7 Effective Ways to Avoid Bankruptcy

Bankruptcy

According to the president of the Federation of Malaysian Consumers Associations (Fomca), Datuk N. Marimuthu, half of those declared bankrupt because of credit card debts are below the age of 30. How do you avoid being declared bankrupt?

1.      Financial Education: it is essential to start young to learn about personal finance. Getting more information about savings, household budget, net worth, proper use of credit cards, good and bad debt, insurance, and estate planning are necessary to be more knowledgeable about managing money.

2.      Budget: The key is to plan your budget and work your budget diligently.  The main objective is to match your expenses including regular savings, housing, and hire-purchase loans within your take-home pay. The outcome is to avoid overspending and falling into the debt trap.

3.      Emergency Fund: The beauty of an emergency fund is like a first aid kit. It is to address unexpected happenings such as getting retrenched or incurring expenses due to an accident or an illness.  The money will tide you over the critical period to meet all your normal monthly expenses for a couple of months until the situation is back to normal.

4.      Avoid bad habits and more wants in life: Gambling is the fastest route to be bankrupt.  Avoid it at all costs. Do not spend more than what you have. Self-discipline and self- control are required to curb the urge to get more wants. If it is beyond your control, you will get into debt and likely to be bankrupt.

5.      Avoid using credit cards: This is especially true for those young graduates who have just entered the job market. The smart way is to use a debit card to get the feel of using a plastic card. When you use a debit card, the amount that you charge to your card is directly deducted from your bank account. The amount that you can spend on your card is limited by the fund available in your account. There is no way to overspend and get into unmanageable debt.

6.      Pay in cash: Instead of getting a personal loan,   save for the amount to buy big-ticket items you need.

7.     Increase your earning power: When you want to spend more just earn more. Learn and equip yourself with more marketable skills. Utilize your expertise such as writing skills to create part-time earnings. Write articles for newspapers and magazines. Turn your hobby like photography into a source of income as a photographer. Invest wisely and create  passive income streams 

Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give.

Source: 7 Effective Ways to Avoid Bankruptcy

Image source: https://www.moneycrashers.com/declare-file-bankruptcy-process/

10 Effective Ways to Establish Your Creditworthiness

Now that America is out of the AAA list, there are only 15 countries in the world with AAA ratings from S and P. Singapore is the only Asian nation with such a prestigious rating. China is only rated AA-. How do you establish a personal rating as good as triple-A? Here are the 10 ways to get it:


 1. A regular source of income: There must be a regular source of income. It means you are holding a job or you are running your own business with a steady income. There must be documentary evidence of your earnings such as your pay-slip or your tax returns.

2. A permanent address: This is the place where you live and you are not moving around frequently. It shows that you are stable and well-established.

 3. Create a credit history: When you do not have a credit history, it is perceived by bankers that you are not trust-worthiness to obtain a loan. Get a small loan and settle the loan in a timely fashion. There you are. You have just created a perfect credit history.

 4. A Current account: Operating a current account is another way to establish your creditworthiness. Keep your record clean by not issuing bounced checks. It is an indication that you are capable of managing your financial affairs.

 5. A Credit card: Having a credit card is an excellent way to build a firm foundation for your credit rating. As long as you always pay on time and pay the full amount, it confirms the trust in you by financial institutions.

 6. Pay bills promptly: Do not delay payments; it affects your credit rating negatively. It is an indication that you are not in full control of your life and finance.

 7. Avoid skipping payments: It is the worst thing you can do to destroy your credit rating. It is a sign that you are in financial problems and you are putting creditors on alert.

 8. Low credit card balances: A high credit card balance means you are spending more and paying less. It is a concern for a creditor.

 9. Keep debt within 30% of your monthly income: Are you building up more and more debt? When you have more debt, it means you have less to spend on your essential items. There is a danger that you may not be able to service your debt.

 10. Budget for it: Your budget should cover all monthly installments payments so that you will pay fully and promptly to protect your creditworthiness.


 Is your credit rating as good as AAA?

Source: 10 Effective Ways to Establish Your Credit Worthiness

22 Things Money Can and Can’t Buy

1. Money can buy you an expensive house,

Money can’t buy you home sweet home.

2. Money can buy you a comfortable bed,

Money can’t buy you a good night’s sleep.

3. Money can buy you a fast car,

Money can’t buy you safety on the road.

4. Money can get an education for your children,

Money can’t buy knowledge for your children.

5. Money can buy material things for your children,

Money can’t buy appreciation from your children.

6. Money can buy you a grand wedding,

Money can’t buy you a lasting marriage.

7. Money can buy you all the books in the world,

      Money can’t buy you intelligence.

8. Money can buy you healthy food,

      Money can’t buy you a healthy lifestyle.

9. Money can get you credit cards,

Money can’t buy you credibility.

10. Money can get you financial security,

Money can’t buy you peace of mind.

