Five steps to financial freedom

By Staff Reporter

Financial security for you and your family does not just happen - you have to be motivated and disciplined, and you have to have a strategy.

1. Knowledge
There is no substitute for knowing the facts. Financial knowledge comes in two parts: educating yourself generally and knowing your financial situation specifically.Financial knowledge is not difficult to acquire. It is available everywhere: in newspapers, on TV, radio and the internet, and through your financial institution's promotional publications.

For most people, financial ignorance has nothing to do with lack of access and everything to do with attitude. We often say, "This is for other people." But to think this way is to do yourself a disservice. Financial matters affect us all in direct ways. It therefore makes sense to become better informed and to understand the processes that can enrich or impoverish us.

2. Goals
We all need goals. Without something to strive for, life becomes a grind. This is as true financially as it is in other areas of life. Most of our goals require money, so reaching them means we must have a financial plan to get there.

There are three types of goals: Long term (for example, to retire with enough to live on comfortably); medium term (for example, to pay for a child's university education, or to extend a home, or start a business); and short term (for example, to budget effectively to control your spending to establish a healthy savings pattern). Take a close look at your own goals and work out the financial implications. With realistic goals to strive for, financial discipline and self-control become much easier.

3. Honesty
Knowledge and honesty go hand-in-hand. Knowledge without honesty is unreliable and will do nothing towards helping you to realise your goals. Honesty means assessing yourself, your needs and your areas of weakness. It means facing facts. Are you in debt over your head? Admit it to yourself. Are you free from debt, but unable to achieve your goals due to lack of commitment? You can change your habits and achieve your goals, but it requires an honest look at yourself. Only if you are honest about your shortcomings will you be able to overcome them!
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4. Discipline
This is the least popular requirement for financial freedom. Financial freedom does not mean having unlimited money. It means managing what you have in such a way that you are free from worry, guilt or fear. Applying discipline where it is required reaps great rewards. Learn to say "no" to yourself. If you keep your goals in sight, it is easier to be disciplined.

The people who find self-discipline hardest of all are those with no clear goals and no plan for how to achieve them - or goals that are so distant and unrealistic that they are removed from daily life.Revisit your goals regularly, apply discipline and self-control, and you stand a good chance of realising your dreams.

5. Compassion
Acquiring wealth can be a worthwhile goal, but on its own it cannot bring satisfaction or fulfilment. True happiness comes from using our resources - whether money, energy or talent - to make a positive difference to the world around us. There are plenty of ways to do this. Some people donate money to charities every month because they approve of the work that the charities perform.

Others use their money to give someone else a leg up - perhaps a younger person with ambition, or a mother struggling to make ends meet. Others, again, prefer to put a small part of their wealth back into the community they grew up in. It all makes the world a better place!

How to … set up your emergency fund

It is important to set aside money to deal with unforeseen events. Setting up an emergency fund to which you have quick access will offset the potential damage such events can do to your savings.

March 22, 2008

By Neesa Moodley-isaacs

Now that you have planned your monthly budget and set up a savings plan using two previous articles in this series (How to … budget and How to … save), it is time to think about setting up an emergency fund for unforeseen events.

An emergency fund can best be described as a fund that you set up to take care of your day-to-day or living expenses at a time when your normal source of income is disrupted.

Examples of such an emergency could be an illness that outlasts your paid sick leave or when you are unexpectedly retrenched. You can use your emergency fund to tide you over until you re-establish a regular income flow and can avoid having to dispose of your assets or to dip into your education or retirement savings to make ends meet.

You can also resort to your emergency fund when you have to meet unexpected one-off expenses that are not included in your budget, such as paying for the funeral of a family member who did not have funeral insurance, or paying the deposit for a second family car, or having to cover the excess payable on your car insurance after an accident.


The question is: how much should you have in such a fund?

According to Prem Govender, the chairperson of the Financial Planning Institute who runs her own financial planning company, Mosswick Investments, the minimum you should have should be enough to comfortably take care of three to six months' expenses. The hope is that in this time you will recover from illness and be able to return to work or, in the event of retrenchment, to find another job.

You might have an income protection policy in place that will provide you with a maximum of 75 percent of your gross income if you lose your job or become incapacitated. However, this will only pay you out for a period of six months, so you still need to have sufficient money in your emergency fund for three to six months.

Your income protection policy also might not cover all your expenses in this time, as you might face increased financial responsibilities, such as paying for medical treatment if you are ill.

Annual payments
Debbie Netto-Jonker, of Netto Financial Services, says your emergency fund should also cater for annual expenses when it is more convenient or cost-effective to make annual rather than monthly payments. A good example of this would be setting aside money for your car's maintenance during the year.

Netto-Jonker says you should try to set aside R3 000 to R5 000 a year for car maintenance, regardless of how much you currently spend on the car. You are likely to spend this amount and more as your car gets older.

You might spend less money in the first five years of your car's life and then end up spending bigger amounts on maintenance as the car gets older. However, by saving a fixed amount each year towards the cost of your car's maintenance, you can avoid having to borrow money to carry out repairs, or putting off necessary car repairs because you don't have the funds. The money you saved in the first five years will stand you in good stead when your car is older and requires more maintenance.


Easy access
There are several ways in which you can set up an emergency fund. However, the key is that you must be able to easily access your emergency fund should the need arise, without incurring expensive penalties. Emergency funds, by definition, suggest that this should be money you can get to in a hurry and at the least cost to you, she says.

The ideal solution would be to use an account or savings vehicle that offers you a fair rate of interest and easy access to your money in an emergency. Some of the financial products you should look at to set up your emergency fund include bank investments, money market funds and, in certain circumstances, endowment policies.

Netto-Jonker says your initial savings towards an emergency fund should be invested in a money market account. When you have saved sufficient money for your emergency fund to adequately meet your needs, you can ask a financial planner to help you to structure an investment portfolio that has the correct balance between investments in cash, bonds, shares and property.

