11 Tips To Simplify Your Financial Life
- By CompareHero.my
- July 10, 2018
A major part of adulting is gaining control of your finances. The less complicated your financial life is, the more secure you’ll feel and the easier it is to make headway on your financial goals. So where do you start simplifying your money issues? Here are 11 easy tactics to getting your financial life together.
Contents
- 1. Create a Simple Filing System
- 2. Use Cash When Possible
- 3. Restrict Usage to One Credit Card
- 4. Automate Your Savings
- 5. Automate Regular Bill Payment
- 6. Keep a Financial Routine
- 7. Store Documents Digitally
- 8. Live Debt Free
- 9. Simplify Your Investing
- 10. Drop Unused Services
- 11. Consider Renting Instead of Buying
1. Create a Simple Filing System
Many dislike filing work, but it still needs to be done! Don’t let your financial statements, bills and letters stack up and be disorganized. Arrange your incoming letters in a file boxes with dividers. Make use of separate the dividers to organize the many types of printed documents, such as receipts, bills, documents to destroy and to file, and so on, pending the right time to handle them. Store the file boxes in a convenient location.
See more:Money Lover App Review – Track your expenses!
2. Use Cash When Possible
Consider embracing a cash-using lifestyle. Use cash as your method of payment for small value items, regular or general purchases. Once purchases are made, keep the receipts to keep track of expenditure.
One major benefit of using cash is it results in lower spending. You will be surprised at how much less money you’ll spend when you have to pull that hard-earned cash out of your wallet. It’s just much harder to pay cash than to use a credit or debit card. Use your credit cards for bigger value purchases that may need buyer protection or a refund case.
3. Restrict Usage to One Credit Card
If you have an obsession with rewards and zero interest rate promotions, you may have built up a remarkable list of credit cards. But when the rewards and zero interest are consumed, the cards have not much value. Keep them wide open for credit scoring purposes but direct your credit card spending on a sole card.
Choose one credit card (or at most two) that offers the greatest benefits and set the rest away. It’s much easier to control your expenses and manage outgoings with one credit card than with three or five.
4. Automate Your Savings
Why not establish a routine on your savings activities? When you have determined an amount you want to set aside every month, arrange an auto-debit, or standing instruction on your banking account to be credited to a special account just for savings.
This is an excellent way to make sure you pay yourself first instead of spending it. You will then have the funds available when needed whether it’s an emergency, to travel, or take advantage of opportunities that arise.
5. Automate Regular Bill Payment
Have you ever overlooked paying a utility bill? Don’t worry, you’re not alone. Many people genuinely missed payments and incur late fees or penalties. Make use of auto-debit options available to automate the payments and have one less worry each month.
Some folks are concerned about security and having transactions automated. But with the advancement of internet security technology, you should not be too stressed about it. Your bills will be settled on-time, besides, security concerns are relatively low compared to the large amount of transactions that occur. Do practice good online and financial security habits.
6. Keep a Financial Routine
Maintain a routine for handling your financial transactions. List down and categorize all your financial transactions such as car and housing loans repayment, credit cards settlement, utility bills according to daily, weekly and monthly transactions. Then schedule the day and time for each. It need not be followed strictly but at least you have a guided, systematic way, and schedule to follow.
7. Store Documents Digitally
Opt to get your bills and statements through digital means, i.e. e-bills and e-statements. Most financial institutions, credit card companies, utility companies, and service providers suggest delivering by email. E-documents guard you against identity theft, lessen the quantity of physical documents you have to deal with or put through the shredder, and facilitate you to centralize all your incoming financial documents.
Archive old documents on the cloud. Most basic cloud storage are free these days, such as Google Drive and Dropbox. Storing important documents as digital copies also protect your documents from fading away or being lost due to natural disasters.
8. Live Debt Free
Carrying debt around costs you more money. Debt is a significant source of constant worry and will make living more strenuous. Getting rid or reducing debt removes a major complication in your life. It won’t happen overnight but have a strategy to make it happen. Clearing your debt is part of the journey towards financial independence.
9. Simplify Your Investing
It’s exciting and worthwhile to do your own analysis and invest in individual stocks. However, it does require your time to do research, buying, monitoring and selling. Imagine the time you have to spend if you have a dozen or more stocks in your portfolio. You can stay away from all of these inconveniences by investing in exchange-traded funds, low cost unit trusts and/or investment solutions managed by professionals. Do make sure that you aren’t paying an arm and leg in fees though!
10. Drop Unused Services
If you are paying for subscriptions and services that you barely make use of, it’s time to get rid of them! Stop subscriptions and services that are not giving you value and reduce yet one more expense from your budget. The smaller number of expenses you need to make, the less complex your finances will be. Keep the services that help save you time.
