It was a hot Saturday afternoon. Rains just stop pouring since the last 1 hour and the heat from the ground is uncomfortably stuffy. I was hiding from the sun in the air condition of Plaza Angsana in Johor Bahru accompanied by some friends. We were there to extend our support to our friends who join the duet singing contest there.
I saw the look of my friends. Mizi, the ever confident alpha male look amazingly stylist and ready to rock the stage. Ejoy, his duo, look pale and can hardly catch his breath. This is his first time on stage and nervousness gets the best of him. I was trying to lift his motivation up by giving some comforting words. A few minutes later, there it were, the chairperson called up their name. It is their time to perform.
While watching my friend getting ready on stage, I looked around. Not very crowded today, but some shoppers do tend to stop by to watch the competition. Some have an empty gaze, no emotion attached to the event at all. Some look cheerful and cannot wait to hear the melodious song the contestant about to perform. Some show disgust look as if the one on stage are not suppose to be there, maybe they felt they can do better on stage. A handful just leering with a judgmental look, complaining every single moves on stage through their look.
My friends started to sing. Some note is perfectly delivered. Some tend to be pitchy due to the nervous feeling. Some words skipped in the verse. But mostly a great performance. The crowd clapped, once they finished their performance. My friends got down from the stage, feeling relieve. We relaxed ourselves, calm down, feeling satisfied with the almost perfect performance and later, were welcomed by a great news that my friends successfully proceed to the next round of the competition.
Maybe such event is something that we all experienced in our life. Our life packed with activities that caught our breath, butterfly in our stomach, nervous, worried of being judge, worried of making mistake in public. These agonizing feeling of being judge by others and feeling embarrassed tend to make most of us to take the simplest step, which is to run for it.
A lot of the crowd prefer to be spectator. We like to judge those at the center stage, we like to comment every single thing up to their choice of shoe color. We think they wear their hair wrongly, we thing that is not their best choice of cloths, we think they talk or sing wrongly. But yet, no matter how much we love to complain, we do not want to take up the center stage ourselves. We like to watch and comment, but we do not want to be the player.
It takes courage, strength, skill, hard work, sacrifice and a lot of embarrassing moment, to be a great player. It takes a lot for someone to stand on the stage to sing in a competition. It takes courage for someone to stand in front of the crowd and talks. I takes strength to do what you believe is right while others are giving your bad judgments, bad advice and telling you that you are wasting your time. Because of this, there are not many players out there but there are millions of spectators.
To change our lives and achieve a steady financial life, it is just the same. Are you a player that willing to do what others not willing to do, so that you can achieve financial freedom? Or are you a spectator who do not want to take risk, but like to sit and watch while other climb their success ladder? Ask yourself this question because only you know the answer. Are you a player or are you a spectator? Are you willing to give yourself chance to success, or you like to watch other people make the first move?
For those player out there, let’s move now. Let’s build our success story now. Let’s act now and let the spectator just be a spectator. If you want to be a player, go to QuestNet and see if you are my kind of player.
Saturday, 6 November 2010
Friday, 29 October 2010
Bijak Wang Bersama QuestNet
Lama dah rasanya tak buat post dalam bahasa ibunda. Jadi, saya ambil kesempatan untuk update post mengenai satu perkembangan drastik dalam hidup saya yang sememangnya tak tersangka.
Mungkin para pembaca ada melihat post sebelum ni di mana saya kupas pasal Asset, Income, Expense dan Liability. Baru-baru ini, saya mengambil keputusan untuk mengambil peluang meluaskan Aset saya dengan menceburi satu peluang perniagaan dengan harapan dapat memperkukuhkan Passive Income saya.
Bukan niat nak mempromote business lak kat sini, tapi kalau ada yang berminat nak usha, tengok la kat http://mkamal.qnstore.com.my/Home.aspx atau http://www.qnet.net.my.
Just nak share sedikit pengalaman kenapa peluang perniagaan ni tetiba menarik minat untuk join, sedangkan kebiasaannya, nak buat keputusan saya fikir berpuluh kali dulu.
Antara perkara yang benar-benar menarik minat:
1) Company QuestNet bercabang dari company Qi yang dah ada dalam market sejak 1998. Jadi asas company kuat, satu prospek yang bagus untuk join company yang kuat macam Qi.
2) Company Qi terlibat dalam banyak cabang perniagaan and QuestNet hanya salah satu cabang je. Jadi support dari Qi untuk QuestNet kuat dari segi turnover and revenuenya.
3) Business tools dan pengalaman dari orang-orang atas juga banyak diajar kepada saya. Jadi banyak benda boleh belajar dari company ni.
4) Modal join cuma bayar sekali seumur hidup. Hasil usaha pula boleh diwariskan kalau-kalau apa-apa jadi kat kita. Satu sistem yang paling menarik berbanding perniagaan-perniagaan yang pernah saya ceburi sebelum ni.
5) Modal pula dalam bentuk pembelian BioDisc, barang kesihatan yang amat versatile dan value for money. Jadi, business jalan atau tak, BioDisc tu je dah cukup untuk buat balik modal.
