so, what's those calls I got... the last offer was 4.5%... no documents required... just say yes over the phone, and $10k will be credited into my account... scams or offers to entice people who don't need PL at all...

... and so high interest for those who really need a loan.

Some answers were already there in the recent posts... if not obvious enough, to recap:

1. You don't pay the minimal amount on cc. You pay as much as you can. So why the savings of 400?

2. Spending first, then savings, then investments... be prudent in your spending... the 400 misc, is that food? If it is, you spend 400 on food, but 1300 on lodging?

3. On buying a first house, a rule of thumb I used was 20% savings, another 10% or 15% from EPF, housing loan 65-70% with tenure of not more than 20 years. This to avoid paying too much interest, and overspending on a house.

(Before some argue that no house can be found using this budget criteria, then too bad... lower your expectations with a cheaper house/apt/hut... or keep renting.)

so true... and was so tempted to get this 'free' money to invest... that I was not thinking at that time of flat rate vs. effective rate, when the 4.5% was mentioned.

Finally, did not take up the offer because can't think of any 10k investment that will immediately give back $500 every month.

1. It can create a false illusion that you are NOT living above or close to your means, that you managed to have some savings when you can't fully pay the credit card outstanding balance.

Take care of the credit card debt first, use every savings you have to clear it first, then re-built the savings. You will have more savings eventually, since you are not spending your hard earned money on unnecessary interest.

2. Well, just pointing out something you can spend less on, which can results in more savings.

3. Longer loan period, more interest to pay. Just like higher loan amount, more interest to pay. Again, just pointing something where we can lower cost of interest... if we wish to.

And be aware that there's no such thing as a STANDARD and NORMAL 30-35 years 90% loan, just because it was offered by the banks, and everyone else doing it.


This post has been edited by j.passing.by: Sep 12 2014, 09:52 PM

FOLKS,

When taking a housing loan, don't just compute how much you can spare on the monthly installment, without regards to the loan amount and the tenure.

Try to compute the total amount of interest to pay if you can varies the loan amount and the tenure. The difference in the total interest can be staggering.

As an illustration:

a) House value 300k. Loan 210k. Interest 4.45%. 20 years. Monthly installment 1323.
b) House value 300k. Loan 270k. Interest 4.45%. 35 years. Monthly installment 1270.


(B) looks more attractive... less downpayment... easier to pay...

How much are the total interests?

Please note the 1st word in the heading of this thread. So your question is irrelevant!

It is 'you' who 'you' should be concerned in 'your own' financial matters. How others do it or how much others have is irrelevant to 'you'.

Anyway, they are illustrations - to drive home the point on how to avoid paying too much unnecessary interest. So don't get too fixated to the given 90k number.

Another way to look at it, say you cannot easily saved up to this x figure, then look for a cheaper house/apartment that you can afford; such that you don't have to have a 90% loan.

Or take a 90% loan, but still afford a higher installment and reduce the tenure.

It's up to you how to 'play' around the figures, but still the important point is this: pay lesser interest.

If you can only do the max (90% loan, 35 years tenure), then you need to really, really need to consider whether or not you are overspending.

"Spending first, then savings..." Take care of the spending, then you will have more savings. Less interest paid, more savings.

A house is the biggest purchase item in one's lifetime; so the savings we are taking here is long term savings, ie. savings for retirement. So less interest paid, more retirement savings.

And if you have enough savings, and don't have any investments other than FD, don't pull out too much from EPF.

That's an interesting take on semi flexi / fully flexi loans, but you are still going it the wrong way if you could only afford the house with the max loan and longest tenure. And hoping that you can reduce some interest in future with the flexi loans.

A wise man, I read, said - in not the exact words: It is not the unexpected outcome that will screw you up. It is the expected outcome that did not happen that will really screw you.

Me, being old school, would rather have a fixed budget, and keep it simple.

I would use a Standing Instruction to auto debit a savings account to pay the monthly installment. So no late payments, no extra fees/interest to pay. Any extra savings like annual bonus, put them into this special purpose savings account. It's a sort of emergency fund, and I can readily know how many months of installments are covered in case I lost my job. (This is another financial tactic: putting savings/expenses into separate envelopes.)

This post has been edited by j.passing.by: Sep 14 2014, 04:57 PM

And that's exactly the problem between reading with an open mind and reading with an inconceivable mind with a preconceived concept. Please read again from post #427 onwards, and you should see that you're now going in a circle.