11. Money can get you services,

Money can’t buy you friendship.

12. Money can get people to work for you,

Money can’t buy passion and engagement from the worker.

13. Money can buy you a branded watch,

Money can’t buy you more time.

14. Money can buy you advertisement,

Money can’t buy you a trusted brand.

15. Money can buy you the VIP treatment,

Money can’t buy you respect.

16. Money can buy you a compass,

Money can’t buy you the direction to go in life.

17. Money can buy you delicious food,

Money can’t buy you appetite.

18. Money can buy material wealth,

Money can’t buy contentment.

19. Money can buy you a peaceful county mansion,

Money can’t buy you a cool, calm, and collected mind.  

20. Money can buy you excitement and thrill,

Money can’t buy you lasting happiness.

21. Money can buy a surveillance system in the office,

Money can’t buy the honesty of the staff.

22. Money can buy you an air-conditioner

Money can’t buy you a good feeling about yourself

Readers are encouraged to add more items to this list.

Source: 22 Things Money Can and Can’t Buy

Effective Ways to Avoid Debt

According to the general manager (operations), Azman Hasim, of Bank Negara Malaysia’s Credit Counseling and Debt Management, there are three reasons why people over-borrowed – greed, lifestyle, and unavoidable circumstances. How do you take steps to avoid unmanageable debts?

Greed

• Gambling: Gamblers are no winners or else there will be no gaming outlets or they will be out of business. Don’t get involved.

• Get rich quick schemes: There is no way to make a quick and easy gain in a short time with your money. Don’t believe in such schemes. Even a solid business venture needs time and hard work to grow.

• Invest for the short term: The stock market is bullish and you decide to make a killing. You use your savings and even borrow more money from a financial institution. Initially, it looks good but a terrorist attack somewhere in another corner of the earth triggers a market slump. You decide to hold on but it is a downward slide all the way and it is too late to salvage the huge loss. It is a situation of investing too much, too short a time for too quick again and at the wrong time. You are now in debt. Investment is for the long term. 


Lifestyle

• Wants: Your wants are unlimited but your resources are limited. Every day you see new gadgets, new cars, TV in 3D, and many more. Advertisements are luring you to spend and spend and your neighbors are trendsetters. Can you control yourself to spend less than your means? 

• Credit cards: The fastest way to get into debt is to spend on your wants on credit, pay the minimum amount, and incur interest at the highest rate. If this is not enough, get advances from your credit cards to spend even more. Can you manage your credit cards without getting into debt?


Unavoidable circumstances

• Accidents and illnesses: Accidents on the road can be prevented when you drive with care. Illnesses can also be avoided when you look after your fitness and health. You can also take up insurance coverage to cushion the blow of an accident or a critical illness. An emergency fund is more effective to meet such unforeseen circumstances. 

• Jobless: The smart way is to acquire more skills so that you will be more valuable in the workplace. In case of retrenchment, you are the last one to go. In the event that you are jobless, an emergency fund will get you through a difficult period until you get a new job.

The key to avoiding debt effectively is your preparedness and discipline.

Source: Effective Ways to Avoid Debt

7 Effective Ways to Manage Your Debt and Boost Your Creditworthiness

A man in debt is so far a slave. ~Ralph Waldo Emerson 


Standard and Poor's has downgraded the U.S. credit rating for the first time ever from AAA to AA+. S and P said it lowered the rating because the deficit reduction plan Congress passed on Tuesday did not go far enough to stabilize the country's debt situation.


On a personal level, how do you manage your debt and avoid erosion of your credit rating? Here are 7 simple ways to do it:

1. Monthly repayments to be included in your budget: It is imperative to factor in all loan repayments into your monthly budget because it is not an optional item. You have to plan for it and you work on your plan. 

2. Timely payment: Do not be late to make your monthly payments. If you do, it will impact your credit rating negatively. You don’t go to work late, right? 

3. Do not skip a single payment: It is a very serious matter to skip even one payment. You are sending a signal to your creditors that something is not right and you are in financial trouble. It will negatively affect your credit rating even further. It’s like you are missing in action for one day and everyone is worried about you.

4. Avoid incurring more debt: At this critical stage, avoid getting into any more debt than you can possibly manage. The most important thing is to get rid of all debt as soon as possible. Curb your wants. 

5. Cut spending: While you are in debt, go for an austerity drive. Look into your spending pattern and cut unnecessary items such as entertainment. 

6. Look for new income streams: It is also wise to look for additional sources of income. Can you turn your hobby such as photography to be a freelance photographer?

7. Be responsible: The worst thing you can do is to jeopardize your credit rating by not communicating with your creditor when you are unable to meet payments. Go and negotiate with your creditors to reduce the monthly payment, waive a few monthly payments or reach a mutually agreeable solution. 

What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience? ~Adam Smith

Source: 7 Effective Ways to Manage Your Debt and Boost Your Creditworthiness

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