6) Support dari orang atas terutamanya dari team Dreamz Evolution (DeVo) dah macam support ahli keluarga. Pertalian persahabatan dan kekeluargaan yang kuat. Team DeVo datang buat presentation dekat sini (Johor Bahru) setiap minggu. Jadi boleh jumpa semua ahli kumpulan, sambil bawa prospek datang. Team DeVo akan support untuk memberi penerangan lengkap kepada prospek.
7) Presentation dari Tean DeVo terutamanya dari Ustaz Harif teramat menarik. Walaupun saya ada banyak pengalaman buat presentation, presentation Ustaz Harif banyak teknik-teknik yang sebelum ni langsung tak terfikir nak cuba. Terima kasih banyak pada Ustaz.
Bila mula-mula join perniagaan macam ni, memang perasaan berkobar-kobar. Tapi pengalaman dari perniagaan yang lain, lama-lama perasaan tu merundum dan mula rasa malas nak jalankan lagi. Tapi sebab perniagaan QuestNet ni mampu berjalan sendiri kalau kita start bagus, jadi rasanya penting untuk saya usaha lebih bagi menggerakkan asas yang kuat dan tak mudah beralah.
Minggu lepas, bawa seorang prospek ke seminar dan Alhamdulillah dia teringin nak join. Nampaknya teknik-teknik QuestNet dan Team DeVo memang benar-benar mudah hingga menarik minat orang untuk join.
Sunday, 19 September 2010
My success story on credit card debt elimination by Jason Holmes
Leading a lavish life has its rewards; however, it also has a price that I had to pay. I had spent without considering how I would pay back, and this lead to a huge amount of debt that I could not pay off. By the time I had realized that I was in a disastrous situation, I had already accumulated $60,000 of credit card debt on 5 cards that I had to pay off. I finally made up my mind that I had to do something about my financial situation, if I was ever to live life with respect again. I strongly believed that there must be some debt solutions that would bring me out of this problem. I want to share a few things that I did to get rid of my credit card debt that you may find beneficial, in case you are in a similar situation.
This guest post is written by Jason Holmes. He is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt consolidation and debt industry, with his e-books he tries to impart to people the different situations and simple debt solutions to get out of difficult situations. Some of his works include e-books like 'Credit Score The Quintessential Therapy for a Happy Pocket', Take Creditors and Collection Agencies to Small Claims Court' and, My Story- From Depression To a Smile'.
- Formulated a budget: I used a couple of free online budgeting tools that helped me plan a budget for myself. This gave me a fair idea of my income and expenditure. I realized that I was earning enough to afford a decent living but not enough to pay off my debts or indulge in any luxury products. So I had to adjust my spending habits accordingly.
- Cut down expenses: After I had planned the budget and then studied it, I realized that I had to cut down on my food expenses. That is where the majority of my income was going. This was because I loved to eat out at fancy restaurants. What I did not realize was that, this was leading to an excessive amount being spent on food when I had no real requirement of that expenditure. So I restricted myself from eating out and switched to good home cooked food.
- Considered additional income options: It was impossible to manage the outstanding amount I was to pay with my fixed salary. So I considered various income options that I could opt for. I finally decided that online money making would be most convenient as I could work at my own convenience, whenever I got time from my hectic job. I looked for various options and finally decided to opt for writing e-books. This was a very comfortable option for me, as I was into writing from a very young age. The profit margin was also huge and helped me pay a huge part of my debt.
- Decided to settle my debts: I wanted to pay off my loans as quickly as I could. Debt consolidation was not a debt solution that I could consider. This is because my financial situation would not let me pay off the debt completely. Thus, I had to opt for debt settlement. I was lucky that my creditors reduced my debt by 44%. The reduced amount came to $35,400. I had to pay this much instead of $60,000, to settle my debts completely. Whatever excess cash I had or earned went into paying the debt and in about 2 years I was completely debt free.
This guest post is written by Jason Holmes. He is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt consolidation and debt industry, with his e-books he tries to impart to people the different situations and simple debt solutions to get out of difficult situations. Some of his works include e-books like 'Credit Score The Quintessential Therapy for a Happy Pocket', Take Creditors and Collection Agencies to Small Claims Court' and, My Story- From Depression To a Smile'.
Sunday, 12 September 2010
The possible debt reduction strategies
Debt plague our money and cash flow, unnecessary draining our hard earn money to pay bank's charges and interest. It is vital to reduce our debt immediately because the bigger the amount that we owe bank, the bigger the charges are.
Recently, one of my friend Ms Dorothy wrote an article that she share with me on her technical method of an effective ways to reduce your debt. I am keen to share them with my reader, hope you able to make the best of these tips like I do.
Everyone ought to strive for getting out of debt. Many hard working individuals get into debt and from time to time debts can become a burden. It can also result in significant financial hardship. There are numbers or ways to reduce your debt, but as everyone’s circumstances are different so there is no such thing as the best debt reduction strategy.
6 ways to reduce your debt.
Once you begin your debt reduction strategy, you will start to see success. The good habits that you will develop should be kept in check so that you don’t again slip back into debt.
Recently, one of my friend Ms Dorothy wrote an article that she share with me on her technical method of an effective ways to reduce your debt. I am keen to share them with my reader, hope you able to make the best of these tips like I do.
