How Much Should You Have In Savings by The Age of 30?
- By CompareHero.my
- May 7, 2021
Having savings as a financial buffer for yourself is a crucial part of personal finance. It is the first and easiest step towards building your wealth before going into other personal finance components that are more complex such as investing, property (asset) management and building your own business (income).
For many millennials out there who are reaching their 30s and are still clueless about where to start in terms of saving money, here is a guide to determine the amount of money you should save by the age of 30.
Contents
Why 30 years old?
This may not speak for everyone but usually, by this age, you should be more rational and firm in terms of making decisions from the perspective of your career, investments, relationships, and even life. Hence, setting a goal (financially) at this age will help you to clarify the action plans you need to make to achieve it by your 30s.
As it is hard to determine the amount of savings an individual should have by the age of 30 due to different starting salaries and years of working, we have come up with a formula that may help to quantify the savings you need to have on a monthly basis in order to be financially bulletproof.
Formula to determine your savings
*Disclaimer: The following formula and suggestions are only for information and reference purpose only.
For example, Amin earns RM3,500 a month as an accountant at the age of 24. He will need to save a total of RM1,505 to consider himself a financially secure individual. With a disposable income balance of RM1,995 after 43% of savings, he still can own a car with a monthly auto loan repayment at about RM500 and live modestly with the rest of the money.
Let’s look into each component of savings and the justification for the allocated percentage so you can better understand the science behind this formula.
Retirement savings
Earlier this year, the Employee Provident Fund (EPF) has announced its increase in the proposed minimum savings of RM228,000 for its members by the age of 55, from the previous minimum of RM196,800.
“The Basic Savings refers to the amount that is considered sufficient to support our members’ basic retirement needs for 20 years from age 55 to 75 aligned with the Malaysian life expectancy. The new quantum (refer to Table 1) is benchmarked against the minimum pension for public sector employees, which has been raised from RM820 to RM950 per month from age 55 to 75,” EPF added.
Source: EPF
According to this table, we should have at least RM29,000 in our EPF account by the age of 30 which means that we will be on the right track to meet the minimum required amount of money to retire and sustain ourselves till the age of 75.
However, we will need to save more than that if we want to beat inflation and live a more comfortable life when we retire. Private Pension Administrator (PPA) CEO Datuk Steve Ong has earlier suggested that every Malaysian should save at least 33% of their monthly income for retirement savings.
After deducting 11% from your monthly income and 12% employer’s contribution into your EPF account, you will still need to save about 9% to 10% every month. Hence, you will only need to deduct 23% from your gross monthly salary to save up for retirement.
Important thing is, your EPF contribution is set at 23% (employee and employer’s contribution) and you will need to find alternative investment products to save the remaining 10% for retirement.
You can choose to invest in one of the 56 private retirement schemes (PRS) in Malaysia that are provided by eight licensed and highly governed banks and financial institutions, depending on your preference.
Related: A Guide To The Private Retirement Scheme (PRS)
Emergency savings
Any unforeseen incident may occur and may cause some financial shock which will require you to have sufficient money in savings. These incidences might include a medical issue, a car breakdown, retrenchment, or a new door for your house when the old one is spoiled.
Let’s be honest, Malaysians continue to take this matter lightly because of the fearlessness towards uncertainty and the consequences that come from it. Last year, we saw multiple retrenchment announcements made by several corporations when the economy suffered a dip in Ringgit and oil prices.
To recap, Bank Negara Malaysia (BNM) in its Financial Capability and Inclusion Study 2015 found that only 6% of salaried Malaysians are able to sustain themselves for more than six months if they lose their main source of income.
While it may be tough to have a buffer of six-month’s worth of savings, you will have to start somewhere. You need to be prepared for the uncertain future and the worst that comes with it.
By allocating 10% of RM3,500 in a liquid or flexible savings account, you can easily save up to RM3,500 (one-month salary) in just ten months. By doing so for five years, you are practically safe for six months when it comes to facing the worst time in the future with an amount of RM21,000 in your savings.
