QUOTE(wongmunkeong @ Mar 25 2012, 06:29 PM)

Protecting yr wealth? Interesting.. i really hope U mean something else other than insurance, which i personally think is more managing life's risks rather than $.
Can share?

yea its 1 of insurance product, but mainly for investment.. as u knw, in insurance is not abt life n death.. living too long also an issue..

Insurance FOR INVESTMENTs?
Ok now i think i know where U are coming from.. NEXT!

Income in RM:
Monthly Salary = 2800 after all deduction

Expenses in RM:
Food = 100
Transport = 100 (Petrol)
Phone Bills = 70
Internet = 90
Parents = 300
Entertainment = 400 (maybe less)
Car loan = 498 ( 2 years to go)

Total = 1458

Monthly saving = 1100-1300 (bout 35-40%)

Asset
ASW = 33,000
Saving = 11,000
Fixed Deposit = 15,000
Gold = 7,000
Stock = NIL

Liability
Study loan = 9k (plan settle by next yr but currently not paying)
Car loan = 498 (till 2014)

Hoping to put more of my savings into shares / stock.
Or should i consider buying properties instead? Since by year 2014 i should be finish paying my car and study loan.

Please advise. Financial freedom still very far or near impossible for me...lol

Dear Mr. Wong, All sifu,

My wife and I are 30 now, just married early of this year, maybe will planning to get child after 1 year, here is my financial status:

our montly net income: RM3800 (me)
RM2600 (wife)
side income : RM300 (minimum)

joint expenses: car loan (mine: RM780/month until DEC2013, wife: loan settled)
house laon RM750 (still owe RM200k, bank value RM280k)
petrol, tol RM400
food RM700
phone bill, internet: RM200
electril bill : RM60
water bill: free
ptptn (me): RM66 (only pay for interest, still owe RM30k)
others (family, grocessories): RM600

Our company do provide medical card, so we not yet buy any insurance.

FD : RM10k
saving account: RM25k

EPF : RM72k (me)
RM37k (wife)

I am in the dilemma on the below situation, so i am looking for your valuable idea:

1) we are thinking of withdraw EPF account 2 for investment (RM30k, we are still entitled to withdraw the money because previously we never withdraw the EPF money and our 1st house S&P still within 3 years ), (mostly invest on 2nd house, ASW, business or others, any idea?), Is this decision OK? or just leave the money inside the EPF

2) my house laon is semi flexi loan (now interest is 4.2%, lock in period left 6 months, should i top up the loan for investment or change to flexi loan and top up?)

3) If you were me, what would you do with my current financial status?

Thanks in advance

This post has been edited by iamsolucky: Mar 26 2012, 11:43 AM

Hey there IamsoLucky. I'm definitely no seafood nor guru-ji though i'll share my point of view/thoughts yar (yeah - i'm a opinionated nosy parker ).

On the detailed net income and expenses - i cant really workout much stuff properly since PTPTN loan repayment data isn't there (thus, not a true pix if i were to calculate). Sorry about that. Note that the main idea is to work towards >30% net salary savings for emergency buffer and investment by reducing expenses.

As for the "if i'm in your situation"
1) EPF A/C2 withdrawal
Why not?
As long as U know what to do with the $ AND the savings (if used to pay off debts) / returns (investments) are higher than EPF's average returns (or nearly the same returns as EPF's WHILE holding and waiting for opportunities).
eg. as long as i'm 80% sure that i can make about 7%pa returns, i'll definitely use my EPF a/c2.
BTW, i AM doing it monthly (taking out from EPF a/c2) now and forsee-able future and plonking it into my flexi-mortgage - saving me 4.4%pa daily rest while i wait for opportunity to use for REITs, Stocks and even <shock><horrors> Foreign focused Mutual Funds.

2) Er.. what's a "semi flexi" home loan?
Thus a bit tough for to share my thoughts on yr Q
Flexi loan to me = i can put in EXTRA $ any time, any amount + i can take out (re-draw) anytime via cheque/online/ATM and no penalties as long as i dont pay off before the locked-in period expires.