Everyone ought to strive for getting out of debt. Many hard working individuals get into debt and from time to time debts can become a burden. It can also result in significant financial hardship. There are numbers or ways to reduce your debt, but as everyone’s circumstances are different so there is no such thing as the best debt reduction strategy.
6 ways to reduce your debt.
- Pay higher than minimum payments: If possible, you should always try to pay more than the minimum payment, or it could take you forever to pay off your debt. When you pay more than the minimum, it really does add up to pay your outstanding balance off a lot faster.
- Debt avalanche: By debt avalanche method, you pay off the loan with the highest interest rate, which will result in quicker debt reduction. Once the debt is paid off, move to the next highest rate and continue down the list, until your debts are totally eliminated.
- Snow ball method: In this method, reorder your debts from smallest to largest. Then make minimum payment on all the debts except the smallest one. When the smallest debt is paid off, you roll the amount you were paying for the smallest debt into the payment on the next smallest.
- Increase your earnings: Earn more money to pay extra on your bills. This will make you to pay off your debts faster and thus reduce your debts.
- Credit card balance transfer: By transferring your outstanding balance from the higher interest rate credit card to low interest rate credit card will speed up the debt reduction process.
- Develop a budget: Try to develop a budget that will record all your incomes and expenses. Once your budget is developed, you will be able to make rational and well informed decisions. Then you can plan about how to pay the credit card companies every month. In this way, you can reduce your debts quickly.
Once you begin your debt reduction strategy, you will start to see success. The good habits that you will develop should be kept in check so that you don’t again slip back into debt.
Monday, 6 September 2010
Asset Income Expense Liability Unearthed
My work had kept me quite busy for the pass few months. Luckily, through this hectic working time, my financial is the least of my worry. Yeah, festive season is coming, Hari Raya is just next week. How is preparation so far?
My baju raya, already purchased. As usual, with ridiculously great deal. Got one set of clothes only at RM29.90. My mother was shock to know that I get it with such low price. Furthermore, I never even sacrifice quality, since the clothes that I bought is red hot in color (my family theme color for this year) and made from satin (I wonder when they will make baju kurung in microfiber since I love that material, hehe).
How about duit raya? Already kept aside and even completely arrange them into each packet, ready to be distributed. The whole budget for duit raya did not even disturbed my monthly budget since unexpectedly I got salary increase last month which give me a boost in my budget.
Talking about the salary increased, although unexpected, it was well appreciated. But it does not even slightly make me feel like I need to upgrade my lifestyle or spending. However, it helps to increase my monthly savings to 20% of my salary. Up to this month, my ASB account (the investment account where I dumped most of my savings), had reached more than RM20,000. Such a satisfying feeling to see that my 5 digit savings kept of increasing every month.
Recently, I read a couple of financial book. Both of the material touch-base on the 4 quadrant of basic cashflow. I felt the urge to share them with you.
The four quadrants is Income, Asset, Expense and Liability. Let me try to explain them in my own words.
Income
This is basically the money that you get or generated through your salary or business. The materials I read did not mention about money from loans or credit cards. But for me, that money also consider as your income which however will also affect the other quadrant which I will mention later. It is utterly crucial to have a positive income somehow. Income is the one that trigger your cash flow. I do not know why we need to discuss about money flow is you did not have income at all. :)
Expense
Where ever, whenever you spend your money, that is cashflow under expense. Your daily spending, monthly spending, bills payment, credit card and loan payment are all under expense quadrant. It is the negative side of Income quadrant. However, it is very visible and can easily be one of the target areas if you are looking for ways to tame you financial habit. Handle you expense carefully and you will enjoy better cashflow.
These 2 quadrants, Income and Expense, are easy to understand. Everyone should understand where their money come from and where did it spend off too. Because of its visibility, these 2 quadrants are mostly the areas that people look at when they are trying to cut corner monthly to make their expense well fit into their income, or is it vice versa? Hehe.
The next 2 quadrants however, are those that people tend to forget. But, the next 2 quadrants was actually what determine the consistency of a healthy financial status. The rich people look at it often. The rich care for it passionately. But sadly, these 2 quadrants are those that average people like us always do not care much.
Liability
Liability means Debt. Personal loans, credit cards, hire purchase, overdraft, home financing, ASB financing and even borrowing money from family or friends are all consider liabilities. Simply said, just open up your favorite bank website and 80% of their service offered is a liability to you. If you take up a purchase which will require you to pay back in future, clearly that is a liability. A non-mortgage or non-collateral loans are the worst one since you will not get any money back in return. A mortgage loan such as home financing and collateral loans such as overdraft over fixed deposit or ASB/Unit trust certificate might be useful in intelligent hand to turn it into profit. However personal loans, hire purchase and credit cards will drain your money.
Worst thing, liability is almost transparent. For example, purchased a car at RM60,000. Get 7 years hire purchase at 4% interest rate per annum. By the time the loan has been fully settled, you will already paid the bank RM76,800 which RM16,800 for the interest. Furthermore, by that 7 years period, your car will drop its value to RM25,000. Even if you manage to sell the car at its current market price, you will still lost about RM50,000 which about RM7,000 per year since you purchase the car. That RM7,000 per year money is consider as if you are renting the car for the next 7 years. Not that it is a total lost, but it is something that we should be considering if that money lost is creating value for the service the car rendered throughout the loan period. I was wondering, did we make this calculation every time we are buying cars? Personally I do not, and I felt such a downer.