Bank investments
If you use a bank savings product, shop around for a savings account that pays the highest rate of interest. Look to find an account that is capitalised on a monthly basis. This means that you earn interest not only on the capital amount you have banked, but also on the interest that your capital itself generates.

"Remember, the magic of compound interest will help your nest egg grow faster," Govender says.

Savings accounts are a popular emergency-fund solution and they are very accessible, she says.

Netto-Jonker says: "Savings accounts may perhaps be too easy to access, which means that you can easily dip into funds without there being an actual emergency. This can be very tempting, and interest payments are usually much lower than a money market unit trust."

With savings accounts, you should carefully check the bank charges or costs, such as monthly charges, as well as any minimum balance you have to keep in the account in order to attract a particular interest rate.

With time and as your savings grow, you may want to transfer some of the funds into other accounts that pay a higher rate of interest but are not as accessible. An example is a notice-deposit account where you are required to give the bank 32 days' notice before you can access your funds. With at least one month's expenses available immediately, you can then give the bank notice for the amount you might need the following month. In this way, you will continue to benefit from further interest on the balance of funds held in the account.

Money markets
Money market accounts usually offer a higher interest rate than a bank's savings account. Because interest rates are high at present, you can earn as much interest or even more interest on your funds in a money market account than you would had you placed your money in a one-year fixed deposit with a bank.
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However, there are usually stipulations on the minimum initial deposit you must make to open the account, which means you need a high initial deposit to open a money market account. This initial amount varies with each institution.

You can, for example, open a money market account at First National Bank with a minimum deposit amount of R10 000 and the interest rate starts at 6.3 percent for amounts of between R10 000 and R19 000, increasing to an interest rate of 8.9 percent for amounts of between R50 000 and R99 000.

You can access your money within one or two days, if not immediately, and you can make as many withdrawals as you like, without incurring penalties. You can earn higher interest of 10.27 percent with the Absa Private Bank Money Market account, but the minimum investment amount required is R250 000.

Endowment policies
A third savings option for your emergency fund is an endowment policy.An endowment policy is a savings policy taken out with an insurance company, usually for a minimum term of five years and a maximum term of 10 years.

These are pure savings policies, which means that there is no risk cover attached. The costs are either imposed upfront or levied on a monthly basis as the premiums are paid regularly.With an endowment policy, the life assurer pays tax on your behalf on interest and on property income earned within the portfolio at 30 percent.

You are allowed to make one withdrawal in the first five years. Your withdrawal is legally capped at the initial amount you invested plus five percent compound interest. Beyond that one withdrawal, savings in endowment policies are difficult to access, and there are usually penalties for early withdrawals.

The advantage of saving this way is that you can commit to putting aside money every month. It is a particularly good option if you are not disciplined enough to stick to a savings plan and are easily tempted to withdraw funds. The disadvantage of using such a vehicle for an emergency fund is the penalty on early withdrawal, particularly if you find you require your money shortly after the investment is put into place.

The bond alternative
Another savings option for your emergency fund, if you are a homeowner, is to put away extra money into your bond each month. Gavin Opperman, the managing executive of Absa home loans division, says this is an often-neglected savings mechanism which is easily accessible.

"By putting extra money into your bond, you are not only saving for a rainy day but also reducing the interest you pay on your bond, which saves you more money," he says.

Albert Einstein said that one of the most powerful forces in the universe is compound interest.

Netto-Jonker says using your home loan to save for an emergency fund is the most effective way to take advantage of compound interest.

"You should take control of your spending urges and leave the money safely stored in your bond, at no extra cost to you," Netto-Jonker says.


There are three ways to save for an emergency fund through your bond:

*When you apply for a bond, you apply for one that covers 100 percent of the cost of the property and make sure you apply for an access or flexible bond. Then you make an initial payment or deposit into the home loan. You will then automatically have access to the funds you have paid into your bond and it is a simple matter of going into your bank branch or making an internet transfer to access the money.

*If you do not have an access bond but you now need access to the money that you paid into your home loan, you can apply to your bank to advance you money from your bond.

Opperman says the bank will assess your payment history and then decide whether to advance you additional funds. You do not have to pay for a second bond registration as the drawdown on the money paid into your bond is not registered at the Deeds Office.

Although it is linked to your home loan, the additional funding is a simple loan agreement between you and the bank, Opperman says. If you have a good credit record and payment history with the bank, the money can be made available to you within a few hours or, at most, within 48 hours.

"Consumers can opt to pay more money into their bond each month, which is what we advise, or they can recalculate their bond repayments over 20 or 30 years, starting from when they accessed the additional funds from their bond account," he says. Opperman says that you should always pay as much as possible on your mortgage repayments so that you reduce the interest you pay.

*The third option is to use your bond as a savings facility and pay the amount you would set aside for an emergency fund directly into your bond. This means you are not only saving money towards an emergency fund each month but your increased bond repayment helps reduce the interest you ultimately pay on your home loan.

If you had a home loan of R1 million at prime (14.5 percent) and paid in R200 extra each month, you would save R200 000 in interest charges and pay off your bond 20 months earlier.

So, you would be reducing your debt and squirrelling money away for a rainy day at the same time. You must, however, resist the temptation to dip into your home loan for luxury or unnecessary purchases.

It is imperative to have an emergency fund in place, no matter how small it is. Remember that essential payments, such as for your rent or bond repayments, electricity, water, rates and food, to name but a few regular expenses, do not stop because you are sick or have been retrenched.

Having an emergency fund will allow you to focus on getting well without being burdened by the stress of being unable to pay your bills or worrying about finding another job immediately.

An emergency fund reduces the danger of your losing your hard-earned assets in the short term.

Gearing Up Your Financial Portfolio for Higher Returns

Hellen Fong YL
Smart Investors 'Women - What it takes to be Financially Free'


Take a typical 24-year old young woman with her new found independence that comes with entering the workforce which also means the start of financial responsibilities. Top priority would be to pay off car loan, education loan, manage credit card debts. Savings could be for future education plans, for example, an MBA or as startup capital for a business in future.

