save hard and then do what? invest? or buy more things?

most of the books for personal financial management will always state the same thing

SAVE and INVEST wisely

er.. balance savings and spending --> build emergency buffer --> invest to hit specific financial goals like wanted lump sum to finance:
a.retirement lifestyle - other than eating alpo
b. yearly travels
c. children's growth
d. parents' medical and well being
e. charities
f. etc.

Not much of an imagination or will have we? There are "bigger things" in the world than "me me me" leh

---

Added on August 15, 2012, 9:22 ambro - missed out one more, giving back (estate planning)
The basics will always be the same, the killer is the different specifics that works well for each individual.

---

Added on August 15, 2012, 9:30 amSomething to share on insurances - thoughts of a trained actuary and CFA:

http://www.investmentmoats.com/budgeting/i...mple-insurance/

Opinions from a trained actuary: Stick to simple insurance
Posted by DrizztAugust 15, 2012

In my insurance blast these few weeks, we talked about a particular trained field of mathematicians who assist in valuing the risks of insurance products, how they don’t seem to buy whole life insurance and investment linked policies.

I managed to get into contact with a US investment professional David Merkel. David is a trained life actuary as well as a CFA. He current managed his own fund, Aleph Investments, and talks about investment mainly in the domain of bonds and insurance companies at The Aleph Blog.

So I pose this question to David:
When I know that you are trained as an actuary it got me curious. They say that actuary assess the risks of insurance products to find value for consumers, at the same time evaluate the probable risks of the product.
What kind of insurance does an actuary actually buy for his and his family? Insurance are often sold with economic bias so what better way to know then find out from people that use actual data and determined it through quantifiable methods.

I heard that actuaries often buy only term life insurance only and that investment linked and limited whole life policies do not make sense. At the same time, it would seem that the way you can claim critical illness is such that most of the time you can claim it, you are almost very disabled or near death. In such a scenario wouldnt [sic] a pure death and tpd [sic] term life be suffice?

David’s reply was as follows:
This is my opinion, given my dealings among actuaries. I could be wrong. Actuaries avoid complexity in insurance products. Why? In general, complex products hide high profit margins. Products that are easy to analyze, like term life insurance, are competitive, and profit margins are low.

The same is true for savings products, like deferred annuities. Actuaries tend to buy simple products that cover basic needs.

Also, they tend to use insurance as catastrophe cover, because they know that having insurance companies pay on a lot of small claims is expensive on average.

There is an exception to all of this. If you are so rich as to need to stiff the taxman, buying cash value insurance policies can make a lot of sense. In that case, wealthy actuaries with clever tax advisors buy cash value life insurance. Death benefits do not pass through the estate.
Actuaries are generally conservative, and avoid insurance products that are not easily analyzed. That should be true of most insurance buyers.
I think that’s why my AIA insurance agent kept selling to me that his well heeled clients buy a lot of endowments.

We wonder whether many of us are in the same situation.
Whatever it is, the common myth in a person not knowledgeable in insurance is cheap equals lesser benefits. This sort of debunks it since guys factor in multi factors in their computation. Then again I could be wrong since there may be some important factors that were assumed, which could be gravely wrong when put into practice.

This post has been edited by wongmunkeong: Aug 15 2012, 09:30 AM

so bro Wong are you practicing ''Buy term and invest the difference'' currently?

Wow. So I grad 25 years old- have ptptn loan. 4 years to save for emergency fund. Already 29. I also need to save for wedding fund- no girl want to marry guy with no money. Add 1 more year 30. Then we save for house deposit 20k+7k fee. This 1 need 2 more year. 32 years old. After that kids come in, taking about 1k/mth. 34 years old. By this time new car needed (old one given by parents)- need to save deposit. PTPTN by now still have a while to pay for. Around age 40+ need to save for kids tertiary education. The boss man give me increment a few hundred a year only.

When do I start saving for investment then? Is the conclusion I need to join BN to get the financial freedom I want?

death/disease/disability + medical insurances? Yup
And no, no endowments - not mega millionaire yet, thus can't afford to take 2%+ to 4%+/- returns for long term locked-in "investments", unless there is a tax relief tagged to it ('ala PRS and/or annuities)

Y ar bro?

I thought I already gave a good example ... hmm ... what about like this ... can I also say that no girl will want to marry a guy with :

1) No savings
2) Save only 10% monthly
3) Get only few hundred increment a year - No offense but if you're getting few hundred increment a year .. there's definitely something wrong with your boss or you ..