How about other liabilities? Taking personal loans RM5,000 with 5 years tenure at 9% interest rate for example. As soon as the loan approved, the RM2,250 interest will directly charge to the loan account. How about credit cards? Imagine that you have RM5,000 credit limit, which you use RM500 monthly but only paid 5% minimum payment every month. Do you know that by 12 months, the credit card will be over limit? By that time, you already paid RM450 interest and now you have RM5,000 debt need to be paid. Even if you stop using the card that time and continue to pay 5% minimum, it will takes you another 6 years to fully settle the credit card debt and by that time, you already paid the bank RM2,550 of interest. Do you see why I said that liability is transparent?
Liability quadrant is pack with purchases or commitments that we take and service for long period of time. By that period, we will be paying a lot of money for bank charges and interest. It is a hassle to calculate every single cent of money lost throughout the commitment period and that is the reason people just do not look at it, or we close one eye to it. Thinking that the monthly payment is manageable and low, we failed to see the bigger picture. We fail to see how much our hard earn money lost for nothing just to take the service of paying in monthly basis. Furthermore, since each commitment seems to only require a small amount of money to pay every month, we kept on taking new commitments, thinking that we can afford them. By the time we realize that 70% of our income vanished just to pay the monthly commitment, only then we realize that we are stuck. Worst thing about liability, by the time we admit that it is hard to pay all the loans monthly payment, we have another 5 years or more to survive monthly to finish off the loans. If our money short in 1 month to pay the monthly debt, do you think you can survive for the next 60 months or more?
Liability is the killer and average people just do not see it. So sad. Hope that we can open up our eyes bigger and look at the full picture and just STOP making new liability and START handling the current ones.
Asset
Now this is a secret why rich people get richer. This is the magical quadrant that answers questions we average people normally ask such as, “How could rich people can afford 2 three-storey bungalows?”, “How could rich people own 3 BMWs or 3 Volvo or afford to buy a Ferrari?” or “I made RM4,000 per month but I have to work 6 days per week. I wonder how much time rich people have to work to afford their lavishing lifestyle”. The answer is Asset. Asset is something that generates money for you. If you have to work to generate money, then that is Income. If you do not have to work but keep getting money, then that source of Income is your Asset.
Example of Assets are house that you rent to others, book that you write and sell through publisher, investment that give you return every year, music or album that you write or sing and now selling hot on air, internet business with amazing hits on its site that it is almost auto-pilot or even MLM (multi-level marketing) that so successful and you do not have to work but your downline is generating profit for you.
For me, my asset so far is my investment. Current focusing on ASB (Amanah Saham Bumiputera) and portion of my money (well budgeted with its risk) also put into Unit Trust with CIMB bank. Current state, I have RM20,000 in ASB. By end of this year, hopefully, it will generate 7% dividend, giving me RM1,400. Even if I stop putting more money into ASB, every year (considering having 7% dividend), the investment will give me RM1,400 without I have to do a single work on it. Imagine if you maxed out the ASB limit of investment to RM200,000. Without doing anything, it will paid you RM14,000 per year or about RM1,200 per month. If you do not take out the capital investment of RM200,000, you will continue to get RM1,200 per month dividend without doing any work as long as the investment continue to make profit. What if you did not spend the RM14,000 but instead you dump it into other investment such as ASW (Amanah Saham Wawasan), then that investment will generate more income for you. That is why I set my long term goal of having RM800,000 in this low risk investment. Even at 6% dividend per year, that RM800,000 will paid me RM48,000 per year or RM4,000 per month. RM4,000 per month is almost my current salary but best thing is that I do not have to do anything to get it. When I reached that goal, then it is time for my retirement.
Rich people do not directly spend their income to expense or worst, liability. Instead, they pay themselves by investing it to increase their asset. Once their asset profitable and generate new income for them, then they improve their lifestyle using the income from their asset.
A carefully manage asset will not lost your capital. Due to this, the asset will continue to give you capital gain which in turn gives you more income. If your spending is controlled only to the profit instead of the capital, then that capital will continue to generate your income without having you to do work. If you continue to use that income to grow your asset, then your income will also increased. Like I said, rich people get richer. And it is all about PAYING YOURSELF FIRST.
If this is a bit confusing, let me give a basic guideline through some simple formulas.
Example that you got RM3,000 monthly for your income:
Which means you need to put aside RM300 every month to increase your asset, for example, on investment.
Means that your monthly spending or payment must NOT exceed RM2,700. This also means that monthly, your RM300 must be put off to ASSET first before you even start to spend the RM2,700 for other commitment.
This RM540 is the only safe portion of your salary that you can spend for liabilities such as home financing or hire purchase or loans. Do you notice how small that portion is? This is because the risk is long term since you might have to commit to 7 years for example on hire purchase. So, this long tenure commitment must be manageably low.
Example that your ASSET grew, and end of the year it paid up RM1,200 or RM100 per month.
With this new RM3,100 income, check out the latest cashflow:
See what happen when the profit from the Asset boost your income? Now:
If this healthly cashflow were properly maintain, that is how rich people will be able to spend more or own a bigger car or house. They simply, but safely, can afford all of them because they continue to get a big amount of Income through their growing Asset.