A flexible mind would not disagree on avoiding a 90% / 35 years loan, and would think "yeah, reduce the tenure with more savings, and (maybe) use a flexi loan to even further reduce the tenure in future as there is a possibility that I could afford a higher installment in future".

What I was trying to point out to you (and readers at large) was not about having a flexi loan or not.

It's about having savings and more savings before buying a house. It's about not being in a hurry to buy a house with the least amount of savings, and the highest amount you can borrowed that take the longest time to pay off.

It's about not overspending on a house. It's about being financially prudence on buying an affordable house that is not above or close to your means.

And if you can do it, you already cut down a whole lot of interest before you even get the keys to your new house, and begin paying the installments.

This post has been edited by j.passing.by: Sep 15 2014, 01:33 PM

First thing you should know is there is no financial sifu or resident advisor here, just posters sharing their experiences and opinions – so don’t take all suggestions given as the gospel truth or expect any financial formula that will ensure success in whatever objectives you’re searching for.

Second thing you should be aware, is this poster (me) likes to use ‘you’ in his sentences. Don’t take them too personally; as most of the time the ‘you’ is NOT directed at you personally. But also the general readers/browsers/lurkers, as this is an open forum... no point addressing issues that are specific to you, as you are not paying me anything; and it’s more fun (and easier to bullshit) to just simply share whether opinions/ideas that crosses my mind.

Third, as you can see, I have too much time... so here goes...

Are you a smart consumer? If you think you are, then you already answered your own question on whether you’re on the right track on money matters.

For example, purchasing a medical card that cost RM150 monthly. How do we, as a smart consumer, know whether it was a value purchased or not? Do you spend the 150 after doing some shopping/research, or because it was recommended, or because a friend has the same thing?

In the case of car insurance, where you can get optional coverage on the windshield for, let’s say, RM60/year.

A smart consumer before getting this optional coverage would find out the cost of the windshield, let’s say about rm180. Then he/she will try to estimate whether it is worthwhile or not.

I wouldn’t off-hand say it will be worthwhile or not because everyone’s situation is different. He/she may be living near a quarry where there’s lot of lorries carrying small stones, or his/her house is in a plantation area with unpaved roads, plus lorries carrying palm fruits that frequently send flying a seed or two onto the cars following behind.

Or he/she may be living in a neighbourhood, where it is unheard of, of car owners replacing their windshields – even for drivers with many years of driving experience.

And even for that motorist living near a quarry, he/she may not think it worthwhile to have the optional coverage; as he/she maybe not that fussy – a small chip on the windshield, never mind, la... no need replacement; or he/she feels that the cost of the replacement is not a worrisome amount to be fret about... no big deal la, just pay out of the pocket as and when it is needed to do so.

On other matters, you seemed to be doing fine... emergency fund nearly touching 6 months of gross salary, just barely the minimum...

Savings per month 500-800... maybe you should try putting money aside into separate ‘envelopes’.

One envelope for travel, one envelope for gifts/festive season expenditure, one for long term (retirement), one for special purpose (like opening a small business – that dessert shop which you edited).

This way, you would know how much exactly you are really saving each month, after deducting those set aside for specific expenses.

As for investments, I biased towards unit trusts/mutual funds, read those threads for more info... I would suggest only invest those savings you aside for the long term ie. retirement.

In some of the recent posts, it was easy to spot the red flags. Like having credit card debt on one hand, and on the other hand, having savings which can clear the debt.

So good money was spend on unnecessary interest that can be avoided in the first place.

And there was a recent thread asking how to settle a loan earlier... it was not a surprise to me reading that thread, as someone I knew had a similar problem.

Let's give this person I knew a name, John.

John is well-paid, and have savings. Has a house, car, etc. And lately, bought a 2nd car for the family.

One day, he told me about a mistake which he inevitably made, which is very similar to that mentioned thread.

He was tired of making the monthly installments on the 2nd car loan, so wanted to clear it with his savings. To his horror and surprise, the outstanding balance is still a big sum to pay even though the loan was nearly 3 years old, and he never missed any payment.

He had signed up a 7-year loan with the lowest possible monthly installment.

How did it happened? It was an 'entry' car for most 1st time car buyers, and most of these car owners take the offered 7-year loan. So the car salesman, and loan agent offered the same to John.

(They didn't ask... and John also didn't ask... the paperwork was like on auto mode, completed without much questions.)

And John automatically signed the loan without much thinking too...

(Or maybe John got confused with the flat rate interest on the car loan which is just a fraction of a percentage above his FD interest rate, and don't mind paying that supposedly fractional difference.)