11. Consider Renting Instead of Buying
Traditionally, Malaysians love their properties! A common viewpoint is the long-term economic advantages of buying instead of paying rent to someone else. However, being a property owner comes with a lengthy list of costs and obligations including repairs and, Malaysia’s #1 past-time, renovating your property! Renting can be a good alternative and is surprisingly often just as good (or even better!) choice for some people.
The original version of this article by Eric Kiang was published at MyPF.my helping simplify and grow Personal Finances in Malaysia.
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Tabung Harapan Malaysia: Hope Fund For Malaysia By Malaysians
- By CompareHero.my
- June 27, 2018
KUALA LUMPUR, July 11 — According to the Ministry of Finance, the crowd fund has received RM144,636,944.31 as of 3pm today.
Since its launch on 30th May 2018, Malaysians have been actively donating to the Tabung Harapan Malaysia (THM) fund in major efforts to help settle the national debt. In just under one month, the fund has garnered an impressive amount!
See also: How Serious Is Malaysia’s RM1 Trillion Debt?
Tabung Harapan Malaysia (THM) is managed by the Ministry of Finance (MOF) donations are to be deposited to a Malayan Banking Berhad (Maybank) account under the Jabatan Akauntan Negara (Account No: 566010626452). All donations are tax deductible.
Finance Minister Lim Guan Eng, did explain that the official trust fund, besides helping to pay off the national debt, is for the people to show patriotism and unity. However, these noble intentions of Tabung Harapan have been met with critical and sometimes distasteful comments. There was even a Twitter thread on how the government should have opened an account in Bank Negara Malaysia (BNM), instead of Maybank. So we realized many netizens still don’t know the role of BNM.
Well, for those who don’t know, BNM is the central bank of Malaysia and serves as the nation’s monetary authority. That basically means, they are:
- The sole authority that issues Malaysia’s national currency
- Advising the government on macroeconomic policies and public debt management
- Ensuring all economic sectors and segments of the society have access to financial services
- Overseeing the efficiency and security of Malaysia’s financial systems
BNM is definitely not the place to do your usual banking matters. You can learn more about Bank Negara and what they do on their website here.
While it is highly encouraged for Malaysians to play a part in this movement, extreme precaution must be taken as there have been fake THM posters bearing a fake account number circulating on social media, as reported by The Star. Don’t fall for them! Those who plan to deposit money into the account are recommended to double check the account number and account holder name before confirming their donation.
It was also reported that MOF will appoint an external auditor to audit THM. While we wait for that announcement of the official auditor, we certainly expect to hear how the fund can be fault-proof against discrepancies and fraud. In the meantime, we are proud to see corporate leaders, associations, unions, political parties, sports bodies, celebrities, and the youth contributing, raising awareness of the national debt and its implications, in the spirit of patriotism and of shared responsibilities.
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What Is Your Net Worth?
- By CompareHero.my
- June 11, 2018
We are sure you have heard of the term ‘net worth’ at least once, especially when Forbes magazine announces their Richest List disclosing net worth of the world’s billionaires. The interesting thing is, regular people like you and I have net worth too! And you should know your net worth as it’s a snapshot of your financial health and an important part of a sound retirement plan. (more…)
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The Different Types of Investors in Malaysia
- By CompareHero.my
- June 6, 2018
When it comes to money, most of us have our own opinions of it. In Malaysia, there tends to be a few characters to money talk with, some of which can be helpful, but some whose advice should be taken with a pinch of salt.
Here are the types of investors you may encounter in Malaysia.
Contents
The Kedai Kopi Gang / Uncle Taxi
There are two types of these investors. First is a hard working person who is really trying to get a big break, often by trading stock. The other is a retiree or someone who is financially well-off. They don’t really care too much about their job (it’s just for something to fill up their time).
Both of these types of investors are “street smart” when it comes to financing. They learn things by putting their money in places where they really shouldn’t have in the first place. And then, they identify what worked, and imitate it. They understand key concepts like value investing, or how to read a company’s fundamentals. But, they can’t explain it using the actual terminology (e.g. they know what a P/E ratio is and how it works, but they don’t know that the letters P/E stand for “Price to Ratio Earnings”).
Most of them tend to be traders rather than investors, and they usually have a higher risk appetite.
Good For:
They can explain various indicators and ratios to you, even if they don’t know the exact terms. They can tell you what the ratios mean in an easy to understand way. Many of them may also have had real experiences with losing their money. So, they understand the emotional and psychological effects more than the academic types ever will.
Bad For:
Asking opinions for safe investing. This is because most of them have high risk appetites, so they may encourage you to take on more risk when investing.
The Avant Garde Investor
These are the types of investors who are comfortable with taking risks. They also like to experiment and try out things which other people have not done or discovered yet. These are also the type of people who would listen to that cool band before their music even became mainstream.
