GROW YOUR MONEY
Retirement planning is a life-long effort, 20 years of retirement requires 20 years of saving. But if time is not on your side, some financial planners advocate setting a goal to save 50% of your net income.
IF you only start building a retirement nest egg when you’re less than 10 years from stopping work, you’re setting yourself up for a rude shock! Still, the inability of most people to safeguard their golden years is understandable. As a species, our experience with retirement is limited.
The widespread cessation of work by mature, mobile members of a population started with the 20th century. Even then it was mainly viewed as a perk enjoyed by those fortunate enough to live in a developed country. So, for more than 98.3% of the six millennia of recorded human history, most people worked till they dropped.
Today, thankfully, we live in a capitalistic era that permits ambitious, motivated men and women to gradually ease away from “working for money” to “having their money work for them”. But it never happens automatically.
Tan Kim Book, chairman of the Malacca chapter of the Financial Planning Association of Malaysia (FPAM), notes, “Many Malaysians have the wrong attitude. They think the government will take care of them or perhaps their children will!”
Recent developments suggest our government is rolling back competition-hampering subsidies to wean our populace off an entrenched entitlement mentality. On the family front, the rising cost of living is making it difficult for even the most filial adult children to provide for all their parents’ needs in retirement.
Financial planner and tax specialist KP Bose Dasan of ITF Management states, “By all counts, we should be seeing truckloads of destitute retired people on the streets. However, that’s not apparent; I believe the family bond is keeping people off the streets.” For now!
Financial planners who rub shoulders with people of all backgrounds believe a retirement funding storm is brewing. For those willing to pay the price in self-education, the solution is clear.
Securities Commission-licensed financial planner Rajen Devadason observes: “The best way to plan for a great retirement that’s devoid of financial stress is to begin aggressive saving early, and intelligent investing soon after.”
Why? Because for compound interest to work, its wealth-building magic requires three elements of growth, one of which is time – lots of it.
Tan, a licensed financial planner with Oscar Wealth Advisory, believes teenagers should have an awareness of retirement inculcated in them.
“The moment we get our first pay cheque, we should start saving without delay. Even if we start with a small sum, saving regularly will bring us closer to our goal.”
The master key is compounding. Consider a proud father who decides to set aside RM1,000 in a savings vehicle the day his baby boy is born. Even if he never again adds any money to that seed money, if it grows at a steady 3% a year, by the time the child turns 20 he’ll have a little over RM1,800.
In case that amount does not excite you, the way to gain more at the end of two decades is to ratchet up the interest earned. After all, if the father had put the RM1,000 into a high yield investment that generated a steady 9% a year, his 20-year-old offspring would have more than RM5,600.
While it takes a rare 20-year-old to not raid ‘the bank’ for a good time with his friends, we’ll assume his parents raised a paragon of virtue with an appreciation for the wisdom of delayed gratification and an understanding of exponential growth.
If the young man leaves the money to grow, then when he’s 40, he’ll have more than RM30,000; at 60, more than RM175,000; and assuming he lives to be 100 – as more and more people are – our (hopefully) healthy centenarian will have more than RM5.5mil.
But as higher yields are sought, the risk-reward relationship dictates more uncertainty (translation: the finite probability of loss rises); this is unavoidable. So, assuming the father originally chose not to stomach excessive risk, you can see from the table above how much the money would have grown to along the way at different rates.
Time certainly is the most important element in the calculus of wealth accumulation. The second element needed for compound interest to work in our favour is the interest rate achieved. The third is the amount of money set aside.
Interestingly, those three linked elements of growth suggest the same number of ways for apprehensive Malaysians to overcome retirement funding shortfalls:
Save and invest for a long, preferably multi-decade, period;
Comprehend the risk-reward relationship; and
Sacrifice today to have seed to sow for a rich harvest tomorrow.
If you’re “young”, say under 35, time’s on your side. And that’s important because, as Bose explains, “Retirement planning is a life-long effort, 20 years of retirement requires 20 years of saving.” He explains that if a person assumes a mortality period of 20 years from 55 (to 75), then he or she should start planning for retirement at 35. Such planning should go well beyond just saving money. Ensuring wealth protection through appropriate insurance policies, and wealth distribution by writing a will and establishing a trust are also crucial.
“Retirement planning also requires using the tax structure for optimal retirement savings.”
Chua Tia Guan, head of tax and financial planning for Great Vision Advisory Group, grimly explains: “An average person has 30 years to generate income and another 30 years to consume his “retirement reserve”, if he has no income. Chua says, “Many people are very poor in the allocation of their financial resources. They don’t envisage their future, and retirement planning is always the last priority in their early working life!”
One solution might be to carefully choose your parents! But what are people supposed to do if they’re pushing 50 and weren’t fortunate enough to have a mathematically talented parent set aside money at their birth? Says retirement specialist Devadason: “Since none of us can go back in time, we should restructure our affairs to permit working beyond our official, irrationally low, national retirement age of 55!”
The self-employed have an edge here, but even the conventionally employed can begin investing in their own self-education to elevate their comprehension of possible investment vehicles and their odds of starting a viable business or gaining fresh employment. Finally, in the waning years before retirement, elevating personal savings rates should be done aggressively. Both Bose and Devadason are extremists who advocate setting a goal to eventually save 50% of net income.
Obviously, most Malaysians won’t want to reach such stratospheric savings levels, but at least aiming for the sky today is one way of slashing our chances of ending up old and broke tomorrow.
Tuesday, September 22, 2009
Thursday, August 27, 2009
How to Curb Your Overspending
How to Curb Your Overspending
Bitten by the buying bug? Try these strategies to curb your spending:
Keep track.
Write down everything you buy for at least two weeks: groceries, petrol, even a cup of coffee. Being aware of where your money goes will put you in control.
Quell the urge.
Postpone buying what you think you want for 48 hours. If you still want it, make your well-thought-out purchase.
Simplify.
Figure out a weekly budget that includes only basics like food and transport. Don't buy anything not in your budget for a month to discover what you can do without.
Quit cold turkey.
Put your credit cards away and pay for everything with cash. Even better, institute a buy-nothing campaign.
Bitten by the buying bug? Try these strategies to curb your spending:
Keep track.
Write down everything you buy for at least two weeks: groceries, petrol, even a cup of coffee. Being aware of where your money goes will put you in control.
Quell the urge.
Postpone buying what you think you want for 48 hours. If you still want it, make your well-thought-out purchase.
Simplify.
Figure out a weekly budget that includes only basics like food and transport. Don't buy anything not in your budget for a month to discover what you can do without.
Quit cold turkey.
Put your credit cards away and pay for everything with cash. Even better, institute a buy-nothing campaign.
Expert Advice That Pays Off
Expert Advice That Pays Off
When it comes to making and keeping cash, the experts will tell you that the best advice isn't new or trendy. So take it from those who've seen what works and what doesn't:
Donald Trump, real estate mogul and star of "The Apprentice":
On debt "Review your budget regularly a�� see where your blind spots are. I know people who don't count entertainment or alcohol or whatever a�� everything must be accounted for. Even a tiny leak can sink a ship. The same with finances."
Jonathan Clements, senior special writer, The Wall Street Journal:
On investing "People bank their financial future on crazy strategies. They are betting the housing market will keep soaring, investing hefty sums in hedge funds or equity-indexed annuities. But there is no easy way to get rich quick. If folks want to retire in comfort, they've got to stick with the basics: Save regularly, diversify broadly. Favour low-cost mutual funds. And show some patience."
Robert Kiyosaki, author of Rich Dad, Poor Dad:
On paying for university "Buy oil! As soon as the kids are born. Oil consumption is up, but supply is down. Get a mutual fund that sells oil stocks a�� Exxon, Mobil, but not Enron! A barrel of oil was $10 in 1998; now it's $60."
David Gardner, editor, The Motley Fool (fool.com) website:
On stocks "What do I invest in? An index fund a�� like those that track the Standard & Poor's 500 a�� because they are mostly managed by machines for a very low fee, not by humans trying to finance their vacations."
"When it comes to money, it's better to do nothing than to do something you don't understand."
Suze Orman, O Magazine
When it comes to making and keeping cash, the experts will tell you that the best advice isn't new or trendy. So take it from those who've seen what works and what doesn't:
Donald Trump, real estate mogul and star of "The Apprentice":
On debt "Review your budget regularly a�� see where your blind spots are. I know people who don't count entertainment or alcohol or whatever a�� everything must be accounted for. Even a tiny leak can sink a ship. The same with finances."
Jonathan Clements, senior special writer, The Wall Street Journal:
On investing "People bank their financial future on crazy strategies. They are betting the housing market will keep soaring, investing hefty sums in hedge funds or equity-indexed annuities. But there is no easy way to get rich quick. If folks want to retire in comfort, they've got to stick with the basics: Save regularly, diversify broadly. Favour low-cost mutual funds. And show some patience."
Robert Kiyosaki, author of Rich Dad, Poor Dad:
On paying for university "Buy oil! As soon as the kids are born. Oil consumption is up, but supply is down. Get a mutual fund that sells oil stocks a�� Exxon, Mobil, but not Enron! A barrel of oil was $10 in 1998; now it's $60."
David Gardner, editor, The Motley Fool (fool.com) website:
On stocks "What do I invest in? An index fund a�� like those that track the Standard & Poor's 500 a�� because they are mostly managed by machines for a very low fee, not by humans trying to finance their vacations."