And the crux of the mistake is that John did not even need to take any loan at all, as he has enough savings to buy that 2nd car in cash.

Even for the sake of having some savings on hand, John could have taken a much shorter loan with a very much higher installment several times that original installment and still able to easily pay it out of his monthly paycheck.

End of story.

Moral of story: Never automatically think that a new car is always tied to a package with a 7 or 9 years loan.

There are some people who really need a 7-9 years loan, and have no other choice because that's the only way to have a car (which they essentially must have for some reason or another.) And it's the cheapest available car...

There are some people who purposely take a 7-9 years loan, because they are small business owners/traders with irregular income; and the lowest possible installment is a sort of safety net that will catch and safe them from missing any payment.

If you don't belong to either group, and can be a smart consumer, join the latter group and spend your money wisely. Don't waste them on unnecessary interest.

Don't join those showy showy wannabe groups... I meant those who way overspend than they can truly afford to, and were just living from paycheck to paycheck; but if you have the means and can afford to, flaunt it if you want to, I wouldn't care...

This post has been edited by j.passing.by: Sep 16 2014, 08:31 PM

Congrats... you are all set for the rest of your life!

I would not touch anything further to reduce those cheap loans...

1. Don't touch EPF to reduce the housing loan.
2. Just continue paying 100/mth to the student loan.

ASB is paying you more than what you would lose in PTPTN. Like-wise, EPF is paying you more than what you would lose in the house loan in interest. So, don't withdraw from the former to pay the latter. Pay them out of your monthly salary.

3. Save at least 100/mth into ASB.
By my calculations, you would incur about 1,700 in total interest paying the student loan, clearing it in 107 months.

If you put 100/mth into ASB at the same time, there will be about 4,000 in total interest, and total amount of 14.8k.

4. Continue with the ASB loan. Complete whatever financial objective you have initially started. Change the method only if you have a alternate method to reach the objective... you don't change objective without considering why you need to change the objective. (You don't move the goal posts nearer simply because you can't kick the ball hard enough.)

Lastly, the loans help to reduce your discretionary income... pay the installments first thing upon getting salary...

This post has been edited by j.passing.by: Sep 17 2014, 07:06 PM

wow, long story... so need to trim some, leaving the essential parts... and I noted there's a 2nd post too...

Not including the student loan, it's a tidy sum of about 53k in personal debt.

You need serious intervention... cannot simply continue on like this, you will only getting deeper and deeper into debt.

Don't blame your job and pay, any increment you have, you will only spend more.

You are living from paycheck to paycheck, and whatever savings you have had - it was already blown away by the cc interest, unfortunate family events, and unpaid leaves.

First things first, do the things that have no other options first, then follow by those things that are optional...
1. Personal loan, 1028.
2. CC balance transfer, 197.
3. Car, 539.
4. Motor, 225.
5. Rental, 250.
Total of: 2239

Net pay: 4300
Balance: 2061

6. 3 credit cards... clear one at a time... pay as much as possible on one of them and the minimum on the other 2:
a) 500
b) 200
c) 200
Total: 900.

Balance left: 2061 - 900 = 1161.

So, can survive or not on RM1161 which is for food, petrol, gym, unfi, etc. etc...

If cannot, you need to tell upfront to your family (and relatives) that things are not rosy.

You might even need to sell the car if needed to do so to reduce the monthly payments... it will also indirectly send the message across to your family that you're not doing fine, financially-wise.

(Borrow, or rent a car to balik kampung. It is an expensive thing to have if you are not using it daily... just like a rich man having a Ferrari to decorate his front porch, and driving it once in a blue moon.)

===============

On your career, I'm not in the same line as you, so what I'm about to say might not be true or correct.

I would suggest not to resign anytime soon without another job. And as you noted yourself, a new boss would not be too kind with unexpected leaves, and unpaid leaves.

Also be aware that in any retrenchment, it is the new hires that will get the axe first.

If the industry you're in are based on projects or contracts, of course the pay is good when there are projects; as the company will face daily penalties when the project is delayed, and bosses more than willing to pay through their nose to get the project done and completed with as many hands as they can possibly get.

But once the project is completed, and no other project in sight, that's when the axe will fall.

This post has been edited by j.passing.by: Sep 17 2014, 08:56 PM

With your recent experiences, you are now a sifu too in your own right... and can share with newbies what you have learnt...

Aren't we all the same? We have nothing to gain too... all just wanting to sound intelligent and smart.