3) Well, me being me,
a. i'd definitely start paying the PTPTN, thus i know the real extent of cash flow, in & out

b. Currently, EXCLUDING PTPTN, joint expenses seems to be 53.07% of joint net income.
Not bad but er.. really, what's the PTPTN payment commitment amount and affect on this 53.07%?
Note that the main idea is to work towards >30% net salary savings for emergency buffer and investment by reducing expenses.

c. $750 for home loan, only 11.19% of joint net income!
VERY VERY good here as in your home isnt a "burden" to U and it's an expense, not investment.

d. Insurance - U may want to look into term life to cover death (yes, it's death not life) and try to recover from critical illnesses.
As for medical - it depends on what is covered and how much is covered by company's medical card.
eg. A "simple" in-hospital procedure cost me $7.5K+ for my ex's cysts/polyps removal and my company covered up to $5K only. Imagine something more complicated... eek.. personally i bought hospitalization coverage for up to $100K only pa and anything above that i think it's already in the realms of critical illness already (i stand to be corrected yar), thus will be tapping my term life to try and recover from critical illness.

e. Only EPF, FD & savings as invest-able / investment assets - all in "Fixed Income" asset sub-classes?
If so, at the very least, personally i'd go and learn about Asset Allocation, sub asset classes, value investing, value & dollar cost averaging
Cash held is not investment but king of opportunities
Investment assets held, which generates $ and the value of these keep in line or beat inflation (on average), are my "collect-ables", not $ per se heheh.
BTW, i assume yr savings a/c amount is for emergency funds? If so, U have more than 7 months' average expenses EXCLUDING PTPTN repayment. Nice.

f. Baby!
Dude - be prepared with about $10K for hospital + this/that food/supplements/doctors/"pui yeet" + baby cot and stuff (car seat, clothes, etc.)
Then, monthly about $1K+/-, depending on whether changgih diapers, milk (after off breast milk - breast is best! if possible ),
Note:
These were my costs in 2008 AND my little one was delivered in University Hospital, not SJMC or Gleneagles hehe. In addition, my ex or i tend to carry my little one around instead of "baby strolling" - i find it cumbersome to move around with the dang thing + collapsing it & car space in/out + it's just so much more "warmer & closer" to be carrying my little one around.
Costs continues into $1K+ during kindie
School - er.. no idea yet but should go down during primary & secondary UNLESS going to private or international schools.

Phew.. please note all the above are my humble opinions & simple POV only, not gospel truths yar. My priorities and methods are not your priorities and methods

This post has been edited by wongmunkeong: Mar 26 2012, 02:05 PM

As a medical student, I would like to affirm that breast milk is the best for a baby. This is because individual mother's breast milk is tailored specifically for your child. Try to avoid formula ones because they are generic formula.

Anyway, your experience gives me an idea on how much expenses I should expect if me and my wife were to have a baby in the future.

Hi BabySteps, since no one responded (except a "potential" sales reply) after two days, I will give it a try.

i) Overall - you are doing Well. Saving 26% of your net income is certainly a good start. Why don't you slowly bump up the % savings to 30+% more consistently? (since you have some spare change after your expenditure, "forced savings" + feel good spend).

ii) A couple of your expenditure items are on the low side...you indicated transport expense of RM50/mthly (it is for weekend use? what about insurance/maintenance expenses?) - why I bring this up is that expenses are commonly understated in financial planning.

iii) Your asset allocation is skewed towards "safety"/ comfort zone. I normally hesitate to give a recommended asset allocation because it has to be tailored to each person's personality (e.g. risk-return profile), time horizon, needs, etc. Since you have a decent amount of $$$ in your FD (above "emergency fund") , you may want to consider investing in equity unit trust/shares. BUT WAIT, please go and educate/learn more on investing before putting your hard-earned money to work. Start small so that the 'tuition fees' will be less...

iv) As for your plan to buy a house in 2 years' time - it depends on your forward earnings ability and mortgage rate/policy in 2 years' time. From your current position and normal trajectory forecast, you should be able to afford 300k house (assumption: 80%, 30 years loan with i/r of 4.5% p.a.)...400k will be a stretch (sorry, no calculations or spreadsheet like Mr Wong - my numbers are primitive back of envelope calculation but it should be okay). That is assuming that you have no other major commitments like CAR loan. BTW, banks are currently assessing bank loans on a net income basis (who knows what will be the loan approval conditions/policies in 2 years' time). I wanted to write more on cars and car loan - a significant financial planning/management problem in M'sia...maybe another time/day to prevent another long posting.