Related: Everything You Need To Know About Emergency Fund
Specific purpose savings
Be it travelling, paying for property, a car down payment, or even funding your wedding in the near future, everyone has their financial goals in the near to medium term. Since your retirement saving is covered, you can allocate another 10% of your gross monthly income for these goals.
You can even allocate this amount of money in a unit trust or fixed deposit to earn yourself some interest over time.
Start today and aim higher
It is never too late to start saving money for yourself. Instead of just relying on one source of income, you can try getting a part-time or freelance job to gain extra income while you are at it. Last but not least, do not neglect debts as it will eat into your savings no matter how much you save at the end of the day.
Read More
A Beginner’s Guide To Will Writing In Malaysia
- By CompareHero.my
- May 6, 2021
None of us has the power to predict the future. So, for peace of mind, and to ensure your family and loved ones will get what is rightfully theirs, here is a guide to help you identify what you should know about will writing and surat wasiat in Malaysia.
Contents
What is a will and why do you need it?
A will is a legal document that will determine how your wealth will be distributed among your beneficiaries and those under your care, such as minor children. It ensures it will be handled and distributed according to your wishes.
There are various types of wills such as:
- Holographic will: A handwritten will that is written and signed by the testator.
- Oral will: Also known as a nuncupative will, which is a will that has been delivered orally through speech to witnesses.
- Living will: Also known as a directive to physicians, this willallows people to state their medical care wishes in case they become unable to communicate their medical decision.
- Wasiat: An Islamic will where a Muslim will make a declaration during his or her lifetime regarding assets.
A will and surat Wasiat are governed by different sets of laws, however, both serve a similar purpose.
There are two types of Wasiat:
- A Wasiat where the testator can give property or asset to a non-beneficiary who is not entitled to anything under Faraid Law. Only 1/3 of the assets that are not administered after deduction of liabilities can be given. The remaining 2/3 of the Testator’s assets will remain the lawful share of his or her beneficiaries under Faraid Law.
- A Wasiat where the testator can choose to donate more than 1/3 of his or her assets provided that the beneficiaries agree.
Terms used in a will and a surat Wasiat
- Testator: the person who makes the will
- Interstate: dying without a will (for non-Muslims)
- Estate: in the context of will, this word means property and assets of a dead person
- Wasi: executor or an individual selected to administer
- Faraid: Islamic law of inheritance
What happens if you don’t have a will?
Did you know that as of July 2017, there remains more than RM327mil amount due to beneficiaries of life insurance policies that has yet to be claimed? In 2016, RM64mil was submitted by members under the Life Insurance Association of Malaysia (LIAM) to the Registrar of Unclaimed Money. LIAM shared that almost all the policyholders affected by this issue were unreachable, mostly because their contact information was outdated.
This is another reason why having a will, ensuring your information is updated and naming a beneficiary is crucial. It will ensure your beneficiaries will not have to go through a lot of trouble to get the pay out money.
When a non-Muslim dies without having a will, his or her estate will be distributed according to the law, except for insurance and EPF savings, where the nominees which have been named are the beneficiaries.
Without a will, the asset’s one leaves behind will be distributed among family members according to the Distribution Act 1958. So you need a will to ensure smooth distribution of your assets within your family upon your demise.
As for Muslim’s, their assets and wealth will be distributed according to the system of Faraid. So who inherits the assets and at what proportions, will have to follow the Faraid system of distribution.
Even though a Muslim’s assets will be distributed according to Faraid, by having a surat Wasiat one can expedite the legal process for their beneficiaries to liquidate the assets. This is because Faraid does not mean that beneficiaries can obtain their entitlement immediately after the death of a person.
Faraid exists in harmony with Wasiat. A testator can also make provisions to benefit their loved ones who do not fall within the category of beneficiaries in Islam, for example, adopted children, non-Muslim parents or any charitable body.
How do you draw up a will and how much would a will cost?
Wills and Wasiat can be written at banks, trust management companies, will writing providers or also with the help of lawyers. However, do take note that if you choose to go through a lawyer when writing your will or surat Wasiat, make sure you engage one who specializes in the field. This is because like doctors, lawyers have their expertise, which means getting a corporate lawyer to help with writing your will may not the best idea. Engaging a lawyer for a will or Wasiat will also be costly, even for a simple one.