"When it comes to money, it's better to do nothing than to do something you don't understand."
Suze Orman, O Magazine
Savvy Savers
Savvy Savers
It’s never too early to teach your child to make sound financial decisions. This will prepare him or her for financial success as an adult. And since kids learn from those around them, says Scott Mitchell, Senior Vice President of ipac financial planning Singapore, your money behaviour will make a big difference. Some tips from the company on raising a money-smart child:
Start a piggy bank.
Encourage your child to put aside a set amount of money each week. Teach them that savings should not merely be money that is left over from their allowance.
Discuss the value of things.
On shopping trips, get your child to help you decide which item gives the most value for money, for example, the best ice cream or chocolate bar. This will help them to start thinking about quality versus price.
Give your kids an allowance.
An allowance is an effective way of teaching your child how to prioritise and make better spending decisions. Give them a reasonable amount – not too much, not too little.
Set simple goals.
“Encourage saving for a toy. This is how children realise some things can’t be bought immediately. A chart certainly helps so the kids can see their goal getting closer each week,” says Scott.
Make it fun.
Go on educational family outings, for example, the local mint, or play Monopoly with your kids. Read them stories that encourage good values that are crucial to saving, like discipline. Let your kids pay for small items on shopping trips. In short, try to involve your kids in an interesting way.
It’s never too early to teach your child to make sound financial decisions. This will prepare him or her for financial success as an adult. And since kids learn from those around them, says Scott Mitchell, Senior Vice President of ipac financial planning Singapore, your money behaviour will make a big difference. Some tips from the company on raising a money-smart child:
Start a piggy bank.
Encourage your child to put aside a set amount of money each week. Teach them that savings should not merely be money that is left over from their allowance.
Discuss the value of things.
On shopping trips, get your child to help you decide which item gives the most value for money, for example, the best ice cream or chocolate bar. This will help them to start thinking about quality versus price.
Give your kids an allowance.
An allowance is an effective way of teaching your child how to prioritise and make better spending decisions. Give them a reasonable amount – not too much, not too little.
Set simple goals.
“Encourage saving for a toy. This is how children realise some things can’t be bought immediately. A chart certainly helps so the kids can see their goal getting closer each week,” says Scott.
Make it fun.
Go on educational family outings, for example, the local mint, or play Monopoly with your kids. Read them stories that encourage good values that are crucial to saving, like discipline. Let your kids pay for small items on shopping trips. In short, try to involve your kids in an interesting way.
Money Talks
Money Talks
Sound money management habits can form a strong foundation for how children deal with other matters when they grow up. “As you teach children about money, they also begin to learn other important lessons such as decision making, priorities, responsibility and goal setting,” says Brian Goh, senior vice-president of ipac financial planning (Singapore). Here are some money lessons in daily activities:
When at the ATM or when using your credit card
To appreciate the value of money, kids need to know where it comes from. Explain that hard-earned money has to first be deposited into the bank before it comes out of the ATM, and that purchases made on credit cards have to be paid for, in full, at the end of the month.
When grocery shopping
This is the best time to teach them how to make sound buying decisions. Have them help you look for items on your grocery list, and compare prices among different items. If you choose one brand of milk over another because it’s on sale, explain the decision.
When giving them an allowance
Paying out allowances on schedule (like the first of every month) teaches children the value of honouring agreements. Help them put away a portion into savings even before they start spending it, and assist them in setting savings goals, like buying a new toy.
When shopping
Spending indiscriminately sends out a dangerous signal that we can get whatever we want, when we want. Instead, teach your kids the difference between needs and wants. For instance, when checking out the latest Plasma TV, explain that while it might be nice to have a new TV, it’s not a necessity because the one at home is working just fine.
When planning a holiday
This is a great time to bring together concepts like budgeting, saving, price comparison, and balancing needs and wants. Money lessons are best absorbed when they are put to practical use, so do involve your kids in the decision-making processes of holiday planning – from picking a destination to scouting for deals.
Sound money management habits can form a strong foundation for how children deal with other matters when they grow up. “As you teach children about money, they also begin to learn other important lessons such as decision making, priorities, responsibility and goal setting,” says Brian Goh, senior vice-president of ipac financial planning (Singapore). Here are some money lessons in daily activities:
When at the ATM or when using your credit card
To appreciate the value of money, kids need to know where it comes from. Explain that hard-earned money has to first be deposited into the bank before it comes out of the ATM, and that purchases made on credit cards have to be paid for, in full, at the end of the month.
When grocery shopping
This is the best time to teach them how to make sound buying decisions. Have them help you look for items on your grocery list, and compare prices among different items. If you choose one brand of milk over another because it’s on sale, explain the decision.
When giving them an allowance
Paying out allowances on schedule (like the first of every month) teaches children the value of honouring agreements. Help them put away a portion into savings even before they start spending it, and assist them in setting savings goals, like buying a new toy.
When shopping
Spending indiscriminately sends out a dangerous signal that we can get whatever we want, when we want. Instead, teach your kids the difference between needs and wants. For instance, when checking out the latest Plasma TV, explain that while it might be nice to have a new TV, it’s not a necessity because the one at home is working just fine.
When planning a holiday
This is a great time to bring together concepts like budgeting, saving, price comparison, and balancing needs and wants. Money lessons are best absorbed when they are put to practical use, so do involve your kids in the decision-making processes of holiday planning – from picking a destination to scouting for deals.
How to be Good with Money
How to be Good with Money
Most of us probably resolve to be more sensible with money in these times. We're going to live frugally, save regularly and not go into the red. But, mysteriously, within a few months we seem to have run up a credit card debt and blown our savings on a holiday. The truth is that you don't need cast-iron discipline or the wisdom of Warren Buffett. Here are some easy steps to get you from profligate to prudent this year - while still enjoying life.
• Find out if your books balance. Get out all your bank statements and work out how much you've earned - include benefits and interest on savings - and how much you've spent over the past year.
• Bank online and check your balance twice a week. This will give you a clear idea of what's going in and coming out.
• Junk useless direct debits. Don't just go on paying for that life cover you don't need.
• Build up a rainy-day fund. Set up a monthly direct debit to put money aside in a high-interest account.
• Organise all your payments. Have your direct debits going out just after your salary is paid in. The rest is yours - to transfer into a savings account paying a better rate of interest than your current account. Transfer back as and when you need extra cash.
• Buy now, pay at once. If you can't afford something one month, wait until the next.
• Use your credit card sparingly. Pull out the plastic when you absolutely have to have that half-price dress in the sales. But always pay it off before it incurs any interest.
• Always shop around when contracts - like your internet and mobile phone service provider - come up for renewal. Don't forget to ring your existing provider to see if it can offer you something better.
• Buy treats with reward points schemes. Use all those points you've accumulated on your various cards to give yourself a treat. Spoil yourself - after all, you deserve it.
Most of us probably resolve to be more sensible with money in these times. We're going to live frugally, save regularly and not go into the red. But, mysteriously, within a few months we seem to have run up a credit card debt and blown our savings on a holiday. The truth is that you don't need cast-iron discipline or the wisdom of Warren Buffett. Here are some easy steps to get you from profligate to prudent this year - while still enjoying life.
• Find out if your books balance. Get out all your bank statements and work out how much you've earned - include benefits and interest on savings - and how much you've spent over the past year.
• Bank online and check your balance twice a week. This will give you a clear idea of what's going in and coming out.
• Junk useless direct debits. Don't just go on paying for that life cover you don't need.
• Build up a rainy-day fund. Set up a monthly direct debit to put money aside in a high-interest account.
• Organise all your payments. Have your direct debits going out just after your salary is paid in. The rest is yours - to transfer into a savings account paying a better rate of interest than your current account. Transfer back as and when you need extra cash.
• Buy now, pay at once. If you can't afford something one month, wait until the next.
• Use your credit card sparingly. Pull out the plastic when you absolutely have to have that half-price dress in the sales. But always pay it off before it incurs any interest.
• Always shop around when contracts - like your internet and mobile phone service provider - come up for renewal. Don't forget to ring your existing provider to see if it can offer you something better.
• Buy treats with reward points schemes. Use all those points you've accumulated on your various cards to give yourself a treat. Spoil yourself - after all, you deserve it.
The 12 Commandments of Wealth
The 12 Commandments of Wealth
1. Seek money for money's sake and ye shall not find.
2. Find your perfect pitch. (Know your strengths and weaknesses.)
3. Be your own boss.
4. Get addicted to ambition.
5. Wake up early. Be early.
6. Don't set goals – execute or get executed.
7. Fail so you can succeed.
8. Location doesn't matter. Success can take place anywhere.
9. Moor yourself to morals.
10. Say yes to sales.
11. Borrow from the best – and the worst.
12. Never retire.
Adapted from The Richest Man in Town by W. Randall Jones
1. Seek money for money's sake and ye shall not find.
2. Find your perfect pitch. (Know your strengths and weaknesses.)
3. Be your own boss.
4. Get addicted to ambition.
5. Wake up early. Be early.
6. Don't set goals – execute or get executed.
7. Fail so you can succeed.
8. Location doesn't matter. Success can take place anywhere.
9. Moor yourself to morals.
10. Say yes to sales.
11. Borrow from the best – and the worst.
12. Never retire.
Adapted from The Richest Man in Town by W. Randall Jones
Study Tips for Kids and Parents
With school back in session, here are tips from Oxford Learning to get your kids through school and dreaded exams.
