Types of Insurance That Even a Frugal Person Should Have

When you have barely just enough money to get by after the major expenses of housing, food and other bills, narrowing down the types of insurance you have can be key to keeping you out of debt. When you’re on a limited budget, you unfortunately don’t have the luxury of purchasing all the types of insurance available so you’ll have to choose the most important ones. So before agents start contacting you as part of their round of insurance leads, know the types of insurance that you absolutely need.

Auto Insurance
If you drive a car, auto insurance is not an option. Since it is mandatory, try to focus on getting the lowest premiums by choosing plans with higher deductibles. Deductibles that are $500 or higher can really decrease your monthly premiums and save you money. Drivers with the cleanest and safest records get the best rates so be careful on the road. Driving recklessly will only cost you more money. Check with state laws and see if you must include collision coverage in your plan, which covers damage to your car. For older cars, collision coverage may not be worth it if you sustain damage to it. If you’re a student, some insurance companies may be willing to give you a discount for good grades so inquire about special discounts such as those.

Health Insurance
You may not think you need health insurance now because you don’t feel sick, and especially if you are young, health insurance may seem like a lot of money every month. But just one unexpected hospital stay or even a single visit to the ER for any reason can cost thousands of dollars. Without insurance, an accident or illness can bring your out-of- pocket medical bills to tens or hundreds of thousands of dollars very quickly. Hospitals and providers may even turn you away. Just like with auto insurance, choose higher deductibles for lower premiums.

Renter’s Insurance
If you own a home, then home insurance is required but if you are a renter, protecting your big ticket valuables is smart, especially since renter’s insurance is relatively inexpensive. Depending on location, and other factors, renter’s insurance can run around $100 to $200 a year for about $20,000 worth or more of your personal belongings. In the event such as a fire, you’ll be glad that your pricey purchases such as your TV, computer, stereo, and clothes will be covered. Know the difference between replacement cost coverage and actual value coverage. Replacement cost coverage is a smarter choice since is would give you the amount of money it would take to repurchase new items, such as a computer, instead of actual value coverage, which would give you a smaller amount for the value of the worth of your items now. Consider using the same insurance company that you use for auto insurance, since they may be able to give a discount for having more than one plan with them.

Life Insurance
Life insurance is important if someone else, such as a spouse, child or other family member depend of you financially. If not, then life insurance isn’t necessary.

(Courtesy of  :  http://www.netquote.com/insurance-agents/)

Banking Service Comparison

Recently, I have compiled some of the banking services provided by Malaysia's bank. My interest is to compare their services on Credit Cards, Personal Loan, ASB Financing, OD Facility, Home Loan and Hire Purchase. Basically, these services are the one that I am using, so I am comparing versus each bank to see if there is a better offer.

Look through my basic simple comparison below. Although the information might be limited, but at least you might be able to have some focus on the best services before you approach that bank for more information on your interested service.

