10 Soul Searching Questions about your Personal Financial Position

How often do you review your financial standing? It is good to scrutinize your personal financial figures at least once a year. Ask yourself these relevant questions. If your answers are mostly affirmative, rejoice, and keep up the good work. If you are getting nowhere and you are unable to break your bad habits to improve your net worth, you can always start now.  It is not too late.  

1.       Paying yourself first: Are you putting aside an amount monthly from your income? The habit of paying yourself first will pay off handsomely in the long run because of compound interest. When you have accumulated a substantial amount you can invest and make more money.   

2.       Reducing your debts: Are you paying off your debts consistently to reduce the outstanding amount?  A smaller amount will attract fewer interest charges and faster for you to clear your debt. It is a wonderful feeling to be debt-free.

3.       Growth in your Investment: Do you see an improvement in your investment? Does it appreciate in value? Have you increased the size of your investment? In other words, is your wealth growing?  

4.       Net worth:  Is your net worth improving? It means your assets are growing and your liabilities such as your outstanding loans are shrinking.

5.       Earning power: Are you making more and taking home more money than before? The ability to get a pay rise or earn more is a positive sign of success.  

6.       Living within your means: Are you able to live within your means? Are you able to discipline yourself and avoid getting more material things? Avoiding spending unnecessarily is the way to stay out of debt and live within your budget.

7.       Giving: Are you donating and giving to charity? The amount is immaterial; it’s kindness and compassion that count.

8.       Insurance: Are you reviewing your policies regularly? Is the sum insured adequately? Doe the coverage meets your requirements? A life policy will be able to replace your earning power in case of an accident or critical illness. A house owner policy and a householder policy provide comprehensive coverage against unforeseen perils and compensate you for your losses.

9.       Kick your bad habits: Have you stopped smoking? Do you still have the urge to go for it one more time and bet for it? Are you able to moderate your drinking habit? Are you watching less TV and spending more time outdoors exercising? You will be able to save a tidy sum to replace your bad habits with good ones.

10.   Learn: When is the last time you read a book about personal finance? Be wise, read, and learn more to be knowledgeable about money matters.

"Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this." - Dave Ramsey

10 Productive Habits to Enjoy Financial Freedom

Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones. – Benjamin Franklin

Is your daily habit of managing your finance helping you to grow your wealth or depleting your financial resources? Here are ten ways to get away from debt, protect your nest egg, and be financially independent.   

1.      Savings: Did your parents teach you about savings while you were young? If you have consistently followed the habit of savings, the magical power of compound interest will make your savings to grow substantially over time. Following this habit persistently is vital because the source of your wealth is from your savings.    

2.      Think: Every time when you want to spend money, think, and ask yourself this question, “Is this a want or a need?” Be wise to resist spending unnecessarily.   

3.      Investment: It is not wise to keep your money in the bank; the inflation rate is much higher than the rate of interest that you can earn from your bank. You can keep your emergency fund in a bank but invest the extra cash for a higher rate of return. Do it regularly and take advantage of the average cost of investing.  (dollar-cost averaging – DCA)

4.      Budget: Do you have the habit of doing a budget and stick to it?  How about preparing your monthly cash flow forecast to see that you have sufficient funds to cover an exceptional expense item in a particular month? Read “Why you need to do a personal cash flow forecast” to find out more.

5.      Live within your means: The habit of not spending more than what you have requires self-discipline. It is the only way to stay out of debt and avoid bankruptcy.    

There is no dignity quite so impressive, and no independence quite so important, as living within your means. – Calvin Coolidge

6.      A simple life: In line with living within your means, a simple life is developing the habit of not getting more material things in life.  Live with what you need and not what you want. 

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

7.      Learn: Get into the habit of learning more about personal finance and the latest business news to see what is trending globally. Stay abreast of the latest development in those sectors that you hold investment.      

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

8.      Insurance: It is important to review regularly your insurance policies to ensure adequacy in the sum insured and  the scope of coverage to meet your requirements  

9.      Health and fitness: The habit of following a balanced diet and doing daily exercise is to maintain optimum health. You will avoid incurring medical expenses.  

10.  Giving back: When you have a roof over your head and are not missing your three meals daily you are better off than many others who are destitute in this world. Be charitable and donate regularly to relieve the sufferings of those in need.