Age: 25
Monthly income: 3.3k nett

Expenses:
Petrol=100
Astro=80
Phone bill=120
streamyx=110
food=10/day on daily basis,more if hangout..so around 300-500
Utilities bill=100
ASB loan=600
Misc=200
Car=using my brother 10 years old kelisa..so settled..haha

Nett Saving: 1490 (calculate based on 500 on food)

Asset:
ASB:100k plus on 2nd year loand (pay monthly without using dividen)

how am i doing?..been reading and most have been roll money into FD..is it that good?..kindly enlighten me..

Hi Wong... Is it ok to redraw housing loan advanced payment and park it into ASB? My HL current interest rate is stood at 5.35 (Coventional Loan) less than <100k.

If U mean "OK to redraw" as in "worthwhile redraw",
then in my opinion:
1. IF U have enough emergency buffer (eg. at least 6 months average living expenses if U are single income and have economic dependents, 3 months if you're married with working spouse and both earns around the same net income)

2. AND U are quite sure (80%? 90%) that ASB will get U 7.35%pa or more (5.35%pa (yr cost) +at least 2%pa extra)

3. AND your mortgage is a flexi mortgage (like SCB's Mortgage 1, Citibank's FlexiHome, Alliance's & UOB's Flexi mortgage, etc.)

THEN Yes, in my opinion it's worth the risk.

I'm curious - U stated yr HL current rate is 5.35%pa (Conventional Loan). U sure this is flexi mortgage? As in U dont get charged for any cost other than the 5.35%pa on the re-drawn amount?

In addition, 5.35%pa is kind of high though may not high enough for U to bother refinancing with other banks yet - it's about 4.2%pa to 4.5%pa these days based on my checks with SCB, Alliance & UOB for a $200K to $500K mortgage last month or early this month. Fixed rate (non flexi) ING & AIA is still around 4.85%pa

Note:
If U are taking out from EPF a/c 2 yearly for mortgage, in my opinion, better do it via monthly scheme which doesnt go directly to yr loan a/c. Thus, U have a choice.

This post has been edited by wongmunkeong: Mar 27 2012, 06:30 AM

There is charges once any advanced payment which is more than 6 month installment (1%) as it still under lock-in period. If I choose tor redraw it, then there is MYR25 bank charge for processing fee. Anyway... the charges so little compare the interest reduction and investment profit earning.

It is not flexi HL... most likely quarter flexi mortgage.... i had been approach by AIA agent offering 4.85% fixed mortgage interest rates... after calculations, found I will paid more if I do so... if think a bit more,it's worth as secure from interest roller coaster rates... but our current situation now still fine and comfort.

If i do monthly epf withdrawal, then the P and L a bit low... as I like the compounded interest to benefit for. Agree?

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Added on March 27, 2012, 7:26 amIn my simple logic opinion:
1. Mortgage
Yeah, not worthwhile to re-finance with AIA or ING fixed interest currently for U. Not even a 2% variance leh - and there are costs involved up front

2. EPF a/c2 monthly withdrawals
Hm.. this one is IFfy
a. It depends whether one prefers to have cash in hand (plonk into flexi mortgage while waiting for opportunities), thus opportunities
VS
b. trust that EPF will continue doing 5%pa+ on average every year

