7 Effective Ways to Avoid Poverty

According to the Census Bureau, one in every six Americans is living in poverty. The population of Malaysia is more than 27 million but there are 47.8 million people struggling in America. How do you deal with poverty effectively?

• Professional and technical skills: It is essential to obtain professional expertise such in law, marketing, computer science, and accountancy. If not, you can also acquire technical know-how like plumbing, wiring, and carpentry. The most important thing is to equip yourself with marketable talents that you can apply what you know throughout your life. As long as you are not lazy, you can work, earn, and live a decent life and avoid poverty. It is also prudent to renew what you have learned and keep yourself updated by learning new things relating to your trade. 

• Start early to save: First of all, you develop a saving habit at an early age. Secondly, the sooner you start to save the more you will be able to accumulate over the long haul. The power of compound interest will work wonders for your money.

• Invest wisely: Invest for the long term. .Avoid get-rich-quick schemes which are too good to be true. Growing your wealth is like growing a tree, it takes time and patience.

• Live within your means: Spending less than what you have earned means there is an excess fund to save and invest. It is also a great way to avoid getting into debt by overspending.

• Avoid bad habits: Bad habits like gambling, smoking, and drinking hurt not only financially but your well-being as well. Smoking will affect not only your health but others who are close to you. Drinking can ruin your life when you are involved in a fatal accident after drinking too much. Gambling is the fastest way to incur unmanageable debt.

• Debt-free: Use your credit cards with caution. Use them for convenience only and not to pile up debts. Getting into debt is easy, but getting out of it is difficult. Pay fully and promptly every month to settle credit card bills.

• Less material wants: When you want less, you spend less and you allow your money to grow further when you don’t touch it.


Be knowledgeable, skillful, and avoid bad habits are the ways to be financially independent and avoid poverty.

Source:7 Effective Ways to Avoid Poverty

8 Reasons Why You Have Unmanageable Debts

The following are the reasons why people seek help from the Credit Counseling and Debt Management Agency of Bank Negara in Malaysia:


1. Poor personal financial management 26%
2. Huge medical expenses 25%
3. Credit card misused 15%
4. Failed in business 13%
5. Out of a job 11%
6. Other reasons 6%
7. Death of a breadwinner 2%
8. Mistakes in investing 2%


Three words describe the debt situation: greed, lifestyle, and unavoidable circumstances.
However, there are effective ways to avoid debt:


Poor personal financial management: A budget is a key to personal finance. The aim is to allocate your income in such a way as to meet all your monthly expenses and include an amount for savings. The whole idea is to live within your means and avoid debt.

Huge medical expenses: The first step is to take preventive measures by keeping fit and maintaining robust health. Eating a balanced diet, exercising regularly, and having sufficient sleep are essential for your well-being. The next step is to take up adequate medical insurance coverage. In case you are seriously ill or as a result of an accident you can reimburse your medical expenses and get compensated for your loss of income while you are in a hospital or recuperating at home 

Credit card misused: It is a credit card, but its main purpose is not for you to purchase items on credit. It is only for your convenience and nothing else. It means you must pay fully and promptly upon receiving the monthly credit card statement. You avoid paying interest on the outstanding amount when you do not pay just the minimum amount and you also avoid late payment charges. When you are in debt, it is very difficult for you to get out of debt. That is the reason why so many people seek help for debt management. 

Failed business: There is always an element of risk in any business venture. The prudent thing to do is not to put all your money into it. Set aside a contingency fund in case your capital is wiped out in a failed business attempt. 

Out of a job: Take steps to secure your job. One effective way is to acquire more skills. In fact, employers are looking for staff with multi-skills to reduce costs. With more skills, you are more valued at the workplace and less likely to be laid off.

Other reasons: One of the things that you should not do for your good friend is to be a guarantor for his or her loan. When someone applies for a loan and the financial institution asks for a guarantor, it means the loan applicant is not qualified for the loan. As a guarantor, you are more likely to end up servicing the loan.

Death of a breadwinner: An accident can happen at any time. The wise thing to do is to get sufficient insurance coverage against death due to accidents and critical illnesses. The proceeds can then allow family members to carry on living without financial difficulties. 

Mistakes in investing: The mistake is about greed. Instead of investing for the long term, you want a huge gain in a short time because the stock market is on an upward trend. Apart from your own savings you also get a personal loan from a bank and dump all your money in the stock market. However, a terrorist attack somewhere triggers a market slump. You continue to hold on to your portfolio, but there is no sign of recovery and you have suffered a huge loss and owe the bank a substantial amount. 


Live within your means, never be in debt, and by husbanding your money you can always lay it out well. But when you get in debt you become a slave. Therefore I say to you never involve yourself in debt, and become no man's surety. If your friend is in distress, aid him if you have the means to spare. If he fails to be able to return it, it is only so much lost.

Andrew Jackson

Source: 8 Reasons Why You Have Unmanageable Debts

10 Money Matters to Teach Your Children

We, as parents, have made many gains and losses in personal finance. It is our duty to share what we know so that our children can take advantage of the knowledge to invest wisely and also to avoid the pitfalls. I think the following are the 10 most important things our children should know and follow faithfully. 

