7 Things to Do Before You Retire

Preparation for old age should begin not later than one's teens. A life which is empty of purpose until 65 will not suddenly become filled on retirement. ~ Arthur E. Morgan

It is reported that the average lifespan of Malaysian is about 75 years. When you retire at age 55 there are still 20 years ahead of you to live. What should you do before you retire so that you are financially independent during your golden years?

1. Settle all debts: Settle all your housing loan and car loan and most important of all, your outstanding credit card debts. To be debt-free is the way to live a carefree life for senior citizens. 

2. Reduce investment risk: Assess your portfolio and rearrange to reduce risks. As a simple example, when previously your investment consists of 60% stocks and shares and 40% fixed income perhaps you should now change to 40% shares and 60% fixed income.

3. Stick to a budget: When you retire, there will be no regular sources of employment income except your own savings and investment. It is important to stick to your budget so that the fund can last you as long as possible.

4. Emergency fund: It is needed more than ever before, especially to cover unexpected emergency medical treatment and related expenses. The amount should be readily available. 

5. Cash flow: Determine the amount you require every month and ensure that there will be steady streams of cash to meet your monthly needs. 

6. Mental attitude: When you retire from work, you do not retire from life. The key is to live a meaningful life when you stop working. Continue to stimulate your mind by learning new things that you are interested in. Blogging is an excellent way to fill your time. You learn about blogging and write articles on your blog every day.

Don't act your age [in retirement]. Act like the inner young person you have always been. ~ J. A. West

7. Look after your health: When you need insurance the most at old age, insurers stop covering you or if they do, it is going to cost you a bomb. The key is to look after your health to avoid critical illnesses and falls.

After you're older, two things are possibly more important than any others: health and money. ~ Helen Gurley Brown

Are you ready to enjoy your retirement?

Source: 7 Things to Do Before You Retire

10 Effective Ways to Save Money

The time to save is now. When a dog gets a bone, he doesn't go out and make a down payment on a bigger bone. He buries the one he's got. ~Will Rogers

What are smart and effective ways to save money? I can think of the following:

1. Savings as an “expense” item in your budget: In your monthly budget treat savings as part of your total expenses so that you can leave it to your savings account. If you try to save whatever is left over, there may be nothing left. 

2. Balance from your monthly expenses: In addition to the monthly allocation for savings, you can save the difference between what you have budgeted (more) for spending and what you have actually spent (less). 

3. Your annual bonus: Do you spend the full amount to buy what you want or do you save part of it? A bonus is not part of your usual income and the amount is not allocated to cover your monthly expenses, save it. 

4. Your annual increment: What do you do with your annual increment? Do you spend more because you have more to spend? Why not save part of it? 

5. Tax refund: Do you get a tax refund from your annual returns? This is an extra amount to save.

6. Pay off debts: Debt attracts interest and interest attracts more interest and you are paying interest for nothing. To keep your hard-earned money, settle all your debts as soon as possible. 

7. Make extra income the easy way: One positive way to save extra money is to earn more by working part-time. What are your talents and what are you good at? Can you provide useful services and charge a fee? 

8. Curb your wants: If you can discipline yourself, you can control overspending and avoid falling into the debt trap, you will save more money. 

9. Trim your expenses: Look closely into your monthly spending and do away with unnecessary items such as entertainment.

10. Keep fit and avoid bad habits: Physical fitness is more than just for the sake of health. It is insurance against critical illnesses. Just imagine the huge amount you can save on medical expenses just by staying fit and healthy. The other issue which is relating to your health is smoking and drinking. By avoiding these bad habits you are not only saving your health but you control your purse strings as well. 

Good health is not something we can buy. However, it can be an extremely valuable savings account. ~Anne Wilson Schaef

Make all you can, save all you can, give all you can. ~John Wesley

Source: 10 Effective Ways to Save Money

Do You Know Your Bank Balance?

Have you ever issued bounced checks? Do you know your available bank balance before you issue a check? Do you maintain a daily record of your banking transactions? The only way to have a trouble-free relationship with your bank is to keep your bank accounts in order. The only way to do it is to keep your own record and reconcile it with the monthly bank statements. Here are the things that you can do so that you are in control

of your own bank accounts:

1.       Keep a simple record: You can keep track of your banking transactions on a piece of paper or you can use Excel to do a better job. From your opening bank balance just deduct checks issued and add money deposited so that you will know the balance in your account:

Your own record

Date                  Transaction                         Amount               Balance