I do not see why we do not want to do this. It is okay to start from small even if you income is small. You will see how much advantage it is once your asset pays off and give you boost in your lifestyle. Do not be too quick on increasing Expense or Liability. Just hold it off first until you really can afford it in future. Give it a try. I have tried it and I know I will be having an amazing lavishing Hari Raya this year without even spending more than what I can afford. Hope you will have a great Hari Raya too this year and hope you will manage the spending well for this festive season.
Selamat Hari Raya and Maaf Zahir dan Batin. Happy holiday everybody!
My baju raya, already purchased. As usual, with ridiculously great deal. Got one set of clothes only at RM29.90. My mother was shock to know that I get it with such low price. Furthermore, I never even sacrifice quality, since the clothes that I bought is red hot in color (my family theme color for this year) and made from satin (I wonder when they will make baju kurung in microfiber since I love that material, hehe).
How about duit raya? Already kept aside and even completely arrange them into each packet, ready to be distributed. The whole budget for duit raya did not even disturbed my monthly budget since unexpectedly I got salary increase last month which give me a boost in my budget.
Talking about the salary increased, although unexpected, it was well appreciated. But it does not even slightly make me feel like I need to upgrade my lifestyle or spending. However, it helps to increase my monthly savings to 20% of my salary. Up to this month, my ASB account (the investment account where I dumped most of my savings), had reached more than RM20,000. Such a satisfying feeling to see that my 5 digit savings kept of increasing every month.
Recently, I read a couple of financial book. Both of the material touch-base on the 4 quadrant of basic cashflow. I felt the urge to share them with you.
The four quadrants is Income, Asset, Expense and Liability. Let me try to explain them in my own words.
Income
This is basically the money that you get or generated through your salary or business. The materials I read did not mention about money from loans or credit cards. But for me, that money also consider as your income which however will also affect the other quadrant which I will mention later. It is utterly crucial to have a positive income somehow. Income is the one that trigger your cash flow. I do not know why we need to discuss about money flow is you did not have income at all. :)
Expense
Where ever, whenever you spend your money, that is cashflow under expense. Your daily spending, monthly spending, bills payment, credit card and loan payment are all under expense quadrant. It is the negative side of Income quadrant. However, it is very visible and can easily be one of the target areas if you are looking for ways to tame you financial habit. Handle you expense carefully and you will enjoy better cashflow.
These 2 quadrants, Income and Expense, are easy to understand. Everyone should understand where their money come from and where did it spend off too. Because of its visibility, these 2 quadrants are mostly the areas that people look at when they are trying to cut corner monthly to make their expense well fit into their income, or is it vice versa? Hehe.
The next 2 quadrants however, are those that people tend to forget. But, the next 2 quadrants was actually what determine the consistency of a healthy financial status. The rich people look at it often. The rich care for it passionately. But sadly, these 2 quadrants are those that average people like us always do not care much.
Liability
Liability means Debt. Personal loans, credit cards, hire purchase, overdraft, home financing, ASB financing and even borrowing money from family or friends are all consider liabilities. Simply said, just open up your favorite bank website and 80% of their service offered is a liability to you. If you take up a purchase which will require you to pay back in future, clearly that is a liability. A non-mortgage or non-collateral loans are the worst one since you will not get any money back in return. A mortgage loan such as home financing and collateral loans such as overdraft over fixed deposit or ASB/Unit trust certificate might be useful in intelligent hand to turn it into profit. However personal loans, hire purchase and credit cards will drain your money.
Worst thing, liability is almost transparent. For example, purchased a car at RM60,000. Get 7 years hire purchase at 4% interest rate per annum. By the time the loan has been fully settled, you will already paid the bank RM76,800 which RM16,800 for the interest. Furthermore, by that 7 years period, your car will drop its value to RM25,000. Even if you manage to sell the car at its current market price, you will still lost about RM50,000 which about RM7,000 per year since you purchase the car. That RM7,000 per year money is consider as if you are renting the car for the next 7 years. Not that it is a total lost, but it is something that we should be considering if that money lost is creating value for the service the car rendered throughout the loan period. I was wondering, did we make this calculation every time we are buying cars? Personally I do not, and I felt such a downer.
How about other liabilities? Taking personal loans RM5,000 with 5 years tenure at 9% interest rate for example. As soon as the loan approved, the RM2,250 interest will directly charge to the loan account. How about credit cards? Imagine that you have RM5,000 credit limit, which you use RM500 monthly but only paid 5% minimum payment every month. Do you know that by 12 months, the credit card will be over limit? By that time, you already paid RM450 interest and now you have RM5,000 debt need to be paid. Even if you stop using the card that time and continue to pay 5% minimum, it will takes you another 6 years to fully settle the credit card debt and by that time, you already paid the bank RM2,550 of interest. Do you see why I said that liability is transparent?