Do you have other good habits relating to personal finance? Please share your story. 

10 Things to Know About Personal Finance

The aim of personal financial management is about financial independence. To be able to enjoy financial freedom you will need to know the 10 topics and act wisely:

1.       Savings: Savings is a good habit to build a solid financial foundation from a young age. However, you can start at any time to save as long as you have a regular income; the most important thing is to avoid procrastination. Do you know how long it takes you to double your money? Use the magic number of 72 divides by the rate of return. If the interest rate is 6% your original $1000 will double in (72/6) 12 years. You do not save for the sake of savings. It is the starting point to build your wealth and be financially independent.

2.       Expenses: Spend time to record your daily expenses because you want to find out where your money goes.  You will be able to do a meaningful budget when you know your actual spending every month.

3.       Living within your means: You know how much you are getting each month and you also know your spending pattern by recording your expenditures, it is time to do a budget so that you will spend less than what you have earned and also set aside an amount each month for savings. The purpose of a budget is to avoid overspending and getting into debt. If you want to spend more you have to earn more.

4.       Good debt and bad debt: Distinguish between good debt and bad debt. A housing loan is a good debt because property appreciates in value over time. A car loan is not a good debt but it is a big-ticket item that you can’t buy with cash. The trick is to put down a bigger down payment so that you will settle the loan in a shorter period and incurring less interest. Credit card debt is definitely bad debt because you pay more for an item that you can buy in cash. An educational loan is a loan and it is a bad idea to be in debt before you can earn a living. Besides, you are not certain that you will get a job upon graduation. 

5.       The wise use of credit cards: Credit cards are wonderful tools to establish your creditworthiness. The right way to use is to settle any outstanding amount fully every month. You need a credit card to do online purchases and you pay less with a cash-back credit card. You can also redeem goods with points earned for all your card purchases. Most of all do not get into credit card debt.

6.       Emergency fund: One of the reasons to save is for a rainy day. You never know when you need an amount quickly and easily. An emergency fund is also needed just in case you are out of a job for a couple of months and you still can live normally without financial constraints. Keep some money in a savings account good for about 6 months.

7.       Investment: If you do not save, you will not be able to accumulate funds and build your wealth. You build your wealth for your children’s education and also for your retirement. The key is to diversify and invest in stocks, bonds, mutual funds, and real estate. The word to remember is long-term. Never believe in get-rich-quick schemes or other scams. 

8.       Insurance: You need insurance protection to cover personal disability, critical illnesses, property damages, and personal liability in case of lawsuits. Insurance coverage will lessen the impact of your financial losses.

9.    Financial learning: Adopt a learning attitude about finance. When you learn more, you know more and you can make wise financial decisions.

10.  Retirement: The tragedy of life is when you stop working there is no more money coming in for your retirement. To get peace of mind and care-free living, plan early for your retirement. Live your golden years independently.

If you are in debt now, the most important thing to do is to get out of debt as soon as possible to avoid incurring more and more interest. It can reach a point where the debt is beyond your control and you could be bankrupt.

Use this article as a checklist to determine how healthy your personal financial well-being is. 

Source: 10 Things to Know About Personal Finance

10 Benefits to Delay Your Retirement

If you are fit and healthy, it is wise to delay your retirement. Working longer is beneficial financially, physically, psychologically, and mentally especially when you enjoy doing what you do and are happy about it.   

1.      Live longer: We are now more health-conscious because we have access to vast information on aging and healthcare. It means we will live longer than before. However, living longer in a world of inflation with the burgeoning cost of medical expenses is very challenging. Will your retirement fund outlive your life or you outlive your retirement fund? Do not be surprised if your retirement years are just as long as your working life, if not longer. The only solution, if you are fit, healthy, and employable, is to work longer.       

2.      Get paid and do what you enjoy doing: If you enjoy doing what you do why not continue and work for a few more years? After all, you are paid to do your job.   

3.      Delay dipping into your retirement fund: When you get paid every month, you do not touch your retirement fund. Instead of getting depleted, it grows.

4.      Maintain your lifestyle: You do not need to adjust your way of life and trim your expenses because you do not have a regular source of income. You continue to live life as you used to be with a monthly paycheck.