01/05/2011     Opening balance              1500.00                 1500.00

03/05/2011     Check issued No. 1001    900.00x                  600.00

10/05/2011    Check deposited                500.00 x               1100.00

20/05/2011     Check issued No. 1002    700.00 x                 400.00

31/05/2011     Check issued No. 1003    200.00                   200.00

31/05/2011     Check deposited              1000.00                1200.00                                

2.       When you receive the bank statement: You knock off those similar items in the bank statement and your own records such as checks issued and money deposited. There will be outstanding items appearing in the bank statement as well as your own record. Now you should take up those items in the bank statement that you have not taken up in your own records such as interest, standing orders, and other bank charges. These charges are to be deducted from the balance of your own record.  The final figure is the closing balance of your bank account

. However, it is not the amount available in your bank that you can use. You have to do a reconciliation with the bank statement to determine the available fund.        

Bank statement (It is assumed that your opening balance and the bank’s opening balance are the same)

Date                  Transaction                         Amount               Balance

01/05/2011     Opening balance                    1500.00                +1500.00

05/05/2011     Check No. 1001                     900.00x                 +600.00

12/05/2011     Check Deposit                        500.00x                +1100.00

22/05/2011     Check No. 1002                     700.00x                  +400.00

31/05/2011     Bank charges                            50.00x                  +350.00            

Your own record updated

31/05/2011     Bank charges                           50.00x             1150.00

                            -

3.       The process of reconciliation: Remember there are some items in your own record which are not reflected in the bank statement, such as checks issued and money deposited not taken by your bank. You should now deducted those unpresented checks and add money deposited but not yet taken up by the bank from the bank balance to arrive at the reconciled balance. This figure should be the same as your own closing balance.

Bank Reconciliation Statement as at 31/05/2011

Balance as per bank statement                                                 350.00

Add:  Amount deposited but not taken up by bank                 1000.00

 Less: Amount withdrew but not yet taken up by bank            200.00

Balance as per your own record                                            1150.00

You can do reconciliation at any time because you can go online to check your bank accounts.  But what is the available fund that you can utilize?   

             

4.       What is your available balance: The fund that you can safely mobilize is the amount stated in the bank statement less all unpresented checks issued by you. According to my simple example, you can now safely issue checks up to   950.00 without bouncing a single check. 

Reconciled Balance                                                       1150.00

Less: Amount withdrew but not yet taken up                  200.00

Available fund                                                                 950.00

Do you think this article is helpful to manage your bank accounts? 

Source: Do You Know Your Bank Balance?

Effective Ways to Avoid Credit Card Debt

The most important thing about credit cards is your mindset. When you have a credit card, what is in your mind? Are you going to entertain yourself and your friends with the card or to buy things you want on credit? Stop thinking about the word credit and treat your credit card like cash. Take advantage of your credit card for the following purposes only:

The objective of holding a credit card

·         Convenience: Avoid carrying a lot of cash

·         Get reward points: To redeem for things you like

·         Savings: Get cash rebates and pay less

·         Simplify your life: Let credit card issuers settle your monthly bills

·         Smart buying: Purchase big-ticket items in installments without incurring interest

·         Online transactions: You need a credit card to transact online.

The wise ways to avoid credit card debt

The keyword is discipline: You have to pay your credit card bill every month fully and promptly. This is to avoid charges on late payment and incur high-interest charges by paying just the minimum amount. Interest is compounded and snowballed on the outstanding amount. It can easily go beyond your means to pay and you can end up bankrupt.

Treat your credit card like cash: It means you set aside the same amount every time you charge something to your card. At the end of each month, the amount you set aside is earmarked for credit card payment.

Self-control: Control your urge to want more things in life. Stop reading advertisements that are luring you just to buy, buy, and buy.

Say no to credit: Getting into credit card debt is easy, but getting out of it is difficult. Avoiding credit and getting cash advance from your credit card is the best thing you can do for yourself.

It is a very simple idea: no credit, no debt, and no money problems.

Source: Effective Ways to Avoid Credit Card Debt

What an Emergency Fund Can do for Your Car Loans and Credit Card Debts

Your current earning may be good enough for you to qualify for a car loan or get your credit cards. However, it is not good enough when you are unemployed. You need an emergency fund.      

Credit card debts

Do you know in most cases people have declared bankrupts because they are out of a job?  See the comments in this article: Credit Card and Bankruptcy in Malaysia. Unemployment may be an issue; the most important thing is that there is no emergency fund to cushion the blow. When it happens, the credit card debt is allowed to snowball and facilitated the bank to institute bankruptcy proceedings against defaulters.  With an emergency fund, you can carry on living normally and pay your credit card bills promptly to avoid interest and late payment charges. Start using your credit card only when you have sufficient emergency funds to cover three to six months of living expenses.