Asset allocation for the example above, assuming a moderate risk profile and investment horizon of 3 to 5 years, would typically comprise Cash 20%, Bond/Fixed Income 50%, Stocks 30%. On the other hand, the asset allocation for a 40 years old matured individual would be different.

Priority would focus on finances for children's education, medical/health and retirement. Assuming the same risk profile but a longer time horizon of say 5 to 10 years, the asset allocation may change to Cash 30%, Bonds/Fixed Income 40%, Stocks/Properties 30%. With early financial planning, retirement is time of peace and relaxation, free from financial burdens.

Earning money is only half the equation to achieve financial freedom. Effectively putting your money to work for you is equally important. How you manage your money today determines your future. That's why taking control of your finances is paramount.

There is no short cuts to building wealth. It commands consistent commitment over the long term. Just like going on a strict diet, self-discipline is key.


Stick to the following recipe and you would not go wrong in your quest to be financially free:

*Save at least one tenth of what you earn.
*Control spending and avoid unnecessary debt.
*Invest on a regular basis, regardless of whether the market is up or down.
*Start early and benefits from compound growth/interest.
*Protect what you have by deversifying your investments.
*Seek advise from a professional.
*Have an action plan and stick to it.

Cash Flow Quadrant - Rich Dad's Guide to Financial Freedom.

One of the article from this Book regarding Fear of Losing Money Categories.


"The fear of losing money seems to divide investors into 4 broad categories"

i) People who are risk adverse and do nothing but play it safe, keeping their money in the bank.

ii) People who turn the job of investing over to someone else, such as a financial advisor or mutual fund manager.

iii) Gamblers

iv)Investors.


Gamblers are the people who plays with the game of Chances and,

the Investor are the people who plays with the game of skill.

BUT, for the people who give money to someone else @ 'do not want to play the game',

They have to choose a Financial Advisor CAREFULLY !

What is Financial Planning?

Financial planning help you to achieve financial security and also greater wealth.

It covers 6 financial components that are essential for you:

1. Cash Management & Budgeting
2. Insurance planning
3. Investiment planning
4. Tax management
5. Retirement plan
6. Estate planning

You can make your own financial planning process by your own if you have sufficient experience and knowledge or if you don't have the abilities you should seek an advice and help from a certified financial planner.

A Certified Financial Planner (CFP) is a professional who have the authority to advice you in financial planning process. They have to meet education, examination, experience, ethics requirements and pay an ongoing certification fee which have been determined by Certified Financial Planner Board of Standards.

It is very important to seek an advice from a Certified Financial Planner (CFP) because if you have any problems with financial planner, you can always seek a recourse from from the professional boards that governs the works & conduct of a financial planner.


You should find a certified financial planner for a specific advice on your financial matter especially when you are in these situations:

1. In need of expertise in certain areas of your finances for example how to evaluate the risk level of your financial portfolio, retirement plan and so on;

2. You want to get a professional opinion about the financial plan that you have developed for yourself;

3. You don’t have time to do your own financial planning;

4. You have an immediate need or face an unexpected life event such as a birth, inheritance or major illness;

5. You feel that a professional adviser can help you improve you current financial portfolio; or

6. You know that you have to improve your financial position but don’t know where to start.

3 Investment Plans That You Should Have

I know that many of you have not read this book, Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not! I’m not really sure why. Is it too technical or it is hard to find in our local bookstore.

Basically the idea is, you shall have 3 investment plans in your life.
1. Plan to be secure
2. Plan to be comfortable
3. Plan to be rich

Any licensed independent financial planner could help you to have the first & second plan. The plan is easy but still it required some degree of discipline. Just follow the plan and you will achieved it.

For a plan to be rich, Robert Kiyosaki has underlined 7 investing principles which must be really understood. I have summarized 2 of them in the previous article.

The main concept actually derived from Monopoly / Saidina board game. Buy four green houses, trade them for one red hotel, and repeat the process until you become rich. But many of you just play the game for fun.

Yes, I agree that Monopoly game is too simple and it is not as easy as you think in real life, but the business principle is really great isn’t it ?


Here is the main principle in the game:

1. Buy a land (an asset)
2. Build a house and rent it (a greater value of asset)
3. Build 4 houses (There are some tax loopholes in Malaysia if you’re having a company)
4. Trade 4 houses for a hotel (a great greater value of asset)


This book starts with a topic “Are you Mentally Prepared to Be an Investor” and ended with “Why It Does Not Take Money to Make Money… Anymore.”

You will read on how to Start with Nothing, the 90/10 Rule of Money, How not to be Average, Investing Like a Rich Person and much more.

In this book too Robert Kiyosaki writes about how World Wide Web has changed the 90/10 Rule of Money You might wonder how a young boy like him can make money on the net already. The creation of modem & internet has created the world of abundance to all of us.

Here is one of the story in the book:
Bill Gates crossed the border from the United States to Canada. When the customs agents asked him if he had anything of value to declare, he pulled out a stack of floppy disks wrapped in rubber bands. “This is worth at least USD 50 billion.” The customs agent shrugged, thinking he was talking to a nut and let the richest man in the world pass through the border without paying anything in taxes. The point is that the bundle of floppy disks wrapped in rubber bands was worth at least USD 50 billion. That bundle of floppy disks was the prototype of Microsoft Windows 95.

The Role of Insurance in Your Financial Plan

Here are some excerpts from Yahoo! Finance on insurance:

Insurance is an important element of any sound financial plan. Different types of insurance protect you and your loved ones in different ways against the cost of accidents, illness, disability, and death.

The insurance decisions you make should be based on your family, age, and economic situation. There are many forms of insurance and, unfortunately, no one-size-fits-all policy.

Life insurance, for example, is a virtual necessity if you have a spouse and children, but perhaps is less important for a single person. Disability insurance, which provides an income stream if you are unable to work, is important for everyone.

You can read further the How-To Article here.

7 things to consider before you buy health insurance

You should not buy any insurance without examine further what the benefits that you will get from the insurance company.

Let 2,3 insurance agents from different insurance companies come to you and compare all their insurance products and select the best for you.

