Friday November 6, 2009

Lityan MD sells stake and pockets RM3.9mil

A credit card is part of a system of payments named after the small plastic card issued to users of the system. – Wikipedia definition. Anyway, for me, it is just a card that replaced notes and coins. Forgive me for my humble definition; I do not own any credit card until the July 2009.

Therefore, I always wanted to have a try and understand how did credit cards works, as I believe this is an experience that cannot be fully be taught by reading, listening and observing. Finally, I applied without really needing it. After just 2 months, I have come out with some lowly personal views.

Good

Convenience            

With just a small plastic card weight less than 10 gram in your wallet, it is no doubt very convenient, and more secured than carrying cash! However, I can live without credit card, and, I do not bring carry too much cash with me.

Rewards

I believe the Bonus Point (BP) system is a very effective invention by retailing industry, because spending money no longer just a win-lose situation, consumer can, at least, “gain” bonus point from their spending. Beside, there is cash-back reward, where you are given discount on your spending. BP or Cash? I am pretty sure I will choose Cash. I only feel comfortable earning BP by paying my necessities with the plastic card.

Status

Credit card can provide some social status to certain people. In fact, I do feel well for the first time; after all, it is just a plastic card! The feeling of having pile of cash is better than having a platinum card, and being rich in your heart is just irreplaceable with holding the card.

Building Credit

Credit record is the key, bank evaluate borrower based on their credit record, a person who pay their credit card debt promptly, would have an added advantage to obtain loan from banks.

BAD

Late Payments

Late payment for outstanding balance could cause various penalties; these additional charges would add up to the outstanding balance. As many people have the habit of Last Minute – pay only on the due date – the chances is high we are unable to settle the debt on time due to a variety or reason, for instance, system failure.

 Debt

Debts can be a driving engine for growing your net worth or it will put you into deep trouble. It seems credit card is the latter one. Once you get used to the easiness of spending with credit card, the likelihood of having carry forward balance in your credit card statement is increasing. Higher credit limit than we can afford is another factor that causes credit card debt.

Hidden charges        

Credit card application form always consists of Terms & Condition, applying in the customer service counter is not ideal, as you will not have enough time to read through it. If you consider reading T&C is troublesome, make sure you ask enough question from the officer, to ensure there are no hidden fees.

Over-Spending

Paying RM 50 cash and swipe RM 50 with the credit card is the same cash outflow, however, you feel better to swipe the credit card because you gain some bonus/rewards and you will not feel the pain of paying cash. When it comes to spending with cash, it always makes me think twice or triple, credit card, just swipe…

Overall, credit card still do not give me any good impression, I feel like I will never like it, no matter how convenience it is. I can live without using it, payment can be made through online banking, meals can be pay by cash, groceries or expenses will not be over-spend if cash is the medium of exchange instead of the credit card! I will only use it for necessities; anyway, brochures sent by the bank will just goes into the dustbin, as they encourage spending more than saving.

Making good use of credit card is called leveraging, spending it on impulse purchase is nothing but stupid.

Reminder for me:

1. Swipe only for necessities

2. No impulse purchase

3. Fully settled outstanding balance before payment due date

4. To verify with credit card issuer for unknown transaction

5. Ask yourself, “needs or wants”

Retirement is the point where a person stops employment completely, a definition from Wikipedia.
However, I considered retirement is a STOP from working what you dislike just for the sake of money.

 When you can make money while doing the things you like the most, isn’t that sounds great to you? It’s easier to say than do, having passion on what you do, does not guaranteed you can earn a living out of it. Therefore, start retirement planning as soon as possible, achieve financial independence, and, get rid of the lousy job.

No matter how, a person need to retire, whether it is voluntary or forced retirement (due to illness or become Total Permanent Disable). All goals and objectives can be failed but no one can afford to fail in retirement, unless you want to face hardship for the remainder of your life.

How should a person start its own retirement planning? Personal Finance planning is never a difficult task, no rocket science involved, but you must have the cash, discipline, commitment and knowledge on it. To make it even simple, what needed is actually just a guide.

3 major steps in Retirement Planning

1.       Find out retirement Income needed during retirement.

·         This however is a regular income that supports daily expenses during retirement. There are mainly 2 type of method to calculate a person retirement income.

                                                               i.      Income Replacement Method

                                                             ii.      Expense Method

2.       Determine total retirement funds required

·         Based on the retirement income calculated, total retirement funds can then be determined.

                                                               i.      Principal Intact

                                                             ii.      Principal Liquidation

3.       Calculate the gap between the current investment assets and retirement funds required. Take proper action (increase your investment amount or achieve better investment return).

