” economy is doing just half its job: The typical large or midsized firm in America is rallying or even prospering, as are highly skilled individuals. But many middle- and working-class citizens and small businesses are struggling.

As an individual what can you do to be highly skilled?

Technological skills involving science, technology, engineering, and math (STEM) are highly sought after by employers. According to LinkedIn 20 of the top 25 skills most in-demand by employers in 2013 involved technology. Companies are interested in collecting data and making sense of it, therefore skills in information related areas are in demand:

• Statistical analysis and data mining
• Retail payment and information systems
• Business intelligence
• Data engineering and data warehousing
• Database management and software
• Information security
• Strategy and strategic planning

Accordingly, STEM education is now a top priority for many of the world's governments. Aim for a degree course because a degree holder will command a higher starting salary than a diploma holder as reported in an article, Grads’ starting pay up to 46% higher than diploma holders, 

 

A survey conducted by management consultancy Hay Group of 95 organisations here found that employers are likely to pay up to 46 percent more in starting salaries for degree holders than for diploma holders. The respondents comprised largely multinational corporations and local companies, as well as about a dozen government organisations.

The average monthly starting salary for degree holders without honours is S$2,741, about 2 percent higher than the S$2,683 last year. Diploma holders can expect an increase of a similar proportion, with average monthly starting salary going up to S$1,878 from S$1,840 last year.

The difference in starting salaries between the two groups was about S$1,000 across various industries.

It is worth mentioning here that a diploma holder’s salary will most likely be stagnant in the long run. 

Apart from acquiring hard skills, you need the following soft skills to complement and sustain your career:·    

    Able to work as a team

·        Effective communication skills

·        Solve problem creatively

·        Be confident

·        Flexible and adaptable 

·        Positive attitude

·        Effective time management to meet deadlines

Get the right skills and be one of the top earners. 

5 Effective Ways to Manage Your Money

Managing your personal finance is about increasing your capacity to earn so that you can save more. It is also about spending wisely and avoiding getting into debt so that you can make your money grow faster. When you need to borrow, you do so sensibly.

1.       Maximize your earning power: Acquire the knowledge and equip the necessary skills which are in demand to boost your earning potential. IT is a hot subject and so is finance and accounting which are required in any business.  Your technical skills are not enough to get ahead and be outstanding. Polish your soft skills so that people will like you and are more inclined to work with you.  Like and enjoy what you do, the money will come.

2.       Maximize savings: You will not spend much on essential items. When you earn more you should save more and not spending on what you want. Your savings serve many purposes:

·         An emergency fund

·         Down payment for a car

·         Down payment for your house

·         Big tickets item- buy in cash and save on interest

·         Start early to save for  retirement

3.       Spend wisely: Look for durability and quality and not just the brands. Popular brands are more expensive because you are paying for their heavy advertising cost. Buy what you need and not what you want to impress others. As long as you have budgeted for savings as an “expense” item, you are doing fine.  It means there are savings and you do not overspend and get into debt. 

4.       Grow your wealth: When you have accumulated your savings over time you should take out the money in the bank and make it work harder. You can leave your emergency fund in the bank. Invest in property, stocks, bonds mutual funds, and precious metals. Each investment vehicle has its own merits and you should diversify your portfolio to minimize financial risks. Look for long term investment and not for a quick gain. Do not be greedy. Slow and steady wins the race.

5.       Borrow wisely: Most likely you will need to borrow to purchase a car and buy your dream house. When you have earmarked and saved a bigger amount of down payment for these two items, you will borrow less and pay less for your monthly installments and for a much shorter term.

Life is about earning your own way, save for a rainy day, live within your means, and be happy for many years to come.

Source: 5 Effective Ways to Manage Your Money

7 Advantages of Paying Yourself First

When you pay yourself first every month you are paying your way towards financial freedom. Paying yourself first is a wonderful thing to do in personal finance. 


1. The savings habit: The earlier you start to save the more you will be able to save. Time and compound interest work wonder for you. This is the best habit as far as money is concerned.

