Do you go shopping when you are sad or when you are feeling sorry for yourself? Do you know if you have a “shopping trigger” that pushes you to go and buy something? Buying something or spending money is supposed to make up for any bad feelings or emotions you are experiencing at that moment. You may feel better after you have done the deed but the feeling is deceptive and temporary. Why? Because it does not solve the root cause of your unhappiness in the first place.

Some people may even need a pick-me-up daily, to get over the stress of working at a job they do not like. What about those who shop when they are happy? Yep, it is also common to indulge in some retail shopping to reward oneself over some achievement, big or small.

Have you ever spent money to show that you belong to a certain group of friends? Yeah, peer pressure can drive you to spend unnecessarily as well. Then again, a person can spend and spend just to show off that he is moving upwards even if he has to max out his credit cards in order to do so.

Take self-responsibility

Right, so there is always a reason to spend money. However, nobody is holding a gun to your head to force you to part with your money. What does this mean? This means that you are ultimately in control all the time. To spend or not to spend, you decide for yourself. If you spend or shop when you feel sad, find a substitute solution. Instead of retail therapy, try to chat with a supportive friend which may offer you some relief. You can also offer support and encouragement to a friend who is in the same boat and move forward together.

If you recognize that you are emotionally driven most of the time to spend money, face it head-on and put a stop to this destructive habit. You may feel resentful and may even hate yourself at that particular moment of denial. It is not easy to deny yourself the pleasure of spending money and getting all excited about it. But later, much, much later, you will see the wisdom of your actions. Only later you will appreciate not falling into the same trap of emotional spending repeatedly. Hey, we have all been there. Each one of us has experience the bitter disappointment of spending denial at one time or another. However, the reward at the end of the road is good.

You just have to keep reminding yourself of it. You break a very bad habit and get to preserve your money for the future. Acknowledge that your emotions can drive you to spend money and instead of giving in to this bad habit, resolve to put a stop to it. Then, find a solution or a better method to address your main problem.

Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

Is Your Spending Habit Driven by Emotions?

Carnival of Financial Planning – Edition #236 – May 11, 2012

Welcome to the May 11, 2012 Edition #236 of the Carnival of Financial Planning.

The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security.

This edition is arranged by subject heading, so that you can browse efficiently.

Enjoy!

The Skilled Investor, Editor

Budgeting and Economics

Everything Finance presents How To Transfer Money Between Bank Accounts posted at Everything Finance, saying, “You may need to transfer money between bank accounts if you have money in two different banks. There are several ways to do this beyond the obvious of driving to one bank, withdrawing the money and then depositing it at the other bank. Which way works best for you depends on how quickly you need the money and how much money you want to spend to transfer the funds.

Sustainable PF presents What is Crowdfunding? posted at Sustainable Personal Finance, saying, “Crowdfunding works in much the same way as microloans for the poor. You receive a large number of small cash infusions, rather than one or two large ones.

Squeezer presents When should you check your credit report? posted at Personal Finance Success, saying, “Checking your credit report is an important step in improving your credit and protecting yourself from identity theft.

David presents Wired Wall Street Capital Markets posted at Wall Street History , saying, ” Looking into the workings of modern securities markets is like looking under the hood of a Prius hybrid car. There are so many complex and obscure parts it’s hard to discern what’s going on. History repeats and informs in market technologies. From the days when front-running involved actual running to the “Victorian Internet era” brought on by telegraphy, we can learn a great deal from looking back at a simpler era.”

Laura presents NerdWallet Study of Prepaid Debit Cards vs. Checking Accounts posted at NerdWallet, saying, “According to our analysis, not only do prepaid cards have a similar number of fees to checking accounts, but many prepaid fees are actually charged for basic and common services – rendering them unavoidable and ultimately more costly.

Financial Planning

Teacher Man presents Lifestyle Inflation – The Upward/Downward Spiral posted at My University Money, saying, “Yes, I know, many of you have seen this before, and are probably thinking, “Man, I don’t go out and spend frivolously, I’m not trying to pretend I’m a Rockefeller, I’m just an everyday person, I don’t have any lifestyle inflation.” Here is the thing – lifestyle inflation is a silent beast.

Kanwal presents Top 5 Things You Need to Know About Dividend Paying Stocks posted at Simply Investing, saying, “Dividends are cash payments made to shareholders. Asa shareholder you are part owner of the company and therefore are entitled to share in the profits. Dividends can also help you determine when a share is undervalued, and priced right for purchase.

Steve presents Stability and Desperation posted at Brip Blap, saying, “What all of these people fail to realize is that the instability they feel in uncertain times like these arises from their own lifestyle, and not from the government or the corporations or “the economy.” Learning how to build prosperity, not just surviving paycheck-to-paycheck, is a big first step. Learning to live within your means gives you a more stable life. Learning to think more about making money than saving money helps create stability.

Echo presents Our Fast Track To Financial Freedom posted at Boomer & Echo, saying, “After all our bills are paid, we have an extra $2,000 per month to work with. So we came up with a fast track to financial freedom. Here’s our 40/40/10/10 savings solution:

Matt presents April Financial Literacy Month: April 27–Moving Costs posted at Living in Financial Excellence, saying, “Yay!! It’s my turn to do a video for Financial Literacy Month! Since I’m in the middle of moving from Wisconsin to Iowa, I thought it would be timely to share how we looked at a few of the financial issues we’re experiencing during the move.

Don presents Why You Need A Will posted at MoneySmartGuides, saying, “A post on Four Overlooked Estate Documents You Need.

Kevin presents Paul Ryan is a Fiscal Liberal posted at Thousandaire, saying, “If Barack Obama is the most liberal president in history for spending $3.6 trillion in 2011, then why does the Ryan plan spend $3.5 trillion in 2013?

John presents Finance and investing education  posted at Personal Financial Planning , saying, ” I have reached the conclusion that 99+% of the financial information that is easily available through the media and the Internet is: self-interested and biased, superficial and non-implementable, historical in nature or just current “noise” reporting without any actionable utility, and/or poorly researched, just plain wrong or unmitigated rubbish.”

TSI presents Professional fund manager performance. posted at Skilled Investor Blog , saying, ” If investment mutual fund managers were truly skilled at beating the market, then you would expect mutual fund manager performance prowess to persist over time. Unfortunately, the evidence indicates that superior past professional performance among mutual fund managers tends not to persist. Past superior mutual fund performance is simply not a predictor of future superior mutual fund performance. ”

PITR presents How Blogging Has Changed My Life posted at Passive Income To Retire, saying, “Find out how blogging has changed my life. It has not only improved my writing, but has allowed me to build a side business.

Jeremy Waller presents Reader Question: Spend Money to Repair a Gas Guzzling SUV or Sell And Get a More Fuel Efficient Car? posted at Personal Finance Whiz, saying, “This week I received an e-mail from one of the PF Whiz readers: We are at a cross road dilemma to purchase or repair. Our gas hog Acura 2005 MDX, with 107,000 miles needs new a timing belt & other minor repairs. The cost estimate is $2800. This car only takes premium unleaded.

Daisy presents 4 Things All Women Need to Know How to Do posted at Add Vodka, saying, “I think independence and self sufficiency is a must for all women.

Walter presents Best Fixed Income Funds posted at Fixed Income Fund Investing, saying, “The bond investment fund market is no place for an individual investor to try to beat the market and get higher returns through attempts at clever fixed income investing. Even professional bond market money managers do not beat the bond market.”

Corey presents Investing in a Timeshare – Is It Worth It? posted at Steadfast Finances, saying, ” Is investing in a timeshare worth it? Find out the benefits and costs associated with timeshare vacation programs.

Amanda L Grossman presents Frugal Mother’s Day Ideas posted at Frugal Confessions, saying, “Sometimes what we want to give loved ones cannot come close to what we can actually afford to give them.

PFP presents Financial planning reading list posted at Best Financial Planner , saying, ” When I work with clients to develop their customized lifetime financial and investment plans, they often ask what they should read to improve their financial literacy. ”

krantcents presents The 3 O’s of Success posted at KrantCents, saying, “The 3 O’s of Success is the fifteenth in a series of articles to help you reach your goal.

Daniel presents Wedding Gift Etiquette – Buy A Gift or Write A Check? posted at Sweating the Big Stuff, saying, “So what do you want for a wedding gift? With just weeks to go before my wedding, I’ve been asked that simple question more times than I can count. When people pose it, they’re looking for a simple answer. Please buy me four Egyptian cotton towels in mushroom from Bed, Bath, and Beyond.

Luke presents Predicting the Future Rate of Inflation – May Edition posted at Learn Bonds, saying, “What does the market say about inflation predictions? The answer is plenty.

Income

Jeremy presents Career Lessons From My Mom posted at Modest Money, saying, ” In honor of Mother’s Day this coming Sunday, I decided to write about how my mom overcame financial adversity. As a single parent she went from collecting welfare to being a successful entrepreneur and is now retired early. She is a true success story.

Brad presents Billboard Cover Letter: When A Resume Is Just Not Enough posted at RESUME Mag, saying, “What happens when a resume is just not enough? Well it’s time to get creative. Take these job seekers, for example, who took their job searches to billboards by the roadside.

Eddie presents What Income Level Do You Consider Rich? posted at Finance Fox, saying, “There’s no secret formula to getting rich. Even as little as 10 Percent of your income invested over 30 years and you’ll be set for the rest of your life.

Linsey presents Update Your Blog to Get Even More Paying Customers posted at 1099 Mom, saying, “A verdict has been reached: Provided that your company’s blog is full of useful, engaging insights, there is a direct correlation between the amount of content you generate and the number of people who are buying your product or service!

Insurance and Risk

FMF presents Thoughts on Long-Term Care Insurance posted at Free Money Finance, saying, “Thoughts on Long-Term Care Insurance.