Some banks in Malaysia also have their own will writing services that start from a few hundred ringgit per will. If you have a large amount of money deposited at the bank (usually over RM100,000), some banks also offer will and Wasiat writing services for free. Aside from that, Amanah Raya Berhad, a trustee company also provides the will and Wasiat writing services. Their charges are as per below:
| Amanah Raya Berhad Will and Wasiat Writing Services | |
| Type of wills | Fee |
| Wasiat | Minimum RM636 |
| Non-Muslim Will | Minimum RM636 |
Charges for wills and Wasiats will vary according to the number of clauses, or items inserted, as well as the level of complexity of the intended will or Wasiat. Whether you choose to write your will or Wasiat at a bank, through a lawyer or will and Wasiat writing provider, make sure you do your homework and choose a reputable one.
This is to safeguard yourself and make sure the authenticity of the will or Wasiat will not be challenged or deemed invalid.
Remember, when writing a will you will need to appoint a witness. To make sure of the validity of the will or Wasiat, you must sign it in the presence of 2 witnesses who are 18 years old and above. For Wasiat, witnesses must be male Muslims.
A will and Wasiat can be reviewed and updated during the testator’s lifetime. It should be reviewed and updated upon marriage, or remarriage or upon the occurrence of events that would cause revocation of a will. A will can be revoked in the following circumstances:
- Will is revoked by a marriage or re-marriage (unless the Will is made in contemplation of a particular marriage). Divorce or separation does not revoke a Will.
- A Will is revoked when the Testator destroys the Will physically with the intention of revoking it. Accidental or malicious destruction by a third party does not constitute revocation.
- A subsequent Will would automatically revoke an earlier Will, whether or not a revocation clause is included in the later Will. The Testator can also revoke a Will by making a written statement of his intention, signed in the presence of 2 witnesses.
- A Will is revoked when a Non-Muslim person converts to Islam because the distribution of his/her estate will automatically follow the Faraid
Finally, take into consideration where you will be keeping the will or Wasiat. Ideally, the location of the will or Wasiat should only be known to the immediate family. For safety and easy retrieval, you can choose to keep it under a custodial service, which many will and Wasiat writing service providers offers.
Read More
7 Costly Mistakes You Make When Taking Out A Personal Loan
- By CompareHero.my
At least one point in an adult’s life, we take out a loan to buy things, pay for things, or even start a business. Personal loans can be a wonderful solution when you need fast cash with no collateral and a few questions asked. Sometimes, you get approved for your personal loan almost immediately.
Some lenders these days boast of 5-30 minute approval to cash-out, but it can range while some still take 24 hours up to 5 business days or a week to process loan applications and approvals.
But not everyone makes use of these personal loans to their fullest potential. Instead of gaining more, those people end up losing money and putting themselves in even bigger debt. This can cause not just financial problems, but problems at home as well.
Of course, not all the mistakes we make when we take out a personal loan leads to debt, bigger financial problems, or divorce. Some of them are just minor enough to cause inconveniences, like prolonged application processing and so on.
However, these are the costly mistakes you would still do well to prevent:
Contents
1. Compulsion borrowing
Think before you get a loan! Getting a loan is a huge commitment. It’s like entering into a relationship. Just because a family member told you that you had gained weight doesn’t mean you need to run to the bank and get a loan so you can Zumba it up, enroll yourself in a CrossFit class, or even get yourself some medical treatment to get rid of that “excess fat” that might not even exist.
Think your decisions through before doing them. It might save you a lot of time, effort, and money.
2. No long-term plans
Impulse borrowing actually can lead to this problem. When you take out a loan on impulse, you’re not completely planning out your long-term finances. That is, you’re not considering your day-to-day expenses for the future. Not having long-term financial plans can get you into a lot of problems, such as debt, inability to pay bills, and almost always being short on money to buy food and groceries: the basics you need for everyday living.