These Avant-garde investors will talk about financial products that will make financial professionals ask, “since when has this been a thing?”. These types of investors would have jumped on the bandwagon of new investments before anyone else had even heard it of it. For example, they may have been the first few people you know who started investing into cryptocurrencies like Bitcoin. They are like the hipsters of the financial world.
Good For:
People who like to learn and find out new ways to invest. Many of them also like to point out flaws in traditional investment products, so they will be good if you want an informed (although rather pessimistic) financial opinion.
Bad for:
This group of investors tend to like fads, which actually does happen in finance. Remember all the hoo-ha over Bitcoins? Most of these type of investors are interested in products which are different, but those products may not necessarily be good products. The danger is that the assets they swore by may be forgotten about next year.
The Wall Street Fan
These are the type of investors who are always posting Warren Buffet quotes on their Facebook or Instagram. They may also respond to questions by quoting him in their conversations. They also tend to subscribe to email responders from Investopedia, and may even be able to explain each component of the Capital Asset Pricing Model to you.
One of the quickest ways to identify these types of investors is that any money related issue they discuss with you will actually sound like they’re writing a Forbes article or for an economic column.
For example instead of saying: “I’m thinking if my mutual fund is worth the fees, I can’t tell because the market was really wacky late last year”, they would instead say, “I can’t identify Alpha due to at least three standard deviation events in Q3 / Q4 2016”.
Word of caution: you may find yourself scratching your head when talking finance with them.
Good For:
If you want the latest updates on financial news because most of them read the Business Times religiously. If you have the time to listen and decipher what they are talking about, they can also explain many critical financial topics to you. For example, the relevance of R-Squared or the difference between physical replication and synthetic Exchange Traded Funds.
Bad For:
Advice on anything that will require a quick decision. They also cannot come up with an easy to understand conclusion on anything. These types of investors are usually more interested in theories than actually investing their money. They tend to spend their money on books and going to courses or seminars, instead of really investing in the market.
The Allergic To Finance Types
These type of investors usually have someone who handles their finances for them. Most of the time, they don’t even know what they’re investing in. All they know is that they have an investment, but they don’t want to have to think about it.
These investors don’t like having to “deal with all that money stuff”, and hate it when they have to sit down and talk numbers.
Good For:
Ideal customers to sell financial products to. This is because most of these characters have no idea or care about commissions and management fees, all they care about is that they invest. But they don’t want to be bored with details.
Bad For:
Any type of financial advice. Most of them invest or buy financial products based on what a relative sold or told them to buy. It is rarely because they actually know and understand the performance of the financial products, so don’t take financial advice from these type of investors.
The Grouch
These are the kind of investors that don’t pay any attention to financial products which are not tangible. So to them, if it’s not physical gold, or property, or something that they can actually hold on to, they won’t trust it.
These are also constantly predicting the economy whether local or globally. Being the grouch, they are usually predicting if it is going to crash. However, since the market actually does crash every few years, theirs is actually an easy prediction. But still, being the grouch that they are, they will somehow exaggerate the impact of the next crash, perhaps saying things like our Ringgit will be so worthless we’ll probably have to downgrade to just eating rice with kicap.
Good For:
Detailed explanation of tangible assets like gold. Many of these types of investors are also good at pointing out flaws in financial products, as they will look at all angles, being the worrywart that they are.
Bad For:
Your morale and if you are making long term plans. When they start going on about the disaster, just remember they’re not known as the grouch for no reason.
See also: Why You Should Never Invest with Borrowed Money
Disclaimer: Neither CompareHero.my nor the content on it is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. The content on CompareHero.my is for general information purposes only and is not intended to be personalised investment advice or a solicitation for the purchase or sale of securities.
Compargo Malaysia Sdn. Bhd. and/or its affiliates cannot and do not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. CompareHero.my may receive compensation from the brands or services mentioned on this website.
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How Serious Is Malaysia’s RM1 Trillion Debt?
- By CompareHero.my
- May 25, 2018
Let’s get the facts straight; Malaysia has financial obligations amounting to RM1.087 trillion ringgit, as at December 31, 2017. This includes Federal Government Debt, Government Guarantees, and lease payments for Public Private Partnership (PPP) projects such as construction of schools, hostels, rental, maintenance of roads, police stations, hospitals, etc. The official Federal Government Debt of RM686.8 billion equates to 50.8% of GDP, and the total debt and liabilities amounting to RM1.087 trillion is 80.3% of GDP.
1 Trillion Ringgit. That is 12 zeroes! Most regular calculators can’t even take 12 zeroes. Where do these numbers come from? What does this mean for us? Is there a need to panic? Well, we’ve broken it down into easy-to-understand points so you can have a clearer picture of what this all means.
