if you now only have 10k cash, suggest you just put in bank for emergency fund ...

only when you have extra money, then only use to invest.

Hi to all financial gurus here, just dropping by to ask your oppinion.

I recently have managed myself to save for my wedding at the next year. So, since it will be at least 6 month before I actually gonna use it for the wedding expenses, I have some considerable ammount of money in my bank account...

And knowing banks just dont provide good dividens/interest, its kinda sad just watching my money just sitting there doing nothing...

So, do you have any suggestion for a short term investment (6 month or so) that I can get my hands into.. maybe FDs or Unit trustes.. Any ideas guys...

Just be careful about doing short term investment. If I were you, I would keep in FD, unless you have parents to fall back on. I did what you intended to do just before my wedding. Asian financial crisis hit, stock market crashed, and my stock holding reduced by 80%. In the end, I didnt have enough for the wedding (Due to pride, I didnt want use my parents money), so I paid the wedding using a few credit cards, and use the angpau money to subsequently settle bill. And I had to cancel or rather postphoned my honeymoon to 4 years later. So just be careful with what the wedding money.

Thanks for the advice newbie99. I understand your point of view.. Actually I came accross with the idea because i have been monitoring in general some of the unit pricess after the financial meltdown.. and it seems to be rising up quite steadily.. Thats why I would love to jump the bandwagon as well.. Anyway, let say I put them in FD, what are the risk or even charges that might applies and need to know? By the way, any other ideas? Thanks for the reply though.

By buying unit trust, I hope you factor in the management fee and front-end load fee. That will take up 5% of your capital. In a normal market, it will take 6-12months just to recoup the fee. So unit trust is for longer term. Yes, I agree prices have increased tremendously after the global financial crisis. Now is a bit toppish. Certain selected stocks are still cheap, but most are generally pricey.

With just 6 months to go, I recommend you to just put it on FD.
Stock prices (which will effect unit trusts as well) right now is at it's top level. You can see the volume is very low and i suspect the momentum to push it harder is very low. Plus, when you put your money in Unit trust, you already lose about 5% of the money on management fees.
Think about it!

Sifus, let's say me and my wife have a combined nett income of RM6000, please advise what are the basic deductions I will need to consider before making a car purchase.

Monthly commitment for 2 person:
Rental 145
Bills 120
Phone 100
Parents 400
Daily expenses 1050
Petrol 500
Entertainment 400
Miscelaneous 250
Total is: 2965

Anything i missed out?

I plan to pay around RM800/mth for 9yrs for the car.
Will I be comfortable with this amount?
We plan to have a baby maybe next year.

p/s: Notwithstanding my basic principle of min 35% savings per month, which should be at least RM2100.

Kindly advise me...thanks a million!!

This post has been edited by stupidbump: May 1 2010, 03:57 PM

stupidbump,

Ask around and you will find that car loan is based on SIMPLE INTEREST RATE. So, for longer tenure loan like 9 years loan, the EFFECTIVE INTEREST RATE is MUCH MUCH higher. It is NOT WISE to take 9 years car loan. After you signed up for 9 years car loan, even if you pay off earlier, you do not save interest.

So, take a 3 years car loan. And, buy a car based on that assumption.

Dreamer

This post has been edited by dreamer101: May 1 2010, 07:29 PM

Dreamer, I know the longer the tenure, the higher the interest rate.

But my main concern is I will be buying a car which will at least last me for the next 5-6 years.
My present proton is already 7yrs old and is still in fairly good condition.

So what I am thinking is to get a better car, but make longer the loan tenure so as to not burden my present life.

Yes, making a 3 year loan does save me alot on interest, but I may be stressed out due to the higher monthly payments.

I did some simple calculations based on current interest rates, and the difference between a 3year and a 9year loan is about RM12k, which to me is quite reasonable.
(based on 3.3 and 3.8%, correct me if i am wrong though)

Mthly payment is less by double for a longer tenure.

I will only need to ensure my investment ROI is minimum >4.5% per annum to withstand the car loan interest, correct?

Kindly advise.

stupidbump,

<< I did some simple calculations based on current interest rates, and the difference between a 3year and a 9year loan is about RM12k, which to me is quite reasonable.
(based on 3.3 and 3.8%, correct me if i am wrong though)>>

Show us the car loan interest rate and loan amount. We can calculate the difference between 3 years and 9 years loan. On first look, I do not think your calculation is correct.

<<But my main concern is I will be buying a car which will at least last me for the next 5-6 years.>>

You main concern is the baby and perhaps you want to buy a house. Car is the LAST of the priority especially if you already have one.

Dreamer

Dreamer, I am not sure if the calculation is 100% accurate, based on assumptions of the current interest rates.
Loan amount is RM51000, and i made a rough estimation 3.3% for 3 years and 3.8% for 9 years. (this might differ from actual)

I assume you also have your own family based from your posts in LYN.
Taking into account house and a baby, how much will I need to spare in future every month?

Kindly advise.

Thanks alot.

stupidbump,


For 3 years, you pay 51 K X ( 1 + 3 X 3.3% ) = 51K X 109.9% = 56,049 3 years = 3 X 12 = 36 payments

Monthly payment = $54,500 / 36 = $1,556.92 REAL INTEREST RATE = 6.23%

For 9 years, you pay 51K X ( 1 + 9 X 3.8%) = 51K X 127% = $68,442. 9 years = 9 X 12 = 108 payments

Monthly payment = $66,442 /108 = $633.72 REAL INTEREST RATE = 6.84%

So, your calculation is correct. Now, the QUESTION back to you is

A) How much does the car costs?? Are you taking a 100% loan?? If not, you have to factor in the down payment costs too.

B) Do you want to buy a house?? And, how much does the house will cost??

