Simple Steps to Financial Freedom

Almost everyone would like to financial freedom. The million dollar question, pun intended, is how?

I’m a firm believer of understanding the WHY first and then the how will follow.

Why set financial goals? Goals give direction to our lives. If you are married, then share your financial goals with each other. It will help you to manage expectations, time commitments and reduces conflicts. You may want to save up to buy a home and didn’t know your spouse want a long oversea vacation, it will create unnecessary tension.

Most of us make plans at the beginning of the year. Yet many fail to follow up simply because they don’t take the necessary steps to make it happen. Here are the steps.

1. Choose something that inspires you

Choose something that is important to you. It will keep you motivated to follow through. Don’t choose something just because of someone else’s suggestion. Remember it is your life.

2. State the goal in the positive

For example, I want to buy a property, is a positive goal. I will not spend money is a negative goal. Why state goals in the positive? The mind does not and cannot register a negative.

Try this. Don’t think of a pink dog. What happened? I bet you just pictured a pink dog in your mind.

3. Set a date for achieving the goal

A goal is only a wish until you set a date. So now, I want to own a property by December 2005 is a real goal. Without a deadline, chances are, it will not happen.

Do not worry about missing a deadline. So what if you miss it. If you aim for the star and you missed, you will still hit the moon. If you aim for the moon, if you missed, you may hit the roof. So aim high.

4. Write it down

Write down your goal and put it up where you can see it daily. Look at your goal list daily until you begin to expect it. Most of us have too much on our minds that we tend to forget the important things. By the time December comes, we wonder what happen to our goals and start again only to fail. This is what I call the “New Year Resolution Syndrome”

Put up the list in places you will see daily like on the computer monitor, mirror, in the car, in your wallet etc.

5. Take action and stay focussed

If you goal is to buy a property, start by looking for locations you like. Check out the prices. Call the real estate agents and visit some property. Stay focussed on your goal and you will find it easy to put aside money to reach it. You will start thinking that I’m saving up to spend on something special.

6. Review your goal

Set up a time frame to review your goals. Check to see if you are getting closer. If not, try to catch up by putting aside less important activities. You may also want to try a different approach. Get the help of your spouse or close friends to help you stay on track.

These steps will help with any goal. It may be to lose weight, get out of debt, save up for your children’s education funds or start a new business.

Take the first step towards your financial goals today.

7 Ways To Have More Money

I know of a couple, with a combined take home pay of almost 8,000 a month. But this couple barely have any savings at the end of each month! And I wondered how can that be? Asking them further, I found that their expenses on some items are much higher and I thought that if they can cut back or made better decisions,
they would not be in the mess they are in not.

Here are some common expenses that I think would drain our income if we are not careful and I’ve listed them here.

1. Transportation. Yes we need transportation to get about, but a car might not be the best way to do it. Cars cost a lot to buy and to maintain. They also depreciate like there is no tomorrow.

To check if your cars are costing you too much hard earned cash, total up your car expenses in a month and compared to other expenses. Find out the percentage of car expenses versus other expenses. If it is way to high, then it is time to cut back.

Tip - If you can, delay buying a car as much as possible. If you really need a car, try to just have one for the family. Avoid have several of them as much as possible. If you really must own a car, see the next point.

2. Buy a used car. If you really need a car consider a used car. A 1 or 2 year old model would have depreciated some 30% or more off the new car prices. Down payment, installment payment, and insurance premiums will also be much lower. Choose wisely for model that is cheap to run.

3. Think Before You Subscribe. Nowadays, there are many promotions for various memberships and services. They tempt people to join with zero or low entry cost to join. For example gym or health club memberships. Many sign up for yearly subscription and don’t bother to use the membership after several months. Instead, sign up for a short a period to try and see if you would really use the facilities before signing up for a longer period.

4. Reduce mobile phone charges. Unless your company pays for the bills, mobile phone expenses can quickly escalate. I’ve seen office based people who do not do any sales or marketing, that requires them to call using their handphones, have mobile phone bills higher than my friends who are in sales!! If you cannot control your phone calls, try a prepaid service rather than a post-paid service because everytime you take out money to reload, you’ll feel the pinch.

Today, mobile phone companies come up with various ways to get you to spend more with musical ring tones, news downloads and sports update. These fancy services increases your mobile phone bills too.

5. Shop online. You can get most things from online and get a good bargain. Many online shops keep cost low by having low rental and advertising cost, but check the mailing charges.

6. Do your shopping off season. In many instances, when you are buying things at the end of season or clearance sale, you can get very good discounts.

7. Turn your hobby into a business. Almost everyone have a hobby or specialized knowledge of a topic. Be creative and turn it into an income source. If you are good with a computer or software, start a related part time business. You can help to repair, trouble shoot and maintain computers.

The bottom line is this. It’s Not What You Make, It’s What You Spend.

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.

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

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.