Thus, you must buy your insurance policy carefully, read the insurance policy thoroughly and understand the coverage offered.


Here are some items that you should look for a medical insurance policy:

1. Limits
You should know what is the limit that you’re entitled to claim, and also annual claim limit. There certain medical procedures such as surgery and anesthesia that would make an insurance company to make a maximum limit.

2. Exclusion
Know what is the exclusion clause in your insurance policy.

3. Pre-existing conditions
You should insure yourself when you’re healthy. Most health & medical insurance company do not cover any pre-existing illness.

4. Renewal period
Could you renew your insurance every year? What is the maximum age which you’re allowed to renew the policy?

5. Is there any co-insurance & deductible?
Co-insurance means that you have to share the total medical cost incurred with the insurance company. Deductible means that you have to pay a certain minimal amount of the medical cost and the remaining will be paid by the insurance company.

6. The claim process?
What is the procedure to make a claim?

7. Cost of the insurance
First, you must ensure that the benefits are sufficient to meet your needs. Next, check whether you can afford the premium.

Do You Need Life Insurance?

“You can’t escape death, taxation or life insurance salesman” Herbet Denenburg.

Consumer Association of Penang laid down some guidance for you on life insurance.

Do you really need the policy?

Life insurance basically the policy where the risk insured against is the death of a particular person, the insured, upon whose death while the policy is in force, the insurance company agrees to pay a stated sum or income to the beneficiary.


Thus, the keyword here is the insurance policy beneficiary. It is the protection for your beneficiary.

1. If you a married man, you’re most likely need life insurance
Man is usually a breadwinner in the family. Thus, his death basically will cause his dependants lost financial resources, income and protection. Unless, you’re very rich person and your estate is more than enough for the next generation, then you don’t need life insurance.
You need life insurance especially when your wife is not working and you have children. Thus, they are all very dependant to you.

2. If you’re a wife, maybe you need life insurance
If your husband could give you more than enough, you’re unlikely need life insurance. However, if your income is vital for family income (both husband and wife) thus you should considered yourself to be insured too and your coverage may not as high as your husband.

3. If you’re kids, no.
Kids have no dependants, thus they don’t need life insurance at all. But remember, an insurance agent may says that insuring the kids when they are still young will mean savings on premiums and ensuring their insurability when they are grow up. The premium depends on the age of the policy holder thus, when kids are insured, the premium is low.

However, from the larger point of view, why spend your money in something that you not needed yet? It is better for you to create a special fund to cover their education in any investment fund. Only a small groups of children need insurance protection because of poor health.

4. Single, unlikely
If you are still a bachelor, you may not life insurance at all. Unless, you’re supporting financially your parents and family. However, please make sure you’re living healthily before you find out that you’re not-insurable because of your health problems. If you thinking to get lower premium, maybe it is the time too.

When do you need a financial planner?

Certified financial planner is a professional who uses the financial planning process to help individuals work out a plan to meet their life goals.

Basically they are known with a qualification such as Certified Financial Planner (CFP) or Chartered Financial Consultants (ChFC).

In financial planning, there are 3 categories. Single purpose, multi-purpose and comprehensive financial planning. For single purpose financial planning, they are basically the person who sell insurance and unit trust / mutual fund. The current development shows there also a person who will help you particularly in estate planning.

The independent CFPs and ChFCs usually can show you more holistic plan because they are not tied-agents who are attached with any financial institutions.

It is very important to seek for a certified financial planner because if you have any problems with your agent or financial planner, you can always seek a recourse from central bank or securities exchange commission, particularly in Malaysia, Bank Negara Malaysia and Securities Commission.

You should find a financial planner for a specific advice on your financial matter especially when you are in these situations:

1. In need of expertise in certain areas of your finances for example how to evaluate the risk level of your financial portfolio, retirement plan and so on;

2. You want to get a professional opinion about the financial plan that you have developed for yourself;

3. You don’t have time to do your own financial planning;

4. You have an immediate need or face an unexpected life event such as a birth, inheritance or major illness;

5. You feel that a professional adviser can help you improve you current financial portfolio; or

6. You know that you have to improve your financial position but don’t know where to start.

Knowledge is Power - Francis Bacon

How To Start Your Retirement Plan?

Retirement planning? You should do it now.

The younger you start, the result will be much more better. Though you’re not even in 40s yet, maybe you’re just graduating from your university, this is the best time to start, but if you’re now 50s and you haven’t start anything yet, well… I’m praying the best for you and may you have got the best children in the world.

You may have already know that planning for your retirement is essential, but you don’t know how to start, here are 6 things that you can do now to start your retirement planning.

1. Save More
Save 1/10 should be good start. 3/10 is better. 5/10 is great. 7/10 welcome to heaven. If you could discipline yourself to save half of your income during your working years, you shouldn’t worry about your retirement years. Live modestly, do more charity and invest wisely.

2. Don’t succumb to peer pressure
Friends always become a big influence in your life. Be different. Let them live beyond their means and accumulating bad debt along the way. Nobody actually cares if you’re not have the same class of car with your friends. If you think they are, try not to save anything from now and find them later for pennies.

3. Start saving small amounts
If you’re not making a simple financial mistakes such as buying a car with 9 years loan, buying furnitures with loans, having a big boys toys and others, then you can start save 3/10 from your total income. But if you have done such mistakes, you should start to save even you just save 1% from your total income and increase the amount later. Better late than never.

4. Put your savings to work
Have an emergency fund. Then, you allocate some of the savings into any investment. Investment on your financial education comes first such buy financial books, attend financial seminar, read my blog (ehem, ehem) and put your money for real either in your part-time business, properties or stock market. Don’t just save.

5. Put a financial plan in place
Set your financial plan for yourself and your family. When you want to marry? When will your children starts their primary education? How much to insure? And all such things. Different investment strategies applied for different investment objectives. Make friends with financial planner, stock brokers, real estate brokers, insurance agent, businessperson. Hire them if you don’t have them in your circle.

