I think he also needs to eat, buy clothes, maybe some movies now and then.... don't think RM750 is a lot to spend for 1 month these days....

Ok, I was hesitant to comment on the initial post, but anyway, from the listing you gave, I think we can clearly see that car is eating up a significant chunk of your income...

RM510 + RM65 + RM80 = RM655 which is 32% of your take home pay.

House Rent seems very low and reasonable, I'm guessing you're renting a room so nothing much to do there.

Hate to say this but the car is really a huge expense, but I guess you're on car loan and maybe hard to do anything about it without suffering significant loss (what car and how long more loan?), but if there is a way to review that expenditure, maybe worth thinking....

The other thing is maybe work out a budget and try to be disciplined in that to try and increase savings from RM200 to more.

e.g. let's say budget RM150 spending money per week, and if you can track down to detailed categories even better, e.g. how much spent on food, entertainment, clothing, etc... but this is easier said that done because I also struggle with keeping track of spending

"salary = 2000 after minus sosco and epf
car loan = rm510
house rent + parking = rm115+65
car petrol = rm80
utilities = rm80
parents = rm200
balance = rm950"

This post has been edited by poolcarpet: Feb 26 2013, 12:06 PM

is the interest rate about 3.2%? that works out to RM510 per month for 7 years...

can't do much for the car since you've already committed 7 yrs loan, unless willing to sell (suffer loss) and drive an older car without loan. keep the car as long as you can, maintain it well and don't tie yourself down with another car loan in the future. then you'll have more flexibility in saving/investing.

for budgeting, it may be easier to set weekly budgets first, e.g. as i've said RM150 per week. once you've finished that, no more... so you'll be very careful with the spending early in the week, and towards weekend maybe even end up with cash surplus which you can save



This post has been edited by poolcarpet: Feb 26 2013, 01:15 PM

1. 2.8% is not low. It is what the bankers want you to think. After you convert this 2.8% to APR, it's probably around 5.2% pa (in contrast homeloans are about 4.xx% APR at the moment).
2. If you need to lower the installment per month before you feel comfortable it's probably the wrong choice.
3. ZERO installments mean EVEN more money for investments. And you need to get returns MORE THAN 5.2% in order to 'benefit' from the 'low' 2.8%

If you do not understand why 2.8% flat rate (car loan rate) is actually higher, read page 13-8 and 13-12 of this PDF
http://www.ibbm.org.my/pdf/Chap13_amend%20...05%20060205.pdf

If too hard to understand (it was for me), just remember car loan is more expensive that what you think. It's never a good idea to take a 9 year loan for any car, it's financial madness.

What car and price btw?


This post has been edited by poolcarpet: Feb 26 2013, 03:43 PM

It's never too late to start cooking a fresh batch of abalone fried rice... forget about the past, learn from mistake and never repeat it. Many would have learned the same way too (myself too)

Shariah compliant is for Muslims, as it takes away the concept of conventional interest and uses "profit sharing" instead.
http://en.wikipedia.org/wiki/Islamic_banking

The IBBM pdf explains it all, also do check out your own car hire purchase documents. In one of the documentation (normally the carbon copy one), you will see details of the loan, total amount, and most important of all the APR. That is the true cost of that loan... not the simple flat rate interest.

Very simple scenario you can imagine, if you have RM100,000 and you want to buy a car - they are offering flat rate interest of 2.5%. Sounds like a good deal, instead of paying cash for the car, take the loan and with the RM100k, put in FD earning 3.05% interest. In the end you make money still cause car loan only 2.5% but FD 3.05%, right?

Wrong. If you calculate properly (remember you need to withdraw the loan installment amount from the 100k FD every month to repay the car loan) you will see that you actually lose money so how can that be? It's because the interest rate quoted is not the same (like talking mm vs cm) and the 2.5% is actually about 4.5% APR which is more than the FD 3.05%. (Again, IBBM pdf has all the explanation and details, but for simple quick calculation, flat rate x 1.85 would give you the rough APR.)

Go check out your own car hire purchase documents and you will see. Here's an example... flat rate 4.4% but in actual fact it's actually APR 8.19%

your example is the same thing lah... they offer you loan at 4.xx% (like car loan) but as you've calculated it's effective rate 9.xx%.

same goes for car loan... exact same principle..

sorry if it's confusing.... just a comparison,

let's say you take RM90k loan for 7 yrs:

1. Scenario 1 - buying a RM100k car, 90% loan at 2.5% flat rate - key in the values into the calculator here:
http://www.autoworld.com.my/v2/tools/loan_payment.asp

and you'll get RM1258.93 per month installment


2. Scenario 2 - buying a RM100k property, 90% loan but at 4.68% APR - key in the values into the calculator here:
http://www.simedarbyproperty.com/home_loan_calculator.aspx

and you'll also get RM1258.56 per month installment.