Liability quadrant is pack with purchases or commitments that we take and service for long period of time. By that period, we will be paying a lot of money for bank charges and interest. It is a hassle to calculate every single cent of money lost throughout the commitment period and that is the reason people just do not look at it, or we close one eye to it. Thinking that the monthly payment is manageable and low, we failed to see the bigger picture. We fail to see how much our hard earn money lost for nothing just to take the service of paying in monthly basis. Furthermore, since each commitment seems to only require a small amount of money to pay every month, we kept on taking new commitments, thinking that we can afford them. By the time we realize that 70% of our income vanished just to pay the monthly commitment, only then we realize that we are stuck. Worst thing about liability, by the time we admit that it is hard to pay all the loans monthly payment, we have another 5 years or more to survive monthly to finish off the loans. If our money short in 1 month to pay the monthly debt, do you think you can survive for the next 60 months or more?
Liability is the killer and average people just do not see it. So sad. Hope that we can open up our eyes bigger and look at the full picture and just STOP making new liability and START handling the current ones.
Asset
Now this is a secret why rich people get richer. This is the magical quadrant that answers questions we average people normally ask such as, “How could rich people can afford 2 three-storey bungalows?”, “How could rich people own 3 BMWs or 3 Volvo or afford to buy a Ferrari?” or “I made RM4,000 per month but I have to work 6 days per week. I wonder how much time rich people have to work to afford their lavishing lifestyle”. The answer is Asset. Asset is something that generates money for you. If you have to work to generate money, then that is Income. If you do not have to work but keep getting money, then that source of Income is your Asset.
Example of Assets are house that you rent to others, book that you write and sell through publisher, investment that give you return every year, music or album that you write or sing and now selling hot on air, internet business with amazing hits on its site that it is almost auto-pilot or even MLM (multi-level marketing) that so successful and you do not have to work but your downline is generating profit for you.
For me, my asset so far is my investment. Current focusing on ASB (Amanah Saham Bumiputera) and portion of my money (well budgeted with its risk) also put into Unit Trust with CIMB bank. Current state, I have RM20,000 in ASB. By end of this year, hopefully, it will generate 7% dividend, giving me RM1,400. Even if I stop putting more money into ASB, every year (considering having 7% dividend), the investment will give me RM1,400 without I have to do a single work on it. Imagine if you maxed out the ASB limit of investment to RM200,000. Without doing anything, it will paid you RM14,000 per year or about RM1,200 per month. If you do not take out the capital investment of RM200,000, you will continue to get RM1,200 per month dividend without doing any work as long as the investment continue to make profit. What if you did not spend the RM14,000 but instead you dump it into other investment such as ASW (Amanah Saham Wawasan), then that investment will generate more income for you. That is why I set my long term goal of having RM800,000 in this low risk investment. Even at 6% dividend per year, that RM800,000 will paid me RM48,000 per year or RM4,000 per month. RM4,000 per month is almost my current salary but best thing is that I do not have to do anything to get it. When I reached that goal, then it is time for my retirement.
Rich people do not directly spend their income to expense or worst, liability. Instead, they pay themselves by investing it to increase their asset. Once their asset profitable and generate new income for them, then they improve their lifestyle using the income from their asset.
A carefully manage asset will not lost your capital. Due to this, the asset will continue to give you capital gain which in turn gives you more income. If your spending is controlled only to the profit instead of the capital, then that capital will continue to generate your income without having you to do work. If you continue to use that income to grow your asset, then your income will also increased. Like I said, rich people get richer. And it is all about PAYING YOURSELF FIRST.
If this is a bit confusing, let me give a basic guideline through some simple formulas.
ASSET increment = 10% of INCOME
EXPENSE monthly = 90% of INCOME
LIABILITY = 20% of your EXPENSE
Increment to INCOME = Profit from ASSET
Example that you got RM3,000 monthly for your income:
ASSET increment = 10% of INCOME
ASSET increment = 10% of RM3,000
ASSET increment = RM300
Which means you need to put aside RM300 every month to increase your asset, for example, on investment.
EXPENSE monthly = 90% of INCOME
EXPENSE monthly = 90% of RM3,000
EXPENSE monthly = RM2,700
Means that your monthly spending or payment must NOT exceed RM2,700. This also means that monthly, your RM300 must be put off to ASSET first before you even start to spend the RM2,700 for other commitment.
LIABILITY = 20% of your EXPENSE
LIABILITY = 20% of RM2,700
LIABILITY = RM540
This RM540 is the only safe portion of your salary that you can spend for liabilities such as home financing or hire purchase or loans. Do you notice how small that portion is? This is because the risk is long term since you might have to commit to 7 years for example on hire purchase. So, this long tenure commitment must be manageably low.
Example that your ASSET grew, and end of the year it paid up RM1,200 or RM100 per month.
Increment to INCOME = Profit from ASSET
Increment to INCOME = RM100
New INCOME = Current INCOME + Profit from ASSET
New INCOME = RM3,000 + RM100
New INCOME = RM3,100
With this new RM3,100 income, check out the latest cashflow:
ASSET increment = RM310
EXPENSE monthly = RM2,790
LIABILITY = RM558
See what happen when the profit from the Asset boost your income? Now:
- You have more money to speed up your Asset growth which in turn will bring more income growth.
- You have more money for Expense but still within your safe border in spending. This means you can safely upgrade your lifestyle.
- You increase your portion for a safe LIABILITY which means you can afford bigger car or bigger house but within a safe budget.