So remember, when you’re taking out a loan, also think of the future and how you are going to repay the loan, as well as where you will be getting the money to repay it with.
3. Incomplete paperwork
Forgetting to submit all the required paperwork and documents can lead to a very annoying and frustrating loan application process. Usually, it’s the borrower’s fault for not reading the full list of requirements, thinking that since a personal loan is a quick way to get cash, it can be easily done with just signing a few papers. It’s not.
You need to prove to the bank or the lending agency that you’re capable of repaying the loan amount you’re taking (plus interest). Not submitting the complete paperwork and requirements will only delay your loan application, and delay whatever plans you have with them.
You might have to keep coming back and forth to the bank or lending agency just to have your application approved. Before applying, make sure to have all necessary requirements on hand (extra photocopies won’t hurt, either) for a smooth and easy application.
4. Incomplete disclosure
You have to complete your loan application form with 100% complete honesty, no ifs or buts. Be as exact and precise as you possibly can. Why? Not telling your bank or lending agency the truth can and will bite you in the ass eventually.
Incomplete disclosure can lead to court cases or even criminal cases since you are committing fraud. Worse, you might be using someone else’s information as you fill out your loan application, and that is identity theft. Don’t do this.
If the application tells you to disclose information that they need to complete the application, then do so. If you’re uncomfortable with sharing that information, ask the bank or lending agency how to go around this, and they will be more than happy to help.
5. Borrowing for someone else
Some people borrow personal loans under their name but give the money for someone else to use. Don’t do this! This is problematic since the other person isn’t the one paying the loan back with interest. What’s more, the other person can just run off with the money and leave you in the dust, paying off the loan and its interest without you reaping any of the loan’s benefits.
6. Ignoring the fine-print
Since getting a loan is also a form of binding contract between you and your bank or lending agency, you have to read the fine print. You might be missing important information about the loan you’re getting, such as a flexible interest that can change every month, or that important changes to your loan term can be changed by the bank without your prior knowledge unless you ask for it. These are details that you need to know since they can make or break your application. Read them before you sign the dotted line!
7. Forgetting to compare
To get the most out of your personal loans, don’t forget to compare the loan products available to you. Check their interest rates, annual percentage rates, and loan tenures to make sure you are getting the personal loan product that’s right for you. This will help you save money as well, in the long run.
Read More
How To Recession-Proof Your Finances
- By CompareHero.my
Without being too negative, here are the things that will happen during a recession:
- Increase in unemployment
- Pay cuts
- Rise in poverty
- A drop in asset prices
- Widening of the wealth gap
With these items listed out, the echo of the word ‘recession’ does incite an unsettling feeling among the working-class. Not just that, as humans, we cannot predict when recession comes, just that it will come at some point. However, the good news is that we can start preparing for it as soon as possible.
If this period of economic downturn turned out to be years away, great!
If it turned out to be the next few months, we’re at least half prepared for it.
Let’s dive in.
Contents
1. Start building your emergency fund
Naturally, the first step to being financially sound is knowing that you’ll be safe for at least three to six months if absolutely everything decides to go wrong.
The core of an emergency fund is giving you peace of mind that you’ll be safe for at least a few months. Expound it as the money that you set aside to use only in times of financial distress.
Related: Everything You Need To Know About Emergency Fund
Obviously, the more money you can park in your emergency fund, the longer you’ll have. That’s taking into account that it will be much tougher to find a job after getting laid off because of recession.
2. Establish a budget
Downsizing your lifestyle and living more frugally could be a challenge to some individuals, but it is a super-effective way to either build that emergency fund or increase your investments.
It’s much less about pinching every single penny and constraining yourself to the joys of life. Rather, it’s more about being conscious when you spend and cutting back on those unnecessary purchases and subscriptions that siphon your money away every single month.
It won’t even impact your lifestyle that much.
Sit down and really track where your expenses are going. Apps like Wally and Mint makes it so easy for us consumers. Then, formulate a plan, tailor it according to your lifestyle and stick to it.
Related: 7 Budgeting Management Apps That Can Help You Track Your Expenses For Free
3. Get out of debt
Being in debt is a burden. There’s simply no other way to put it.