Sarah presents Investment risk and returns posted at Do-It-Yourself Financial Planning , saying, ” When making personal finance and retirement planning decisions, individuals must confront the dilemma that, historically, more conservative portfolio investments have yielded substantially lower investment returns than the returns that riskier investments have delivered. With either lower or higher risk-adjusted market return strategies, you simply cannot have your financial cake and you eat it too.”

Investing

Squeezer presents Principles of Investing posted at Personal Finance Success, saying, “I explain why I like to invest in dividend-paying companies.

FMF presents Asset Allocation and the Efficient Frontier posted at Free Money Finance, saying, “The efficient frontier is the blending of all possible components into portfolios with the highest possible return and the lowest possible volatility. Diversification means you always have something to complain about. But it also allows investors to craft allocations that are along the efficient frontier, getting the most return for the least volatility.

Teacher Man presents Choosing the Latest Investing Fad posted at Young And Thrifty, saying, “Don’t you love the guys/gals that get their investment advice from the water cooler? You know the guys and gals that are constantly hopping on the bandwagon of whatever terrible investment advice that their co-workers heard on the radio on the way in this morning?

Van Beek presents How to Invest with Stock Options posted at Stock Trend Investing, saying, “Investing in stock options is slightly more complex than trading in basic stocks. The two fundamental methods of trading options are buying calls and puts. Buying a call means you are betting that a stock which underlies your option will rise above a certain price within a certain date, which is called the expiration date of the option. The converse applies when you buy a put. When you buy a call or a put, you also have the opportunity to buy or sell 100 shares of the stock that underlies each of the option contracts you had purchased. Here is the procedure to invest in stock options.

ETZ25 presents Thoughts on a Dividend Stream For Entertainment posted at Entertainment Timez, saying, “I hash out my plan of attack for the future dividend stream for entertainment.

TRL presents Different Places to Save a Down Payment posted at The Retired Landlord, saying, “Find out the many different accounts or investment places that you can use to save a down payment for a rental property.

TSI presents Mutual funds and Morningstar Ratings posted at The Skilled Investor , saying, ” Individual investors and their advisors appear to make investment decisions that are heavily influenced by the Morningstar Rating system. Because the stars are very widely used and often misunderstood, these are articles to help investors make more rational decisions about the stars. ”

DJL presents Distressed Global Financial Markets  posted at Nerds on Wall Street , saying, ” Stock markets are almost perfectly transparent, with full information available to all, and the best electronic clearing and settlement in history. These technologies were omitted in building the skyscraper of cards (“house of cards” seems too mild) out of collateralized debt obligations (CDOs), credit default swaps (CDSs), synthetic collateralized debt obligations (SCDOs), and the rest.”

Jack Parker presents NoLoad Index Funds posted at Preferred Investment Funds, saying, “Some mutual funds and ETFs must be better than others, but which ones are they? How can you tell before the fact?”

Ken Faulkenberry presents Capital Preservation: In a Bear Market, He Who Loses the Least, Wins posted at AAAMP Blog, saying, “The prudent strategy in a secular bear market is making captial preservation the highest priority until there is evidence of a new secular bull market.

Managing Debt

Ben Feldman presents How the Debate Over Student Loan Interest Rates Affects You posted at ReadyForZero Blog, saying, “This post discusses the debate over student loan interest rates that’s happening this week in Washington, D.C. It’s taking place because interest rates on certain federal student loans are scheduled to rise from 3.4 to 6.8 percent on July 1st, when a previous law that lowered the rates temporarily is set to expire. We describe the arguments on each side of this debate and how it may change (or not) your repayment of student loans.

J.P. presents Savings And Debt Debate: Where Should The Money Go? posted at Novel Investor, saying, “The savings and debt debate has been ongoing since the first loan was created. With only so much income to spread around, a big decision must be made. Do you use any extra money to pay off debt or add it to savings?

Mike presents Watch Out: Pitfalls of Credit Card Rewards Programs posted at Rewards Cards USA, saying, “It’s important to understand that there are pitfalls associated with rewards programs. Participating in a rewards program, if you aren’t careful, can actually turn into a real problem, leaving you in debt – and without the rewards points you thought you had.

Mike presents Best Cash Back Credit Cards posted at Rewards Cards Canada, saying, “For people like me, collecting travel rewards is not the best value for my spending habits and lifestyle. I like to put cold-hard cash back in my wallet every month to help supplement my everyday spending. Here are the best cash back credit cards:

Glen Craig presents How Will Your Student Loans Affect Your Credit Score? posted at Free From Broke , saying, “Many don’t think about the long-term affects of student debt when they go to school, especially not how it affects their credit score.

Real Estate

John presents Mortgage Rates Hit Record Lows posted at Wallet Blog, saying, “To buy or not to buy…Wow, what a question! With mortgage rates at record lows, now may well be the right time either purchase or refinance a home. Take a look at the how and why of low interest rates and decide for yourself.

Crystal presents Doing it Again – Renting Out a Spare Bedroom posted at Budgeting in the Fun Stuff, saying, “We rented out the spare bedroom of our current home 2 of the 5 years we’ve lived here. And we’re doing it again starting today.

SFB presents 8 Most Common Types of Houses posted at Simple Finance Blog, saying, “Shopping for houses means looking through countless of listings, In order to eliminate the confusion, below are the eight most common types of houses

Retirement

Jeffrey presents Travel When Retired? No! Travel Now! posted at Money Spruce, saying, “I just dont buy into the whole ‘travel when youre retired’ thing. It seems like such a waste to wait my whole life to travel and, not to be morbid, but assuming I make it to retirement age. I just got back from my latest trip to Montreal, which was fantastic. It was my first visit, and it definitely won’t be my last.

Brock presents Retirement Spreadsheet Software posted at IRA Account Investment, saying, “Whether or not to make investments into “traditional” tax-advantaged employer accounts and IRAs versus investing in “Roth” tax-advantaged employer accounts and personal IRAs is never a straightforward nor simple financial planning decision.”

Frank Knowles presents S and P 500 Funds posted at Large Cap Funds, saying, “The no load index fund strategy of the Schwab S & P 500 Index Fund tracks the S and P 500 stock index. This no load index fund was listed as one of the top 25 lowest cost index mutual funds in a research study.”

Savings

Mike presents Best Airline Miles Credit Cards posted at Rewards Cards USA, saying, “One of the reasons that many people sign up for rewards programs is to save money on travel. Here are some of the best airline miles credit cards:

Raj presents The Basics of Money Management – Save, Invest and Repeat posted at eMoneyLog, saying, “The article covers the basics of money management – saving, investing and repeating the process. The emphasis is on repeating as many people save and invest initially but do not repeat and do not accumulate wealth.

Financial Freedom presents Personal Savings Rates posted at My Financial Freedom Plan , saying, ” Understand how your current savings rate and retirement withdrawal rate would affect all of your lifetime personal financial planning goals ”

Mike presents Why Cash Back Beats Travel Rewards posted at Rewards Cards Canada, saying, “A free vacation keeps many Canadians loyal to their travel rewards program, but for me, cash back is king. Here’s why cash back beats travel rewards.”

Taxes

Monroe presents Roth IRA Conversions posted at Do-It-Yourself Financial Planning , saying, ” This article could help you to make a more informed decision about your family’s Roth investment strategy. Key to you making a better decision about your lifetime Roth account contribution and asset conversion strategy is the need for a sophisticated financial planning software tool.”

That concludes this edition. Submit your blog article to the next edition of Carnival of Financial Planning using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: carnival of financial planning, blog carnival.

This article is posted at: KCLau's Money Tips

Best Personal Financial Planning and Personal Investment Articles this Week from Personal Finance Blogs

Raising a kid is expensive and raising more than one will cost tons of money. Parents have to provide a comfortable house, food, clothing, education, healthcare, entertainment, child care, gifts, etc. I have been tracking my household expenses for quite a long time with separate columns for my kid’s expenses. Hence, I have a pretty good idea on how much money was spent on each of my three kids, each month.

My spouse and I have been doing quite well coping with the cost of raising our three kids and we never really needed to analyze the total expenditure. Anyway, out of curiosity I decided to calculate how much money was spent on each kid as I have the data readily available. I used the two previous year’s data (2010 & 2011) to do my tallying-up. As expected, a large chunk of expenses went towards education and covers school fees, tuition cost, transportation cost, lunch or pocket money, school books, workbooks, uniforms, stationeries and other things that a student requires.

During the two years, the two older boys attended a Chinese primary school where their lessons start at 7.00 am until 3.00 pm in the afternoon. Each of them generally needs RM4 on average each day to spend on food during recess and lunch hour in school. They normally take breakfast at home and will sometimes bring food from home.

The figures I got for last year (2011) is as follows:

Each child has a health (cum education) insurance coverage. Therefore, about one-quarter of the cost above is due to payments of the insurance premiums. My daughter goes to a Chinese kindergarten and her school fees is RM140 a month and she does not get pocket money as the school provides food during recess. She had serious dental problems last year and that incurred a few hundred ringgits in treatment cost.

Below are the figures for the year 2010

My second son had a slightly higher expenditure compared to the rest due to dental treatments as well. He had to get a temporary brace to straighten out his front teeth. Similar to the previous year, one-quarter of the total expenses went towards their insurance premiums. The bulk of the expenses actually go to education related expenses.

From the two figures above, I can conclude that each kid requires RM4000 – RM5000 annually to support and cover his/her expenses. Annually, that comes up to RM12, 000 – RM15, 000 on raising three kids. I expect the figures to change as my kids continue to grow and develop. Their expenses will also change according to circumstances and in response to changing needs and wants.

Do you know how much you spend on your kid(s) each year?

Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

Money Spent on Raising 3 Kids

This is the Video Reply that Evanna Phoon did to address the Questions asked on our Webinar “How To Build a Franchisee Business with Rockwills” on Tuesday, Apr 10, 2012 9:00 PM – 10:00 PM Malaysia Time. The Video Reply is for Brief explanation, please refer to detailed explanation on the text below Video.

Question #1: is Rockwills Franchise License Certificate recognised by any association or body ? Insurance is govern by Bank Negara, how about Will Writing & Trust industry ?

Answer #1: Rockwills is operating under Franchise business format regulated by Franchise Act 1999. The services we provide such as Will-writing & Trust is under Rockwills Trustee which is regulated under Trustee Act 1949 & by the authority just like any Bank Trustee. We also comply with Wills Act in Preparing our Wills.

Question #2: for CFP holder, do they still need to sit for Rockwills 3+1 day course ?

Answer #2: Yes, all applicant (even those with legal qualiication) must go through our training & pass the test. It’s very difficult to fail in our exams

Question #3: Is will & trust industry regulated ?

Answers #3: We comply with Wills Act in preparing our Wills, Rockwills Trustee is regulated under Trustee Act 1949.

Questions #4: From Sarah
Thanks for organising the webcast on this. I was just wondering, if there are other similar franchisee business on will & trust. If so, what makes Rockwills stand out from the rest?

Answer #4: Rockwills is the only Company in Malaysia that offer will & trust services using Franchise Business format. Others Companies (Trustee Companies, Law firm other professional firms etc.) may also offer will-writing services as compliment to their own core business. For Rockwills, will & trust services is our core business and we have more than  25 in house full time Legal Advisors to offer continuous training & support to our Professional Estate Planners.

With our own Trust company licensed by the government under the Trust companies act, this makes us a complete estate planning group where we are able to offer good support to help in providing comprehensive Estate Planning solutions. We have even set up an Advisory company to provide Estate Planning advice to High Networth individuals. Beside the large pool of Legal advisors, our management team have a combined experience of over 100 years in financial services. Moreover, we are in the business for the long term and have put in more than RM5 million investment. Our 17 years of operations is proof of our commitment.

Question #5: From Anthony
In the example given of Total Trust Asset of RM10mil, RM52,500 will be charged as trustee fee yearly.
For 27 years, ~ RM1.4mil will be charges as trustee fees – I assume this fees will be deduct from the Trust Asset of RM10mil, leaving the child RM8.6mil. Am I right?

Answer #5: the trustee fee is calculated every month on the balance (including the interest earned) of each month and divided over 12 months to determine the fee for that month. So the trustee fee of rm1.4 is not accurate as very much depends on whether any distributions are made.For example, the first month for rm10mil will be:
First rm1 mil at 0.75% : rm7,500 / 12
Next rm9mil at 0.5% : rm45,000 / 12
Total for the month is rm4,375
If there’s a Uprepare, diamond package bought, then the discount is 20% of RM 4,375 ?

If the next month rm1mil was distributed earlier the fees would be:
First rm1 mil at 0.75% : rm7,500 / 12
Next rm8mil at 0.5% : rm40,000 / 12
Total for the month is rm3,958.33
If there’s a Uprepare, diamond package bought, then the discount is 20% of RM 3,958.33 ?The above would be used to calculate for the succeeding months ahead.In addition, undistributed funds are kept in interest bearing accounts and would in many cases sufficient to pay for the trustee’s fees.

Questions #6: Uprepare Package – Diamond & JadeThis was not explained throughout the presentation, can you clarify ?

Answer #6: UPrepare stands for Estate Administration Services Package. Perpetual fixed estate administration rates & enjoy estate administration discount of 10% to 30% of RWT fees, depending on the types of UPrepare package. the purpose of this package is to allow the testator to hedge against inflation or future increase in fees. In addition, they are entitled to discount and a refund of the fee when our Trustee fees exceed RM6,000

The Complete UPrepare Package can be found if you click the link here
Link to download UPrepare Package for more detail

Question #7: from Daniel
Thanks for your highly recommended and well interpretation of the franchise under rockwill. I have watch replay and I find it quite interesting but the problem is this is more suitable for people that in the insurance business right? I am just curious if you are not a insurance agent, will it be difficult for a person to start up this business? Do we need to maintain certain amount of quota in order to maintain your income. Thanks

Answer #7 : It is not necessary to be Insurance Agent so because the market potential is so huge that our full time PEPs are able to capture more business and do well. In addition, most of the clients would prefer a person who is full time and focus on the business. If a person is serious and commit to the business, there is no worry about quota because it is very low at only 8 cases a year.
In addition, many of our full time PEPs who are not insurance agents are doing well with the proper guidance, support and commitment. Many also qualify for our annual incentive trips overseas.

In my group, I have very well establish Company Secretary Firms, Audit Firms, Property Agents, Housewifes, Entrepreneurs, Employee that take up this Franchise License. But I’ll always asked them about their purpose of taking up this license, is it due to value adding their clients ? for income increase ? for helping their friends and relatives ?

After knowing their purpose, I’ll try to assist them to achieve their goal. I will never force my franchisee to do sales … only when they are ready and clients are ready. Surprisingly, those who do well in my group are those who treat Rockwills Service as a good sharing of knowledge to share with their friends.Question #8: from Chu Yaw 
I have some questions after watching the webinar replay:
What’s the typical length of sales cycle between a middle income networth and a high networth client?

Answer #8 : There is no fixed sales cycle for estate planning services. The duration of closing is not based on net-worth but depend on the client’s wishes & instruction, data collection & full documentation etc. this is also dependent on our PEP’s knowledge and skills in handling the clients. Once the PEP is well versed with our services, then they can close the case faster. This is where Rockwills is well known for providing a lot of training and workshops to build our PEPs. However, from my experience, high net-worth clients require patience and some of instances, I’ll need to deal with their advisor, company secretaries, tax and audit. So, it’ll take some more time ( a few months) but it’s worth it because through interacting with their advisor, I indirectly get a lot of referrals from them at this moment. You reap what you sow … If you put your heart to service your clients, you’ll get the rewards. In short, for middle income, it might take 2 weeks to close the deal, for high net worth, it’ll take 2 weeks to a few months. However, we pay commission progressively base on stages, not only when client finalize their estate plans a few months later.

This article is posted at: KCLau's Money Tips

Video Reply from Evanna for Webinar “How To Build a Franchisee Business with Rockwills”

I have three kids, all were born between 1995 and 2010. So, they belong to Generation Z (Gen Z), the digital age. Referring to various sources, the Generation Z timeline tends to vary, for example 1992 – 2011 and 1994 – 2004 but I will stick to 1995 – 2010.

Gen Z kids are computer savvy, comfortable with handling electronic gadgets and digital technologies like the Internet. There is no surprise here as Gen Z kids were exposed to the Internet, computers, laptops, cell phones, iPods, iPads, video games, online networking, etc. from the time they were born.

As a Gen X parent (born between 1961 – 1981), I feel ancient sometimes but I do have some accumulated experience when it comes to money. I have been through the smooth and rough patches, the ups and downs when it comes to handling money. Therefore, I do have this one advantage over my digital savvy kids and they will benefit from whatever advice or knowledge I share with them regarding money.

I believe that some money rules are meant to stay and no matter what generation you belong to, the rules remain constant and effective. Below are several money rules of thumb that have helped many people to manage their money successfully. These are the rule of thumbs that I constantly remind my kids at home.

• Save as much as possible, as early as possible
On average, each of my kids get to save about RM700 yearly from money they received as allowances, gifts and ang pows. It is not much but it is good practice for them to receive and manage some money.

• Spend less than you earn
This translates to having some savings that will generate some returns for you. On top of that, you are in control of your debts. Control your spending and you control your debts. Many people are unaware that even small purchases can accumulate to become one gigantic ball of debt. This happens especially when using credit cards and not settling all the bills promptly each month.

• Do not be wasteful
This applies to money as well as other things like food, groceries, water, electricity, etc.

• Find ways to earn extra money
For example, a hobby or a part-time activity that can generate some passive income.

• Evaluate your buying decisions and restrain from impulse buying
It is hard to resist the temptation to spend money on each visit to the shopping mall. Therefore, reduce your frequency of going out to the malls. In addition, delay your purchases for a certain period (e.g. 1 month) to factor out emotional impulse buying.

The above are easily understood by kids and young adults alike. What is your favorite money rule of thumb that you like to teach your own kids at home?

Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

My Generation Z Kids

This is a guest post from philanthropist tycoon Koon Yew Yin.

Tun Dr Mahathir Mohamad, speaking at a media conference after his lecture on ‘The Challenges Faced by Muslims Now’ organised by the Terengganu state government on May 3 was reported to have said:

“Air Asia fares are so cheap, sometimes free, but it has been able to provide service for the last 10 years. Logically the company should have gone bankrupt, while MAS which has received government aid up to RM3 billion, is still losing money every year.”

It is good of Dr Mahathir to point out this key paradox of a poor performing government-linked company (GLC) as compared with a private sector driven one.

It would have been better and more educative for the country had he explained why, as the Prime Minister of the country for more than 20 years, he gave orders to pump government aid and taxpayers’ money into MAS.

Also what role did he play in orchestrating the numerous bailouts which helped enrich Tajudin Ramli and other cronies who milked MAS dry and brought the airline to the doors of death?

Economics of the airline industry

In a statement issued on May 2, MAS parent Khazanah Nasional Bhd said it had on Monday terminated the share swap with AirAsia major shareholder Tune Air Sdn Bhd. It was reported by the press that both Tony Fernandes and Kamarudin Meranun resigned from the MAS board the same day.