1. The power of compound interest: Start to save early and take advantage of compound interest Just look at the following illustration taken from Money Sense Getting Smart with Your Money, a book published by Credit Counseling And Debt Management Agency: 

2. The danger of credit and credit cards: Credit cards are double-edged swords. They can serve you or ruin you financially. The most important thing is to avoid credit. Credit means incurring debt and paying very high interest. It can easily lead to bankruptcy. Treat your credit cards like cash. Keep a dollar for every dollar charged to your card so that at the end of a month you can pay the credit card bills fully and promptly.


3. Avoid get-rich-quick schemes: It is always too good to be true. Why should the person approach you? He could have made more money by himself instead of asking you to join in.

4. The importance of working hard for financial success: To be successful and ahead of others it is necessary for you to be innovative and creative. You can run your own business or you can be employed, you need to have unique and original ideas and work hard at it. The money will follow. Money is the by-product of your productivity.

5. Long-term investment: It is important to invest and hold an investment for many years. It will even out the rise and fall of the market Landed property is one of the best investments Land is scarce; it appreciates over time, it is good to rent out and collect rental or as a roof over your head. Be careful to choose a good location. Invest and hold shares of companies that are trusted brands. Collect dividends, get bonus and rights issues and let the value of shares appreciates over time

6. Avoid gambling: The root cause of this problem or bad habit is greed, one of the human weaknesses. Once you are addicted, it is a one-way ticket to hell.

7. The power of networking: Get to know professional people in the field of finance. Learn a thing or two from them. The more you know the more resourceful you are to make a wise decision pertaining to financial issues.

8. Save up for a big-ticket item: Instead of getting it on credit and incurring interest, save up and buy in cash. .In a way, it is to avoid impulse buying and on second thought you may not want the item after all.

9. Live within your budget: Children should budget their pocket money or live within their means when they have started working. The budget should include an amount set aside as savings besides the normal monthly expenses. The most important thing is to avoid overspending. It means incurring debt. It is very difficult to get out of debt.

10. Cultivate the habit of savings: Inculcate the habit of savings. The amount is not important but the habit is. Savings serve many purposes. The money can be put aside as an emergency fund. You can also save up to buy a big-ticket item. When you have saved up sufficiently you can also invest and build your wealth. 


What are the other important things to teach our children about money? Share with us.

Source: 10 Money Matters to Teach Your Children

How Safe is Your Money in the Bank

In Malaysia, there is a system established by the Government to protect depositors against the loss of their insured deposits placed with member institutions in the event the member institution fails. It is administered by Perbadanan Insurans Deposit Malaysia (PIDM) and brought into effect in September 2005.

All types of depositors, whether businesses or individuals are protected. The maximum limit of coverage is RM250,000 per depositor per member institution.

Your deposit with member banks is covered automatically and it is free. When you have one million Ringgit you can deposit with four different banks and not four different branches of the same bank at RM250,000 each to get effective cover.  

Your money may be safe in the bank but is it productive? There are two factors to consider:

·     Internally

 Interest on savings accounts and fixed deposits are so low that it is impossible to keep up with inflation. It means you need to fork out more money to buy the same item as time goes by. For the money you keep in the bank it is worthless and less over time.   

·         Externally

Malaysia’s credit rating according to Standard & Poor is A-. It means Malaysia has a strong capacity to meet financial commitments, but somehow susceptible to adverse economic conditions and changes in circumstances. In case of a negative revision in credit rating, the exchange rates for the Malaysian Ringgit against other currencies will be weakened. It means you need to pay more of your money to exchange for the same amount in foreign currency. As an example, the exchange rate for 1 US dollar is RM3.22 as of December 13, 2011. If there is a negative revision of our credit rating because of adverse economic conditions, you may need to pay more than RM3.22 to get one US dollar.  On the other hand, the Malaysian currency will appreciate against other foreign currencies if there is a positive revision of our credit rating.      

You can view Standard & Poor's Credit Rating for each country here. 

It is advisable to keep your money in the bank for emergency purposes only. You need other investment vehicles to grow your wealth and beat inflation and currency fluctuation.

Source: How Safe is Your Money in the Bank

10 Bad Habits to Avoid and Reduce Your Expenses

Do you have these bad habits which are not only a drain of your financial resources but are also detrimental to your good health?

1. Smoking: A packet of cigarettes costs about RM10/=. If you smoke a pack a day it means you will be burning away RM3, 650/= a year. At the same time, you are also ruining your health. When the amount is invested you will be richer by many times more than the amount you have burnt and you are also in good health to enjoy your wealth later.

2. Drinking: It is more than a waste of money because the habit is always related to drunk driving and in many cases they are fatal. 

3. Use the car more than necessary: Don’t just think of your car when you think of transportation. Your two legs are an excellent means of going places easily and conveniently. Why waste petrol and car maintenance when you can walk?