Kids
1. Listen and hear. Pay attention in class. Jot notes on the main ideas. Don’t understand something? Make a note and ask someone to explain it to you.
2. Ace your homework. Use a planner to enter homework as soon as it’s assigned. Pick a comfortable place to do homework and study.
3. Study effectively. Divide material into units and assign each unit a day. Give yourself a three-day break before the test. Study in short bursts – 15 minutes at a time – then take a five-minute breather to exercise and refocus.
Use Oxford’s SQRCRC method to study:
Survey introductions, headings and summaries for main ideas.
Question: “What do I hope to learn by reading this?”
Read for details.
Cover the work.
Recite what you’ve just read.
Check how well you have done.
Parents
1. Help your child prepare a study schedule, and review it together every morning.
2. Create a special work environment that encourages best efforts and makes it easier for your child to get into study mode.
3. Get involved. Your interest shows them that school is important.
Kids
1. Listen and hear. Pay attention in class. Jot notes on the main ideas. Don’t understand something? Make a note and ask someone to explain it to you.
2. Ace your homework. Use a planner to enter homework as soon as it’s assigned. Pick a comfortable place to do homework and study.
3. Study effectively. Divide material into units and assign each unit a day. Give yourself a three-day break before the test. Study in short bursts – 15 minutes at a time – then take a five-minute breather to exercise and refocus.
Use Oxford’s SQRCRC method to study:
Survey introductions, headings and summaries for main ideas.
Question: “What do I hope to learn by reading this?”
Read for details.
Cover the work.
Recite what you’ve just read.
Check how well you have done.
Parents
1. Help your child prepare a study schedule, and review it together every morning.
2. Create a special work environment that encourages best efforts and makes it easier for your child to get into study mode.
3. Get involved. Your interest shows them that school is important.
Wednesday, August 26, 2009
Ways to Motivate Your Child
1. Create an environment at home that encourages a child's curiosity. Ensure that your attitude as a parent towards learning is one of excitement and reinforce this in your child.
2. The older the child, the more important the peer group is in the development of the child's motivation, so you should try to encourage your child's contact with peers who are motivated to do well at school and are intrinsically motivated to learn.
3. If possible, reward your child for having done a good job, for a competent performance, rather than for simply having completed a task moderately well.
4. Create exciting and interesting opportunities for your child to learn, to use his imagination and in which he can be creative and where he is able to see the results of his creativity and work.
5. The more your child is able to see the connection between his actions and an outcome, the more he will be in a position to take responsibility for his actions.
6. Encourage your child's involvement in as much decision-making as possible, at home and at school.
7. Avoid enrolling your child in a school characterised by an extremely authoritarian style of teaching and leadership. The effects of this type of school may seem to be effective because of the emphasis on extrinsic motivation, but they are often short-lived.
2. The older the child, the more important the peer group is in the development of the child's motivation, so you should try to encourage your child's contact with peers who are motivated to do well at school and are intrinsically motivated to learn.
3. If possible, reward your child for having done a good job, for a competent performance, rather than for simply having completed a task moderately well.
4. Create exciting and interesting opportunities for your child to learn, to use his imagination and in which he can be creative and where he is able to see the results of his creativity and work.
5. The more your child is able to see the connection between his actions and an outcome, the more he will be in a position to take responsibility for his actions.
6. Encourage your child's involvement in as much decision-making as possible, at home and at school.
7. Avoid enrolling your child in a school characterised by an extremely authoritarian style of teaching and leadership. The effects of this type of school may seem to be effective because of the emphasis on extrinsic motivation, but they are often short-lived.
Piggybank Basics
Eat your vegetables. Wash your hands. Always say "please" and "thank you." We are full of advice for our children, but when it comes to money, we often have little to say. As a result, our children may grow up with clean hands and good manners, but without the foggiest idea how to handle their finances.
Here are some basics that will help guide them their entire lives:
Show them the future.
If your 13-year-old were to sock away $1000, invest it at 8% (a reasonable return for a good long-term investment) and add $100 every month, by the time she's 65, she would have $980,983! Show your youngster how it works with an online calculator such as the one at www.dinkytown.com - click on "Savings Calculator."
Be careful of credit.
Credit cards can help you make necessary purchases and build a credit history, but they must be used responsibly, which means paying off your debt promptly. Explain to your children that when you buy something using a credit card, you can easily wind up paying two or three times what you would have paid if you used cash.
Teach patience.
Suppose your youngster wants a new bicycle that costs $150. Rather than shelling out the cash or passing over the Visa card, give him a regular allowance and explain that by putting aside, say, $15 each week, he will be able to buy it for himself in only ten weeks.
Provide incentive.
Reinforce the importance of saving. "For every dollar he or she agrees to save and invest rather than spend, you agree to add another dollar to the pot," says financial planner Cathy Pareto.
Explain your values.
Values and money are deeply intertwined, says psychotherapist Eileen Gallo, co-author of The Financially Intelligent Parent. When your child clamours to have you buy something, explain why you really don't want to make that purchase. "You might say, e??'d rather save that money for your education,'" advises Gallo. Every time you spend or don't spend money, you have an opportunity to share your values.
Here are some basics that will help guide them their entire lives:
Show them the future.
If your 13-year-old were to sock away $1000, invest it at 8% (a reasonable return for a good long-term investment) and add $100 every month, by the time she's 65, she would have $980,983! Show your youngster how it works with an online calculator such as the one at www.dinkytown.com - click on "Savings Calculator."
Be careful of credit.
Credit cards can help you make necessary purchases and build a credit history, but they must be used responsibly, which means paying off your debt promptly. Explain to your children that when you buy something using a credit card, you can easily wind up paying two or three times what you would have paid if you used cash.
Teach patience.
Suppose your youngster wants a new bicycle that costs $150. Rather than shelling out the cash or passing over the Visa card, give him a regular allowance and explain that by putting aside, say, $15 each week, he will be able to buy it for himself in only ten weeks.
Provide incentive.
Reinforce the importance of saving. "For every dollar he or she agrees to save and invest rather than spend, you agree to add another dollar to the pot," says financial planner Cathy Pareto.
Explain your values.
Values and money are deeply intertwined, says psychotherapist Eileen Gallo, co-author of The Financially Intelligent Parent. When your child clamours to have you buy something, explain why you really don't want to make that purchase. "You might say, e??'d rather save that money for your education,'" advises Gallo. Every time you spend or don't spend money, you have an opportunity to share your values.
Sunday, August 23, 2009
20 Lazy Ways to Save Money
While the media can't decide if the recession is nearing its end or not, we do know that there hasn't been a tremendous surge in wages, job creation or the stock market. Consequently, most of us are staying pretty conservative on our spending. Here are a few relatively simple ways to keep an eye on your pennies while you're waiting for that brighter economic future to arrive.
1. Schedule automatic payments. Have (at least) your fixed monthly bills paid automatically to avoid missing a payment and having to fork over extra money for late fees and/or interest. You can set up auto pay features through your bank's online bill paying service or by arranging it directly with the company or service provider.
2. Eat your groceries. Did you know that Americans regularly throw away nearly 15% of the food they buy at the grocery store each year? That can add up to hundreds or, depending on your supermarket budget, thousands of dollars each year. Save money by actually eating what you buy. Not sure how? Bypass the bookstore and borrow a cookbook from the library!
3. Bundle services. If you're paying different vendors for similar services you may be overpaying. Call your communications providers to see what price you'll be quoted if you switch and bundle your internet, phone and cable TV services.
4. Pay off credit card. If you're not paying off your credit card balance each month you're paying interest and, for most Americans, it's a pretty steep rate. Pay it off and you could save a tidy sum by eliminating your interest charges.
5. Mark your calendar. Whenever you rent something - library books, videos, etc. – mark it on your calendar and save money by avoiding those quickly mounting late fees. Many stores and libraries also now offer email reminders to help the constantly harried so sign up for the extra help!
6. File your taxes on time. Or if you need to file an extension at least pay what you owe on the due date. You'll avoid annoying notices from the IRS and, more importantly, save on penalties, fees and interest.
7. Roll it over. If you're switching jobs and you can't leave your 401(k) invested with your current company, roll your 401(k) into either your new employer's 401(k) or an IRA within the 60-day window instead of withdrawing the money. By doing so you'll keep the money invested - and earning interest - and avoid those nasty taxes as well as the additional 10% penalty.
8. Switch credit cards. If you're carrying a balance on a high interest rate credit card check out other card issuers to see if you could transfer your balance to one with a lower interest rate and fewer fees. Use sites like Creditcard.com or Bankrate.com to compare card rates, and pay careful attention to how long those terms last so you don't wind up paying a higher rate and erasing any potential savings.
9. Use your privileges. Are you an AAA member? Do you belong to the AARP? What about your local credit union? Check organizations you have memberships with to see if they offer buying privileges or discounts.
10. Rent instead of buy. You might be excited to expand your driveway but don't let your enthusiasm overtake good sense. Hold off on buying that jackhammer and think before you spend on big-ticket items or items that you'll use once or infrequently (like movies and books).
11. Buy instead of rent. Don't pay the exorbitantly high prices charged by rent-a-center type stores for items you'll use regularly and keep long-term like computers, furniture and appliances.