Personally, i'd rather do (a.) as nearly 50% of my assets (excluding my karaoke machine, ant farm and cars ) are with EPF or EPF related (think Mutual Funds) investments. My flexi mortgage is BLR -2.2%, thus currently 4.4%pa daily rest.
Yes, i know i lose the variance between EPF's 5%pa+ vs 4.4%pa WHILE waiting for opportunities - to me, that's part of my cost of investment.
I usually do REITs and good stocks with this cash
REIT's average net dividends i'm getting is about 6%pa to 8%pa (depending on value bought). This is excluding the ups and downs of price.
eg. a few BSDREIT transactions is making 20%pa+ (dividends + price appreciation)

This post has been edited by wongmunkeong: Mar 27 2012, 07:30 AM

From a financial viewpoint, there is no good reason if the loan is a truly ZERO-interest loan. The $$$ in excess of the minimum can be put to better use (for e.g. - put in fixed deposit to earn some interest).

However, if you find that having a loan/debt is like a "monkey on the back" - then paying more than minimum to settle the debt earlier will enable some form of relief (it's an intangible benefit that cannot be measured in dollars & cents).

This post has been edited by chabalang: Mar 27 2012, 09:52 PM

Monkey on the back?
To me it's more like a 100kg dead weight on my neck WHILE SWIMMING (unless that debt is for an investment asset generating great cash flow / returns and my D/E is way below 0.3... i can keep dreaming can't i Chabalang)

Hehe , a little bit of dreaming is good for creativity and help to relieve stress (but excessive dreaming detaches one from reality).

Back to the part on debt: I am one of those AVERSE to debt (maybe, it has to do with my upbringing - my parents do not like to owe others $$$). My family and I buy all our cars with cash (just make sure - can be accountable to LHDN). My housing/property flexi-loans have near zero balance (functioning like an overdraft). I know that I am SILLY not use to such CHEAP financing (BLR-2.4%) to invest in something that can generate >5% p.a. BUT I can sleep better knowing that I don't owe anyone $$$. I know that I will never be very rich because I do not know how (or rather choose not) to use other people's money to make MORE $$$.

Back the original question on INTEREST-FREE study loan: there is no good financial justification to pay more than the minimum - unless it is for the "debt-free" status. I am not that familiar with study loan (since I have not taken one) - not sure on whether there are special clauses or whatever.

It truly is a zero-interest loan from JPA, although I need to repay it over 25 years and the payment amount progressively increases (pay 1x in months 1-40, 1.5x in months 41-160, 2x in months 161-300).

In some countries you can get a tax relief from your education loan repayment, if only that applied here too

Also thought about the possibility of deflation - but I think I shouldn't spend too much time worrying about that.

Age: 25
Net Income : RM 3600

Monthly Expenses
Rental RM420
Food n stuff RM 700

Credit Cards
currently holding 3 with some ezy payment on 2 of it.

CC1 - Insurance(RM333) and some ezy payment(RM250) 10 months more to go)
CC2 - Ezy Payment RM 400 ( 8 months more to go)
CC2 - For petrol. RM400

Debts
Done with car installment.
Currently paying back 1k to my parents for 6 months as i borrowed some money from them to purchase a property

Looking at how my badly managed finance is now, i probably only can start my saving after m settle with all my ezy payments.

any advise for someone who's really keen to improve his financial?

Thanks

This post has been edited by xander: Mar 27 2012, 11:27 PM

1) Just pay minimum sum since it is a JPA loan - it is a form of benefit from the Govt. Just enjoy the Govt. subsidy.

2) Too bad, there is no tax relief for education loan repayment in Malaysia (only for housing loan interest expense for SPA signed during 9 Mar 2009 to 31 Dec 2010)

3) Prolonged deflation in Malaysia is highly unlikely in the foreseeable future (occasional short-term deflation is possible if the local economy takes a dive along with "global recession"). Why? (i) M'sia is still on a growth path + relatively young demographics -> income growth and increasing household consumption will push prices higher (ii) increasing middle class in large economies such as China and India will ensure continued demand for commodities (yes, commodities prices can swing wildly in the short-run with all the "hot money" and financial derivatives BUT the underlying demand will be intact) - over the long-run, commodities prices are more likely to be on upward trend rather than downwards (iii) a number of developed countries (e.g. US and EU) are so indebted - do you think they will want inflation or deflation? With inflation and weaker currencies, they are repaying "Cheaper" loans.