My advice ? Cut down expenses, get a better job Ok I know it's easier said than done .. I'm also just starting lol .. but that's the way it is .. think harder about it ... like I said if you can somehow save 50% (Which is know is crazy too) then you only need half year to build your emergency fund ... Again this is also just advice You can always get the girl you want and your latest gadgets and Audi A4 and all if you find a way to do it ... but please share your secret too I'd like to not save and get everything as well

This post has been edited by GymBoi: Aug 15 2012, 09:52 AM

The conclusion is to live BELOW your means, not live WITHIN your means.
Make $100, spend $100 = live now only
Make $100, spend $70, save $30 = balance of now and future

Is it everyone else's fault or one's own responsibility for one's current and future lifestyle?
Your boss-man's responsibility is to give U an opportunity to make a living, NOT make U wealthy.
It's your own responsibility to make yourself wealthy.
Graduates these days with such thinking.. sigh.. anoneh, when i started working, diploma only and $700pm.
U think U have it hard? Plenty of others have it harder - think Syria, parts of Africa, even rural parts of Malaysia.

I just bought a whole life policy insurance with saving plan last year.I think i've made a mistake whereby i didnt do much research on insurance by the time i bought it because everyone around me is buying whole life policy.

Yes everyone including my family , friends and colleagues so i ASSUME there is NO problem since no one whining about high premium or whatsoever.

But until few months ago i read a books regarding personal finance and the author encourage us to ''Buy term and invest the difference'' with is quite NEW to me.So based on my understanding :

1) Pay lower premiums,get the same cover (payout is same)
2) i'm investing myself with the leftover money which i believe i can grow my wealth better than those saving / ILP plan after compound interest.Let's says i park the money in low risk investment like bond fund / or REIT

but there are also disadvantages too whereby :

1) If i terminate the policy now all the premium paid will be burn off.
2) Term insurance covers up to age 70, so have to assure that after 70 i will have to self-insured

Thats all i know...Bro Wong feel free to give some comments

Hehhe - i know the feeling.
I had investment-linked insurances + whole life insurances before too.

IMHO, it's VERY easy and cost effective to compare and get death/diseases/disability (3D) TERM insurances.
Heck, the best bang for the buck i saw thus far (again, i'm not omniscient ok - haven't seen 100% of everything) is the Public Mutual's group insurance underwritten by Great Eastern, for its investors.
RM1,100 pa - from my memory (please check website yar) covers $200K death or up to $400K permanent disability or $400K critical illness
RM550 pa - for $100K, $200K, $200K
etc.
I only need my 3D insurances to cover up to 55 as i won't be earning an income by then, my investment assets will. Thus, need no "replacement income" WHEN i kick the bucket after 55 - no impact on my loved ones.
Note - if U have outstanding mortgages, U may want to have 3Ds running UNLESS yr mortgages have MRTA.

As for medical - a bit harder to compare as many clauses are different.
In addition, some prefers non-term insurances for medical due to riders and stuff.
Personally, i aim to self-insure by 55 for 3D & medical, thus i'm going with term insurance for medical. Note however, most term insurances for medical does not have riders and can insure only up to 75 (renewals only from 60 onwards or so).

Well, personally i terminated my PRU & AIA, even though "painful"
Thinking like an investor - cut loss or continue holding kaka? Zero-holding thinking - if i were not holding this, would i now buy this or buy others of more value?

Just bouncing some thoughts/ideas with U yar - not 100% gospel truths.

thanks for your input bro Wong

I gave a reflection of the average joe in my post. Till when do you want to eat bread. Parents already pay for tertiary, parents already give downpayment for house, parents already give car, 2.5k/mth enough meh? Everyone become rich boss who will do the work?

Personally, I make healthy sum which after deduct house and stuff still have 20% savings. I intended to show the hopelessness of the situation in Msia.

Ah.. so, my bad, it was just your reflection on the avg joes in MY - my apologies for assUme-ing

Well, what i shared is still true and er.. EVERYONE become rich boss?
Which country, even advance/developed countries, have U seen statistically where that happens?
Makes sense in reality or not ar?

BTW, why $2.5K/mth only? As one gets better at creating and giving value, do U honestly think one will make $2.5K/mth only?
If one is living in rural MY, $2.5K/mth = good life liao lor right?
In Klang Valley, susah lar but like i said, that's just the starting point for most grads these days.

Great to hear you're doing well, gambate!