6. Learn new skills
Learn something new that is not related with your daily job. Cooking. Sewing. Gardening. Direct selling. Stock investing. Martial arts. Blogging. Teaching. Anything new for you. But, please make sure that it could generate an income for you.



Careful planning will lead to victory.
Poor planning will lead to defeat.
Worse, if there is no planning at all.
Sun Tzu

14 Questions for you before using share margin facilities

Stocks investor sometimes tend to use share margin facilities blindly without looking into their own financial knowledge and ability.

Buying stocks using margin means that you’re borrowing some money from the brokerage company. You must pledge a collateral. It is not a free money.

You should review yourself before you want to use any share margin financing.

Financial Position
1. Do you have any funds that you can access if any shortfall happens?
2. Would you be able to serve the interest and repayment?
3. What much you can afford to lose?
4. How much risk you are willing to take?

Market
1. What is your view of the market?
2. Are you a very knowledgeable investor?
3. Would the potential gains outweigh the interest that you have to pay?

Financial Institution or Stockbroking Company
1. What are the fees and interest charges that you have to pay?
2. How is the margin calculated?
3. What is the margin call level and force-sell level?
4. What sort of shares are acceptable to the financial institution / stockbroking company?
5. How are the shares valued?
6. What are the terms and conditions for withdrawal?
7. How would the transactions be conducted?

These are some questions to be asked to yourself before you’re buying stocks with share margin financing.

Happy investing.

Investing: 10 Ways to Lose Your Money in the Stock Market

1. Go against the trend

2. Count your money while you’re in the market

3. Listen to other people tips

4. You only know when to enter, but do not know when to exit

5. Ask other investor whether your plan is good or not while you’re in the market

6. You don’t have a trading plan

7. You have doubt on your own trading plan

8. You don’t want to take / lock your profit when it has reached the target

9. You don’t have money management

10. Cut your loss when it is too late

Happy Investing...=)

Money Markets Funds

If you have read the Type of Mutual Funds on Investment site you might come across with the money market funds. It is one type of the mutual funds exist in the investment world. It is a type of savings choice that you should know too.

Money market mutual funds have relatively low risk compared to other mutual funds. The fund is limited by law to invest only in high quality short term investment such as government securities. Though the risk is small, the possibility of losing money still there.

Here are some advantages and disadvantages of money market funds:

Advantages

1. Pretty Safe
Cash investment are viewed as safe because your money generally invested with reliable borrowers for only a short period. In addition the Securities and Exchange Commission requires that all taxable money market funds invest at least 95% of their assets in securities of the highest grade.

2. Higher Return
Generally dividend from money market funds are higher than savings account or certificate of deposits.

3. Cashing in
Most of the funds offer free check writing privileges and you can redeem your money at any time


Disadvantages

1. Inflations eats
Money market fund doesn’t really hedge your money against inflation. Usually the funds at the end only gives you a real profit of around 1% or less after hedging against inflation rate.

2. Risk
Though it is savings concept, money market fund is neither insured or protected by the federal government agency. The fund seek to become a stable fund, but there is no assurance on that.

Types of Mutual Funds

There are thousands of mutual funds or unit trusts in the market. They are not the same.

Though the funds are sold by the same company. There are funds designated to outperform the index, mimicking the index, sectoral funds and others. Thus, it is very important for you to know your investment objective and also your risk profile.

Investing in mutual fund is not only about making 50% return per year. It is about matching your investment objective and risk profile, thus if you can gain even 5%-7% and it is consistent gain annually for 30 years, it is a good investment if you are a low risk investor.

But if you’re searching for 50% return in 2007 but a year later the fund only gives you -10%, and you’re not that savvy investor, I don’t think you have made a correct decision. To make the situation worse, the fund is for your retirement!

Here is a general types of mutual funds that are available in the market:

1. Equity Funds
The most common funds that will become the hottest in town when they are making 75% return in a year! Basically this type of fund will invest in stocks & equities but among the equity funds itself, they’re also differences. The risks are not the same. There are equity fund which invest for:

Company dividends
Company potential growth
Small Capital company
Value Investing
Big capital company
and many more.

2. Bond Funds
Invest largely in the bond market, particularly in the bond issued by the government and big corporations. Bond funds generally known as a conservative type of investment without the potential for growth and high returns.

3. Index Funds
Index funds are equity funds that allocate their assets in any index components, like the Kuala Lumpur Composite Index, Dow Jones, S&P and others. The strategy behind the funds is very simple, follow the particular index. Your investment won’t outperform the index nor do worse than the index.

4. Hybrid Funds
Balance. That is the keyword. The fund manager will allocate some amount of fund in the bond market for safety reason and invest the other parts in the equity. Among the strategies of hybrid funds is to put the money in the equity in the bull market and retreat to bond market when the market in bear situations.

5. Money Market Funds
Money market funds invest in money market securities which are sold by financial companies in a variety of denominations and by the government. The investment in money market securities is usually on for short periods. In other words, money market funds is like your savings account in the bank but it give you better return, but remember, money market funds is not insured like your savings account.

6. Industry / Sectoral Funds
The fund invest specifically in certain industry such as industries sector, banking, technology, consumer, energy, and others. If you’re working in one of the industries this fund may suitable for you.

7. Syariah Funds
In Malaysia, Syariah funds also have different types. Basically syariah funds can be categorized into funds which are invest largely in equity, bonds, index that has been approved as a halal investment.


Happy investing.

Save your money in Fixed Deposits / Certificate of Deposits

Savings is essential in financial planning. It is a first step before you move further to investment planning. There are plenty of places where you can put your savings in. Traditional savings account, fixed deposit or certificate of deposit, money market funds or even in below your pillow. If you want some return in with protection, you might want to save your money in the fixed deposit account (FD) / certificate of deposits (CD).


FD / CD is a special type of deposit account with a bank that typically offers a higher interest rate than a regular savings account. It is an investment account with protection because they are insured (mostly) like a savings account by the federal government agency.