If this healthly cashflow were properly maintain, that is how rich people will be able to spend more or own a bigger car or house. They simply, but safely, can afford all of them because they continue to get a big amount of Income through their growing Asset.
I do not see why we do not want to do this. It is okay to start from small even if you income is small. You will see how much advantage it is once your asset pays off and give you boost in your lifestyle. Do not be too quick on increasing Expense or Liability. Just hold it off first until you really can afford it in future. Give it a try. I have tried it and I know I will be having an amazing lavishing Hari Raya this year without even spending more than what I can afford. Hope you will have a great Hari Raya too this year and hope you will manage the spending well for this festive season.
Selamat Hari Raya and Maaf Zahir dan Batin. Happy holiday everybody!
Sunday, 18 April 2010
Update : Freedom from Money
It is been quite awhile since my last update on this blog. Maybe because all my plans on money saving that I laid down in this blog has work marvelously that I do not even bother to look for other money savings tactics that I can update into this blog. :)
Sorry for all my readers that long for updates on my blog. However, I am still open to answer questions about how to lead life into debt free through email. I love to share my ideas for those who looking for ways to improve their financial life.
For those whom had read through my diaries on how I reached a financial haven, let me update all of you on what my tips have done to my life.
Money tracking
I still keep track of my money flow. As I highlighted earlier, I used my phone to write notes on money flow which I can transferred to Excel file anytime I have free time. I used to transfer the information to Excel daily since the file can help to calculate my daily budget which I direly need to make sure my daily spending do not exceed my budget. But after 1 year plus of doing that, subconsciously my mind consistently maintain its daily budget spending even though I do not calculate them daily. Now, I only update the Excel once every 2 weeks but so far, none of the update showed me that I spend more than I can afford. I guess once the spending discipline burnt into my habit, my spending is automatically tamed.
AKPK
It has been 1 year and 8 months now that I hold account with AKPK. I received bank statements every month and it showed very consistent reduction in my loan to bank. AKPK maintain paying all the banks the money as indicated in my AKPK agreement. Those bank that will send updates every months through statements are AEON, RHB, AmBank, EON, Hong Leong, HSBC and Standard Chartered. All these banks, except AEON, showed in their statement that they charge very low interest rates which the monthly payment have no problem to handle. Thus, my loan balance keep on reducing every month. Only AEON still charging 18% interest rate and the loan balance keep on increasing because the monthly payment is too low to handle interest rate. I approached AKPK councellor on this and they tell me to just ignore the bank statement and the interest rate since once AKPK tracking showed that they have paid AEON full amount, they will get AEON to waive all the unnecessary charges.
Maybank is one of the bank which do not send monthly statement. But, they keep on updating my account online through Maybank2U. From the online account, it showed that AKPK payment were paid every month and amazingly, Maybank did not change any finance charge at all. Seems like they gave the best deal through AKPK so far.
Other bank such as BSN, Citibank and Alliance will not send monthly statements but they will send yearly statement showing how my loan balance is reduce upon payment from AKPK. All these updates kept me sleeping like a baby at night knowing that all my bank loans will some day hit zero and I will be debt free.
House Loan
From all my surveys online on housing loan, I know that my current CiMB home loan is not the best. I was undergoing their locking period for 5 years, so I cannot changed my house loan to other bank without penalties. However, that will not stop me from trying to reduce the interest that I am paying them.
CiMB offered to lower my monthly payment due to lower BLR. I know that this will not do me any good since lower monthly payment will increase tenure and increase total interest that I paid to them. So, since my previous monthly payment were already budgeted, I kept paying the previous monthly payment amount even though they told me that I can pay less now.
I also withdraw 10% from my KWSP (EPF) to settle some of the house loan. This is very important since having lower loan balance means lower interest per month. In long run, even though I did not get the 4.5% of dividend for my KWSP, that money will help to lower my house loan balance thus lower my interest paid to bank. I might not gain money, but most importantly I do not lose too much money too.
My Personal Life
My personal life have been such a wonderful experience since. I do not afraid of money anymore since my discipline have tackle all my bad spending money habit. Everytime I want to spend on something, I survey for best offer. I have always satisfied with all my spending since I know that all my spendings is only on best offer around.
Recently, I add air conditioning to my house since I cannot tolerate anymore with the high temperature the world is getting to. I also got new handphone since my old one already damage after 3 years of its service. The best thing, these spending were taken out from my savings money which was well budgeted for the spending. I budgeted $1,200 for aircond and get $950 deal. I budgeted $1,000 for handphone and end up getting one for $500. The money savings ideas is so burnt into my mind that I constantly able to see all potential good deals.
I was sent to Germany last months due to work. EUR is 5 times higher than MYR. I never imagine how I could survive there if I was flooded with my money problem. However, 3 weeks there had been amazing experience. I maintained a healthy budget and come back to Malaysia without having any money problem and even manage to save a lot of money. I make sure that I only spent what my company supports me and very less of my personal money flow to EUR. 3 weeks there without spending money in Malaysia actually saved my budget since I came back with 3 weeks of budget never been used.