If a gap cannot be narrow down by either increasing your investment or achieve better return, delaying retirement could help.

Too often people feel difficult, or maybe lazy, to find out how much they need during retirement.  Think about this “You spend 9-12 hours to work and solve your boss/client problem, how many hour you allocated for yourself to determine your future lifestyle?”

Everyone knows when they need to visit clinic, but not much people know when they need financial planning. The reason is simple; they do not feel the PAIN yet.

I often heard a lot of “If I know…” from people around me included myself also. It is okay when nothing serious happen, however, you cannot foresee the future. Planning cannot prevent you from risk or danger, but it provides you the solution for you and your dependents. Whenever everything goes as planned, most likely you can reach your destination smoothly and happily, something happened in between, you know what action to take to rectify your problem.

For that reason, it is important to have financial planning; you would not want to spend your hard earned money just because of one major unpleasant incident. Majority of us classified ourselves as risk adverse, in which I believe, they are risk taker. Why?

•             These people do not have adequate emergency funds.
•             They do not trust insurance, therefore, no insurance coverage.
•             Enjoy now, suffer later. (No intention to save for retirement at the early stage)
•             No proper tax planning, end up paying more or penalty.
•             They believe this “Once I die, I don’t need to bother anything”

There are more… but these thinking are too selfish, and irresponsible to your dependents.

If you LOVE your parents, husband/wife, or children, you need to have a proper financial planning.

To know when you need financial planning,

Ask yourself a few questions:

1.            After using credit card to reward you or your family member, do you start to scratch your head?
2.            Do you need to try hard to save extra money, after settling all debts or expenses?
3.            Is your credit card statement showing an increasing balance?
4.            After paying all the debts or expenses, you exhausted all your monthly income?
5.            Do you sacrifice your meals just to pay your monthly expenses?
6.            If you lost your income, would you finished up all your savings within few months?
7.            Do you need to borrow to survive?

Any “Yes” for the above questions mean you need financial planning.

A responsible person will

•             never want their dependents to suffer, to pay for your liabilities and taxes?
•             pass their assets to their loves one.

Financial planning is not an easy task, try to record down all your expenses for at least a month, you will know how difficult just to track all your expenses. Cash Flow Management, your first step!
 

Cheers!

What is Earning?

Earning is income, cash inflow that we earned by trading our precious time. Everyone have a value that they think they should be paid for, or, fair value.

What is Saving?

Saving is the balance of our earning (if any).

Does a paycheck represents a person socio-economic status? You can earn a lot but saving nothing, or, spent more than you earned (Credit Card). This is why moving around to get higher pay salaries, does not help. This is because your appetite is getting bigger, you tend to spend more, which I classified this kind of behavior as a lack of discipline in financial planning.

There is a lot of examples for us to refer, Mike Tyson and Michael Jackson, both earn millions, and today both are bankrupt. Sometime it does not matter how large your paycheck or how much you can earn, what really important is the ability to SAVE!

I personally think that SAVING is the first successful step in financial planning, because it is the outcome of budgeting and cash flow management (CFM). If you follow your budget, monthly/weekly, you will know how much you manage to save. Furthermore, in term of CFM, you earned and spent wisely.

Until here, somebody might ask/said, “Where is life” or “life is about enjoy”; I totally agree, but living beyond our means now could end being difficult life later. Always remember “No Pain, No Gain” and forget about “Enjoy now, suffer later”! I definitely prefer to suffer first and enjoy later... It makes the enjoyment evens sweeter!

When I will start enjoying? 5 years from now, the tree that I plant now will start to give me back some fruits.

Cheers,

‘ Dylan

Types of Goals

Goals or Objectives can be classified into three groups, SHORT, MEDIUM & LONG.

Short Term                : Less than 1 year

Medium Term            : 1 – 5 years

Long Term                 : More than 10 years

The above length is my own define period; different people have different length about these term.

Once you have decided on your objective, you are required to take action or else, it is just a written plan on a paper (be an armchair strategist), at the end of it, you will not achieved what you have planned.

Reference:

Setting S.M.A.R.T objective (http://dylan-lim.livejournal.com/1113.html)

Cash Flow Apportionment (http://dylan-lim.livejournal.com/2009/02/07/)

Implementation

1.      Take action, NOW.

2.      Understand what you are doing!

3.      Be Discipline.

4.      Take advantage of automatic banking transaction, this can save both time and costs.

5.      Set a reminder if you cannot remember all of it. (There’s a penalty for myself if I have forgot/too lazy to perform manual transaction, Yes, I am very serious and strict to myself).