When you buy FD / CD, you invest a fixed sum of money for a period of time - 6 months, 12 months, 15 months, 30 months and even 60 months. In exchange, the issuing bank pays you an interest at regular intervals.


This means that if you put $ 5000 in a regular savings account, you get almost nothing. However, if you put $ 5000 for 12 months in FD / CD, you may get your money back later plus an extra interest, 3% for example. Thus, you will make more money.

But, the downside is if you redeem your FD / CD before it matures , you will pay penalty and also gain nothing. So, before you put your money in this type of account, you have to make sure that in any particular period before the account matured, you still have an extra money to cover your expenses and also for emergency purposes.

This type of savings account scheme may not only issued by a bank, but also by any financial institutions. Their broker or agent sometimes will call or mail you and offers a savings plan. And for the next post, I’ll give you questions to be asked to the agent / bank to make sure you are buying the right and safe savings plan.

For the meantime, you may like to watch another video on debt trap here:

The Debt Trap - One in every 60 U.S. households filed for bankruptcy in 2005. It’s likely someone in your family, a neighbor down the block or a co-worker in your office is in bankruptcy court. It’s not just an American problem either. Scotland has had a 33% rise in people losing there homes. For every $100 an Australian earns, they owe $130. What about you?

Free from debt means independence to you?

What is meant by independence?

Basically it is a power to do anything that we want without other people interference. You have a freedom. You have a choice.

I’m sure each of you want to get a financial freedom. You can do whatever you like. No more bad Monday. You’re doing your work because you love to do it. You can do more social works. You can donate more. You can help other people as much as you like.

Most people define financial freedom as free of debt. Especially bad debt. Credit card debt. Personal loan debt. Education loan debt. Car loan debt. Housing loan debt. You want to settle these debts as soon as possible.

By having a debt settlement plan it could give you peace of mind. Maybe you should start somewhere now by declaring your independence from debt and she is giving you few steps to be followed:

Read this blog: Declare Your Independence From Debt!

9 Ways to Avoid Yourself from Debt

You should always differentiate between good debt and bad debt. A good debt will help your life and bad debt could make you life miserable.

Read on to learn further 9 ways to avoid youreslf from debt trap.

1. Don’t sweep your debts problem under the carpet
You must learn how to manage your debt properly. You shouldn’t ignore your debt problem. There are always ways to get out from debt trap. But you must learn. You should get a professional advice. Don’t forget the debt because the debtor won’t forget you.

2. Don’t live far above you means
A smart things to do is live within your means. You may look ordinary, but it is better than you have a big debt problem that you can’t handle. A life is great when the is no creditors calling, creditors letter which disturbing you life isn’t it?

3. Don’t spend too big in a special ocassion
Anniversary, birthday, festivals always make you spend your money very fast. Learn to plan your expenditure properly. Avoid making last minute shopping which could always lead you to make improper financial decision. Special ocassions celebration do not always mean to spend lavishly, but be simple and thankful.

4. Don’t be influenced by advertisement and salesperson
Aware of excessive advertisement and salesperson. They were both professionals in their job. Don’t make decision after the advertisement or after any sales presentation. Think properly. Be informed. Don’t rush. There will be always better car to be produced next year.

5. Control your credit card usage
Credit card is the best way for banks to create money from the thin air. The interest imposed is too high but you need only to pay minimum payment. That’s the bank purpose to make you give them your hard earned money every month. Don’t pay everything by using credit card. Learn how to use the borrowed money properly.

6. Don’t buy on hire purchase if you could afford lump sump payment
Hire purchase payment basically means you have no money to pay cash. Thus, plan your budget properly. Save your money as much as you can. You earn more money by saving more but you pay more money to debtor if you buy on hire purchase.

7. Buy a house when you can’t afford to pay installment
Though a bank may approve the loan, but they never know your money management. Thus, don’t buy a house first if you have a deficit budget. Rent a house could be a better choice until you become really affordable.

8. Don’t become a guarantor
Think properly before you become a guarantor for any people. If the borrower fails to pay off the debt, by default you should pay all his debt. You may inherit all his debt.

9. Don’t gamble
Why visit casion when you know the odds of winning will always with the casino? You’re making a financial mistake when you think that by buying lottery, go to casino could always make you a millionaire.

Debt Management: Debt-Snowball Method

Dave Ramsey, a financial author has taught the debt reduction method known as debt-snowball method. It is a form of debt management that usually applied for revolving credits.


Here are the steps on how to reduce your debt by using debt-snowball method:

1. You have to list all debts according to the smallest balance to the largest balance. However, if two debts are very close in amount owed, the debt with a higher interest rate would come first. A, B, C, D list for example.

2. Pay the minimum payment on every debt.

3. Find out how extra money can be paid for the smallest amount debt (A).

4. Pay the minimum payment on every debt plus the extra money for the smallest amount debt (A) until it is paid off.

5. Then, add the amount of money used to settle the debt A (minimum + extra) for the next debt in order i.e. the second smallest debt (B) until it is paid off.

6. Repeat these process until all debts has been paid in full.


That’s all.

Effect of Student Loan Debt

According to the video below, in America since 1991 the student loan debt has caused the percentage of young people delaying their marriage doubled.

Wow. Me think the delaying of marriage among young people currently is a worldwide problem. Personal financial problems is the main and common barrier for young couple not to marry early.

Well, debt management is really important nowadays. Your life will be really miserable if you can’t handle your debt properly starting from student loan debt, credit card debt, personal debt, housing debt, business debt and many more.

In a modern words, it is known as “Economic Stability”

Well, in Malaysia the cost of “duit hantaran” and “belanja kenduri kahwin” are among the major factor in delaying the marriage in Malay community. Other races has their own “economic stability” issues too.

Well, what do u think?

People Having Bad Credit Also Deserve Financial Help

By: Anaya Erika

If you have a county court judgment issued against you, lenders put you in the category of bad credit borrowers. Bad credit arises in many ways. Arrears, default in repayments and bankruptcy means that you belong to the bad credit category. This section of borrowers is taken care of by sub-prime lenders. These lenders specialise in dealing with borrowers who have low credit scores.