So how much history we can rake up with credit cards, except to spend, and spend much more than the regular swipes at Tesco and Petronas? When we want to be financially prudence and use the CC like a debit card?

Read that link in the above post on the 5 things bankers look for. Credit history is the last item. The top 2 are foremost important: Valuation and DSR (Debt Service Ratio).

Valuation: The bank will be holding the property as collateral. So they will want to have as much collateral in case of loan default.

DSR: This shows how much you can pay monthly, and items 3 and 4 lend support to what you claimed you can pay. The bank don't want you to default... taking over the pledged property and lelong it would be too much work when they are in the business of giving loans and collecting principal plus interest.

"Less than 10pc of EPF members can live above poverty line, deputy minister says"

So says the headline, but in the article was just a bunch of stats given by the deputy minister in Parliament. It's putting words into someone's mouth... quality of report is bad.

The stats means nothing much without knowing how much was withdrawn earlier at age 50, and much earlier for housing & other reasons.

(480k = 24k over 20 years. The maths is too simple... that only simple-minded financial wealth CONsultant uses it. Yeah, he puts 480k under his bed and take out 2k every month.)

===================

"I'm 1 of the 1331."

While 69% has less than 50k at age 55.

I think it's high time for EPF to give more dividends to the lower groups by introducing tiers and caps... since EPF often complaint of having too much money that they can safely and conservatively invest without taking too much risk and yet get a reasonable return.

That's the reason why a scheme was introduced to allow members to withdraw to invest into mutual funds. And they, later, defeat this purpose by setting a higher 'basic income' table...

I think EPF internally has had already many pools of investments... some for long term, some riskier, etc. Just that they need to set up dividend tiers similar to what banks do with fixed deposits with different interest rates at each level of tenure.

I don't think there is any definite yes or no answer. I still advocates being a 'smart consumer'... you shop around, you compare, and buy whatever is necessary. And don't overspend.

And don't commit to anything long term when you're not too sure of your monthly discretionary income, ie. savings that you will have after all the bills, monthly installments and basic expenses; be it insurance or investment.

Will the expenses change in the next several years? New house, new car, holiday, children, etc in the near future? These are the types of questions you should be pondering too.

So this thread is taking another turn? From managing lifestyle expenses to seriously managing money as consulting a licensed financial adviser?

"Proper insurance planning", instead of the usual debate whether the medical card is necessary or not?

A sub 2k in savings account to pay 1% of annual income for a financial makeover instead of the usual 'why don't you put into FD for more interest'?

I was 'entertained' by some of the bulls that were spread here; and there were some bs sales pitch here as well... and it's easy to spot them whether the posters identified themselves as agents or not.

When they do identified themselves, I tend to skip their posts... as they usually end up with the motive to sell themselves. Boring to read.

I opened to read this thread 'cos Wong Sifu was the lastest poster... and got a bonus that SuperSound posted too.

A fairy tale.

It was amazing to hear that there are banks elsewhere in this world that give negative interest. Yes, their customers will have less instead of more after keeping their money in these banks.

Banks here is even better in their marketing, and are able to get their customers to pay to keep their money with them without the customers realizing it.

Customer John has extra money above his normal savings. He can put in an extra 100k towards a new house for himself and his family, and take a lesser loan of 400k. And with his monthly salary, John can finish paying the loan in 15 years.

When making enquiry at the bank, the loan officer introduces him to a better loan scheme. This flexi loan allows John to put his extra 100k into the account, which also allows him to withdraw at anytime, and it will also offset the interest charges on the outstanding loan balance.

It sounds like a pretty good loan scheme. So, John agreed and take up a loan of 500k.

Since the loan is now at a higher amount, and also the fact that any extra amount he puts in each month (which he will probably will as John is a bright young man and good in his job and his boss pays generous bonus and annual increments) will also offset the interest charges, John decided to have a lesser monthly installment as well, the loan tenure is now 35 years.

As when John puts in extra money above the monthly installment, John calculated that the total cost of interest will be the same whether the loan tenure is 15, 20 or 35 years.

Before I forgot to mention, John is 29 years old. He is married and co-signed the loan and property with his wife.

As said, the banks here is good in their marketing, and able to convince John to commit and locked him into a 35 years loan instead of his intended plan of a 15-year loan.

End of fairy tale.

=================

John is now richer because with the flexi loan, he has an extra 100k which he can withdraw for any urgent needs. He don't have to put aside extra savings as emergency fund.