Car loan

 A car loan is quite a substantial amount. The fact is that the car does not belong to you, you are the hirer and the bank is the owner. When you default on installment payments, the bank will repossess your car. Most likely than not, the current car value which has been depreciated over time is insufficient to cover the amount you owe the bank.    The bank will go after you for the difference. When you are unemployed, you have no funds to top up the amount. The outstanding amount together with compound interest will accumulate into a sum like RM30,000 in Malaysia to declare you bankrupt. An emergency fund will help you avoid such a situation.  

 Do you have an emergency fund? It is good to cover life’s unexpected expenditures such as sudden medical expenses but more importantly, avoid being declared bankrupt.            

Source: What an Emergency Fund Can do for Your Car Loans and Credit Card Debts

Tortoise’s Way of Making Money

You must have heard about the story of the race between a hare and a tortoise and eventually the tortoise won the race slowly but steadily. Similarly, you can’t get rich quickly in investment. Making money is for the long-haul:


Long-term investment: As an example, Genting Singapore (G13) is a winning stock (gamblers are generally losers) in gaming. Invest early and keep the shares for the long term. Over time the stock will appreciate in value You will also reap the reward of a bonus issue, rights issue, and regular dividend payments. 

Trusted brands: Invest in shares of companies (if public listed) with trusted brands. What are the trusted brands? Just look at the annual report of Reader’s Digest Trusted Brands. Among the trusted brands voted by consumers in 2010 by the Reader’s Digest, Asia’s Trusted Brands Survey are Acer, Carlsberg, Canon, Great Eastern, Honda, Maybank, Panasonic, Petronas, Prudential, Public Bank, Samsung, Sime Darby, Sony, and Yeo’s 

Dollar-cost average: You invest at regular intervals at an equal amount to take advantage of a lower total average cost for the shares purchased over time. It is because when prices are high you get fewer shares and when prices are low you get more shares.


Prudent investment is a combination of picking trusted brands, investing regularly, and going for the long term.

Source: Tortoise's Way of Making Money

10 Tips to Avoid a Default on a Car Loan and Bankruptcy

According to a news item in The Star, there were more than 500 bankruptcy cases every month due to the failure of people to service loans for their hire-purchase of motor vehicles during the past five months this year. How can you prevent such a thing from happening to you? 


1. Factor the monthly repayment amount into your monthly budget: The big question is: Do you think there is room to accommodate the monthly installment in your monthly budget? If the total cash outlay including the car installment is more than your inflow, you can forget about getting a new car, bankruptcy will be the only outcome.

2. Hold on to your gratification: Don’t follow others just because one of your friends has got a new car. Exercise self-discipline to live within your means.

3. Get a smaller c.c. car: Opt for a smaller cc car so that you are comfortable with your monthly budget. Don’t overstretch. 

4. Save more for a bigger down payment and a smaller monthly installment: This is the most sensible thing to do so that the monthly amount fits nicely into your monthly budget.

5. Wait for the next pay increment to buy a new car: Perhaps now you are not in a position to get a new car. How about the next pay increment? Can you hold on to it? 

6. Wait for your next bonus to make the down payment: Bonus time is a good time to consider making a down payment for a new car.

7. A used car: What do you think of a used car? It should not be more than three years old and free from accident.

8. A shorter installment period: Just imagine an interest rate of 3% for a loan of 50,000 the amount of interest for one year is 1500, for 2 years it is 3000, for 3 years it is 4500, for 4 years the amount will be 6000 and for five years it will be 7500. Go for a shorter duration. Besides, the future is unpredictable; the sooner you complete the installments the better it is 

9. Get the basic model: Get the basic model with manual transmission minus the leather seats and wood paneling. It costs very much less. 

10. A need or a want: In a country like Singapore with an effective public transportation system such as MRT and buses, going from one place to another is a breeze. You don’t really need a car. Ask yourself: Is it a want or a need? It is easy to purchase a car, but maintaining a car is a different story. The cost of petrol, parking fee, maintenance cost, insurance and not to mention depreciation and accidents, will burn a big hole in your pocket.


You get a good feeling to show off your new car among your friends, but if you fail to catch up with the monthly installments just for three consecutive months your car will be repossessed. If you still owe more than RM30, 000 after disposing of your car, the bank will make you bankrupt. Where are you going to hide your face?

Source: 10 Tips to Avoid a Default on a Car Loan and Bankruptcy