Hopelessness of the situation in MY? Then help to make little changes where U can lor.
OR just give up?
IMHO, MY isn't THAT bad though neither is it great. All countries and Gov has their issues - even the good ol US of A.

Just a thought

This post has been edited by wongmunkeong: Aug 15 2012, 11:50 AM

Starting graduate with RM2.5k is consider not bad. Many people who are not working professional still below that amount. I remember my first job salary RM1200 with diploma (year 2005) and work until 3k (year 2009) only get my first car. After get a car, saving not much already.. So the conclusion is one must learn how to manage money wisely.

The expert always said what most important thing we always forget is to invest in ourselves. Read more financial books and improve financial knowledge. This is how I get started to change my mindset and keep learning everyday

This post has been edited by alvinlim84: Aug 15 2012, 05:52 PM

I'm a fresh grad too,23 yrs old, just started work for about 4 months with RM2k,minus EPF all that RM1900. Recently been reading about Unit Trust due to my work (a project that related to investment,so i have to read investment stuff too) and i become more interested in Unit Trust.

My average monthly expenses was about RM1.2-1.3. Haven't start paying back PTPTN loan yet. So far no commitment because my parents bought insurance for me since young (thank god!my parents are wise!).

So can i seek some advise from sifus here, is it wise for me to start invest in Unit Trust now? Or wait for few more years? I'm considering long term RSP with higher risk equity fund.
Also if in future will I be able to switch from RSP to EPF Investment?

This post has been edited by kaven: Aug 15 2012, 10:20 PM

Dude - i'm no sifu ar.. thus clarifying with U:
Apa tu
a. RSV?
b. RSP?

I thought i was quite updated with the things one can do with EPF A/C1 & EPF A/C2 - looks like there are more options based on your posting, the hunger.....

oh my,hahha typo! should be RSP!!! please forgive my noobness sifu~~

PRS izzit? Private Retirement Scheme?
OR
really RSP? Stands for what ar bro?

i thought RSP stands for Regular Saving Plan ? no?

er.. yeah those are the initials
Pardon moi - got used to the terms used in LYN - DDI (direct debit instructions AKA monthly standing instructions) thus doing Dollar Cost Averaging
OR every period execute manually value cost averaging or value investing.

Ok down to the heart of the matter - where U shd do it now or later right?
Opinions / Point of View follows (not rules yar)
Simple - 1st things 1st, have U built up at least an emergency buffer / kitty of 3 months' average expenses?
eg. Say U spend $12K pa all in all, thus your average expenses pm = $1K, thus U should if possible have $3K squirrelled off somewhere safe & stable - eg. savings a/c + FD
This $ is to save one's tail in case of emergencies (no, not when U NEED that new coach bag or S3) INSTEAD OF BEING FORCED TO SELL your investment to cover tail. When one is forced to sell, it may not be the right time and one can incur losses easily.
Why?
Simple - ALL investments (excluding FD, savings a/c lar - those are generally "storage") have some sort of transaction costs, either when buying or selling or BOTH. Unless one is incredibly lucky, usually it takes time to break even then make profits.

Then after building the above OR while working on the above, checkout what amount of risks U need to cover.
(Keep in mind, insurance is to cover and transfer your risks, NOT as investments.)
eg.
a. if U have economic dependants, pls ensure U have death insurance - yes, death insurance, not life as it pays out after death
Get enough and at the best bang for the buck.
b. does your employer cover enough hospitalization & medical? - no, then please look into it.
Again, insurance should be used as a risk transfer (to insurance Co) and to cover costs which will be disastrous to U or your loved ones.
Buy enough for now + maybe forseeable future (3 years? 5 years?) - balance your coverage needs with costs/affordability.

Now, when U have the above 2 settled - U should have a good hands-on on money & risk management, ie. spending less than U earn by living below your means, thus enabling U to build and accumulate wealth. In addition, WHILE doing the above, learn about asset allocation, classes of assets, investment methodologies like dollar cost averaging, value cost averaging, value investing, growth investing, trend, etc.

Then start accumulating your ammo for investments and while accumulating - formulate a big pix plan, perhaps based on asset allocation + execution methodology coupled with selected/filtered specific investments (eg. DCA with PFEPRF, VCA with PIX, value investing with stocks like PBANK, NESTLE, DLADY, etc.)

Track them and manage them as per your plans and methodologies.
By tracking them, U can then review monthly, yearly, etc. whether your picks AND methodologies work - else tweak.

Phew.. digest digest heheh. Hope the above summary helps.