12. Ask. That's right, just ask. You can't be paying any more than you currently are, so why not ask if you can get the interest rate lowered on your credit cards or loans? Also, ask for a discount on services like your wireless phone, trash removal or pet care instead of switching to another vendor, and of course ask "is that the best you can do" on any big ticket purchases like cars, appliances and furniture.In a tight economy it might be worth the seller's while to cut the price instead of losing the sale, and you'll both benefit in the end!
13. Just say no. To the extended warranty that is. They hardly ever make financial sense. Weigh the repair or replacement cost (and if you would even need or want to repair or replace it down the road) against the cost of the warranty and graciously pass when offered.
14. Have the awkward conversation. Americans average more than $750 yearly on holiday gifts and that's probably much more than most would like to spend. If your gift-giving is costing you more than you can realistically afford there's a good chance it’s more than your relatives can afford (or would like to spend) as well. Take the plunge and broach the subject. Offer a more reasonable alternative (say, limit giving to children or put a dollar amount on gifts per person). More than likely your relatives will be grateful SOMEONE finally raised the subject and you’ll save money in the process.
15. Eat at home. If the idea of cooking for yourself seems like too much work at least opt for take-out instead of dining out - you'll save on the tip, the alcohol and most likely the cost for appetizers or dessert.
16. Balance your checkbook. It might take a few minutes but it's something you should be doing anyway and it can pay off huge dividends by helping you avoid bouncing a check and incurring steep overdraft fees (not to mention a little embarrassment)!
17. Stick with your bank. When withdrawing cash drive or walk the extra minute it takes to use your bank's ATM and avoid the fee that could come with another bank's machine. Better yet - switch to a bank that doesn't charge fees!
18. Use your TV. If you're paying for cable why not use all of it - and save some money in the process? Cancel the video membership and watch movies through cable movie packages you're already paying for or check out your free "on demand" shows. Drop the gym membership and work out at home to channels like FitTV, and bag the magazine subscriptions and watch the same shows (like Martha Stewart) on TV instead.
19. Quit those bad habits. Smoking, overeating and drinking are costly habits to maintain. Okay - this is the "lazy" way to save, not necessarily the easy way. But you can save boatloads of money in two ways by saying sayonara to your favorite vices: (1) You'll save money by cutting out on the regular spending it's costing you, and (2) you'll probably save on insurance premiums and long-term health costs. It's the ultimate win-win.
20. Forget the pet. Sure it sounds heartless but did you realize that welcoming home a little Fido can cost you an average of more than $1,500 a year - or $15,000 over 10 years? Feline fluffies are pricey too - just under $1,000 a year or approximately $9,000 for 10 years of care. Looking at the long-term picture, that's a new car or the down payment on a home! Keep walking right past that pet store and keep the money in your pocket instead.
The recession won't last forever, but in the meantime take advantage of these lazy ways to stay on track financially, and develop some pretty good money management habits for the future!
1. Schedule automatic payments. Have (at least) your fixed monthly bills paid automatically to avoid missing a payment and having to fork over extra money for late fees and/or interest. You can set up auto pay features through your bank's online bill paying service or by arranging it directly with the company or service provider.
2. Eat your groceries. Did you know that Americans regularly throw away nearly 15% of the food they buy at the grocery store each year? That can add up to hundreds or, depending on your supermarket budget, thousands of dollars each year. Save money by actually eating what you buy. Not sure how? Bypass the bookstore and borrow a cookbook from the library!
3. Bundle services. If you're paying different vendors for similar services you may be overpaying. Call your communications providers to see what price you'll be quoted if you switch and bundle your internet, phone and cable TV services.
4. Pay off credit card. If you're not paying off your credit card balance each month you're paying interest and, for most Americans, it's a pretty steep rate. Pay it off and you could save a tidy sum by eliminating your interest charges.
5. Mark your calendar. Whenever you rent something - library books, videos, etc. – mark it on your calendar and save money by avoiding those quickly mounting late fees. Many stores and libraries also now offer email reminders to help the constantly harried so sign up for the extra help!
6. File your taxes on time. Or if you need to file an extension at least pay what you owe on the due date. You'll avoid annoying notices from the IRS and, more importantly, save on penalties, fees and interest.
7. Roll it over. If you're switching jobs and you can't leave your 401(k) invested with your current company, roll your 401(k) into either your new employer's 401(k) or an IRA within the 60-day window instead of withdrawing the money. By doing so you'll keep the money invested - and earning interest - and avoid those nasty taxes as well as the additional 10% penalty.
8. Switch credit cards. If you're carrying a balance on a high interest rate credit card check out other card issuers to see if you could transfer your balance to one with a lower interest rate and fewer fees. Use sites like Creditcard.com or Bankrate.com to compare card rates, and pay careful attention to how long those terms last so you don't wind up paying a higher rate and erasing any potential savings.
9. Use your privileges. Are you an AAA member? Do you belong to the AARP? What about your local credit union? Check organizations you have memberships with to see if they offer buying privileges or discounts.
10. Rent instead of buy. You might be excited to expand your driveway but don't let your enthusiasm overtake good sense. Hold off on buying that jackhammer and think before you spend on big-ticket items or items that you'll use once or infrequently (like movies and books).
11. Buy instead of rent. Don't pay the exorbitantly high prices charged by rent-a-center type stores for items you'll use regularly and keep long-term like computers, furniture and appliances.
12. Ask. That's right, just ask. You can't be paying any more than you currently are, so why not ask if you can get the interest rate lowered on your credit cards or loans? Also, ask for a discount on services like your wireless phone, trash removal or pet care instead of switching to another vendor, and of course ask "is that the best you can do" on any big ticket purchases like cars, appliances and furniture.In a tight economy it might be worth the seller's while to cut the price instead of losing the sale, and you'll both benefit in the end!
13. Just say no. To the extended warranty that is. They hardly ever make financial sense. Weigh the repair or replacement cost (and if you would even need or want to repair or replace it down the road) against the cost of the warranty and graciously pass when offered.
14. Have the awkward conversation. Americans average more than $750 yearly on holiday gifts and that's probably much more than most would like to spend. If your gift-giving is costing you more than you can realistically afford there's a good chance it’s more than your relatives can afford (or would like to spend) as well. Take the plunge and broach the subject. Offer a more reasonable alternative (say, limit giving to children or put a dollar amount on gifts per person). More than likely your relatives will be grateful SOMEONE finally raised the subject and you’ll save money in the process.
15. Eat at home. If the idea of cooking for yourself seems like too much work at least opt for take-out instead of dining out - you'll save on the tip, the alcohol and most likely the cost for appetizers or dessert.
16. Balance your checkbook. It might take a few minutes but it's something you should be doing anyway and it can pay off huge dividends by helping you avoid bouncing a check and incurring steep overdraft fees (not to mention a little embarrassment)!
17. Stick with your bank. When withdrawing cash drive or walk the extra minute it takes to use your bank's ATM and avoid the fee that could come with another bank's machine. Better yet - switch to a bank that doesn't charge fees!
18. Use your TV. If you're paying for cable why not use all of it - and save some money in the process? Cancel the video membership and watch movies through cable movie packages you're already paying for or check out your free "on demand" shows. Drop the gym membership and work out at home to channels like FitTV, and bag the magazine subscriptions and watch the same shows (like Martha Stewart) on TV instead.
19. Quit those bad habits. Smoking, overeating and drinking are costly habits to maintain. Okay - this is the "lazy" way to save, not necessarily the easy way. But you can save boatloads of money in two ways by saying sayonara to your favorite vices: (1) You'll save money by cutting out on the regular spending it's costing you, and (2) you'll probably save on insurance premiums and long-term health costs. It's the ultimate win-win.
20. Forget the pet. Sure it sounds heartless but did you realize that welcoming home a little Fido can cost you an average of more than $1,500 a year - or $15,000 over 10 years? Feline fluffies are pricey too - just under $1,000 a year or approximately $9,000 for 10 years of care. Looking at the long-term picture, that's a new car or the down payment on a home! Keep walking right past that pet store and keep the money in your pocket instead.
The recession won't last forever, but in the meantime take advantage of these lazy ways to stay on track financially, and develop some pretty good money management habits for the future!
Saturday, August 15, 2009
Raising a Family
Years ago, as a new mother, I had moments of self-perceived superiority over my husband when it came to making decisions for, and about, our child.My resolve to follow “mother’s intuition” outweighed and trumped all outside forces. I even went so far as to shower pity upon the man misguided enough to assume his care could be comparable to mine, gleefully telling friends and family about his parenting mishaps.
Mishaps that to me were incomprehensible mistakes, such as one midnight hour transfer of our crying first-born to the recipient of the next wakeful shift. Taking hold of our discontented baby, I felt something unexpected inside his diaper and–like a red-nosed clown pulling the never-ending scarf from his mouth–I drew out a long, primary-colored cord, to which a child’s cassette-recorder microphone was attached.
My face twisted in anguish as I pictured my husband changing our baby’s diaper in the middle of the night and including any arbitrary items that just happened to be on the changing table at the time.“He’s lucky he didn’t get the whole recorder in there,” he said, yawning at my judgmental glare and padding into bed for a few hours of sleep before heading to work.From driving off with expensive baby gear on the roof of the car to letting our son stay up late without brushing his teeth, I was convinced that I knew what I was doing and that he, in fact, did not.
And then, one snowy day in upstate New York, I hit my husband’s car.With my car.While we were both driving…as I was following him to the repair shop to have his deer-jumped-out-from-nowhere bumper fixed.And even though our entire family was in my car at the time (no one was hurt), my husband didn’t label me incompetent or dim-witted as I may have done to him.