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Added on March 28, 2012, 2:44 pm

Hi SlowCiken, I was waiting for Mr Wong to reply to you since he does a better job than me but it has been three days. I can only give my opinion on a "macro" perspective. I presume your stated income of 4k is Net household income (correct me if I am wrong). Your goal is to afford a house of 350-400k in 4 years' time with a deposit of 50k.

1) Your current position: FD of 10k. Assume no liability/debt? How did you get dividen of 3.2 (you meant interest rate of 3.2% p.a.)?

2) You need to save another 40k over four years. At your current saving rate of 500/mthly, you get only 24,000 (savings) + 10,000 (current FD) = 34,000 principal (in 4 years' time) + around 2,600 interest on savings (depending on i/r and savings interval) = 36,600. You need to increase your monthly savings to around 750 an (increase of 250 from current savings of 500/mthly) to achieve 50k in 4 years.

3) How to increase savings? Two points: (i) 400 for utilities/telco seemed to be high to me. You may want to squeeze 50-100 from it. Use prepaid, cut Astro to a cheaper package (ii) I am not sure I will be accused of evil or not - being filial is good but you may want to cut your allowance to parents. If you are not willing to or unable to, you have to squeeze another 200 from some other expenses OR increase your income by the amount. The trick is to minimize the "pain" or impact on your daily lifestyle but you still have to prioritize what is necessary and what is nice to have but do without it.

P.s. if you are a Bumi, have you considered putting your $$$ into ASB rather than FD? ASB is a good alternative to consider if you qualify for it.


This post has been edited by chabalang: Mar 28 2012, 02:44 PM

Your target is 50K but I think 80K is a more realistic figure for a 350K-400K property. Please bear in mind that you have to pay for legal fees, stamp duty, renovation and furnishings.

If you want to do it in four years you should save 1400 per month@3.2 interest rate for the next 4 years.

My advice would be first to cut your expense and to increase your income. This is how I would do it:-

1. Parents - Reduce to RM500 - Tell them your goal and they will be happy to help you - save 200
2. Rent - RM550 - maintain
3. Food - Reduce this to RM500. Start cooking at home and only eat out once a week - save 500
4. Bills - Cut out Astro and water and electricity should be below RM50 - Save 350
5. Other items - This is too high. Shampoo and other misc should be less than RM100 - save 150

In all you will save an additional RM1200. Include that with the RM500 you save every month, you will reach your goal in less than 4 years. Not only that please know that once you buy a property you have to start paying your monthly installment which may be RM1400 per month. If you can save this much every month then you will be able to afford the installment when the time comes. You also need to know that although once you buy a property you don't have to pay rent, you will have other expenses related to home ownership like maintenance, quit rent and assessment etc.

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Added on March 29, 2012, 6:11 pmYou have a savings of RM3144 per month, why do you want to withdraw your epf to invest? You should only do that if you are certain that you can invest that money in another investment vehicle that can give you at least 7% return per annum. If not my suggestion is to:-
1. Build an emergency fund of 6 months of your household salary of RM6700. You already have 35K so you can save 3K for another two months and you will reach this target.
2. Then set up a baby fund. Calculate how much money you will need initially when your child is born. Estimate the price of the medical expense, the equipment (baby crib, car seat etc). If you need RM20K, then start putting part of this 3K into this baby fund after your emergency fund. Also start paying the principal on your ptptn debt. Although you have to pay low interest, it is still interest. When your child is born you should start thinking about saving for his/her education and not be still paying for yours.
3. Once your child is born, if you are bumi, start up a ASD account and start putting away some money there. Even if you put RM500 per month, by 17 your child will have at least a RM150K head start.

I started saving for my child when she was born and also taught her to save her money. All angpows and money gifts are added to her education fund. I also bought an apartment which I will sell to fund her education. All in all I estimate that there will be a fund of at least RM350K for her studies when she reaches 17. My problem is that hoping she will WANT to go to college/university.

Good luck and happy planning!





This post has been edited by cynthusc: Mar 29 2012, 06:13 PM