A borrower who does not have a perfect credit history needs to be cautious. Not all lenders will entertain your application for bad credit loans. Everyone goes through a bad financial phase. But, some people recover from the situation while some do not. There are many lenders in the market who provide bad credit loans against security (your home). Getting such loans without any security becomes a little difficult.

Bad credit unsecured loans are high-risk propositions for the lenders and, therefore, difficult to get. Even if lenders provide such loans, the interest rate is very high. Take for example, a tenant applying for bad credit loans. Such a borrower increases the risk for the lender many a times.

There is no security to rely on and the previous conduct of the borrower is also discouraging. In order to cut down his risk, the lender will either refuse the borrower or give a loan at high rate. But, if similarly situated borrower approaches any lender with a security to offer, the situation can be different.

Online lenders in the UK market offer an opportunity to the borrowers to apply online. This is the most convenient way to search for loans. These lenders have individual policies for providing bad credit loans and unsecured bad credit loans. So, it becomes imperative that you contact some of these lenders and find a loan that matches your requirements. After all, people having bad credit history also deserve to get another chance. A good repayment track in the future can help them in regaining the creditworthiness in the loan market.

For more information about bad credit loan, bad credit unsecured loan and debt consolidation loans. Please visit our website. Article Source: http://www.articlebiz.com/

Money Personality Test

I took this simple test just now by answering several questions on personal finance and my money personality is a Micromanager.

“Micromanagers love planning, planning, and then planning some more! Their budget is usually designed to avoid surprises and in preparation for any foreseeable contingency. Micromanagers can become very uncomfortable if an unforeseen expense arises. They often can tell you how much they have in the bank to the penny and how much they spent this month on groceries, taxes, etc.”

“Micromanagers are often comfortable with spending money on luxury items, as long as they are planned for and built into their budget.”

“Micromanagers are rarely susceptible to investment schemes. However they may sometimes miss out on good opportunities as they repeatedly explore the pluses and minuses of an investment. If a micromanager does invest, it will tend to be in more conservative ventures such as bonds or CDs.”

“If you don’t feel your micromanaging to be excessive or cause you or your loved ones tension, this may be a very effective style of money management for you. If you find yourself spending an excessive amount of time reviewing your budget to the detriment of other spheres of your life, you may wish to explore developing more effective coping strategies.”


How about you?

Take this simple test here.

ASB - Loan is a good investment?

Here is an article from Mr Azizi Ali, ChFC, regarding the issue of borrowing money to invest in any investment products. This is an old article by him, but I still thinking that it is still relevant information for you.
***
One of the most common question I get is this: is it a good idea to borrow money to invest in investment x (the x can be unit trusts, ASB, properties, business, Bank Rakyat shares, etc., etc.) ?Let me answer the question in real world terms.

Firstly, that is how folks build serious money - by using other people’s money. This strategy is a regular occurrence in business. Entrepreneurs borrow money from the bank to finance their expansion. They conquer the world, repay the loan and make tons of money. And that is always a good thing.

Now this concept of borrowing money to make more money works a treat for businesses as the margins are wide. The interest charged for the loan is often below 10 percent, but the business reaps 30, 50 or even 100 percent return on their investment.

Further, because of the wide margins, even when the returns drop, the businesses still make loads of money.

Now you can see why this concept is made-to-order for businesses.

However, the same does not apply when it comes to investments such as shares or unit trusts. Often time, the margin or spread between the interest and return is slim - less than 3% most of the time. For example, the interest charged is 9% but the return is only 12%.

Now if the situation remains like that - with the interest at 9% and return at 12% - things are still hunky dory. You would do well taking the loan and making the investment. However, what usually happens is that the return starts to drop off. From 12%, they drop to 10% and then to 9%. (By the way, this is what happened to the fabulous ASB.)

The way things are going, the return could very well drop below the interest charged! And this is not an unusual thing. When that happens, instead of making money, the investor is now forking out money. And that, needless to say, is not a very nice thing to happen. Not exactly the stuff of fairy tales. (By the way again, this is what usually happens when folks borrow money to invest in stocks.)

Now after painting the real world scenario, let me answer the question. Yes, you should borrow money to invest - if the spread is wide (more than 5%) and you are pretty sure that the situation will remain status quo for the loan period. For example, if the interest is 9%, the return should be at least 14%. Otherwise, let others be the test-pilot. You watch by the sidelines.

Now, I know a lot of people will jump and shake their heads. They will reminisce of how their father, grandfather, uncle, auntie or neighbour made tons of money by borrowing money to invest even when the spread was ultra-thin. Of course it can happen. People also strike the lottery but has it happened to you?

If the spread is thin, you are taking an unnecessary risk. While you can make a little bit of money, the chances of you losing a lot of money are significantly higher. Once the return starts to drop and/or the interest start to rise, you lose both money and sleep. And that is no way to make a fortune.

In case anyone thinks that this is a theory from the ivory tower, I personally will not borrow to invest if the spread is less than 5%. In fact, I will not borrow to invest in unit trusts or shares - period. I only borrow money to expand my business and for property investment.

Trapped in Credit Card Debt

Few notes on credit card usage in Malaysia. Your debt can be increased tremendously if you are not well aware of the power of compounding interest that work against your benefits.

a. More than 40% credit card users out of the 8.8 million credit card holders only manage to pay the minimum 5% of their outstanding balance.

b. Credit card defaulters accounted RM 700 mil of the RM 18.6 billion in non performing loans.

c. Any unpaid credit card loan, the annualise percentage rate is 19.7%

d. 7,456 people had enrolled into Debt Management Programme under Credit Counselling and Debt Management Agency (AKPK)

e. 31% from those people got into financial problem because of credit card.

f. 52% faced financial trouble because the combination of hire purchase, housing loan and credit card debts.