Instead, he gracefully acknowledged that we all make mistakes, that we all have lapses in judgment, that—though this particular car incident was a tough one to swallow–no one is immune to the slip ups, oversights and inaccuracies that make each of us “human”.
I slowly, but very surely, began to appreciate that all the focus I had spotlighted on my husband’s mistakes was my mind’s way of shadowing my own blunders.A cassette recorder microphone folded into a diaper was not nearly as dangerous as what I had just done. And driving off with a brand new Baby Bjorn on the roof of our car not nearly as expensive.
Many years have gone by now, and I continue to learn from my husband’s effortless forgiveness of my faults. Better still, has been the realization that his ideas and intents for our family most often have significantly better outcomes than what would have occurred had I been the only one in charge of making the plans and decisions.Every now and then, a glimpse of my “mother knows best” syndrome sparkles in my eye, and such was the case this summer when I impudently told my husband “no” to the tackle football league for which he wanted to sign up our oldest son.
Ultimately, I saw the errors of my own self-importance and relented.And, last weekend I watched my proud son stand in front of his team and receive a trophy with a confidence and self-respect he gained from accomplishing something he had previously assumed he couldn’t do—until his dad encouraged him to try.Certainly, there are limits when it comes to accepting our partners “contributions”–I took over diapering duty while it lasted…and he’s taken over driving…forever…But, we continue to grow as a result of our combined efforts and respect for each other’s roles and involvement in this life-long endeavor called “raising a family”.
Mishaps that to me were incomprehensible mistakes, such as one midnight hour transfer of our crying first-born to the recipient of the next wakeful shift. Taking hold of our discontented baby, I felt something unexpected inside his diaper and–like a red-nosed clown pulling the never-ending scarf from his mouth–I drew out a long, primary-colored cord, to which a child’s cassette-recorder microphone was attached.
My face twisted in anguish as I pictured my husband changing our baby’s diaper in the middle of the night and including any arbitrary items that just happened to be on the changing table at the time.“He’s lucky he didn’t get the whole recorder in there,” he said, yawning at my judgmental glare and padding into bed for a few hours of sleep before heading to work.From driving off with expensive baby gear on the roof of the car to letting our son stay up late without brushing his teeth, I was convinced that I knew what I was doing and that he, in fact, did not.
And then, one snowy day in upstate New York, I hit my husband’s car.With my car.While we were both driving…as I was following him to the repair shop to have his deer-jumped-out-from-nowhere bumper fixed.And even though our entire family was in my car at the time (no one was hurt), my husband didn’t label me incompetent or dim-witted as I may have done to him.
Instead, he gracefully acknowledged that we all make mistakes, that we all have lapses in judgment, that—though this particular car incident was a tough one to swallow–no one is immune to the slip ups, oversights and inaccuracies that make each of us “human”.
I slowly, but very surely, began to appreciate that all the focus I had spotlighted on my husband’s mistakes was my mind’s way of shadowing my own blunders.A cassette recorder microphone folded into a diaper was not nearly as dangerous as what I had just done. And driving off with a brand new Baby Bjorn on the roof of our car not nearly as expensive.
Many years have gone by now, and I continue to learn from my husband’s effortless forgiveness of my faults. Better still, has been the realization that his ideas and intents for our family most often have significantly better outcomes than what would have occurred had I been the only one in charge of making the plans and decisions.Every now and then, a glimpse of my “mother knows best” syndrome sparkles in my eye, and such was the case this summer when I impudently told my husband “no” to the tackle football league for which he wanted to sign up our oldest son.
Ultimately, I saw the errors of my own self-importance and relented.And, last weekend I watched my proud son stand in front of his team and receive a trophy with a confidence and self-respect he gained from accomplishing something he had previously assumed he couldn’t do—until his dad encouraged him to try.Certainly, there are limits when it comes to accepting our partners “contributions”–I took over diapering duty while it lasted…and he’s taken over driving…forever…But, we continue to grow as a result of our combined efforts and respect for each other’s roles and involvement in this life-long endeavor called “raising a family”.
Kids and Creativity: Tips for Sparking Your Child's Natural Creativity
Childhood and creativity seem to go hand in hand. Many times, the best thing we can do to encourage and spark their natural creativity is to get out of their way.
Here are some tips that have worked for me to help spark our children's natural sense of curiosity and creativity.
1. Have a variety of art supplies and make sure they are readily available. This doesn't have to be a big expense. Order some discount supplies online or shop around at flea markets and discount stores. Things you will want to include: cotton balls, beads, white glue, glue sticks, rubber cement, rhinestones, paper, markers, colored paper, crayons, watercolors, and oil pastels, along with a variety of papers. Also fill a box with things that you find around the house: tiny containers, old magazines, old holiday cards and so on.
2. When your children finish a piece of artwork, ask them to tell you about it. Engage your children in a conversation about the various creative choices they made that created the finished product. Try your hardest not to criticize these choices. Just really listen to what they have to say. You might also want to point out that it's often the things we think are mistakes in our art that lead to some of our best and most creative work.
3. Prominently display your child's artwork when it is complete. By doing so, you demonstrate that you truly value their art and creativity.
4. Talk about your own creative endeavors. It's important for your kids to see your own creative processes. Whether you paint, write, scrapbook, photograph or sew, allow them to see you (often) engaged in a creative pursuit. Make sure that you are honoring your own creative artwork by displaying your work prominently in your home, as well.
5. Work on art side by side with your child.
6. Visit art museums and galleries together and discuss what appeals to you the most. Discuss how the appreciation of art is very personal and unique to each individual.
7. Actively encourage your children in the creative pursuits that they seem drawn to. If they show interest in a musical instrument or a new genre of dance, for example, sign them up for a short workshop or class where they can learn more.
8. Show your kids that every day of life can be creative and filled with imagination. Show your kids, though your own actions, that they can bring creativity and fun to common, everyday tasks and, in so doing, make them more fun.
Here are some tips that have worked for me to help spark our children's natural sense of curiosity and creativity.
1. Have a variety of art supplies and make sure they are readily available. This doesn't have to be a big expense. Order some discount supplies online or shop around at flea markets and discount stores. Things you will want to include: cotton balls, beads, white glue, glue sticks, rubber cement, rhinestones, paper, markers, colored paper, crayons, watercolors, and oil pastels, along with a variety of papers. Also fill a box with things that you find around the house: tiny containers, old magazines, old holiday cards and so on.
2. When your children finish a piece of artwork, ask them to tell you about it. Engage your children in a conversation about the various creative choices they made that created the finished product. Try your hardest not to criticize these choices. Just really listen to what they have to say. You might also want to point out that it's often the things we think are mistakes in our art that lead to some of our best and most creative work.
3. Prominently display your child's artwork when it is complete. By doing so, you demonstrate that you truly value their art and creativity.
4. Talk about your own creative endeavors. It's important for your kids to see your own creative processes. Whether you paint, write, scrapbook, photograph or sew, allow them to see you (often) engaged in a creative pursuit. Make sure that you are honoring your own creative artwork by displaying your work prominently in your home, as well.
5. Work on art side by side with your child.
6. Visit art museums and galleries together and discuss what appeals to you the most. Discuss how the appreciation of art is very personal and unique to each individual.
7. Actively encourage your children in the creative pursuits that they seem drawn to. If they show interest in a musical instrument or a new genre of dance, for example, sign them up for a short workshop or class where they can learn more.
8. Show your kids that every day of life can be creative and filled with imagination. Show your kids, though your own actions, that they can bring creativity and fun to common, everyday tasks and, in so doing, make them more fun.
Learning Happiness: Everyday Activities to Increase Your Happiness
While cleaning my bookshelf the other day, I found a book, 14,000 things to be happy about. It looked brand new, but the date inside was from years ago. This book sat beside my collection of self-help books, which in contrast were dog-eared, highlighted and clearly used. Holding the happiness book, I wondered why I hadn't used it. Then I realized I always thought happiness was something fleeting and incapable of improving my life.
Recently, my beliefs have changes as a result of what I've learned. I've discovered that being happy, contented, and positive are skills, which can be learned with practice and determination. Therefore, I made the decision to start my own journey to learn happiness and have been happily rewarded. Here are a couple of things that I've learned on my journey as well activities that have helped teach me more about happiness:
Recognize the hidden happy moments in a day. When something wonderful happens to us, we usually know we're happy. It's the common, everyday moments of happiness that often elude us. One way to change this is by becoming deliberately aware of when we're feeling happy during the day. I found an activity that helped me and it might also help you. It's very simple: Get a notebook or a tape recorder and keep track of any happy moments you notice during your day. By writing them down or recording them, you become aware of these moments that might otherwise have passed by unnoticed. One such moment occurred for me when I was very late for an appointment and frustrated at getting every red light. As I sat fuming at the latest stop, I noticed a little boy in the school bus next me making silly faces at people. Watching him made me feel happy. I wrote this moment down in my notebook. It became one of many. Now, I look forward to finding happy moments in my day. I even challenge myself to see how many I can find. How many happy moments are you missing in your day? Try noticing them and see if you find your day is better for it.