“Under the earlier agreement, MAS was to be only a full-service premium carrier, while AirAsia and AirAsia X will be low-cost regional and medium-to-long-haul low-cost carriers respectively. The new collaboration terms allow the airlines to enter each other’s domain if they wish to,” said The Star in its report ‘It’s official, MAS-AirAsia share swap is off’.

When planning the future of MAS, it is important that the government avoids not only the mistakes of the past but also takes a rational approach based on economic fundamentals. One line of simplistic thinking is that there is a bright and profitable future for MAS since the number of air travellers continues to increase by about 5-7 percent per year.
But if you look at the history of airline industry profitability, this is not the case for airlines worldwide. In fact, if you add up all the profits of all the airlines over the last 100 years the total would come to less than zero. The years of losses outweigh the years of gains.

Financial History of MAS and SIA
In 1972 Malaysia-Singapore Airlines (MSA) became MAS and SIA. In the last 10 years from 2002- 2011 SIA reported a total pretax profit of Singapore $13,992 million, averaging S$ 1.4 billion per year.

MAS reported losses in 1997 RM 260 million, in 2005 Rm 1,300 million and in 2011 reported a stunning loss of Rm 2,520 million (Wikipedia).

The fact is the airline industry requires huge capital and produces atrocious returns on capital employed. Hence, year after year, many of the main players produce poor profit margins or they produce outright losses.

Why you might ask is it that an industry with year-on-year rises in sales cannot generate good returns to shareholders?

It all comes down to the economic structure of the industry. One of the forces that limit profitability is the intensity of the rivalry between the leading airlines. There is over-supply leading to pressure on prices. This is exacerbated by a high degree of freedom for new competitors to enter the industries.

If, say, an airline route between two destinations is found to be reasonably profitable it is not long before new entrants try to grab customers or current airlines simply move their planes to this profitable route.

It is truly an industry governed by the principle of “survival of the fittest”.

The ego and elections factor

It would seem that every developing nation wanting to show off to the world its progress MUST have its own airline, regardless of the impact on an industry already grossly over-supplied, and regardless of whether they have the ability to manage efficiently. So there is a regular stream of announcements of new airline ventures.

Now that Malaysia has also done it and failed dismally, the next logical question to ask is why doesn’t the Malaysian government allow MAS to fold up or go under?

There are two main reasons: Firstly, the perennial optimism of managers and shareholders. “Just one more chunk of money will see us break through into profitability as we rout the opposition!” seems to be the credo of these parties based on their self and not national interest.

Secondly, there is government interference. Around the world we see many governments come to the rescue of their airlines despite perennial losses. Malaysia has not learnt these lessons – initially for reasons of national pride tied to the ego of leaders but now increasingly apparently to save jobs and to prevent the retrenched employees from voting for the opposition.

It is an expensive mistake to continue MAS. Mahathir who has on more than a few occasions bailed out MAS from liquidation using enormous sums of taxpayer money should answer this question instead of beating around the bush on the divorce event.

Honouring Dr. Mahathir

Finally, MAS should be a case study in all MBA programmes on how not to set up an airline industry or how to bankrupt the nation quickly. Perhaps it can be a course offered in the Institute of Tun Dr. Mahathir Mohamad’s Thoughts (IPDM) established on 19th August 2003 by the Malaysian government at Universiti Utara Malaysia. And Dr. Mahathir should certainly be invited to provide guest lectures on this financially disastrous chapter in the country’s history when he was at the helm.

This article is posted at: KCLau's Money Tips

AirAsia – MAS divorce aftermath: Can the bleeding stop?

There are two things you ought to know about your retirement money right now.

EPF is investing our retirement money for potentially higher return by:

1)    Investing larger sum in global markets (read: foreign exchange risk)

2)    Investing in subprime housing loan (read: default risk)

You and I are part of the statistics of 5.7 million EPF contributors.

There is only one thing we may want to consider after digesting the details of these two moves by EPF,  further below, and that’s -

Withdraw your EPF money to purchase/build your home or to reduce/redeem your housing loan.

These are what we know so far: -

Global Investment Diversification: The Facts

Since April 2011, the Employees Provident Fund (EPF) has intensified its investment in global equity and fixed income to add value and provide a reasonable rate of return to the savings of its members.

The fund’s total exposure in global investment assets as at Dec 31, 2011 was only 13.37% of its half a trillion rinngit of total assets.

Fast forward one year, its Chairman said that EPF will increase its investments in global equity and fixed income in line with the mandate given by the Government to now invest up to 23% of its investment assets in international markets as part of its investment diversification strategy.

Otherwise, it claimed it would be hard to maintain dividend of 5.8 percent and 6.0 percent in 2010 and 2011 respectively.

Quote from EPF Chairman:

“The EPF faces constraints domestically given the limited breadth of investment products and liquidity to trade on large volumes. Aside from mitigating the concentration risk in the domestic market, overseas investments offer higher opportunities for capitalisation of returns over a long-term investment horizon”

However, we need to know that - Risk and return are positively correlated.

Wait, let me rephrase this.

Return and risk are positively correlated.

Sounds much better, aye?

There is absolutely no such thing as having the security of Fixed Deposit and at the same time, having a return of 20 percent a year.

Anyone who tries to sell you such idea is either a swindler or misinformed.

Subprime Housing Loan Scheme: The Facts

The amount

• RM 300 million tranche drawn out of the total RM 1.5 billion allocation plan to finance subprime house buyers.

*Subprime house buyers/borrowers = individuals who are not able to borrow from normal banking institutions

• Federal Territories Foundation has set up a SPV (Special Purpose Vehicle) to handle the loans.

The Arrangement

• The Minister said loan is secured by DBKL. Loan is to government, not individuals.
• The ownership of the house shall remain with the SPV until the Ijarah* lease agreement has been fully settled by the subprime borrowers.

*Ijarah means Hire Purchase – which means, a flat rate interest throughout the financing term, unlike conventional mortgage loan. Read here to convert from HP rate to real rate to make apple to apple comparison with normal housing mortgage rate.

The Return

• EPF get 5.5 return ROI annually with projected 10 percent risk of default
• DBKL will buy back the houses to secure the cash flow required for the repayment of the loan in the event of non-payment.
• Good thing is that collaterals of these loans are real estate properties. Properties are always a good hedge against inflation, provided there’s no housing bubble burst like in the US.

*Legally, EPF is only obligated to give you only 2.5 percent dividends as per Section 27 of the Employees Provident Fund Act 1991

The Caveat

• What are the borrowers’ details? What are their credit ratings? What houses are they buying (and their prices?)? What are the REAL reasons they don’t qualify for loan from banks? And what determine whether someone qualify for this scheme when banks rejected them? If I earn RM 1,000 a month, do I qualify?
• If borrowers default, will government use its money to repay EPF?

*Hold on, doesn’t government’s money come from our money too? The 6% government tax we all pay nowadays?

I am not against charity (which is a totally different thing) or government’s People First, Performance Now effort the bridge the gap between the rich and the poor. But if it’s your money, I think you could think of a better way to utilize it.

I’ll let you sleep over it.

p/s – Share this if you think more people should also sleep over this.

LCF on Personal Finance is a free community blog which focuses on simplified and practical money knowledge you could apply instantly. The founder, CF or Lieu, as he is fondly known, thinks that personal finance does not have to be boring; he regularly churns out articles on money issues affecting the man in the street, such as “Take this 8 immediate actions this year to pay less income tax last year” when he’s not solving engineering issues.

Sources:

http://www.financemalaysia.blogspot.com/2012/02/is-it-viable-for-epf-to-support.html

http://www.nst.com.my/streets/central/eligible-house-buyers-to-get-offer-letters-1.74771

http://thestar.com.my/news/story.asp?file=/2012/2/8/nation/20120208132602&sec=nation

http://www.themalaysianinsider.com//malaysia/article/first-phase-of-epf-home-loan-scheme-starts-tomorrow-says-minister/

This article is posted at: KCLau's Money Tips

This Concerns your EPF Retirement Money – Must Read

What’s Dropbox?

I am actually using Dropbox on a daily basis. My latest project is always on the Dropbox folder so that it is backed up on the “cloud”, and I can access it on any computers including my iPhone and iPad.

My co-authors Mandy Hiew and K.C.Chong referred Dropbox to me and now I am referring it to you. I guess this is the first tool I publicly recommended in 2012. Have fun with it!

Why I like Dropbox so much?

- It gives me the peace of mind that my current projects (including some new books manuscripts) are always saved and have a clone copy in all my PC, Mac and on the Internet.
- It is so convenient to share files with partners
- It has a Dropbox folder in all my computers. If I make a change using my Windows PC, it is automatically backed up and I can then access the latest file from my MacBook Pro later. It all just happens automatically.
- The best thing is you never know that it is running. It just works.

I think you will like Dropbox too. Trust me.

This article is posted at: KCLau's Money Tips

Why I love DropBox

DOWNLOAD the book preface
(right-click and save link)

The philanthropist tycoon and super investor Koon Yew Yin just published a book -
Malaysia: Road Map for Achieving Vision 2020

Many would think that this book is against the ruling Government. It is not and neither it is supporting any political party.

Koon Yew Yin is simply pointing out that we have been travelling by the wrong road and he’s just showing you the right road.

However, I would you like to read the book preface carefully to appreciate Koon Yew Yin’s aim in writing the book.

For your information, the first 1,300 copies were completely sold outwithin a week and the publisher is rushing to meet the additional orders.

After you have read the attached preface, I believe you will want to buy a copy which should be available from most book shops.

regards,
KCLau

DOWNLOAD the book preface
(right-click and save link)

P.S. Please click the “like” button to share it with your Facebook friend as well, if you think this is worth sharing.