Bank	Credit Card	Personal Loan	ASB Loan	OD Facility	Home Loan	Hire Purchase
Affin Bank Berhad	Annual Fee : RM50 Int 18% BT 6.88% 0% EPP	NA	NA	FD mortgage BLR+1% daily rest	MOF 95% 45yrs/75yo BLR-2.3% OD BLR-0.5%	MOF 90% Max 9yrs Fixed 4.00%
Alliance Bank Malaysia Berhad	Annual Fee : RM68 Int 18% BT 7.25% 0% EPP Rewards Point	Int 11.99% pa Up to 60mths Income >RM2k	NA	NA	MOF 90% 30yrs/65yo 1-5yr : BLR-1% >5yrs : BLR -1.2% OD BLR+0.79%	MOF 90% Max 7yrs Fixed 3.9%
AmBank (M) Berhad	Annual Fee : RM75 Int 17.5% BT 8.99% 0% EPP Rewards Point	NA	NA	NA	MOF 90% MRTA 30yrs/65yo BLR-2.05% OD BLR-0.5%	MOF 90% Max 9yrs Fixed 5.1% Var BLR
CIMB Bank Berhad	Free for Life Int 17.5% No BT 0% EPP Rewards Point	Income >RM800 Max 5yrs	Max RM200,000 BLR-1.65% OD available	Mortgage FD, CIG, CIMB Deposit, CIMB UT, ASNB BLR-2.00%	MOF 90% GMTA 30yrs/65yo BLR-2.05% No OD	MOF 90% Max 9yrs Fixed 3.25%
Citibank Berhad	Free for Life Int 17.5% BT 11.99% 0% EPP Rewards Point	Income >RM2000 Int 8.52% pa Up to 60mths	NA	Mortgage FD	MOF 89% 30yrs/65yo No OD	NA
EON Bank Berhad	Annual Fee : RM75 Int 17.5% BT 5.50% 0% EPP Rewards Point	Int 9.00% Up to 72months	NA	Existing Current Account	MOF 90% MRTA 30yrs/65yo 1-8yrs : BLR-1.6% >8yrs : BLR-2.3% OD BLR-0.6%	MOF 85% Max 7yrs Fixed 3.75% - 3.9%
Hong Leong Bank Berhad	Annual Fee : RM80 Int 17.5% BT 12% 0% EPP Rewards Point	Income >RM2000 Int 12% Up to 60mths	NA	NA	MOF 95% MRTA 30yrs/65yo 1yr : 2.38% 2yr : 3.38% >2yrs : BLR-0.95% OD BLR-0.75%	MOF 90% Max 9yrs Fixed 4.00%
HSBC Bank Malaysia Berhad	Annual Fee : RM80 Int 18% BT 12% 0% EPP Rewards Point	Income >RM2000 Int 10% Up to 60mths	NA	Existing Current Account BLR+1% - BLR+1.5%	No Info	No Info
Malayan Banking Berhad	Annual Fee : RM60 Int 18% BT 12% 0% EPP Rewards Point	NA	Max RM400,000 1-3yrs : BLR-1.65% >3yrs : BLR-1.5%	NA	MOF 90% MRTA 30yrs/60yo 1yr : 3.88% 2-4yr : BLR-1.1% >4yrs : BLR-1.0% OD BLR+1.0%	MOF 90% Max 9yrs Fixed 4.25% - 5.00% Var BLR+1.00%
OCBC Bank (Malaysia) Berhad	Annual Fee : RM70 Int 18% 0% EPP Rewards Point	NA	NA	Mortgage Property, FD, UT	MOF 90% MRTA 30yrs/65yo BLR-1.5% No OD	NA
Public Bank Berhad	Annual Fee : RM68 Int 17.5% 0% EPP Rewards Point	NA	NA	Existing Current Account	MOF 95% 40yrs/70yo 1yr : 3.37% 2yrs : BLR-1.0% 3-5yrs : BLR-0.2% 6-10yrs : BLR-0.3% 11-15yrs : BLR0.5% >15yrs : BLR-1.0% OD BLR-0.75%	MOF 90% Max 9yrs Fixed 4.23% - 4.89% Var BLF+0.99%
RHB Bank Berhad	Annual Fee : RM70 Int 17.5% BT 6% 0% EPP Rewards Point	NA	Max RM200,000 1yr : 3.8% >1yr : BLR-1.35% OD available (BLR-1%)	Mortgage FD, ASNB BLR-1.00%	MOF 90% MRTA 40yrs/65yo BLR-1.7% OD BLR+0.18%	MOF 90% Max 9yrs Fixed 3.75% - 4.00%
Standard Chartered Bank Malaysia Berhad	Annual Fee : RM90 Int 17.5% BT 7.99% 0% EPP Rewards Point	Income >RM2000 Int 17% Up to 60mths	NA	Mortgage FD, UT	Information Not Clear	NA
United Overseas Bank (Malaysia) Bhd.	Annual Fee : RM0 Int 17.5% BT 12% 0% EPP	Income >RM2000 Int 10.75% Up to 60mths	NA	Mortgage FD, UT	MOF 90% MRTA 40yrs/70yo 1-3yrs : 5.9% 4-10yrs : BLR-1.25% >10yrs : BLR-1.5%	NA

All the information above are gathered from respective bank website. For those column that information "Not Available" or "Not Clear", is because the information on their website is very limited.

Learn how I let my finance commit suicide

Let me share with you my own personal experience that gave me a wake up call to get myself the hack out of debt.

It all started when I was just at my first job, getting $2,000 per month. It felt so good to have $2,000 all to myself. The feeling itself was contributing to the whole problem. Suddenly, I felt that I am richer (thinking that before this, I merely living with $400 per month from my university sponsorship program). Now, I was 5 times richer with my new salary. What that feeling did to me, within just 1 year from starting my new job is:

1. I thought that I can own a car. So, I buy a 2nd hand Kancil to go work.
2. I rent a house which was 40 minutes away from my office, so that I can be near to my university friends.
3. I applied for credit cards from Citibank with $5,000 credit limit.
4. I started to buy new clothes, new gadgets and things for my well-being.