Make a conscious shift from negative to positive.It's hard to feel happy when you're focused on the negative. Like a big pimple on our face, what we don't like can seem to be much more obvious than what we do like. Unfortunately, the more we focus on the negative, the more likely that's all we'll see. Changing this means we have to consciously bring more attention to the positive things that happen to us. For example, I used to talk about my day by reciting what went wrong in it. I'm changing this by learning how to shift my negative comments into positive ones. This can be done two ways. You can match the negative comment with an unrelated positive. Therefore, if I say I'm mad at myself because I forgot my dentist appointment today, a positive statement might be that I received a compliment about my latest newsletter. The other option is to make the negative comment into a related positive one. For example, I missed my doctor's appointment, but I called to apologize and made a new appointment. To be honest, this activity is challenging for me, but it has made me aware of the positive things I often missed. By regularly practicing shifting from the negative to the positive, I do feel happier about my day. Try this activity. See if you feel also feel happier when you pay attention to the positive.
Bring humor into your day.There's nothing like a good laugh or smile to trigger happiness. I like to start my day with a funny video clip. I have one saved on my computer about the silly things cats do. As I love cats, this clip always makes me laugh, even though I've seen it tons of times. By starting my day with a laugh, I've found I feel much happier. See if this works for you. Be creative. Use whatever makes you laugh, such as newspaper comics, a favorite joke, or a silly picture. Use humor again and again during the day, whenever you need a reminder to be happy.
Practice, practice and practice some more!Any new skill requires practice and learning happiness is no different. You have to work at it every day until it becomes part of your daily ritual. Therefore, try the activities I've suggested or create your own. Just keep practicing! The payoff is worth it. As you give more attention to feeling happy, you will also increase your overall well-being.As for me, I look for new ways to keep happiness a constant force in my life. Of course, there are still times I feel angry or sad, and that's okay. But now, I also pay attention to when I feel happy. I also practice happiness regularly. The book, 14,000 things to be happy about, I found on my bookshelf is now part of that practice. I'm confident it will soon look just as dog-eared, marked up and used as my old self-help books. It's another step on my journey to learning happiness
Tired of Worrying? Here are five Ways to Fight Your Worry Monster
I admit it. I am a worrier. I've decided that my worrying is due to an annoying little monster appropriately named, the Worry Monster. I have bought countless books and CDs, all of which promised to dispose of this devilish little thing. But it still pops up now and then.
Finally, I realized instead of trying to get rid of it, I needed to negotiate a compromise. I would agree to live with it, but it could NOT run my life! Learning to live with my Worry Monster was a conscious decision. I was tired of trying to prove it wrong.Worry monsters are very sneaky. There's always a kernel of truth to what they tell you.
Worry is about the possibility of something bad happening. Well, guess what? Something bad can happen and sometimes does! This is the power of Worry Monsters; the possibility that they just might be right.In dealing with my Worry Monster, I've found that the most effective strategy is to do things that keep me in control of it. If you also struggle with a persistent Worry Monster, here are some ideas for you to consider:
STOP TRYING TO KILL YOUR WORRY MONSTERI know it's so tempting. But like any monster, when you try to kill it, it will just fight back. Worry Monsters are not good for you, but you ended up with yours for a reason. It is important to figure out what it's trying to tell you.So, really listen for the messages behind your worry. Is it that you might fail, not live up to someone's expectations, or that you might not be able to cope with something? Whatever the message is, it's important to hear and acknowledge it. Once you do this, you are on your way to quieting your Worry Monster's annoying chatter.
TAKE CONTROL OF YOUR WORRY MONSTERWorry Monsters hate it when you take control. It's like the alpha dog stuff. You better be sure your Worry Monster knows YOU are the alpha dog. Otherwise, it will take control and proceed to tell you everything that could go wrong in your life.You can stop it, however, if you develop strategies for handling what might go wrong. Write these strategies down and keep them. When your Worry Monster starts grumbling at you, just wave the strategies in its face to remind it who's in control!
LAUGH AT YOUR WORRY MONSTERWorry Monsters hate it when they hear you laughing. It just saps all their power. If one is hanging around your house, find ways to make yourself laugh.In addition, they tend to take themselves VERY seriously. Therefore, the best thing to do is make fun of your Worry Monster. Laugh in its face. This tactic usually annoys it so much it will slink off and hide.
TALK WITH A FRIEND TO CALM YOUR WORRY MONSTERFriends can give you a different perspective. There is a caveat here: Be sure you pick people who have control over their own Worry Monsters. The last thing you need to hear is, "Oh, that's terrible! I'd be worried too!" Find someone who can listen while offering positive and constructive support.Remember, Worry Monsters thrive on your fears; they need to keep you anxious. Good friends ease your anxiety by getting you to look at your worries in a different way. In addition, if something bad does happens, they're there to help you through it.
EXERCISE AND CHASE AWAY YOUR WORRY MONSTERWorry Monsters prefer slouching on top of your shoulders and playing with your mind. They are not fond of physical activity. Therefore, if you take a long walk with the dog, run on your treadmill, or just do jumping jacks for ten minutes, your Worry Monster will find someplace else to hang out.Worry requires a lot of mental energy. When you exercise, your mind has to focus on the energy your body needs. Consequently, there is not much left over to feed your Worry Monster. This is a good thing. Most Worry Monsters could stand to lose a bit of weight!I've listed five ideas that can help you manage your Worry Monster. You can use them or create your own. Have fun thinking of the ways you can stop your Worry Monster from being such a pest. You may not eliminate it from your life, but it is possible to coexist with it!
Finally, I realized instead of trying to get rid of it, I needed to negotiate a compromise. I would agree to live with it, but it could NOT run my life! Learning to live with my Worry Monster was a conscious decision. I was tired of trying to prove it wrong.Worry monsters are very sneaky. There's always a kernel of truth to what they tell you.
Worry is about the possibility of something bad happening. Well, guess what? Something bad can happen and sometimes does! This is the power of Worry Monsters; the possibility that they just might be right.In dealing with my Worry Monster, I've found that the most effective strategy is to do things that keep me in control of it. If you also struggle with a persistent Worry Monster, here are some ideas for you to consider:
STOP TRYING TO KILL YOUR WORRY MONSTERI know it's so tempting. But like any monster, when you try to kill it, it will just fight back. Worry Monsters are not good for you, but you ended up with yours for a reason. It is important to figure out what it's trying to tell you.So, really listen for the messages behind your worry. Is it that you might fail, not live up to someone's expectations, or that you might not be able to cope with something? Whatever the message is, it's important to hear and acknowledge it. Once you do this, you are on your way to quieting your Worry Monster's annoying chatter.
TAKE CONTROL OF YOUR WORRY MONSTERWorry Monsters hate it when you take control. It's like the alpha dog stuff. You better be sure your Worry Monster knows YOU are the alpha dog. Otherwise, it will take control and proceed to tell you everything that could go wrong in your life.You can stop it, however, if you develop strategies for handling what might go wrong. Write these strategies down and keep them. When your Worry Monster starts grumbling at you, just wave the strategies in its face to remind it who's in control!
LAUGH AT YOUR WORRY MONSTERWorry Monsters hate it when they hear you laughing. It just saps all their power. If one is hanging around your house, find ways to make yourself laugh.In addition, they tend to take themselves VERY seriously. Therefore, the best thing to do is make fun of your Worry Monster. Laugh in its face. This tactic usually annoys it so much it will slink off and hide.
TALK WITH A FRIEND TO CALM YOUR WORRY MONSTERFriends can give you a different perspective. There is a caveat here: Be sure you pick people who have control over their own Worry Monsters. The last thing you need to hear is, "Oh, that's terrible! I'd be worried too!" Find someone who can listen while offering positive and constructive support.Remember, Worry Monsters thrive on your fears; they need to keep you anxious. Good friends ease your anxiety by getting you to look at your worries in a different way. In addition, if something bad does happens, they're there to help you through it.
EXERCISE AND CHASE AWAY YOUR WORRY MONSTERWorry Monsters prefer slouching on top of your shoulders and playing with your mind. They are not fond of physical activity. Therefore, if you take a long walk with the dog, run on your treadmill, or just do jumping jacks for ten minutes, your Worry Monster will find someplace else to hang out.Worry requires a lot of mental energy. When you exercise, your mind has to focus on the energy your body needs. Consequently, there is not much left over to feed your Worry Monster. This is a good thing. Most Worry Monsters could stand to lose a bit of weight!I've listed five ideas that can help you manage your Worry Monster. You can use them or create your own. Have fun thinking of the ways you can stop your Worry Monster from being such a pest. You may not eliminate it from your life, but it is possible to coexist with it!
Monday, June 22, 2009
Seven pitfalls to avoid in stock investing
Investopedia columnist explores ‘forehead-slapping stock blunders’.
The past one month has been agonising for equity investors across the globe who have seen their portfolio deplete considerably. This then may be the time to take stock of the situation and analyse what are the pitfalls to avoid when investing in equities.
There are some basic principles of investing that one should always bear in mind. In a recent slideshow presentation, Investopedia columnist Glenn Curtis explored seven “forehead-slapping stock blunders” made by investors. We analyse these factors in the Malaysian context.
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● Mistake No. 1: Ignoring catalysts
According to Curtis, the No. 1 mistake is ignoring catalysts that drive companies’ earnings. He says proper valuation, calculating price/earnings (PE) ratios, and running cash-flow spreadsheets only provide half the picture when selecting a stock, as they merely depict where a company stands at that point in time and not, more importantly, where it is heading.