4. Junk food: It is foolish to use your hard-earned money to buy something which does not give you nutritional value and it can be easily turned into a bad habit to consume regularly and sabotage your health and well-being

5. Soft drink: Why waste money to get a soft drink when water is freely available at home? Excessive consumption of sugary drink will bring you critical illnesses and long-term sufferings 

6. Gambling: Gambling leads to debt and bankruptcy. It is the worst habit you can ever have in life.

7. Surfing the Net: Don’t waste electricity and the cost of connection when you surf the Net aimlessly. It is a waste of time and energy when you can be productive in other ways.

8. Inactive: When you don’t move your body often you are more likely to succumb to illnesses and as a result incurring unnecessary medical expenses. 

9. Watching TV: It is yet another bad habit that makes you lazy besides taking away your money to pay for the monthly subscription and not to mention paying more for electricity. The longer you watch TV the lazier you will be. In the end, nothing gets done. When you are connected to the TV set you are disconnected from your family members.

10. Disorganized: Don’t store things such as grocery items at home haphazardly. When you can’t locate an item you waste money and time to get one outside. By the time an item is discovered, it has long passed its useful life and you have to throw it away. Not planning your trip is another way to waste precious time and petrol 


By avoiding these bad habits you will be richer by the amount of money that you can save and even more.

Source: 10 Bad Habits to Avoid and Reduce Your Expenses

Smart Shopping Reduces Expenses

Whoever said money can't buy happiness simply didn't know where to go shopping.  ~ Bo Derek

Beware of little expenses; a small leak will sink a great ship ~ Benjamin Franklin

Grocery shopping is fun in the cool comfort of the mall. You can make shopping more pleasurable by adopting the following strategies to get what you want and worth every cent of your money.    

1. Shopping list: The most effective way to go shopping is to get a list ready. The key is to stick to the list and not buying anything else. The other advantage is to get what you need in one go and avoid going back to the mall again and again for items you have forgotten to purchase. 

2. House brand: Go for house brand instead of the popular brand for common items such as toilet rolls and tissues. House brand items are cheaper and they are just as good if not better.

3. Discount accord to specific credit card holders: Shop at those malls which offer credit cardholders with discount.  You don’t get a discount when you shop with cash. The most important thing is to be disciplined and not to shop for something you don’t need just because you can charge it to your card.

4. Promotional items: Watch out for items you need with special offers. Check out items you can purchase with further purchase at a discount.

5. Coupons: Take advantage of coupons to cut costs for items listed on your shopping list.  Don’t use a coupon to buy something you don’t need just because it is a bargain.

6. Prepare a list in advance: In the course of a week jot down items to be purchased so that you will remember to get them when you go shopping.

7. Do it once a week: It is not a good thing to go shopping often. For me, I do it once a week. The whole idea is to avoid buying things we don’t need and also to avoid wasting petrol and time going shopping.        

8. Avoid junk food: The right way is to shop for food with nutritional values and things that offer durability. Avoid processed or preserved food. Don’t buy sugary beverages or fried items.    

      A bargain ain't a bargain unless it's something you need.  ~Sidney Carroll

 He who will not economize will have to agonize. ~ Confucius

Source: Effective Shopping Reduces Expenses

Credit Cards and Young People

According to a report from Credit Counseling and Debt Management Agency of Bank Negara Malaysia or The Central Bank of Malaysia, among the cardholders below the age of 30, 50% of them are unable to settle their credit card debt and they have to declare bankruptcy. In the survey, among the delinquent cardholders, 22% cannot properly manage their personal finance and another 27% cannot control the use of their credit cards.


What can young people, especially fresh graduates, do to manage their personal finance? Here are some useful tips


• Pay in cash: You will not get into debt when you pay in cash for all your purchases. Your spending is limited by your financial resources.

• Use a prepaid card or debit card issued by Visa or MasterCard: For a start young people should use a prepaid card (it is preloaded with a sum of money and you use it as a credit card until the amount stored in the card is exhausted). You can also use a debit card and it is linked to your bank account. Like a credit card, you can charge your purchases to your card up to the maximum amount of your available fund in your bank account. You will gain credit card experience this way.

• Credit card: When you are using a credit card for the first time, remember to treat it like cash. For each Ringgit, you charge to the card back it up with cash for the same amount to meet payment at the end of the month. Do not opt for the minimum payment. You will not only incur interest but at the same time, it is the route leading to unmanageable debt and eventually bankruptcy. Use the card for convenience only. Don’t buy in credit to attract interest and debt.

• Impulsive spending: Do not show off your credit card by entertaining your friends lavishly with it. Do not buy what you want but use the card to spend according to your monthly budget. In this way, you stay out of debt. Getting into debt is easy but getting out of it is very difficult. Spend only your own money but not the bank’s money. Nothing is free in this world.


You can keep your credit cards but you have to spend within your monthly earnings and treat your cards like cash in your pocket or in your bank accounts. Settle the credit card bills promptly and fully to build your creditworthiness.

Source: Credit Cards and Young People