Notice how in both scenarios we are taking RM90k loan, over 7 years, and monthly installment is almost similar?

If you follow the formula in page 13-12 of the IBBM pdf, you'll work out that 2.5% flat rate is equivalent to 4.68% APR.

That 4.68% is the true cost of the car loan at 2.5% flat rate, that's what I'm trying to say.

Sorry man, I'm not a banker no idea Maybe it's easier for most people to understand if it's shown as flat rate. Also looks better from bank's point of view, as most people will think 2.5% is 'lower' than 4% APR for example...

If you use APR method, it's actually interest charged on reducing balance, e.g. 100k loan at 2.5% for 7 years, in the 7th year your loan amount would be must less than 100k, probably RM15k (just simply tembak a value) - yet you are still 'charged' 2.5% of 100k for that final year.

It's just different way of looking at interest, in the end you still pay same amount of interest as you can see/calculate from the car/house loan example above. (calculate payment per month x total months, both same).

And just did some googling and found HLB offering car loan based on BLR!

http://savemoney.my/mach-by-hong-leong-ban...ntrol-car-loan/

"VARIABLE RATE at 6.6% p.a. is approximately 3.5%-3.7% p.a. after converting to FLAT RATE."

so good to see different approaches and thinking. for me, i think 16 months or even 12 months is way too much. i keep about 3 months only for CRUCIAL xpenses. that means some other luxuries are NOT catered for, e.g. entertainment.

maximize the rest in investment, whether ut or property or shares...

if there is a serious need for more than 3 months then there is still sufficient time to plan.

just my views but i agree everyone will have different planning/requirements.

Just curious, what kind of insurance is that RM200 per month??? RM2400 per year?

Again as mentioned for another forum-er before, I think car again take up a huge chunk - RM500+200+50 = RM750. Throw in insurance above and this is already RM1k gone.

RM800 on food & groceries maybe a little too much? RM200 per week? Just for yourself alone???

What is your typical spending on food daily with the RM26?


This post has been edited by poolcarpet: Mar 6 2013, 04:54 PM

For EPF A/C2 with flexi mortgage, you still can't touch the money right? If you withdraw from A/C2 to reduce homeloan, the exact amount cannot be withdrawn under flexi mortgage, right?

Ok I know yearly withdrawals definitely cannot, not familiar with monthly withdrawals but I would think EPF might want a statement to proof that the money was used to repay the loan and not for anything else... ? anyway hard to touch EPF $$...

fully agreed with the last few posts!!

sometimes i see how today's parents 'spoil' their kids, i

all expensive branded stuff, new cars, branded watches, super special birthday celebrations, really

It's not THAT long... if you buy new properties. I believe the date is from S&P signing date, and for new properties, it will take around 2-3 years for construction anyway, so it will be maybe 2-3 years after VP.

I believe the rates are 15% within first 2 years, and 10% between year 2-5, and this is charged on the profit (not selling price) and you can also deduct costs associated and RM10k relief. Or if really hit a goldmine property (DPC?) and you want maximum, you can also choose to have once in a lifetime exemption.

Unfortunately RPGT is just the smaller amount associated with selling a property, there are other costs too

There are lots of good spreadsheets out there too, I've used this before:
http://www.simpleplanning.net/

I think there are two school of thoughts on debt repayment.....

1. Pay off the one with highest interest rate
2. Pay off the smaller amount

#1 is very calculative, and aim to reduce the cost of loan
#2 is more human emotions side, as you clear the loan you feel more positive and be encouraged even more to clear the rest

Personal loan 4% pa, should be around 7.xx % effective
CC interest should be around 18% pa?

If so, then you should pay off the CC as soon as possible, and control future spending with the CC. Never carry any CC balances because that is the most expensive form of 'loan'. Once that is settled, tackle the PL.

For ASB, no idea not familiar with that - if you are getting returns higher than the PL/CC (which I doubt so) then NOT a good idea to withdraw to pay off the loan. It's as simple as working out which will give you more 'returns'. If you do withdraw from ASB, then you must be disciplined NOT to take on another PL/CC balance, otherwise it's an endless cycle

Here is a way to manage CC spending.... if you have a CC where you can pay online (e.g. maybe same bank), treat the CC like actual money.

1. Make payment using CC
2. Once back at home, login to online banking and make the payment (same amount as charged in #1) to the CC immediately.
3. Repeat this and at the end of the billing cycle, you should have very little or zero balance in the CC.
4. Your 'credit limit' is based on what you have in your bank account, not based on the CC credit limit (which at often times is way too high in my opinion)

Never be tempted to sign on those credit card installment plans (unless 0%, but even that, be very careful with budgeting). I personally only have 1 credit card, that's all - don't want or need so many cards, and also don't want to keep feeding govt RM50 in annual fees.....


This post has been edited by poolcarpet: Mar 13 2013, 10:40 AM