My 2nd biggest mistake was never track my money flow during this period. My current monthly car payment, house rent and daily spending was actually within my salary budget. But, since I never monitored my luxury spending of shopping, I was actually spending more than I able to cope. Whenever I am out of cash, I started to swipe from my credit card. By end of the month, I only paid back the 5% minimum to my card and continue to use it until it's maxed out its outstanding limit.

My 3rd biggest mistake, was the way I tried to recover from not having enough money. I applied for new debt. I applied for 2nd credit card from MBF with credit limit $4,000. Since my personal finance skill never improved, the new debt soon add up to my problem when the $4,000 limit is maxed out.

After that 1st year, I have been trying to survive monthly trying hard to make it the minimum payment to my cards. It does not stop me from spending, but instead, I kept borrow people money to survive every month to pay for all those loan payment.

3 years after that, my life never got any better. I was transferred from one state to another due to my work, and every change in life was such a drawback since I had no savings at all. I was unable to really say that I managed to enjoy my salary, because every time I got my salary, it was gone to pay for credit cards that seems never actually reduce on its outstanding. This was all because I kept on paying the 5% minimum, then charge again the card every time there was some credit available.

Then, on my 5th years, I happened to stumble across BSN personal loan that offer up to $20,000 loan for tenure of 5 years with interest 6% per annum which was very low compare to the market that time. I applied the loan, in my mind thinking that I want to use the loan to finally get myself out of the credit card problem. To my luck, the loan was approved and suddenly $20,000 flowed to me. That was the first time I saw so many cash in my hands.

Did I manage to get out of my finance problem? No! This is what happened:

1. I paid $9,000 for the 2 credit cards. It gave me a sudden improvement on my credit rating. All of a sudden, any credit cards or personal loans application was easily approved.
2. I started to buy things that I wanted from the last 5 years but never can afford to before.
3. I started to buy expensive gifts for those people who always let me borrow their money when I am in trouble before.
4. I started to track my cash flow. But, I failed to track my credit card usage.

Within just 6 months, I was drained out of the $20,000 cash. But, it felt good since I managed to track where the cash have gone too and I did not felt that it went to waste. Because of my good credit rating, all banks seem to treat me well and money seems to never ending flow around me. Here what happen during that period:

1. My Citibank credit card was converted to Gold Card to give me more privilege but do not increase in $5,000 credit limit.
2. My MBF credit card now have $4,000 credit limit available to me.
3. I was approved for HSBC Gold credit card with $10,000 credit limit.
4. EON bank gave me credit card with $8,000 credit limit.
5. I got RHB credit cards with Plus One privilege so that I got points buying gadget from SenQ with $4,000 credit limit.
6. Standard Chartered bank gave me credit card with $6,000 credit limit.
7. Hong Leong bank approved a $8,000 credit limit card.
8. Maybank also gave me $5,000 credit limit card.
9. I got Jusco Aeon credit card too with $4,000 credit limit.

All of a sudden, I got $54,000 in credit cards so-called "available" to my use. I was spending like crazy. Never had a moment of window shopping. Anything in display, I will just swipe my card to buy them. I even use my cards online to buy product from Lelong.com or Ebay.com. I kept on tracking my cash flow, but that time, never occur to me to track my credit card flow. Every month, I paid just 5% minimum on the card, but the statement keep on showing that I still have many available credit to spend on.

Another big mistake during this time, I started to feel that it is very convenient for me to apply for personal loan since I was easily approved for one from BSN. So, here I go again:

1. Applied for personal loan from Alliance Bank of $20,000
2. Personal loan from Citibank of $10,000
3. Personal loan from AEON of $2,500

I felt that I was on top of the world. I purchased a 2nd hand Gen2 car during this period. During this period too, I was transferred to another state to follow my work requirement. My company paid me an amount of $15,000 cash for the transferred.

After transferred, I purchased a house at my new location. The purchase supposed to be very light for me, because I got support from my EPF for $18,000 for the down payment and legal fees.

After settled down here, I kept on spending to fill up my house with furniture, gadgets and appliances. Within just 3 years, I maxed out on all my credit cards and used up my entire personal loan. I am now, in total, in debt to bank at $106,500. Monthly, to pay these loans and minimum of my credit cards, it takes me around $7,000. I was stunt by this number since my salary was only $5,000 that time.

After 7 years of working life, now only I felt that my life in trouble. What can I do? How can I manage paying for $106,500 of loans, my hire purchase and my home loan? My salary considers too limited compare to what I owed bank.

Do you had the same financial disaster life story like mine? I will share with readers on my next post of how I finally get out of this problem. If you have you own advice, it would be most appreciated to share them here.