This article is posted at: KCLau's Money Tips

Malaysia: Road Map for Achieving Vision 2020 by Koon Yew Yin

This is a recent stories I received from William E, who had kindly shared with us his experience. Read his email below:

Hi KC,

Thanks for giving me this opportunity to share.
I started out my career life as a sailor onboard the ship. Sailing as a cadet under scholarship and earning USD (back in 1997) was quite a big thing then. And by age of 21, I have climbed to the rank of officer on board the ship and earning a handsome salary of USD 2000 per month. It was good back then with the exchange rate of 1USD = RM3.8, and I didn’t have much chance to spend as I was working on board most of the time. Thus, whenever I completed a contract of 7-8 months onboard, I would bring back a chunk of cash back to Malaysia.

photo credit: robef

My first hard lesson:

My dad advises me to buy a property back then in 2002, a shop lot unit at Air Keroh, Melaka. But being the naïve me, I chose to invest the money in a business with a friend. I had an idea doing wurst and foot long sausages business, an idea which I picked up whilst travelling in Germany. I trusted my friend so much, that I being the one with more money in hand, will pay most of the items and he is just coordinating. We couldn’t even get past the stage of opening, when I realize my coffers ran dry and he still unable to fork out a single cent for the business. Thus, another lesson learnt. (Never fully trust anyone in business). And yes, I regretted fully today for not buying that shop lot!!

My 2nd hard lesson:

I quit sailing in 2004, and started to work in Singapore and thereafter in JB. Whilst I am in JB, I saw an opportunity of doing IT service and web page setting up business. A lot of other old tow-kay I met do not have property IT infrastructure in their office. But as I am not an IT expert, I decided to get my own younger brother to team up with me and do this in JB. I will help him out on part time and he will go on full time job. It all went well, until I realize that though I have the interest and discipline for entrepreneurship, but not my brother whom is more relax and prefers night life. Thus, we end up fighting over it and close down the business, and the worse part is I will still have to face the big bosses in my job, and they will criticize on my failure to deliver in that IT business. This is a big blow to. My lesson learnt here: If you want to do a business, always make sure that you personally is good at it, instead of hiring or teaming up with anyone!!

Finally see the light:

After I fail in JB, I moved to Singapore and work for my previous boss, concentrating in what I do best – shipboard operation. God bless, after few years of working for him, he finally opened up an option to me last year. I asked to buy part of his company share and he agrees to it (he is aging and he don’t have a son to take over the business). So, we sat down and talk over the terms and company status, and in less than a month, I’m one of the partners in the firm, till today.

I believe with strong determination and interest to do it, anyone can be good entrepreneur.

Kindest regards
EE.CT, William
Operations & Marketing Manager

I believe no matter what kind of mistakes you make, you will still have chance to get back up and thrive at the end. Thanks to William for sharing with us. Do you have anything to ask William?

This article is posted at: KCLau's Money Tips

Reader’s Story: Sailor turned business owner

Paying taxes is hardly a pleasant experience but here it is again – the tax filing season. If you are like me, I lamented on what I should have done last year which would entitle me for more personal income tax relief.  But what’s done is done, as a Malay proverb goes – “nasi sudah jadi bubur” which literally translates to “rice has turned into porridge already”. If you had thrown away all your receipts, there’s no way you can get them back.  And if you didn’t sign any Housing Sales and Purchase agreement between 10 March 2009 to 31^st December 2010, there is really nothing you can do now to qualify for the RM 10,000 relief on home mortgage loan interest.

The late Steve Jobs once said:

“You can’t connect the dots looking forward; you can only connect them looking backwards”

Under certain circumstances, I disagree. There are certain things that we can anticipate; it all depends on us to lay down the dots now, looking forward so that looking backwards in the future, everything connects the way we want them to.

The critical date for tax planning is 31 Dec, not 30 April.

Here’s my self reminder and practical action plan for the rest of the year so that I don’t get that same “Darn!-I-should-have-done-this” feeling for YA 2012 tax filing season next year. And I would like to share it with you.

#1 Keep your broadband subscription receipts intact

Let’s start with the easiest – your broadband service.

If you are reading this, I bet you are on a broadband plan.

Anyone still on TMNET Dial Up 1515? Seriously…

Subscribing to a broadband service is the easy part; the hard part for most people is keeping your receipts for the next 7 years.

But Just Do It. It’s your money at stake here.

Don’t forget, the broadband account needs to be registered under your name, the taxpayer.

Another point to note is that data service plan for smart phone is also subject to tax relief under this category.

Told you this is easy peasy, yes?

#2 Get some (and more) reading material now

Set a target of RM 83 per month for books and magazines purchase. How about Personal Money to improve your financial literacy? That’s RM 9 (retail price) per month. For books, consider KC Lau’s Top 93 Personal Finance FAQS in Malaysia, and for the more advanced reader, you should consider Millionaire Teacher, the 9 Rules of Wealth You Should Have Learned in School by Andrew Hallam, whom I recently interviewed in a podcast series.

In short, any hardcopy or electronic forms of books, magazines and journals (excluding newspaper) purchased locally or overseas are relievable. Reminder – the onus of proof of purchase lies on you.

Even if you don’t have time to read now, buy something which you would find useful down the road, not only for yourself, but for your kids as well. You can even purchase e-books from site like ebooks.com.

#3 Get an iPad Right Now

No, this is not a sales pitch.

It used to be the conventional desktop or laptop personal computer, but now, iPad is also entitled for this. There’s an argument saying other tablets such as Samsung Galaxy Tab or Kindle Fire is not claimable but here’s some info from a finance blog I followed – Kris from knowthymoney.com. In one blog post, he obtained info from Inland Revenue Board which states only anything with traditional calling or short messaging service hardware capability is not categorized as a computer. As such, any smart phones such as iPhone are out, but any kinds of tablets should be categorized as computers.

But we are all smart and know a workaround for this, aye? – With the help of Voice over IP (VoIP) software such as Skype, we can easily make call or send text messages.

By the way, you cannot claim this for receipts under your spouse name.

#4 Do medical checkup regularly

Set a target to undergo a comprehensive medical checkup twice a year. RM 500 should be more than sufficient to cover this cost.

Incidentally, this is How I Define Wealth, but a fellow personal finance blogger, Champdog from Journey to become Financially Independent, has this alternative equation:

Wealth = Money + Health + Relationship

Money is usually a yardstick on how far you are from financial independence in a time span.  That’s only one third correct. Health and relationship are the integral elements because it affects our overall personal well being. I don’t think there much meaning to life if your family’s broken and you are confined to a wheel chair.

By the way, this is also applicable for your spouse or child.

#5 Exercise more!

This is a paragraph I need to quote directly from financetwitter.com. If you don’t find it amusing, leave a comment below and explain why

D11 – Purchase of sports equipment for any sports activity, restricted to RM300. Sports equipment includes equipment with short lifespan such as golf balls and even shuttlecocks but excluding sports attire such as swimsuits and sports shoes. You may scream till foam at mouth – how the heck do you expect a person to swim without swimsuits or run without a pair of sports shoe. I supposed the government thought it would be fun if you swim naked or run around barefoot like a chicken (*grin*).

#6 Save extra for your retirement

Keep your eyes open for further details on the newly Securities Commission-approved Private Retirement Scheme (PRS) to supplement your EPF contributions.  If you are risk adverse and are really passive in investing your own money, PRS is offered by the following 8 intermediaries below. The total premiums paid for PRS is eligible for tax relief up to RM 3,000.

• AmInvestment Management Sdn Bhd
• American International Assurance Bhd
• CIMB-Principal Asset Management Bhd
• Hwang Investment Management Bhd
• ING Funds Bhd
• Manulife Unit Trust Bhd
• Public Mutual Bhd
• RHB Investment Management Sdn Bhd.

#7 Extra insurance (Education endowment policy ) premiums for child  or medical insurance

I have a mixed feeling about endowment policy because a real property investment might provide better returns if managed correctly. Therefore, increasing your medical insurance coverage for yourself or your spouse to fill the RM 3,000 quota seems to be a better choice. And do you know that 60 percent of your medical/life insurance policy or riders such as the 36 critical illnesses are claimable under medical insurance premiums tax relief? I recently realized that I, too, have been underutilizing this portion because for most of us, RM 6,000 tax relief for combined EPF and life insurance policy has been maxed out already. I previously blogged on how to do this – Pay less income tax with this one simple tip.

#8 Get additional academic credentials

This is especially important if you are in the education industry. If an additional paper qualification would propel your career advancement, it could be justifiable in terms of cost spent. Any Masters or Doctorate level of any course of study qualifies for up to RM 5,000 tax relief. Apart from that, other skills or courses on technical, vocational, industrial, scientific, ICT, accountancy, Islamic finance and law are also eligible. I do wonder why Certified Financial Planner (CFP) certification is not included though.

How long you need to keep those receipts for tax purposes? IRB requirement is 7 years. The calculation of the 7 year period begins from the end of the year in which the Income Tax Return Form is filed. Effectively, you need to keep it for 9 years. You incurred relief expense in Year 1, submit the Income Tax Return Form by 30 April in Year 2, and then keep the receipts pursuant to tax rules for 7 years.

You can print this out now. You are welcome.

Share this if you find it entertainingly useful.

Interesting points from Personal Money April 2012 issue

Never spend unnecessarily – think of tax deductions as subsidy. Say your personal tax rate is at 26 percent, for everything tax deductable item or service of RM 100, you only pay RM 74.

Failure to submit tax return within the stipulated dateline will result in a penalty of 20 percent of total tax payable.

Property investors with properties registered under their children’s name, who is still a minor (below 21 years old, unmarried), will NOT transfer away the taxable rental income from your total taxable income. IRB can assume the income from property belonging to a minor is the income earned by his or her guardian/parents, because a minor is still dependant on you, by law.