One important point to note, government debt and external debt are 2 different debts. Malaysia’s external debt includes external offshore loans, public enterprises and the private sector (that report in to Bank Negara Malaysia). It was reported that our external debt rose to RM883.4 billion as at end-December 2017.
| Malaysia Federal Government Debt and Liabilities | |||
| Debt and Liabilities | Amount (RM) | ||
| Official federal government debt Bank Negara Malaysia (BNM) breakdown can be found here |
686.8 billion (50.8% of GDP) |
||
| Government guarantees The committed government guarantees would include entities such Danainfra Nasional Bhd (RM42.2 billion), Govco Holdings Bhd (RM8.8 billion), Prasarana Malaysia Bhd (RM26.6 billion), Malaysia Rail-link Sdn Bhd (RM14.5 billion) as well as an estimated RM38 billion for 1MDB. |
199.1 billion (14.6% of GDP) |
||
| Lease payments for public-private partnerships The lease commitments which were designed specifically to circumvent the Federal Government guarantee and debt limits. These include including rental, maintenance and other charges for a whole list of “Public Private Partnership” (PPP) projects such as the construction of schools, hostels, roads, police stations, hospitals etc. |
201.4 billion (14.9% of GDP) |
||
| Total federal government debt and liabilities (debt-to-GDP ratio) |
1,087.3 billion (80.3% of the GDP) |
||
The debt-to-GDP ratio is a critical metric for evaluating a country’s fiscal health. The internationally accepted norm for a country’s debt-to-GDP ratio is 55% or below. The key points to understanding debt-to-GDP are:
- The debt-to-GDP ratio is an equation that shows a country’s economy produces and sells goods and services have enough to pay back debts without suffering further debt.
- A high debt-to-GDP ratio isn’t necessarily bad, as long as the country’s economy is growing, since it’s a way to use leverage to enhance long-term growth.
- Countries can run into problems with debt-to-GDP ratios in several ways, including unexpected slowdowns, demographic changes or excessive spending.
- There are several ways to deal with a higher debt-to-GDP ratio, including less government spending, encouraging growth, or increasing tax income.
Where do we stand on a global scale?
World Public & Private Debt Hits Record USD$164 Trillion <– Click here for more details
Singapore has a 112.2% debt to GDP ratio and Japan’s government debt accounted is at 239% of the country’s GDP!. Australia’s debt is at a low 39.6% of their GDP and the United Kingdom’s government debt is similar to ours at 85.3% to their 2017’s GDP.
What is a good or bad debt-to-GDP ratio?
A high debt-to-GDP ratio isn’t necessarily bad, as long as a country’s economy is growing. Credit Rating Agencies gave Japan’s debt-to-GDP ratio very little attention, but Greece’s 160% got analysts predicting its collapse. The reasons for these differences vary, but can include:
- Buyers of the Debt – A higher debt-to-GDP ratio is acceptable when the buyers of the debt are either domestic investors (citizens) or repeat buyers that have a reason for buying. For instance, Japan’s buyers are domestic and the U.S.’s buyer (China) purchases debt to keep a favorable trade balance with its largest consumer.
- Economic Growth – A higher debt-to-GDP ratio is acceptable when an economy is rapidly growing because its future earnings will be able to pay off the debt more quickly. For instance, a country projected to grow 5% next year will automatically see the ratio decline, whereas a country projected to contract will see it grow.
- Plan of Action – Countries with a viable plan to address a high debt-to-GDP ratio may receive some leniency from rating agencies. But those without a plan often face sharp downgrades and criticism. For example, Greece in 2011 did not have a viable plan of action and faced harsh criticism from rating agencies.
Common solutions to a high debt-to-GDP ratio:
- Cut Government Spending – Governments with a high debt-to-GDP ratio can cut spending to reduce their debt burden. However, the trick to successfully cutting spending is not to deter growth and undermine the GDP portion of the equation.
- Encourage Growth – Central banks can encourage growth by cutting interest rates, which (in theory) leads to easier commercial lending. Higher growth increases the GDP end of the equation and lowers the overall debt-to-GDP percentage.
- Increase Tax Income – Governments can increase taxes as a way to pay off debt. But again, the trick is to increase taxes in a way that does not affect GDP growth and undermine the denominator in the equation.
“Let me emphasize that the fundamentals of the economy remain strong. The financial sector is stable, the banking sector is well-capitalised and there is sufficient liquidity in the market. We believe that with the new administration focused on CAT (competency, accountability and transparency), investor confidence will only be strengthened over time. Together with the commitment of the new Government as well as the support of Malaysians all over the country, we will definitely succeed in saving our country,” – Finance Minister Lim Guan Eng (24 May 2018)
Monetary policy and sovereign debt are complex topics. You can get an advanced degree in this stuff, and still not quite understand it. So unless you yourself are economically savvy, it’s best left to the experts to scrutinise the decisions of government’s new action plan. Life is complicated enough already.
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