I maintain 10% of my salary to go to ASB and a few month later, my savings will reach 6 months of my monthly salary. That will be enough for my emergency fund and should be enough for me to take up ASB - Overdraft. I hope that ASB-OD will work as a tool for me to further speed up my savings for my retirement. If so, I reached my short term goal of having 6 months salary of emergency fund and I am on a good direction of reaching my long term goal for retirement plan. As for my medium term goal for debt free, no worries at all since AKPK will be there to help me reach that goal within the next 3 years.
Again, I would like to invite all my readers to take action today, changed your habit and change your life to a better, most beautiful experience of freedom from financial prison. All you have to do is to ACT NOW!! Best of luck.
Sorry for all my readers that long for updates on my blog. However, I am still open to answer questions about how to lead life into debt free through email. I love to share my ideas for those who looking for ways to improve their financial life.
For those whom had read through my diaries on how I reached a financial haven, let me update all of you on what my tips have done to my life.
Money tracking
I still keep track of my money flow. As I highlighted earlier, I used my phone to write notes on money flow which I can transferred to Excel file anytime I have free time. I used to transfer the information to Excel daily since the file can help to calculate my daily budget which I direly need to make sure my daily spending do not exceed my budget. But after 1 year plus of doing that, subconsciously my mind consistently maintain its daily budget spending even though I do not calculate them daily. Now, I only update the Excel once every 2 weeks but so far, none of the update showed me that I spend more than I can afford. I guess once the spending discipline burnt into my habit, my spending is automatically tamed.
AKPK
It has been 1 year and 8 months now that I hold account with AKPK. I received bank statements every month and it showed very consistent reduction in my loan to bank. AKPK maintain paying all the banks the money as indicated in my AKPK agreement. Those bank that will send updates every months through statements are AEON, RHB, AmBank, EON, Hong Leong, HSBC and Standard Chartered. All these banks, except AEON, showed in their statement that they charge very low interest rates which the monthly payment have no problem to handle. Thus, my loan balance keep on reducing every month. Only AEON still charging 18% interest rate and the loan balance keep on increasing because the monthly payment is too low to handle interest rate. I approached AKPK councellor on this and they tell me to just ignore the bank statement and the interest rate since once AKPK tracking showed that they have paid AEON full amount, they will get AEON to waive all the unnecessary charges.
Maybank is one of the bank which do not send monthly statement. But, they keep on updating my account online through Maybank2U. From the online account, it showed that AKPK payment were paid every month and amazingly, Maybank did not change any finance charge at all. Seems like they gave the best deal through AKPK so far.
Other bank such as BSN, Citibank and Alliance will not send monthly statements but they will send yearly statement showing how my loan balance is reduce upon payment from AKPK. All these updates kept me sleeping like a baby at night knowing that all my bank loans will some day hit zero and I will be debt free.
House Loan
From all my surveys online on housing loan, I know that my current CiMB home loan is not the best. I was undergoing their locking period for 5 years, so I cannot changed my house loan to other bank without penalties. However, that will not stop me from trying to reduce the interest that I am paying them.
CiMB offered to lower my monthly payment due to lower BLR. I know that this will not do me any good since lower monthly payment will increase tenure and increase total interest that I paid to them. So, since my previous monthly payment were already budgeted, I kept paying the previous monthly payment amount even though they told me that I can pay less now.
I also withdraw 10% from my KWSP (EPF) to settle some of the house loan. This is very important since having lower loan balance means lower interest per month. In long run, even though I did not get the 4.5% of dividend for my KWSP, that money will help to lower my house loan balance thus lower my interest paid to bank. I might not gain money, but most importantly I do not lose too much money too.
My Personal Life
My personal life have been such a wonderful experience since. I do not afraid of money anymore since my discipline have tackle all my bad spending money habit. Everytime I want to spend on something, I survey for best offer. I have always satisfied with all my spending since I know that all my spendings is only on best offer around.
Recently, I add air conditioning to my house since I cannot tolerate anymore with the high temperature the world is getting to. I also got new handphone since my old one already damage after 3 years of its service. The best thing, these spending were taken out from my savings money which was well budgeted for the spending. I budgeted $1,200 for aircond and get $950 deal. I budgeted $1,000 for handphone and end up getting one for $500. The money savings ideas is so burnt into my mind that I constantly able to see all potential good deals.
I was sent to Germany last months due to work. EUR is 5 times higher than MYR. I never imagine how I could survive there if I was flooded with my money problem. However, 3 weeks there had been amazing experience. I maintained a healthy budget and come back to Malaysia without having any money problem and even manage to save a lot of money. I make sure that I only spent what my company supports me and very less of my personal money flow to EUR. 3 weeks there without spending money in Malaysia actually saved my budget since I came back with 3 weeks of budget never been used.
I maintain 10% of my salary to go to ASB and a few month later, my savings will reach 6 months of my monthly salary. That will be enough for my emergency fund and should be enough for me to take up ASB - Overdraft. I hope that ASB-OD will work as a tool for me to further speed up my savings for my retirement. If so, I reached my short term goal of having 6 months salary of emergency fund and I am on a good direction of reaching my long term goal for retirement plan. As for my medium term goal for debt free, no worries at all since AKPK will be there to help me reach that goal within the next 3 years.
Again, I would like to invite all my readers to take action today, changed your habit and change your life to a better, most beautiful experience of freedom from financial prison. All you have to do is to ACT NOW!! Best of luck.
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