Datelines to know

E-filing, BE form – May 15

E-filing, B form – July 15,

Hard copy filing by post, BE form – May 3

Hard copy filing by post, B form – July 3

Hard copy filing by self submission, BE form – 30 April

Hard copy filing by self submission, B form – 30 June

LCF  blogs about simplified personal finance issues and practical how-to money tips at howtofinancemoney.com

This article is posted at: KCLau's Money Tips

Take these 8 Immediate Actions This Year to Pay Less Income Tax Next Year

The New Year celebration is long past over and many people should have gotten started on their New Year’s resolutions by now. When it comes to money, everyone has a similar goal and that is to make, save and accumulate more money. For those carrying past debts, their New Year resolution may include paying off those debts and not to get any new debts.

The methods or ways of achieving money goals will vary from person to person. Having helpful goals can assist a person to focus on achieving his or her financial target. Rather than waiting for a new year to begin and implement some serious money moves, you have the option of doing a money makeover anytime during the year. Below are several money makeover moves that allow a person to immediately jump into the action and see quick results. These makeovers are good anytime year-round and a person does not have to wait for a brand new year to start acting upon them.

• Cut out all miscellaneous spending for an entire year
Forego purchases for magazines, cigarettes, coffee, etc. On top of that, cut out spending on manicures, pedicures, hair-cuts, car wash, weekly pizzas, weekly movies, etc. In short, buy fewer products and services.

• Get better organized financially
Get on top of your finances by setting up an organized system. For example, set up a filing system to keep track of receipts, financial statements, insurance policies, etc.

• Hoard and grow your money
Find out the best places to park your money to get good returns.

• Eliminate existing debts
Initiate a plan to tackle and pay down all your debts. For example, consolidate your debts into one manageable and low interest debt. Sell off unwanted (unused) stuffs to get extra cash or get a second job to earn extra income to pay off your debts.

• Start planning for your retirement
It is better to start early rather than too late when it comes to saving for your retirement. Use a free online calculator to run some numbers and get an estimate of your retirement needs. You will need to set a target for monthly savings. Remember that time is a great friend if you start early in building your wealth.

What if having goals or resolutions do not seem to be of much help to you? You have gotten started but tend to slack later on. Well, you are not alone. There are many people who could use a push or a guiding hand when it comes to better money management. If you are one of them, why not try and subscribe to a money management program like the one offered by KC Lau, entitled “Money Automation System.” You get to learn with like-minded individuals in a highly supportive environment that will keep you motivated to improve your financial situation.

Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

5 Money Makeovers Applicable Year-round

Many time there are many seminars and you read in newspaper regarding Will Writing. It can be a very long explanation with technical legal jargons that might till the end confuses you. Here’s a summarized way to explain to you about the difference if we were to pass On with a Will & Without a Will. Just remember these three key difference: Ownership, Time and Cost. Enjoy the video …

Without a Will:

1. You lose ownership and control of who you want to pass your estate to. The Distribution Act will decide for you.
2. It’ll take longer time for your family to unfreeze your estate because you need to go through a process to apply for Letter of Administration, appointing an Administrator and find 2 Sureties (or in layman, we call them Guarantors)
3. It’ll cost more money for your family to unfreeze your estate by going through the process of applying for Letter of Administration.

With a Will:

1. You gain ownership and control of who you want to pass your estate to.
2. It’ll take shorter time for your family to unfreeze your estate because you already name your executor and distribution wishes.
3. It’ll cost less money for your family to unfreeze your estate by going through the process of applying for Grant of Probate.

About the Guest Author:

Evanna Phoon is the “Most Sought After Rockwills Will & Trust Specialist”. Her website is www.malaysiawills.com, where anyone can register for FREE SEMINARS on Will Writing & Trust and watch FREE Video Education Series to help increase awareness of Will, Trust and Estate Planning services in English, Mandarin and Cantonese.

She had done over 200+ video blogs on the topic of Will, Trust, Funeral & Bereavement care and Estate Planning. She was invited as a speaker at International World Bloggers Summit 2011@PWTC, Rockwills CEO achiever´s congress, Negeri Sembilan Chinese Chamber of Commerce & Malaysia SME Business Networking Seminar.

Evanna writes regularly for Malaysia SME newspaper and two Chinese medium magazines “mystudy.my” and QiJi.

Prior to joining the financial planning industry, she worked for a few years as an electronics engineer with Intel, Freescale, Motorola and Western Digital. While still studying in the university, she appeared in billboards and did catwalk modeling. She was Miss Astro Chinese International Finalist 1998/99 and had won Miss Sunway Beauty Pageant title in Year 1999. She is currently married with two children and love to spend her time mountain biking and outdoor sports with her family.

This article is posted at: KCLau's Money Tips

With and Without a Will – What is the Difference ?

Capital preservation AND growth – the Utopian achievement for all investors.

The idea of concurrent capital preservation and growth is that you get capital growth over time without losing a single dime. Your portfolio is practically immune to all kinds of short term volatility.

It means, there is zilch realized or unrealized capital loss, coupled with guaranteed capital return.

Having one’s cake and eat it too.

Here are a few case studies why this is as good as reviving salted fish, or running your automobile on water.

Case Study 1 : Fixed Deposit Account

“Investing” in fixed deposit is synonymous with capital preservation in risk-averse investing.

There is also an alternative to fixed deposit, and that is capital guaranteed fund, in KC’s previous article here.

However, the fact is that, even people who put their money in fixed deposit accounts yearn for some capital growth; despite having to contend with very low return due to fear of losing their principal.

If capital preservation were your sole objective, you would have locked your money away in a safe.

But is your money really growing? At best, bank fixed deposit rates are just on a par with inflation rates.

So, if you naively thought that your money is growing, it really isn’t. You need to understand the time value concept of money for this to make sense.

Now, after reading this, are you able to discern that your value of money is actually constant, if not depreciating?

Nonetheless, you definitely succeeded in preserving your capital here.

This explains that capital preservation and growth cannot co-exist.

Case Study 2: Apple Inc

Let’s talk about the stock price of Apple Inc. (AAPL)

There is no any other company with growth as impressive as Apple Inc for the past 5 years. Apple’s stock price and success is the epitome of growth.

If you took a long position in AAPL  (when its stock price bottomed during the 2008 recession) until today, you would have grown your money by five fold. This is speaking from own experience as I did hold Apple Inc stocks in 2008. Read my previous post here : Most Costly Investment Mistake – Apple Inc, My True Story

But during a period between August 2008 and March 2009, Apple stocks dropped by more than 50 percent, as stock market crashed.

As you can see for yourself, growth and capital preservation really don’t go hand in hand. To enjoy long term growth, one needs to stomach short term volatility.

Case Study 3: Mutual fund

On the local front, we take an example from the one of the best performing mutual funds for the past 10 years – OSK UOB Kidsave Unit Trust Balanced Fund.

It  won Lippers Awards of Excellence for 10 years category in 2011 and 2012.

Source: Thomson Reuters

I have a position in this fund since May 2011, with entry price of RM 0.5509 and RM 0.5405.  Short term market volatility has caused the NAV price to dip below RM 0.53 by end of September 2011.

Source: Bloomberg

It is obvious that a 10 years period award-winning fund is not judged by its short term return, but by its performance over long period of time.

Again, this shows that long term is synonymous with growth, while short term means volatility.

Source: FundSupermart

Food for thought

Capital preservation per se as long term investment goal is rare.

It makes you lose purchasing power; at best, it keeps you on par with inflation rate.

True capital preservation goal can only be achieved with absence of volatility. No downside, but no upside either. Because one requires the other.

To get even modest growth, one needs to embrace volatility risk, which means stepping away from the concept of true capital preservation.

To sum it all, guaranteed capital preservation and growth together is misstatement. Someone who guarantees you not to lose a dime in any investment return while earning huge returns could be a swindler or misguided. If it’s the former, run away fast! And if it’s the latter, still run away. Because he who doesn’t comprehend the simplest basic of finance and economic fundamentals should not be selling you financial product.

Our action plan and key takeaway

The best way to get growth and its secondary benefit, capital preservation, is to think long term.

Very long term. At least 3 years, but optimally, 5 to 7 years. That’s when you normally have a full business cycle. I am also getting this inside my head now – think long term…think long term… .

Investing for long term growth means screening for an investment vehicle which maximizes return, while minimizing volatility. For mutual funds, one way to do this is to quickly check the Sharpe ratio of a fund and compare it with other funds in its class. See my previous write up here: Unit Trust Risk-Return Part 1: The Sharpe Ratio

Of course, there are also many other options such as real estate. If you are a veteran investor (I am surely not ), please share your investing story below. I am sure the rest of us who wants to grow our money for financial freedom would benefit abundantly from your experience.

*This post was a result of a short but inspiring article published in Personal Money March 2012 issue: Capital preservation AND growth?. The article excerpt was reproduced from the New York Times bestseller by Ken Fisher - Debunkery: Learn It,Do It and Profit from It – Seeing Through Wall Street’s Money-Killing Myths.

LCF is an engineer with keen interest in financial planning and investing. He maintains a blog at LCF on Personal Finance, which aims to spread financial literacy to the masses through practical and simplified how-to money tips.

This article is posted at: KCLau's Money Tips

Capital Preservation and Growth is Overrated – Here’s Why (Real Case Study)

Have you ever received conflicting advice from other people or well meaning friends? One such advice is “Enjoy your life now while you are still fit to do so. Spend some money to go travelling and visit other places. You won’t get to do this when you are old and less energetic. Life can be short and you may miss the chance completely.” To emphasize his point, your best friend goes on to give a good example, “Remember so and so who died of a heart attack at the age of 45 years old? Apparently, he had a comfortable amount of savings put aside plus a house and a property. He was working hard and did not even get the chance to enjoy life before he died. What a complete waste.”