5.      A self-esteem booster: When you look around people of your age they have nothing to do but to engage in idle chitchatting to pass the time at the coffee shop and yet you are gainfully employed. It’s reassuring to know that you are still productive.

6.      Delay brain aging: Working is the best for your brain to stay sharp, active, and healthy.  Bear in mind that you are able to keep your job because you still can contribute and perform.

7.      More time to grow your investment: Investment is not a get-rich-quick scheme. A good investment like blue chips takes time to appreciate in value. When you do not liquidate your investment to fund your retirement, you allow your wealth to increase in value. 

8.      More time to save even more: While you are employed, you and your employer continue to contribute to your retirement

scheme. It means you are able to save and earn more interest. 

9.      Stay current: It is an excellent way to keep up with everyday changes. According to an article, Learn, Unlearn And Relearn: How To Stay Current And Get Ahead,  Since change is the only constant you can truly rely upon, learning to navigate and adapt to it is not just important to your survival, it’s essential for you to thrive in the bigger game of life. Learning new things is fun, exciting, and life-enriching.

10.  Fulfilling life: When you are employed you continue to take part in social engagement and maintaining friendships. Getting connected is a big part of a meaningful life.

Conclusion

It is necessary to sustain healthy habits like daily jogging, mediation, and getting sufficient sleep every night to unwind, relax, and control stress. Drink plenty of water and eat healthily to nourish your system and provide energy to work hard and smart.   

10 Wise Ways to Choose a Credit Card

You are unique, so is your choice of a credit card. Your financial background dictates your lifestyle and the type of card to suit your needs. However, from the standpoint of a smart consumer, you should wisely consider the following salient points.   

    

1.      Type of cards: If you are in college you should consider using a cash card or a debit card instead of a credit card and get the hang of a plastic card without worrying about incurring credit card debt.  If you are one of those rich and famous people you should be using a charge credit like American Express. It has no credit limit and it is only limited by your financial resources. You are not given credit and you have to pay the full amount when you receive the monthly statement. For the rest of us, we can opt for a Visa or MasterCard.

2.      Free for life: Look for a card with no joining fee and no annual fee. Why pay extra when you can get a card for free?

3.      Lifestyle: Your lifestyle determines your preference for a credit card. When you are on the road a lot, a petrol credit card would be handy to control your travelling expenses. If you are a frequent flyer, a flight and lodging credit card would suit your way of life. I enjoy going to the movies, so I get a GSC Hong Leong Bank Visa Card and pay less for my entertainment expenses. It is a good idea to have a shopping credit card to reduce your grocery expenses.

4.      Carry two cards: It is prudent to carry two cards; one for Visa and another one for MasterCard just in case one or the other cannot be accepted for whatever reasons.  

5.      Choose a friendly financial institution: It is good to choose a card issuer that you are familiar with. In case you need help, you get speedy and satisfactory assistance.  

6.      Benefits: Look out for benefits suitable for you. One such benefit is a balance transfer. Are you carrying too many cards with huge balances? Look for one card to consolidate your debt with zero interest transfer for the longest period to ease your financial burden. Are you purchasing a big-ticket item, get a card with a zero-interest installment plan for the longest period.   

7.      Security: Get a card issuer usually a bank that is able to notify and alert you for unusual transactions promptly. It could be a genuine transaction, but it is reassuring to know that the bank is on top of things. 

8.      Low-interest rate: Get a card with the lowest interest rate just in case in one particular month you are unable to pay the full amount you will not be impacted with high interest for the outstanding balance. I always advocate credit cards are for convenience and not to obtain credit and incur debt. If one fine day you get into financial difficulties and default your repayments, your name may be black-listed in Central Credit Reference Information System (CCRIS) or CTOS, a credit reporting agency in Malaysia, or worst still you become bankrupt.

9.      Penalty charges: Issuing of credit cards is a lucrative business for financial institutions. You are charged for joining fee, annual fee,  interest for late payment, interest for outstanding balances, cash advance, replacement of lost card, just to name a few.    Get a card with fewer penalty charges or for a smaller amount  

10.  Cashback or rewards: With a cash-back card you pay less every month. With a reward card, you can accumulate points for the amount you spent and redeem for goods. The choice is yours. 