According to Curtis, the No. 1 mistake is ignoring catalysts that drive companies’ earnings. He says proper valuation, calculating price/earnings (PE) ratios, and running cash-flow spreadsheets only provide half the picture when selecting a stock, as they merely depict where a company stands at that point in time and not, more importantly, where it is heading.
Therefore, in addition to a quantitative evaluation of a company, investors need to do a qualitative study to determine which catalysts will drive future earnings.
Take for example, Astro All Asia Networks plc. The counter, not unlike countless others, has been on a steady downtrend since January 2008.
It seemed to matter little that it was offering a dividend yield of some 7%, had cash of RM1.06bil and achieved record domestic subscriber base of 374,000 as of January this year.
While from a valuation perspective, one may deem the counter an attractive buy, but its share price kept falling. Why? Because investors were more concerned over its operations in Indonesia and the high provisions it has had to make. It recently announced a wider-than-expected loss of RM529mil for financial year ended Jan 31, 2009, largely due to losses from its Indonesian venture.
However, some analysts believe the company will return to the black in the current year (no further writedowns expected) and that it may declare higher dividends in the absence of any major capital expenditure requirement.
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● Mistake No. 2: Catching the falling knife
Buy when everyone is selling. That is easier said that done. Too often, investors buy in before all of the bad news is out, or before the stock stops its freefall.
Buy when everyone is selling. That is easier said that done. Too often, investors buy in before all of the bad news is out, or before the stock stops its freefall.
“New lows in a company’s share price often beget further new lows, as investors see the shares dropping, they become disheartened and sell their shares. Waiting until the selling pressure has subsided is almost always your best bet to avoid getting cut on a falling-knife stock,” says Curtis.
In Malaysia, remember when crude palm oil prices were plunging alongside crude oil? Plantation heavyweights saw their share prices fall, which has yet to subside even now.
In Malaysia, remember when crude palm oil prices were plunging alongside crude oil? Plantation heavyweights saw their share prices fall, which has yet to subside even now.
This time last year, Sime Darby Bhd was at RM9. Today, it hovers at RM5.55. Asiatic Bhd too was trading at RM7.40 a year ago while today it is RM4.04. IOI Corp Bhd has seen its share price drop from RM6.65 to RM3.82 on Thursday.
For investors who had started accumulating commodities or commodities-related stocks last October, they would have seen their portfolios dip by an average 30%.
For those who accumulated Resorts World Bhd last December, thinking its downside was close, especially since it hit its 52-week low of RM2.15 on Dec 12, how wrong they must have been.
The stock is now trading at its new low of RM1.92 despite its cash pile of RM4.55bil. It continues to be haunted by corporate governance and related-party transaction issues.
Looking purely at the historical PE ratio of a stock can be deceptive. More so when trying to buy a stock at its lowest historical PE.
The stock is now trading at its new low of RM1.92 despite its cash pile of RM4.55bil. It continues to be haunted by corporate governance and related-party transaction issues.
Looking purely at the historical PE ratio of a stock can be deceptive. More so when trying to buy a stock at its lowest historical PE.
“This is because if price is constant and earnings continue to drop, then the PE ratio will rise and distort the picture. You never know if you’re buying at the lowest price,” says a head of retail research at a local brokerage.
He says it is better to buy a stock when the related sector bottoms out.
He says it is better to buy a stock when the related sector bottoms out.
“The way to gauge this point of inflection will be to compare the sectoral data with historicals during previous economic crisis,” he says.
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● Mistake No. 3: Failing to consider macroeconomic variables
Let’s say an investor finds a spectacular company to invest in. Valuations are reasonable and it has several new developments pending announcement. Fund managers are accumulating the shares and the stock looks ready to rock!
Let’s say an investor finds a spectacular company to invest in. Valuations are reasonable and it has several new developments pending announcement. Fund managers are accumulating the shares and the stock looks ready to rock!
Hold your horses and check that enthusiasm.
The current macroeconomic conditions, both global and local, are going to largely dictate the sentiment and buying momentum of the stock.
“If the whole market is falling, there will be very few stocks that will go up. The odds of a retailer selecting these quality stocks are slim,” says a retail head.
The Malaysian investing environment at the moment is far from encouraging, particularly after the fourth quarter 2008 gross domestic product growth of 0.1% stunned the market.
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The current macroeconomic conditions, both global and local, are going to largely dictate the sentiment and buying momentum of the stock.
“If the whole market is falling, there will be very few stocks that will go up. The odds of a retailer selecting these quality stocks are slim,” says a retail head.
The Malaysian investing environment at the moment is far from encouraging, particularly after the fourth quarter 2008 gross domestic product growth of 0.1% stunned the market.
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● Mistake No. 4: The issue with dilution
Another red flag to look out for are companies that issue millions of shares, hence causing a dilution in earnings per share. Malayan Banking Bhd (Maybank) fell below RM4 on Monday, the first time in more than a decade, on concerns over its proposed RM6bil cash call and potential hefty impairment losses.
Another red flag to look out for are companies that issue millions of shares, hence causing a dilution in earnings per share. Malayan Banking Bhd (Maybank) fell below RM4 on Monday, the first time in more than a decade, on concerns over its proposed RM6bil cash call and potential hefty impairment losses.
Following the announcement of a rights issue on Feb 24, the stock price has fallen 26% to RM3.98 from RM5.40. Recall that Maybank has offered a rights issue of up to 2.2 billion new shares on the basis of nine-for-20. The issue price for its proposed renounceable rights issue is fixed at RM2.74 per share, which represents a 34% discount to the theoretical ex-rights price of RM4.17 per share and a discount of 43% to the closing price of RM4.82 on Feb 24.
AmResearch says Maybank’s estimated earnings per share for the year ending June 30, 2010 will be diluted to 38 sen from 52.2 sen previously. “The general perception of a company that raises capital during difficult times is that it is desperate and this will have a negative effect on its stock price,” says the retail head.
Curtin instead advises to try seeking companies that are repurchasing stock and, therefore, reducing the number of shares outstanding. This process not only increases earnings per share but also tells investors that the company feels there is no better investment than its own company at the moment.
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● Mistake No. 5: Not recognising seasonal fluctuations
Most sectors go through booms and bust. In other words, they are cyclical. Investors looking for stocks to buy, need to take into account the sectors that are at present in vogue.
Most sectors go through booms and bust. In other words, they are cyclical. Investors looking for stocks to buy, need to take into account the sectors that are at present in vogue.
For instance, would it be a good idea to invest in the semiconductor sector, knowing full well there’s a major slowdown in chip sales and a case of layoffs and inventory building up?
In the case of the retail and consumer sector, their sales go up and down depending on which part of the year it is. The year-end school holidays and festivities normally see sales picking up.
In the case of the retail and consumer sector, their sales go up and down depending on which part of the year it is. The year-end school holidays and festivities normally see sales picking up.
At other times, sales are fairly staid.
Similarly, would it be wise to invest in a property company when the sector has gone through a five-year bull market, and will probably need to undergo a period of correction before it rises again?
Similarly, would it be wise to invest in a property company when the sector has gone through a five-year bull market, and will probably need to undergo a period of correction before it rises again?
“The fact is that many companies, such as retailers, go through boom-and-bust cycles year-in and year-out. Luckily, these cycles are fairly predictable, so do yourself a favour and look at a five-year chart before buying shares in a company,” says Curtis.
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● Mistake No. 6: Missing sector trends
While stocks can buck the larger trend, this behaviour usually occurs because there is some huge catalyst that propels the stock.
While stocks can buck the larger trend, this behaviour usually occurs because there is some huge catalyst that propels the stock.
For the most part, companies trade in relative parity to their peers. This keeps the stock price movements within a trading band.
Let’s say an investor owns a banking stock in Malaysia. While Malaysian banks are not exposed to the huge debts and toxic assets of Citigroup, American International Group or Bank of America, Malaysian banks may likely be affected in a protracted downturn.
Not surprisingly, Public Bank Bhd, Maybank and Bumiputra-Commerce Holdings Bhd have come under heavy selling pressure on negative newsflow and a worsening economic outlook.
Financial valuations in Malaysia have pulled back substantially from a peak of 2.5 times price-to-book (P/B) in January 2008 versus 1.2 times P/B currently.
Hence, if other banks are experiencing certain negative perceptions or problems, most likely the Malaysian banks will also be affected. The same is true if the situation was reversed.
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Financial valuations in Malaysia have pulled back substantially from a peak of 2.5 times price-to-book (P/B) in January 2008 versus 1.2 times P/B currently.
Hence, if other banks are experiencing certain negative perceptions or problems, most likely the Malaysian banks will also be affected. The same is true if the situation was reversed.
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● Mistake No. 7: Avoiding technical trends
Learning basic technical analysis can be very useful when deciding to take a position in a stock. For instance, would you bet heavily on stocks on Bursa Malaysia when the Dow Jones Industrial Average is trending down every day? Curtis says investors don’t have to be a chartist to be able to perform technical analysis.
Learning basic technical analysis can be very useful when deciding to take a position in a stock. For instance, would you bet heavily on stocks on Bursa Malaysia when the Dow Jones Industrial Average is trending down every day? Curtis says investors don’t have to be a chartist to be able to perform technical analysis.
“A simple graph depicting 50-day and 200-day moving averages as well as daily closing prices can give investors a good picture of where a stock is headed,” he says.
He advises investors to be wary of stocks that trade close to their average as it usually means it can sink even lower. The same can be said to the upside. Also, when volume trails off, so does the stock price.