2. Free from debt: The most important thing is that when you can pay yourself you are spending less than your income. It means you will stay out of debt. Debt is the most dreadful thing in money matters 

3. Emergency fund: Life is unpredictable, that is why it is necessary to save for an emergency fund in case you are out of work or in serious illness. The fund will be able to take care of your expenses for a couple of months

4. Big-ticket item: Isn’t it good to get a big-ticket such as a flat-screen TV without paying extra. Save enough and pay for it in cash by shopping around to get the best deal.

5. Down payment: You can get your dream car or your dream house when you have saved enough to pay for the down payment. 

6. Education and retirement: It is a farsighted move to save and invest so that you can send your children to higher education. It is also a great way to save early for a care-free retirement.

7. Wealth building: The starting point to build your wealth is when you can pay yourself first. The amount will snowball over time and you can maximize your return by prudent investment to make your money grow. 


When you pay yourself first you get paid by yourself forever.

Source: 7 Advantages of Paying Yourself First

Are You Doing The Right Things Financially?

Have you spent some time to review your financial position? Are you growing your wealth or getting deeper into debt?   Here are a few things to check and compare your worth since the beginning of the year. 

1.     Debt: Are you reducing your debt or adding more by spending more than what you have? To be debt-free is a top priority to gain financial freedom. Do it now to reduce your debt or else more interest will be added to the outstanding amount. When it is beyond your means you will be made bankrupt.   

2.     Income: Are you getting more income such as pay increment, bonus, or income from a part-time job? If you want to spend more you have to earn more. 

3.     Expenses: Do you monitor your expenses? Are you following your budget? Are you spending less than your income? Control your outflow is to live within your means.

No man is rich whose expenditure exceeds his means, and no one is poor whose incomings exceed his outgoings. - Thomas Chandler Haliburton

 

4.     Savings: Are you paying yourself? Is this amount included in your expense budget?  There will be no saving if you were to spend first and save later.

It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for. –Robert Kiyosaki

5.     Investment: Do not believe in get-rich-quick schemes or gambling. It is the fastest way to get into debt and become bankrupt. Are you investing for the long term like keeping stocks that are paying dividend consistently over the years? Active trading in the stock market is not investing but speculating.      

The Stock Market is designed to transfer money from the Active to the Patient. –Warren Buffett

6.     Insurance protection: Is your house adequately insured?  Is your life policy able to replace your earning power just in case you are permanently disabled or no longer around to look after your family?

7.   Net worth: Is the value of your net assets worth more than what you have since the starting of the year? The simplest way to do it is to reduce your debt and increase your savings and build your wealth through investing.

Wealth consists not in having great possessions, but in having few wants. –Epictetus

8.     Financial Knowledge: Are you reading and updating your financial knowledge. You will be wiser in financial matters. 

An investment in knowledge pays the best interest. –Benjamin Franklin

9.     Self-discipline: Are you in control of your money or a slave to it?  Think carefully before you part with your money. Resist impulse spending to avoid spending unnecessarily.

You must gain control over your money or the lack of it will forever control you. –Dave Ramsey

10.                        Skills: Your technical know-how is a great source of wealth. You can create a unique idea to strike gold and make you rich. Leverage the power of technology to enhance your earning power. 

If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability. –Henry Ford

Conclusion

 The ultimate goal of personal finance is financial freedom. Your everyday financial activities should be guided by this goal.

Credit Squeeze Hits Auto Industry

Banks are rejecting close to 60% of vehicle loan applications amid a credit squeeze.

Top on their red-flag list are applicants with two or more instalment defaults on other loans.

Nanyang Siang Pau reported today that apart from raising interest rates, banks are now more stringent in processing vehicle loan applications in order to lower the risk of bad loans.

"Defaulting on two instalments on any previous loan is enough to cost an applicant a rejection," a source said.

"However, it also depends on the period of default. If it is just one or two days each time, or if the borrower had forgotten about the due date, it is another story.

"But if the applicant had defaulted up to a month in repayment, it calls into question his/her ability to repay a loan," the source added.

As a matter of practice, banks consult the Central Credit Reference Information System (CCRIS) or CTOS (Credit Tip-off Service) to check the credit reports of loan applicants.

The credit reports provided by CCRIS or CTOS contain individuals' financial history specifically related to their ability to repay borrowed money.