On top of that, if you’ve just lost your job in a recession, these debt payments will only add even more stress to the already taxing efforts to survive.
Going off track to speak a little about personal finance, getting out of debt as soon as you can save you A LOT of money in interest payments! Almost every financial advisor in the world will tell you that getting out of debt always comes before thinking about investing any of it.
Related: 7 Strategies To Get Out Of Debt Fast During The COVID-19 Pandemic
4. Diversify your income
If you have expertise that you can offer to the world, start building on that! It could be dropshipping, being a freelancer, or even a virtual assistant.
Related: 8 Side Jobs for Malaysians to Earn Extra Money During CMCO
Although the income you’ll get from starting this side hustle will be minimal in the beginning, over time, it will help you to realise that you don’t need to rely on one source of income to survive.
For example, during the MCO lockdown, most of the working class is forced to stay in their homes. And because of that, those who need to physically be at work got their paycheck severely halved.
Having a side income is not only to pad the wallet during ‘normal periods’, it’s about having a safety net and knowing that you won’t be in trouble if one falls through.
5. Diversify your investments
On top of needing to diversify the income, it is also crucial that you start diversifying your investments. If you have all your funds invested in only one type of asset, an economic downturn in that certain market could potentially become a disaster for you.
The adage “Don’t put all your eggs in one basket” rings especially loud on this one.
Assuming that whether you invested everything in stocks or if you had diversified, your returns remain 10% per annum. However, if you had diversified, the impact of one market crashes is much lower. In this case, would you rather have diversified or not?
Of course, in real life, the numbers might vary. But it is ultimately better to have diversified and have a slightly lower return than risking everything on one type of asset.
6. Consider a recession-proof job
Recession-proof jobs are the jobs that will still be there regardless of what is happening in the economy. For instance, healthcare workers, teachers, IT professionals, utility workers, accountants, and more.
The fact is that during a recession, very few job sectors remain together. There will be either pay cuts or layoffs. While there are no 100% guaranteed recession-proof jobs, these few industries do seem a lot safer than others.
For more money-saving and finance-related tips, you can read the following articles below. Enjoy!
Read More
Perbezaan Antara Hutang Baik dan Hutang Buruk
- By CompareHero.my
- May 5, 2021
Sebelum memohon pinjaman, anda perlu tahu jika ia akan menjadi hutang yang baik atau buruk bagi anda. Tidak tahu bagaimana untuk membezakan antara kedua jenis hutang tersebut? Ketahui bagaimana hutang boleh menjadi baik atau buruk, dan pelajari bagaimana untuk menguruskan hutang anda dengan bijak!
Contents
Apakah yang dimaksudkan dengan hutang baik?
Menurut data dari laporan terkini Manulife Investor Sentiment Index (MISI), 68% rakyat Malaysia sedang menanggung hutang, yang terdiri dari kos sara hidup yang tinggi, sewa, dan pendidikan anak-anak. Dengan peningkatan mendadak hutang isi rumah dalam kalangan rakyat Malaysia, Bank Negara Malaysia (BNM) telah mengetatkan syarat-syarat permohonan pinjaman untuk semua institusi kewangan berkaitan bagi membendung situasi tersebut.
Dari perspektif yang lain pula, Agensi Kaunseling dan Pengurusan Kredit (AKPK) melaporkan kebanyakan rakyat Malaysia yang mendapatkan khidmat bantuan mereka berhadapan dengan masalah kad kredit.
Hutang atau pinjaman bermaksud anda meminjam wang dari pihak lain (individu atau institusi kewangan) yang akan dibayar semula dalam suatu tempoh, kadangkala berserta faedah. Ramai dari kita memohon pinjaman kerana kerana kekurangan tunai untuk membuat pembelian. Apa yang menjadikan hutang itu ‘baik’ atau ‘buruk’ ialah samada impak hutang tersebut keatas status kewangan anda positif atau negatif.