You can read the full report from The Star Online : Easy Credit, Easy Spending

Debit Card Dangers

Read this before you swipe! Debit-card dangers

Yes, debit cards are convenient — but consider these points of caution
First, some basics: A debit card looks just like your credit card, but works like an electronic check. The payment is deducted directly from your checking or savings account. When you use your debit card to purchase items, you or the cashier slides the card through a scanning machine that enables your bank to verify that the funds are available and then approve the transaction. Most debit cards can also be used to withdraw cash at ATMs, and can also look just like your ATM card (look at the face of the card to find the “debit” language).

Debit cards are handy — so handy, in fact, that two-thirds of American households have them. They are more convenient to carry than cash or a bulky checkbook, plus swiping the card is easier and faster than writing a check. In addition, there are no interest payments. The money is deducted out of your account right when the purchase is made. Finally, you can use your debit card’s cash-back feature to get cash when you make purchases at a store, avoiding a separate trip to the bank or the ATM.

Despite all these benefits, there are some cautions to keep in mind:

Credit-building

You are not building

credit with a debit card like you do with a credit card. Your debit card purchases do not enable you to build up positive credit. That means your good habits go unnoticed. However, by using your debit card instead of your credit card, you can avoid running up a big bill and making late payments, harming your credit. So if you have trouble making payments on time, a debit card would be the way to go.

Fraud protection

Debit cards do not give you the same fraud protection as credit cards do. The federal regulations are very different for debit cards than for credit cards when it comes to financial liability. When using a credit card, you are generally responsible for the first $50 of fraudulent charges, whereas your liability on many debit cards can be as high as $500. In addition, unlike a credit card, if there is a problem with your purchase, you are not able to withhold payment until further investigation by the credit-card company. If your debit card is stolen or lost, report it to your bank immediately. In many cases, if you wait more than 60 days to report your card lost or stolen, you could be responsible for all of the damages. Of course. always check with your bank to understand its policies and applicable state laws. Don’t take this lightly: A recent study in 2007 put fraud losses from debit-card purchases at $245 million.

Lost or stolen cards

A debit card is like a blank check, so you need to guard the card and the number on the card. If your card gets stolen, a thief can empty your bank account in minutes. Thieves don’t even need your card. As long as they have your name and card number, they can shop online or over the phone with your card information. If your debit card is lost or stolen, call your bank immediately! Follow the phone call with a letter.

Protect your debit card by holding on to your debit-card receipts and

checking them against your bank statement each month.

Merchant disputes

If there is a dispute regarding a purchase you make, you are in a weaker position when you use a debit card instead of a credit card. The merchant already has your money when you pay with a debit card. So while the dispute is taking place, your money will remain with the merchant and you will only see that money again if you win the dispute.

Rewards

While some debit cards are beginning to offer rewards, they are still far fewer and less valuable than those offered by credit cards. Ask your bank if there is a rewards program you can enroll in to earn points toward travel or goods every time you use your debit card. Most likely the rewards will not be as valuable as the ones you get with your credit card.

Immediate

deduction

When you use a debit card, the money is immediately taken out of your banking account. With a credit card, there is a float period between the time you make the purchase and the date the credit-card bill is due. This means that you earn a little bit of extra interest on your money sitting in your bank account when you use a credit card vs. a debit card.

No added services

Credit cards often come with added benefits, such as extended warranties on products purchased and insurance for rental cars and airline travel. Debit cards do not offer these services.

Tracking spending fees and overdrafts

When using a debit card, it can be difficult to keep track of what you purchased if you aren’t diligent in writing down everything or if you don’t go online constantly to check your account. Making a mistake on the balance can cause you to think you have more in the account than you really do, and can ultimately result in accidental overdrafts.

If you unintentionally let your balance get too low, each debit that comes through will bounce. With fees as high as $34 per bounce, this can add up to hundreds of dollars in a matter of seconds. So, for example, if you forgot to track a few debits and you have written a large check, many banks will honor the large check and then bounce all the debits, even debits as small as $2.

Even if you do keep track of your accounts, the bank’s calculations may not be as accurate as you are. It takes time for deposits to become available and the funds may not be accessible as soon as you would like, leading you to believe you have more in your account than you really have access to. This can cause you to spend more than is in the account and rack up overdraft fees.

Debit-card overdraft loans are more expensive than overdraft loans from any other source, including overdrafts by check. Debit-card overdrafts cost people $2.17 in fees for every dollar borrowed, compared to check overdrafts, which cost $.86 per dollar borrowed.

Fees

Banks prefer the credit option when you use your debit card, because they make more money in fees. For a $200 transaction, for example, a bank could make $1.99 if the customer chooses the “credit” option and signs his or her name. This is more than three times the 60 cents they usually make from customers who choose “debit” and enter a PIN number.

WHAT YOU CAN DO: Here are some ways to stop banks from stealing your hard-earned money.

Keep your balance upKeep a cushion of money in your account to avoid bouncing checks or debits. Decide that you are not going to let your account fall below a certain amount, like $1,000; when you see it getting close, transfer money into it from another account. If you don’t have the money to replenish it, then you should cut back on spending.

Track your accountSign up for your bank’s online banking program. This is an easy way to see what is going on with your checking account. Pay close attention to the available balance.

A lot of us think that once you deposit a check in the bank, it’s yours for the spending. Watch out, this is not the case! Most banks put holds on checks for several days, even up to a week. Until the money clears, you should not use your debit card. Debits go through right at the time of purchase, and if the bank is holding your deposit, you’ll get huge fees on the overdrawn debits. If you need the money right away, take the check to the bank and have it turned into cash, then deposit it. When you deposit cash it is available almost immediately.

Call your bank

When it comes to overdraft fees, banks hope you won’t fight back and request courtesy credits. Many banks will credit you back the fee or part of the fee if it’s your first offence.

Use cash

Cash can’t bounce and that’s the beauty of it. If you are not willing to use a

credit card, then cash is the next best option. I’ve found spending actual cash makes you more aware of what you are spending. It seems when you swipe a debit card, you tend to spend more because it doesn’t seem like spending “actual” money. At the beginning of each week, take out what you think you’ll need and stick with that.

By Sloan Barnett (MSNBC)