This means past or existing loans or even credit cards held with other financial institutions will have a bearing on new loan applications.

Bank Negara Malaysia's statistics showed that of the total vehicle loans of RM7.24 billion applied for in May, only RM3.72 billion, or 51%, was approved.

The vehicle loan approval rate dropped further to 48% in June when only RM3.66 billion from a total of RM7.55 billion applied for was approved.

Perodua president and chief executive officer Datuk Aminar Rashid Salleh said many people want to make a booking but find it hard to secure loans.

"The rate of rejection of car loans is 40-45%," he said.

Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor said the used car business has also been hit hard by the credit squeeze and as much as 60% of the used car loan applications have been rejected.

Source:http://www.thesundaily.my/news/1158234

10 Down-To-Earth Ways to Make Money

Invest a little and let it grow

Neil McCarthy started investing in the stock market when he was 34, in the depths of the 1970s bear market. "It got scary for a while," he recalls, "but my philosophy was to invest a little bit and let it grow. When stocks went down, I would buy more."

McCarthy contributed the maximum to both his IRA and his 401(k) at Union Carbide, where he started as a research chemist and got a boost from a 100% employer match. He and his wife, Maureen, who worked as a teacher for several years, continued to save for retirement, even while they were paying for their two sons' college educations.

Their big payoff came with the 1990s bull market. "Everything kept adding up and compounding, and then it doubled in three or four years," says Neil. "It was $500,000, and suddenly it was $1 million."

The McCarthys invested mostly in stock funds but avoided technology companies. "People were going wild with Internet stocks, but it didn't make sense to me," says Neil, who did the financial analysis when he worked in marketing for Union Carbide. "When I saw P/E ratios of 200 to 300, I thought it was absolute nonsense."

Their practical investing style preserved their millionaire status when the market crashed. They also benefited from a bit of fortuitous timing when Neil, who spent the last 14 years of his career working for BP Amoco, retired in 2000. He took his retirement payout as a lump sum and invested part of the money in an immediate annuity just before interest rates started to fall, getting a bigger payout than if he had chosen the company's pension annuity.

Neil, 65, and Maureen, 61, have $1.3 million in savings, which they haven't had to touch. Counting the annuity and Neil's pension from his 20 years with Union Carbide, they have a net worth of about $2.1 million. And that doesn't include their house in Roswell, Ga., valued at about $525,000, which is almost paid off.

The McCarthys are classic stock-market millionaires, reaping the benefit of steady investing through bull and bear markets. But one piece of simple advice made all the difference: "If you wait to save out of what's leftover from your salary, it's not going to happen. Pay yourself first."

The following tips are practical, sensible, and honest ways to make money:

1.       A unique business idea: In this age of technological advancement, can you come up with a unique idea to create an app? If it is useful and popular, Google or Facebook will be willing to pay you millions to purchase your innovation and make you filthy rich. Do you have a wonderful business plan that can attract a lot of customers?  Get an idea to make a fortune.   

2.       Marketable skills: According to an article, the Best (and worst) jobs for 2014, CareerCast is out with their annual ranking of the 10 best and 10 worst jobs for 2014, and let's just say that math and science guys everywhere are about to high-five. Nine out of 10 of the best jobs fell into the STEM career category (science, technology, engineering, and math), with the "numbers guys," in particular, locking in three of the top four spots. Acquiring relevant technical skills so that you are an expert in your chosen field of endeavor. In the business world, your technical knowledge is highly sought after by employers. As long as you do a good job and continue to update your skills, you will be in demand. 

3.       Pay yourself first: You don’t spend all of what you have earned if you want to grow your wealth. You have to save some so that you can invest later when the amount is substantial.   

4.       Invest: The amount you invest, the rate of return, and how long you hold your investment will determine the size of your wealth.  Like doing business there is an element of risk involved but it is better than keeping your money in the bank and allowing inflation to erode your purchasing power and making you poorer in the long run.  

5.       Free from debt: Living within your means is the only way to stay away from getting into debt. When you are in debt you have to pay interest for the outstanding amount. More interest will be added as long as the debt is not cleared.   