The opposite of the advice above goes something like this, “Don’t spend money now as you may need it urgently later on. Who knows what lies in the future or during your retirement years? It is prudent to reserve your money now as much as possible and only enjoy it later.” Sounds familiar? Now, for the example that goes with the second advice “Hey, did you read the story about the old man who was abandoned by his only son? The son could not support him and sent him to the old folk’s home. The old man did not have any money and was totally dependant on his son for support but the son was not doing so well either. I heard that during his younger days, the old man managed to travel quite a bit and even drove a big car. What a pity he did not think to save some of his money for old age or retirement.”

Which advice would you listen to? Would you go for the first one or the second one? You may gravitate towards the second advice while another person may choose to go along with the first one. The opposing preference only shows that each person is different. Both advices are valid though.

I know that the two stories sound exaggerated but I believe that they do apply to some real life people. Now and then, you do hear of similar stories cropping up. The dilemma is if you spend money now, maybe you won’t have enough during your retirement years. On the other hand, if you hog your money now, you may not get to enjoy the fruits of your labor later on due to bad health that normally comes with old age.

Finding a balance

You would probably have guessed already at the obvious solution to the above dilemma. The answer is to find a balance between saving and spending money. You want to avoid regretting not saving sufficient money for your old age and also avoid regretting not spending some while you are able to. Finding the correct balance can be tricky though but only you can give the green light to how much money is to be reserved for your retirement years and how much money you can spend for enjoyment now.

Do some financial planning to put your money situation into the proper perspective. If you have achieved all your money goals, for example your savings amount is on target, you have no bad debts and you are earning a stable income, nobody can stop you if you want to spend some money for pleasure or leisure now. Spending some money means spending a reasonable amount that you can afford.

On the other hand, if your money situation is precarious with debts to pay off and a savings target that has not been met, it is better to stint now to strengthen your financial situation. As the proverb goes, “As you sow, so shall you reap”, your actions now will dictate the consequences later on. I’m sure I’ve used this proverb before but there is no harm in repeating it again. Once you have reached a satisfactory stage in your finances, then you can start to enjoy the results of your hard work.

Jacquelyn is the co-author of “Teaching Your Kids About Money” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

To Save or to Spend Your Money?

There will be some interesting stories shared by readers from time to time. This one catch my attention and I think it wold benefit you as well. Here is the email from Eidil.

As a a teenager who is on his way to grow up become a man, I live a simple life here in Penang, with a moderate income for just only RM1k plus. I have a big dream of becoming not just a succesful man but I want my self to become a millionaire and maybe a succesful entepreneur or businessman. With nowadays economy, we can not predict anything because we hardly get to know what is going to happen on the next day. However for me, I like to plan anything that I do and follow on schedule. It helps my life to be organize with anything I do.

When it comes about money, some of my friends will call me “kedekut”. Haha.. probably I am. It is easy to say for them who do not have any responsibility towards family and any other commitments. This is because some of them come from a rich family and some of them do not have any family’s debt that have being pass over to their shoulder.

Usually people around my age, around 20s, when they start to work, they will be thinking of buying a new luxury car, find a nice girlfriend, go for holidays and they are thinking about enjoy! enjoy! and enjoy! But not for me, I do not have such life because I’ve been summoned to save whatever i have including money for any emergency for my family.

All of my friends always say to me ” get a life man..” Haha.. that is true because as you might see, what kind of life can I have when I need to save all I got for my saving. It doesn’t matter how much do I earn, I need to save because I do not have any saving which is left for me by my family, not like my friends.

So I’ve being thinking and saving. What did I mean by thinking and saving? Thinking, I’ve being thinking about my life. Why can’t I enjoy like others? Why I can not even change my old motorcyle? Why I can not have such a beautiful lady as my girlfriend? It tooks me about more than a year of thinking about this. As time goes by, I keep seeing that all of my friends are very happy with their life until that moment come.

The moment of changing the attitude. It is all started on one fine day when I “lepak” at a coffe stall with my friends and suddenly one of my friend just arrived. He ordered one milo ice and suddenly he asked 4 of us,”hey have you guys heard about the ASB-loan?”. He explain to us about how we can fill up our ASB book with RM200k and i was excited about it. He recommended us to do it at Maybank because he worked there.

So after that day, one week later, I took my annual leave and went to the bank because I can not stand anymore and just keep dreaming to become the owner of the RM200k. WOW!! Haha.. So on my leave day, I went to Maybank and ask about this ASB loan and they explain to me on everything about it. Unfortunately, I forgot to bring my ASB book, so I need to return back home to get my book and come again to the bank. Well, you know what? Without I noticing that my saving for two years were almost more than RM15k inside the ASB book.

So I decided to do the maximum of the ASB loan which is RM200k for 25 years in just ONE DAY!! Wow!! haha.. By paying to the bank lump sum of the payment for one year, after this I don’t have to worried anymore. So, on that evening, I told my friends about this good news and ask them have you all did it? All of them say NO and they got ask me where do I got my money to pay for the ASB loan? You know the answer, from my saving. I didn’t realize that while I’ve been thinking about my life for the past 2 years, at the same time I already save more than my friends that spend their money for their “enjoyable” lifestyle.

So after a few months, 2 of my friends did the ASB loan, but not like me, they paid it monthly and they did it for only RM50k, compare to me which is RM200k. Because of the saving power, I am now one step further than my friends. Now, I can concentrate on buying gold with my monthly salary while my friends used their salalry to pay the ASB loan.
Again, I am one step ahead from them. However, I still got my friends who ask their “rich papa” to pay for their ASB loan and become equal to me, for me that is nothing because that is his luck. Good for him but for me, I am proud of myself because i am using my own saving money to earn something more big.

So, what I’m trying to say here to fellow readers.. You can enjoy but after you have gain more than you spend. That is my principe. When the time you have money, then everything will come on the spot by itself including girls. Hihihi…

I know some of us might feel unfair for example… I heard a lot from my non-Bumi friends said that Malay are lucky because you have the ASB, Tabung Haji and a lot facilities for the Malay. But, let me tell you Malay also sometimes jealous to the non-Bumi because they hold the power of industry for example in Penang itself. From my point of view, there is no point to keep on blaming and jealous to each other because you know why? We live in the same country here, so we should work hard and build up together our own economy and gain more money by sharing whatever we have.

All the jealousy and envy, for me that is the old minded thinking. I think for me, as an individual, I love to see where all of us sitting down and discussing on how we can gain more money and improve our economy, no matter what race you are, what skin color you have… But, for me when it comes to money, I think everybody have the right on it.

So, lets imrove our economy and money power together.Wrok together and build wealth together for our own future and generations. REMEMBER: Save early cause you can gain more for your compounded power. Ignore others and keep saving and you will satisfied when you see it grows.

Thank you KC for giving me this opportunity to share my story and opinion.

Thank you,
Eidil

So, if you are a bumiputra in Malaysia, have you taken the loan for ASB investment? Did you have more than RM15k savings when you are 20 years old? Please share your thoughts in the comment section below.

This article is posted at: KCLau's Money Tips

Email from a reader: Save enough to get started with maximum ASB loan

“Your Money or Your Life” and no I am not referring to the book by Joe Dominguez with Vicki Robin. I am referring to the fact that some people (make that many people) put money as their No. 1 priority in life. No doubt money is important and accumulating wealth is natural. However for many people, it has become the sole reason for waking up in the morning. Why is that?

Is that what people aim for in life, to amass as much wealth as possible? Money has its many uses such as affording lots of people the freedom to retire early and to travel extensively. How about living a life of luxury and being able to cater to your every whim and fancy? Is this your personal goal too?

Personal values

Before you say “yes”, just think for a moment that if you have a child, would you teach your child to pursue the same goals? Or would you emphasize a different set of values? Values such as appreciating the simple things in life, not to be wasteful, not to take things for granted and that human relationship is also important? Would you teach your child to pursue money goals to the exclusion of everything else?

The answer is no as you would teach and emphasize that money is just a means to an end. There is more to life than just focusing totally on building wealth. Think for a second, is this what you are doing in your own life? I find it hard to imagine why a person would have this total fixation or single-minded pursuit on money. I am not even referring to a struggling person but to the rich who just can’t seem to have enough. This brings to mind of a wealthy and ambitious man I met a few years ago.

He owned a construction company that was doing quite well. If I was not mistaken, he was in his early 60s. His company was doing well and there were a few projects in-hand. In his case, he was fortunate to have a politician as a friend to back him up. Even though his company was doing well, I did not see him treating his employees well. It probably did not occur to him that the success of the company was largely due to the support from the employees.

His children were all grown up with one son helping him with the business. He lived alone as he was estranged from his wife and his other children all lived abroad. From what I observed, he led a lonely life and his main interest was in running his business and churning out more profit. One thing was for sure and that was he did not need more money as he was already well-off. A year later of meeting him, I saw his obituary in the local newspaper. His death happened suddenly and I had the feeling that he would have wanted his life to be different if he knew that he had only one more year to live.

This incident brought home the point that everyone will die one day and whatever wealth he or she has amassed will be left behind. A person who spends his entire life amassing wealth could not run away from death nor could he bring his wealth with him when he dies.

So, the message is you can pursue wealth but not to the exclusion of other important things in life such as your family and other life goals. You have to ask yourself whether pursuing wealth is the single most important goal you have in your life or is it one of many important life goals. Be mindful of how you steer your life so that you do not end up like the man described above. I am sure that none of you would desire that kind of life that is a lonely life.

Jacquelyn is the co-author of “Teaching Your Kids About Money” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

Your Money or Your Life

Can a person become sick due to money? You answered correctly if you said “yes.” A person who constantly worries about money may be afflicted with “Money Sickness Syndrome” (MSS). MSS was identified by Dr. Roger Henderson in 2006 who is a leading mental health expert in the UK.