In Malaysia, go to iMoney.my to select a card to match your requirements

Protect Your Belongings with a Householder Policy

A householder policy, like a homeowner policy, covers loss or damage to your contents or movable possessions caused by the following perils:

Fire, lightning, and explosion caused by gas for domestic purposes

Aircraft

explosion (other than gas used for domestic purposes)

Road vehicles or animals

Bursting or overflowing of water tanks or pipes

Electrical Installations

Windstorm, tempest, earthquake, volcanic eruption, and flood

Theft with violent forcible entry or exit

Loss of rental

Liability to third parties for accidents in your property

Compensation for the death of the insured.

You may wish to cover the following perils which are excluded in a standard policy:

Subsidence and landslip

Riot, strike, and malicious damage

Please ensure that the sum insured is adequate. You should decide on the basis of compensation for your householder policy, whether it is on reinstatement or the replacement value. You will be compensated with the value of a brand new item under a reinstatement basis but on the depreciated value of the item lost under a replacement basis. Do extend selected coverage to perils excluded in a standard policy.

To facilitate claim in case of a fire or other perils, keep your bills and receipts together with photographs of all household items in a safe place. I would suggest that you back up your documents in the cloud using a cloud storage provider such as Google Drive or iCloud. If you keep your documents at home and save them in your hard drive, laptop or iPad, in the event of a fire, they may be destroyed and you cannot produce documentary evidence to substantiate your claim. According to an article, Top 20 reasons your insurance claims get rejected, At the claims stage, some insurers want proof of purchase, such as an invoice. Be aware that the onus is on you to prove your loss,” he says. Jooste advises that you take photographs of each item in your home and save them to a disc or external hard drive.

Conclusion: 

Cover your home and its contents with a house owner policy and householder policy respectively. Make sure the sum insured is adequate; get an extension to cover perils excluded in a standard policy and include such expenses like the removal of debris after a fire.  

Is Your Home Adequately Insured?

After taking up a house owner policy for your house, you think you are fully covered in the event of a fire? I must say that most likely it is not. There are three aspects of a house owner policy to consider if you want to be fully covered:

·         Sum insured

·         Additional perils

·         Other expenses

Sum insured:

You should insure your property on a reinstatement basis instead of indemnity because coverage on reinstatement is the actual cost to rebuild your house after a fire. You do not want to insure the actual price you previously paid which is insufficient now due to inflation. You have to find out from a reputable building contractor the cost involved to rebuild a similar house that you are occupying excluding the cost of land. If you do not insure fully you will be compensated proportionately.

As an example, the cost to rebuild a similar house of yours is $200,000 and the sum insured of your houseowner policy is only $150,000 you are deemed to be self-insuring the difference. During a fire, say, you suffer a loss of $10,000, you will be paid:

Sum insured $150000 x Loss $10000/Rebuilding cost $200,000 =$7,500  

Additional perils

A normal house owner policy will cover your building, including its fixtures and fittings, garages, walls, gated, and fences. The main perils covered are:

·         Fire, lightning, and explosion caused by the gas used for domestic purposes.

·         Aircraft damage

·         Explosion (other than gas used for domestic purposes)

·         Road vehicles or animals

·         Bursting or overflowing of water tanks or pipes,

·         Electrical installations

·         Windstorm, tempest, earthquake, volcanic eruption, and flood

·         Theft with violent/forcible entry or exit

·         Loss of rental

·         Liabilities to third parties for accidents in your property

You need to extend the coverage of the house owner policy to include the following:

·         Riot, Strike & Malicious Damage

·         Subsidence and landslip

These are excluded from a normal house owner policy, In case of damages caused by, say, riot, strike, and malicious damage your houseowner policy is not enforceable.

Other expenses

After a fire, you have to think of the additional cost involved in removing debris. To rebuild your house will also involve architects, surveyors, and consulting engineers’ fees. These are not in your standard houseowner policy. Therefore the sum insured for your houseowner policy you have to add these expenses.  

Conclusion:

You should take up both houseowner and householder policies to obtain a comprehensive cover for your home and its contents. However, you have to make sure that the sum insured is sufficient. Find out what perils are excluded in the policy that you need to extend coverage.