6.      Be sure to review your action, to make sure you are on track, otherwise, please take necessary adjustment.

I have read something regarding habit, habit = 21 days repeating behavior. Once you have perform certain behavior for consecutive 21 days, you are building a habit, so, never gave up so easily.

MY COMMENTS TO MYSELF IS “I AM NOT DSICIPLINE ENOUGH.”

I always remind me with this:-
"I earn income by sacrificing my time, therefore, I am actually trading my time for money.
Therefore spend wisely, because once I spent it will not in my wallet anymore!"

So that, instead of spending first, I always put aside a portion of my income into a separate saving account which does not have an ATM card.
I am actually a spendthrift, but I spent on something worthy.

Income apportionment; pay slip is something people tend to ignored. For a very common reason, "They are fixed, why bother to open it?" but, I do. Even though it is fixed, but I still need to plan it.
When its come to planning, I never use Ringgit Malaysia(RM), I use Percentage(%), for some reason, my income is not fix, because sometime I will received dividend, interest, commissions etc.
Other than that, I think % is more viable, as income change (increase or decrease); I can still use the same % to distribute my Income.

At first I have no idea how to manage my money, but now I have got a benchmark, but I do not follow it exactly.
http://dylan-lim.livejournal.com/1004.html from T. Harv Eker.

above table is my own 9 jars =D, I am satisfied with it at the moment, but when the time is right, I will reduce Jar 4 and increase my Jar 6

Save first, Insurance second, invest third, spend the balance wisely. =P

***************************************************************************************************************************************************************************************************************
I dare not say I am an expert in Personal Finance, and that, this journal should not be treated as my advice in personal financial planning, you should seek your own Financial Planner, which hold approved licenses.

Furthermore, setting up this Journal for personal use only, because i need to remind myself what should i do for my financial planning.
***************************************************************************************************************************************************************************************************************

but set your objective first...

Setting goals or objective

• Can help improve money management methods and even achieve them more than expected. Saving money without purpose is just like driving a car without knowing the destination, waste of time, effort, and might even cost more than you save.
• Objective provides direction, knowing the direction to achieve your objective; you can then construct a plan and know “how”, “what”, “where” and “when”.

Set your S.M.A.R.T objective(s) or goal(s) that are:-

Specific, Measurable, Attainable, Realistic, and Timely = S.M.A.R.T
 

Example:            Mr. Alex’s goal:
To put aside RM 6,000.00 as emergency fund in 1 year’s time (or 12 month’s time).

 
***************************************************************************************************************************************************************************************************************
I dare not say I am an expert in Personal Finance, and that, this journal should not be treated as my advice in personal financial planning, you should seek your own Financial Planner, which hold approved licenses.

Furthermore, setting up this Journal for personal use only, because i need to remind myself what should i do for my financial planning.
***************************************************************************************************************************************************************************************************************

The 6 Money Jars
by T. Harv Eker

Financial Freedom Account (FFA – 10%)

This is your financial freedom jar where the money is not spent, but used for saving and investment to generate more income.

Long Term Saving for Spending (LTSS – 10%)

The purpose of this jar is to prevent impulsive buying and to encourage one to save for an expensive item like going for a holiday or buying an flat-screen LCD TV.

Necessities Account (NEC – 55%)

This jar for all your daily expenses. If it exceeds 55% you have to simplify your lifestyle or alternatively, find ways to earn more money.

Education (EDUC – 10%)

You must keep investing in your own education as anything that is not growing is dying.

Give Account (Give – 5%)

Contributing to others in one of the fulfilling goals in life, and one of the impetuses of earning more is so that you can give more.

Play Account (Play – 10%)

At the end of the day, don’t forget to reward yourself. By celebrating your success each month, will boost your spirit and confidence to achieve more.

“When you can manage what you have, you will get more"

***************************************************************************************************************************************************************************************************************
I dare not say I am an expert in Personal Finance, and that, this journal should not be treated as my advice in personal financial planning, you should seek your own Financial Planner, which hold approved licenses.

Furthermore, setting up this Journal for personal use only, because i need to remind myself what should i do for my financial planning.
***************************************************************************************************************************************************************************************************************

I dare not say I am an expert in Personal Finance, and that, this journal should not be treated as my advice in personal financial planning, you should seek your own Financial Planner, which hold approved licenses.

Furthermore, setting up this Journal for personal use only, because i need to remind myself what should i do for my financial planning.