MSS is triggered by financial stress and consequently sufferers experience physical and psychological problems such as depression, weight gain and sleeplessness. Financial stress may stem from worrying about making enough money, the lack of financial control, the high cost of living, how to maintain a certain standard of lifestyle, etc.

Those with debt problems are also at risk. These people do not know how to spend their money wisely and control their overspending. Hence, they accumulate debts which cause them to worry excessively.

Warning signs

There are signs to look out for that signal a person is heading towards trouble and getting MSS. For example, the person has trouble paying his bills (i.e. late payments), doing overtime work to earn more; his credit is at the limit and getting a new loan in order to pay off the old one.

There is a misconception that only low net worth people are affected by MSS. The real situation is even high net worth people are also affected. Nobody can actually escape from financial worries and all of us have it to some degree.

In a study done in the UK in 2009, 87 percent of people (British) have financial stress. It was reported that unskilled workers, high level managers and professionals suffer from financial stress. The women had higher levels of stress compared to the men and the most obvious symptom was anxiety.

In a separate study in the US, 35 percent of middle-class Americans were afflicted with physical stress or a member of their household had it, due to the recession that started in late 2007.

Taking control

Dr. Roger Henderson’s own advice is to take control of the situation. He recommended three ways to deal with money-related stress called “The 3 A’s.” It stands for “avoiding, altering or accepting.”

• Avoiding: According to Dr. Henderson, a person should avoid unsafe investments or job situations. The person should live within his means and save for the future.

• Altering: The person either scales back his lifestyle or increases his income by finding a better or higher paid job.

• Acceptance: A person has to accept the fact that experiencing some financial stress is a normal part of life which affects everybody.

There are people who are not aware of their real financial situation and remain ignorant similar to an ostrich that buries its head in the sand. The reality is some people can actually improve their money situation just by altering their attitudes or their perceptions about money. A simple yet a significant step such as living within their means can make a huge improvement to their financial situation.

The main symptoms of Money Sickness Syndrome again are weight gain, depression, sleeplessness or insomnia, loss of concentration and low sex drive. In order to avoid these health problems, a person is advice to take some control over his money situation or to seek professional help.

Read other articles by Jacquelyn at WParent.com on parenting matters and Tips4Everyone.com on solving marriage problems.

Reference source: Money Sickness Syndrome spreading fast. www.walletpop.co.uk & Yahoo Finance

This article is posted at: KCLau's Money Tips

What is Money Sickness Syndrome?

At one point or another, you may have encountered an online banner displaying a smiling person offering you the secret to earning 4 digits per hour. Surely, it is an enticing offer; but isn’t it a little too good to be true?

We’ve seen online schemes growing by the numbers. It is very likely that you, and the rest of the public who want to get rich quick, would just end up funding what these online offers are promising, instead of you and the others getting funded by these promises.

Most people who fell for these schemes are more likely to have more holes in their pockets or worse, become victims of identity theft. These schemes usually contain proposals disguised as “investments” or “franchises”, or even unclaimed “wills” set out to grab your money.

Cyber crime is on the rise with the current downtrodden economy, leading to more and more people stretching the boundaries of the legal and the illegal. Online schemes are out there to steal personal information to support their own interests. God knows what these strangers can do with your information. Think forged signatures and false credit card purchases.

With the rising cost of living, along with rapid technology growth, life is becoming more expensive to catch up on with the latest fads and comforts.

There are many different ways in attaining absolute financial freedom (A.K.A. getting rich). Some people choose to work double jobs along with other side jobs to make ends meet. Some even go back to school to sharpen their skills and get connected to key people in the field they’re passionate with. Some would quit their vices altogether.

The truth is no matter what they tell you about getting rich automatically, quickly or instantly, it just doesn’t cut it. Getting rich is a process and a journey. There is no short cut to it. One must rely on his own sense of judgment, his instincts, practicality and sufficient knowledge of accounting and applied math to become financially advantageous.

To avoid the hassle of putting your money where it isn’t supposed to be, listed here are 5 warning signs of online schemes

1. Nigerian Scheme
The Nigerian Scheme gained its notoriety by sending e-mails to unsuspecting people claiming that the sender is a lawyer and is and will be responsible for transferring money to your account since you are an heir to a wealthy “relative” who has recently passed away. These emails usually come in wrong grammar; but here’s where it gets suspicious: the “lawyer” requires you to give a copy of your personal information and wire in money to pay for “processing” fees. Good luck with getting a response after sending in your cash and info.

2. Ponzi Schemes
A Ponzi scheme can be identified afar by an offering of exorbitant returns on an investment. It gathers its victims by promising an average of 30% interest on your investment every 60 days.

Say you invest $100; you would receive a check 60 days later telling that your investment has earned you $30. You make another investment, this time $200. After 60 days, your $200 becomes $260. Quite a get rich quick scheme obviously. Then here you go, happy that you’ve made a quick buck, you start referring friends and they fall for it.

What’s really going on here is that the administrator pays off your returns using other investors’ money. Once referrals stop coming in, finances will fall like dominoes and once the company runs out of money to pay back majority of its investors, they run off with what’s left.

3. Affinity Fraud
Affinity is called as such because most of its victims are mainly soft-hearted and sympathetic internet users. This scheme starts off by an email claiming that the sender is entitled to a huge trust fund back in his native country. The sender however is abroad and lacks the funds to travel by plane. He then proceeds to tickle the heartstrings of the receiver, promising that once he gets home to his country, he’ll give more than what the plane tickets cost.

4. Work-at-Home Scams
Work-at-Home scams target housewives and other young people seeking self employment. While work from home is becoming a great way of earning under the comfort of your own roof, scams still exist, giving this thriving occupation a bad name.

Work from home scams usually start off with a tag-line offering the secrets on how to earn 4 digits per hour. Sign up and send in a registration fee to get a worthless work from home kit and a fluctuating work from home career where the paychecks do not arrive regularly. Breaking even for that registration fee will take longer than how quickly you’ve paid for their promise.

5. Foreign Lotteries
The foreign lottery win scheme preys on the gullibility of people who see winning the lottery as a lifetime accomplishment. This starts off congratulating the receiver as he has won the lottery in a foreign country, and since he’s not a registered citizen of the said country, he then is required to pay taxes from his winnings before the winnings can be released to him. The only ends that meet here are for the scammers, and never for you.

About the Author: Johann Carpio is a marketing consultant for Purechecks.com, a leading company that offers checks online. In his free time, he is working on plugging the holes in the Unified Field Theory and how to make money out of it.

This article is posted at: KCLau's Money Tips

The Get-Rich-QUICK Nonsense

In case you have not heard about 1Care social heath insurance (another 1Malaysia “initiative”) yet, here is a summary of what we all will be facing if the proposal is passed as law in Parliament soon. This definitely affects your wealth, but most importantly, it also impacts the well-being of your spouse, your children, your parents and everyone you care about.

In the current health care system, when you seek medical treatment at private clinics/hospitals, you either pay from your own pocket or, if you have medical insurance, your insurance company will pay for your expenses.

For government clinics or hospitals, you pay a small fee only because the expenses are paid using taxpayers’ (our) money.

1Care is going to change all this. It would be a major revamp whereby the government wants you to believe that 1Care will make health care cheaper and better for citizens from all walks of life. All private clinics and hospitals need to join this sytem for standardization. A noble intention, yes, but wait until you read about some of the salient points regarding its proposed implementation below.

• You pay a mandatory 10 percent deduction of your monthly gross salary to contribute to National Health Care Financing Authority (NHFA).
• You cannot opt out. Your employer will face legal action if they do not participate.
• You cannot choose your doctor to seek free medical treatment. 1Care system will assign one for you. If you want to consult other medical practitioner, you need to pay your own.
• You only have the basic health care services for free. How “basic” is anyone’s guess for now. If your medical treatment is not under the “basic package”, you need to pay your own.
• NHFA will pay RM 60 to the assigned doctor whom you seek medical treatment from. This only covers consultation fees and injection, if needed. Patients will be charged current private health care rates instead of public health care rates.
• You need to go the the pharmacy for the prescribed medicine. Insurance companies will have major say in the price and the range of this standardised medicine list. It will likely to be the cheapest medicine. This will save cost for 1Care and maximise profit for the insurance companies. If you don’t like the medicine prescribed, you need to pay for your own medicine.
• Like all medical insurance, there is a limitation on the number of visits to your assigned doctor – 6 visits per year. Exceeding this limit means you need to pay on your own.
• Your assigned doctor decides which specialist you can go to. If you wish to see the specialist or go to a hospital of your choice, you need to pay on your own.
• There is NO refund on your 10 percent monthly deduction even if you do not seek any medical treatment at all!

My financial thoughts

One thing is certain, our health care quality will deteriorate under such proposed implementation, at a less affordable cost.

Is it fair for all age groups to pay a flat rate of 10 percent of one’s income? This contradicts with the very core concept of mortality & morbidity rate in insurance.

How about unemployed people? Are they eligible? If no, how can they seek medical treatment? If yes, does that mean the employed is essentially paying the health care expenses for the unemployed?

Details are vague, and there are many more questions yet to be answered.

Share your thoughts on this.

Source:

Youtube: TAK NAK 1Care

Malaysia Chronicle: 1Care rip-off

Facebook: Tak Nak 1Care

LCF is an engineer with keen interest in financial planning and investing. He maintains a personal finance blog at http://www.howtofinancemoney.com/ which aims to spread financial literacy to the masses through practical and simplified how-to money tips.

This article is posted at: KCLau's Money Tips

1Care National Healthcare proposal: How would it benefit Malaysian citizens?