6.       Learn: Read books, go online to read the latest business news. Equip yourself with financial knowledge to make wise money decisions.

7.       Reinvest for growth: Earn more by ploughing back what you have made and grow your wealth.

8.       Property: Land is a scarce resource, so property investment makes sense for the long term. Choose the location wisely. Often your home is your first investment.  

9.       Shares: Invest in companies with a solid performance in terms of sustainable growth and earnings, healthy cash flow, and consistent dividend payout. It is a reliable source of passive income.  

10.   Do not believe in get-rich-quick schemes: Do not be greedy. There is no such thing as getting a very high return within a very short period of time.   

What are your ideas about making money?

10 Things You Don’t Do With Your Credit Cards

David, a 49-year old father of three, lives in Kuala Lumpur. He holds a high position in the Management of a large corporation in the city and his income is more than RM 90,000 every year. He lives a lavish life – driving luxurious cars, dining in expensive restaurants, living in an upscale area, and sending his children to expensive private schools.

On the surface, it seemed like David’s family led a great lifestyle, filled with many international vacations and expensive materials. However, in addition to the family’s impressive collection of expensive assets, they have a less impressive collection of credit card debts; a total of RM 60,000.

A few months ago, David tried applying for a housing loan to purchase another house to add to his list of assets. The application was unfortunately rejected due to a poor credit rating resulting from late bill payments.

He decided to come to AKPK to get some advice on resolving his financial position. Firstly, the counselor advised him to stop using his credit cards. He was also advised to practice discipline when using his credit cards and to live within his means. He was reminded that the more he uses his credit cards, the more debt he takes on.

David also shared that he never checked through his five credit card statements, he simply paid the minimum 5% amount required by the banks and moved on assuming everything was in order. He was advised against this practice because this will lead to him not knowing how much his debts actually are.

He figured that he could pay off half of the outstanding right away and by doing this, he could eliminate about half of his credit card debt. He was given a budget he could work with to settle his credit card debts within a year due to his high income.

In addition to this, he also realized that his expensive “assets” would not be able to help him through his financial position and promised to make changes to his lifestyle to avoid getting into more debt. David was thankful for the guidance given by AKPK’s counselors and commented that if he had been equipped with knowledge on managing his personal finances earlier, he would not have been in debt now.

Source of this story: http://www.akpk.org.my/learning/success-stories/id/1005/story-42

A credit card is a great financial tool. However, it controls and destroys you when you are unable to manage it properly. Be smart and avoid these 10 things:  

1.      Incurring debt: Yes, a credit card gives you credit.  It is only temporary and you have to pay the outstanding amount when the statement arrives.  When you do not pay or delay payment, hefty interest will be added. The amount snowballs with compound interest the longer you postpone your payment.

2.      Paying the minimum: Always pay promptly and fully to avoid interest charges. While you are paying the minimum at the same time you are also adding more charges to your credit card account and the outstanding amount will become a much bigger sum. Over time paying the minimum amount may be beyond your financial means.

  

3.      Using it when you are already broke: When the time is bad, more people use credit cards to charge their daily expenses. It is bad because you are already running short of cash and it is unlikely for you to pay what you owed. You will end up as a bankrupt.

4.      Ignoring the monthly statements: Look closely at the monthly statement to spot any fraudulent charges, do not just pay without matching all charges with your charge slips.

5.      Getting cash advances: It is another no-no because it attracts a cash advance fee and also interest on the amount advanced.   

6.      Paying for an annual fee: Get a card that is free for life. It is foolish to pay for the use of credit cards.

7.      Paying late: Pay promptly to avoid interest charges. Make it a habit to pay when you receive the monthly statement.

8.      Spending almost reaching the credit limit: As a general rule, you do not use more than 30% of available credit. It affects your credit score adversely. It is also likely that too large an amount can be out of your control.  

9.       Spending just to earn rewards points: It is another silly thing to do by charging more and spend unnecessarily just to earn reward points. Use your cards only when you need to.

10.  Spending more than you can afford: Avoid impulse spending to break your budget. Live within your means is a golden financial rule to stay away from debt and misery. 

Are you making these credit card mistakes?