C) As per baby, you spend what you can afford. You buy a car means that you have to spend less on the baby.

Is the car REALLY worth it??

Basic rule of 33% or 28%, your TOTAL monthly payment should not exceed 1/3 of your salary = 2K. If you commit yourself to $800 per month on the car, that means you can only take loan with monthly payment of 2K - $800 = $1,200. You can reverse calculate and find out how much house can you afford. It looks like around $100K to $150K. Is that what you want??

Dreamer

Dreamer,

A. I am looking at a second hand altis 2008, market price at RM83k, plan to trade in my wife's saga 2004 around RM12k, and top up with RM20k from my current savings. Adviseable?

B. I have no plans to make my own house purchase at the moment. My parents advised me against it. They already bought a house for us 2, but I insisted the house be under my mom's name. I may consider buying a house or condo (for investment purposes) in the coming 10years.

C. I actually have accumulated some savings from my salary and investments, which i consider substantial compared to peers at my age of 26.
What my wife find funny, which may be the case is, I don't like to use or touch the money I saved. May consider spending the amount saved, only if I am really stressed out or unable to afford with our monthly income. So the baby costs is still an uncertainty.

I seriously Thank You for your attention and advice.

A few simple rules I abide with,

A. A car is to get to point A to point B, so you only need to get the cheapest car that can do the job with enough safety features is good enough. Buying to show off is not good investment. I rather get a cheaper newcar than a second hand car. Reason? Maintenance, resale value and car loan (more expensive for 2nd)

B. Buy your house rather than rent, if you rent your money goes to someone's else pocket. If you buy house the money pays back to yourself and property is also one form of investment/savings. Also property is good for inflation.

C. I never touch the money designated for savings, investment because thats they are for. If you keep taking it out you can never get to your objective. Use a 6 month's emergency fund for these purpose. Also if you think you save more than your peers, just use this rule of thumb to count. This is just a rule of thumb, so don;t take it as a guide!

Gross income per year for both x age / 5 = Assets that you should have. ( Assets = cash +EPF+investment+properties -liabilities)

If you earn 6,000 x 12 x 26 / 5 = RM 374,400 assets required.

But still different people have different style, the above are just my rules nd might not be applicable to you.

This post has been edited by gark: May 2 2010, 12:42 PM

Gark,

Mind to explain the formula? why /5 ?

It's just a rule of thumb i follow, the original calculation uses 10 to determine if you can have enough assets to retire. The rule of thumb is created by Dr. Thomas J. Stanley which write the book Millionaire Mind and Millionaire next door. good book if you want to read it.

If you have double the amount with the original calculation (hence 5), then you can assured that you are on your way to a comfortable retirement.
If you have less than the amount of the original calculation (using 10), then you need to accumulate more.

It's just a personal benchmark i use, so if you want you can use 10.

This post has been edited by gark: May 2 2010, 12:53 PM

Dreamer, I get your point.

Mind to elaborate on what you meant by I LOSE SOMETHING when i accept the house?

@Stupidbump ( sorry to address you in such a manner )

First , congratulating you for having a good saving habit. Keep it up.

Most of us have future goals on one hand and we have limited incomes on the other , so we need to prioritize our goals.

We take care of those we seriously need them , so wants are secondary.

Judging from your combined income level, it might be more practical to consider your basic needs ( first ) than WANTS. Want is termed as you do not need to have one, but you insist to have one.

A low budget car could be termed as a need due to poor public transport. An expensive car is termed as want as you have an option to choose.

A goal or plan could be upgraded once your income level improves.

From your list , I summarise you have more than 2 GOALS :-

1) Buy a car
2) To have a baby
3) To take care of your parent ( You need not say much, but there is a budget for that )

So I suggest you do a cost analysis of the three above first, before you commit anything to them ( 1 and 2 )

By the way, you also do not mention about Insurance such as Medical Insurance. so you may need to standby some money for future medical costs. And who is taking care of your parent's medical cost ? And who is taking care of your baby/spouse/parent if you stop working. Where is the money to come from ?

For car , you need to know HOW Banks EARN their interest from you and how much you get back if you want to fully settle the car loan in the future. Having a 9 year loan is simply too long IF YOU COMPUTE OUT.

For having A Baby ( one at a moment ). Have you factored in his or her education budget as well, like saving an amount each month.

Do you need someone to babysit your baby since both of you are working.
The fee could vary from place to place rm 500 to 1K, roughly.

Food and clothing and some budgets to visit the doctors too. Children are prompt to illness bcos of low anti body etc.

Then your parent- Is your parent having enough retiring fund after giving you the house ? Any medical budget for your parent.

Too much to plan right ? So which one is more important to you, now ?

Your car or baby/parent ?

Prioritize them.

If you take all into consideration ( let say you do not want to buy a house ), your saving rate could drop drastically to below 20%. Let also assume you want to have only one baby right now until such a time . I mean that is your plan.

So planning carefully.

And happy planning.

This post has been edited by SKY 1809: May 2 2010, 11:40 PM

SKY 1809, thank you very much.

I noted down some of your above points down for considerations.
One thing which was not mentioned is the insurance, wihch to date, is still a grey area to me.
My parents said I need not worry bout that as I am already covered, but to what extend I'm not sure...

I did not actually worry much bout both my parents, as you can see, my mom did well in bringing me up with being savvy..
So I assume they already had theirs well planned. Both are still working in the government sector thou as of now.
Would be retiring in another 3 years time or so.
The house is a second buy, they have another fully settled one in my hometown.
I initially planned to make a house or condo purchase in KL, but my parents advised me against it, thus the idea of getting a better car popped up..

Anyway, all comments, advises and POV are very much appreciated..They made me more easier in planning.

This post has been edited by stupidbump: May 2 2010, 10:40 PM