Hutang baik akan bakal meningkatkan status kewangan anda, sama ada untuk jangka masa pendek ataupuun jangka masa panjang. Contohnya anda melakukan pinjaman untuk mengembangkan perniagaan anda. Pinjaman tersebut boleh dikelaskan sebagai hutang baik. Antara ciri-ciri hutang baik ialah:
- Menambah baik nilai kewangan anda.
- Membantu mengembangkan simpanan.
- Jumlah bayaran semula yang rendah.
- Kadar faedah yang rendah (ataupun kosong)
Contoh hutang baik
Pinjaman pendidikan
Kaji selidik yang dijalankan menunjukkan Malaysia menduduki tangga kelima dalam senarai negara dengan kos pendidikan tinggi termahal. Kos untuk mendapatkan pendidikan tinggi boleh kini semakin meningkat, oleh itu, tidak hairan mengapa ramai rakyat Malaysia berhutang untuk menghantar anak mereka ke universiti.
Tetapi, bak kata bekas Presiden Universiti Harvard, Derek Bok, “If you think education is expensive, try ignorance.” Mempunyai kelayakan dari university akan membantu seseorang individu untuk mendapatkan pekerjaan yang lebih baik, dan juga boleh meningkatkan pendapatan pada masa hadapan. Oleh itu, pinjaman untuk pendidikan merupakan satu pelaburan dah boleh dianggap sebagai jenis hutang yang baik.
Pinjaman untuk pelaburan
Mengambil pinjaman untuk digunakan sebagaai modal pelaburan seperti untuk dilaburkan ke unit amanah atau untuk dilaburkan ke Amanah Saham Berhad (ASB) boleh menjadi pelaburan yang baik, dengan syarat anda faham akan apa yang anda lakukan. Syarat penting untuk menjadikan hutang ini satu hutang baik ialah pulangan dari pelaburan yang anda buat mesti lebih tinggi dari kadar faedah serta bayaran semula pinjaman anda.
Apa itu hutang buruk?
Hutang buruk ialah jenis hutang yang tidak mendatangkan apa-apa kebaikan keatas status kewangan anda. Selain itu, hutang buruk juga boleh menyebabkan anda perlu menggalas lebih kos sara hidup salah dalam jangka masa panjang. Ciri-ciri lain hutang buruk termasuk:
- Membeli barangan yang mempunyai nilai susut yang cepat di masa hadapan, conthonya kereta.
- Hutang kad kredit yang tidak dibayar tepat pada masanya.
- Kadar faedah yang tinggi dan membuatkan anda perlu membayar hutang lebih dari nilai yang sepatutnya.
Contoh hutang buruk
Hutang kad kredit
Kad kredit boleh memberikan banyak manfaat dari segi kewangan sekiranya ia digunakan secara betul. Tetapi, kad kredit boleh menjadi hutang buruk jika pengguna tidak menjelaskan baki tertunggak tepat pada masanya.
Lebih teruk jika pemegang kad kredit hanya melakukan pembayaran minima sahaja, sekadar mencukupkan syarat. Tindakan ini akan menyebabkan kadar faedah yang dikenakan terhadap baki tinggi, sdan juga boleh menjejaskan skor kredit pengguna.
Bagaimana untuk menguruskan hutang dengan baik?
Hubungi pihak bank atau pemberi pinjaman dengan segera jika anda berhadapan kesukaran untuk menjelaskan pinjaman anda tepat pada masanya. Kebiasaannya, pihak bank akan terbuka untuk menstrukturkan semula jadual pembayaran kerana mereka juga ingin mengurangkan jumlah pinjaman tidak berbayar (non performing loan).
Selain daripada itu, anda juga boleh menghubungi Agensi Kaunseling dan Pengurusan Kredit (AKPK). Ditubuhkan oleh Bank Negara Malaysia, agensi ini menawarkan perkhidmatan percuma antaranya kaunseling, nasihat pengurusan kewangan, dan juga pengurusan hutang dibawah Program Pengurusan Hutang (Debt Management Programme)
Sebelum anda memohon pinjaman, bandingkan terlebih dahulu jenis-jenis pinjaman yang ditawarkan oleh bank untuk mendapatkan kadar faedah terbaik.