“Sticking purely to fundamental analysis can be detrimental to one’s portfolio,” says the retail head.
He says technical analysis measures the real demand and supply for a particular stock. “It helps guide investors to determine the exit and entry points,” he says.
The Star 21 March 2009
Enforced Savings Needed
AS someone who is ill disciplined when it comes to saving money for a rainy day, I am thankful that the EPF remains a solid bastion of enforced savings for ordinary salaried workers like me.
The EPF likes to remind us that its main role is to manage the retirement savings of its members, including the type of withdrawals made as governed under the EPF Act 1991.
The EPF likes to remind us that its main role is to manage the retirement savings of its members, including the type of withdrawals made as governed under the EPF Act 1991.
So I am actually happy when the mandatory contributions are increased and hugely disappointed when the dividends are reduced. In my opinion, what we have in the EPF must always remain at the maximum possible, based on our earning power.
Even though certain withdrawals are allowed, I feel we should only use those that are absolutely essential, such as when my wife and I withdrew from both our accounts to help buy our first house.
Withdrawing to buy a computer, for example, is a no-no. Although I do invest in unit trusts, my consultant finds it very hard to convince me to take out more money from Account 2 on a regular basis despite all the forms I had pre-signed.
If it is so difficult for me to even use part of my EPF savings for pre-retirement needs as allowed by the law, why then would I volunteer to reduce my monthly contributions as suggested in the economic stimulus plan?
Perhaps the policy makers, taking a macro viewpoint, are convinced that the total sum that can be technically added to the market if everyone were to volunteer to take a three percentage-point cut, will make a difference.
They may imagine all of us heading to the shopping malls to spend, spend and spend. Or at least head to the teh tarik stall each evening to do our bit for the local economy.
But it will take much more to convince me that I will be helping to boost the national economy with about RM200 extra in my pay packet each month if I were to volunteer to make the cut.
I wonder what difference it would make to the majority of contributors who will have even less of the extra cash to spend each month.
I wonder what difference it would make to the majority of contributors who will have even less of the extra cash to spend each month.
Considering the cost of living has gone up and our purchasing power has been significantly reduced in recent times, there is little this magical three percentage points can do for the individual per se.
And another thing, there is now a tax-free limit on EPF savings and insurance premiums amounting to RM8,000.
If, by reducing our contributions, we go below the limit, it can also have implications on our tax bracket.
If, by reducing our contributions, we go below the limit, it can also have implications on our tax bracket.
Unless we are those who truly know how to manage our funds to make our money grow, I will certainly not interfere with what I have in my EPF. I would rather the taxman take less from me each month. That would be a reason to go on a spending spree.
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● Soo Ewe Jin is deputy executive editor, The Star. He believes God never gives us more than we can handle, even in money matters.
Sunday, June 21, 2009
Right To Play
Playing is a way for children to cope with anxiety.
I asked a group of primary school-age children to jot down their ideas on what their rights are. They all agreed that they had the right to live, be loved and be protected. One thing they left out in their list was the right to play. When I asked them whether they felt they had the right to play, many of them felt that the adults in their lives controlled this.
Play allows children to learn to manage their anxiety. When children play, they are in a safe space where they can experiment at will. All rules are suspended and they are not bound by any physical or social constraint. In play, children can go their own way. A child at play makes her own decisions instead of following what others say. When children play, they can set aside what is going on in their lives.
Play helps children come to grips with their past and also, just as importantly, to build their future with a sense of a happy ending.
Play is active. Children do not have to be passive observers or suffer what is happening around them. They can actively participate in whatever is happening around them. For many young children who are living in silence, they can speak up without fear.
Play is the way a child works out his problems. As adults, we are constantly talking things out with one another. We talk about our past experiences and how they affect our present. We try to understand what is going on in our lives by pondering the possibilities and making connections.
When children play, they act out what they have heard or seen. They use their own words and actions to respond to what is going on around them. Their play actions help to relieve the anxiety they feel about what has happened. Through their make-believe sessions, children find the strength to cope with the challenges.
When children play, they act out what they have heard or seen. They use their own words and actions to respond to what is going on around them. Their play actions help to relieve the anxiety they feel about what has happened. Through their make-believe sessions, children find the strength to cope with the challenges.
A 2½-year-old girl feeds her teddy bear food. She tells him, “Eat up. You cannot grow if you do not eat.” She keeps shoving the spoon with her pretend food into his tightly sewed up “mouth”. She gets angry with him and hits him. Then she picks him up and cuddles him, repeatedly saying, “I’m sorry.”
Play allows the child to test-drive their ideas before they use them to cope in real situations. I remember when my girls first started preschool, they often played pretend school with one another. I could tell how they perceived school as I watched and listened to them. One time, I was alerted that one of their teachers was using the cane in the classroom when I saw my daughter using a long stick. She kept telling her “class” to sit down and be quiet.
Play helps children come to grips with their past and also, just as importantly, to build their future with a sense of a happy ending. Children need to play out their fears after undergoing difficult situations, such as illness, family squabbles and adversities. During times of uncertainty, children use their play situations to give themselves some comfort and guidance.
Humour is also a powerful tool in managing anxiety, and children delight in their growing capacity to make use of it. They start to experiment with practical jokes from an early age. Children would do something funny or make up funny words to fend off their vulnerabilities or the boundaries set by their parents.
My second daughter would make up a language to communicate with us whenever she felt uneasy or reluctant to co-operate. She would either tell a joke or make a remark that no one understands. She would also say something really outrageous when things get a bit tense. She told us that this was her way of refraining from a fight or argument with us.
Children learn to adapt to many situations that are tense or aggravate them to feeling anxious, for example, when they have to attend a new class or on a visit to the doctor’s. Young children who engage in varied play situations with their siblings and peers will discover that things are not so bad after all. Having enacted the situation in their play, children feel they have better control over things.
Parents can help their children to play out how they feel about a particular situation. To do so, they have to give them space without structuring their play with adult rules. Let them say the words they choose. There is no right or wrong in play. Let the child lead. Parents need to respect that children will play and work out their problems at their own pace and in their own time. It is the child’s right to play.
By Ruth Liew
Treasure Moments
Children live for the present, and this is something parents need to be mindful of. PARENTS work hard every day for their children’s future and pray that their children will not make the same mistakes as they did in the past.But children live for the present. They seize the moment to love and take delight in everything they see, hear and feel.
Most parents feel pressured to safeguard their children’s future. They put them in the best schools and enrol them in various classes so that they can learn as much as possible. One 10-year-old boy mapped out his day on a piece of paper. Looking at the detailed account of what he participates in daily, I asked him when is leisure time. He told me that it is when he goes to bed.
Ask any parent with adult children, whether they have any regrets of the past. Many would tell you: “I wish I had spent more time with my children.”
In a newspaper article, one Hong Kong businessman who suffered great loss in the economic crisis said that he finally got a chance to slow down and spend more time with his family. Parents often worry that they will spoil their children. Some treat their children harshly, calling them derogatory names and punishing them whenever a behaviour is deemed inappropriate.
According to Dr Maria Montessori, during the first three years of life, children are guided by what nature has intended for them. They have natural instincts to learn in a way that is best suited for them.
It is important that parents respect this inner teacher. Well-meaning parents who do not fully grasp what the child really needs from them will unwittingly frustrate his efforts by making him follow their lead and keep up with fast-moving schedules.
Instead of reaching their full potential, children feel stressed out and misunderstood.
School-age children who are overwhelmed by homework and exams find no outlet to express their frustration. They get punished in school for not passing up their homework; at home they face the music for not doing well in school.
When asked whether their parents love them, many children will say: “I know they love me when they buy me things I want. And when I do well in school.” Children equate their parents’ affection to gifts. Parents need to be happy, well-adjusted adults, so that their interactions with their children will foster emotional stability.
Sharing lots of hugs and kisses can help children overcome stress and make them happy and healthy. Sometimes when parents sacrifice time for their children, they find that the child is not interested in interacting with them. And then they want their parent’s complete attention at the most inappropriate time. This can be upsetting for busy and stressed out parents.
Children need time alone with their parents. They need to know this is a priority and not a burden for their parents. If you have very little time in the morning, make time for your child in the evening. Doing homework together is not spending time alone with your child. He needs you to find him interesting to be with.
Arrange for some time alone with your child. You may not be able to do this with your child every day. Some of my best memories of childhood were the times my mother and I spent reciting poems together. Now whenever possible, I will pick up a poetry book and read aloud to my girls.
The idea here is to share what you love. My mother-in-law used to tell stories from the Bible to her children whenever she could find some time. Today, her grown-up children are constantly reminded of the values and beliefs they picked up during those treasured moments with their mother.
How to curb your debts
Good spending habits can help curb debts. It’s discipline that matters most WAGES is a sensitive matter and with the economic downturn, there are suggestions for it to be paid on a weekly or even fortnightly basis.
A system of weekly salary payments, said reader Saad Hashim in his letter to the editor on Monday, would help people plan their budgets better and hopefully, avoid going to the Ah Long.
With modern technology, he reckons that this should not be too difficult for companies to implement.
Many feel that getting weekly wages enables them to plan their cashflow better with one person suggesting that it could be more useful to those in the lower income group.
This is the group that manages their expenses on rather tight cashflow. A weekly wage system would help them plan on a more realistic basis when it comes to big ticket items. These items usually require lump sum payments on a monthly basis and those who got caught in the initial euphoria of such large purchases, may find that they don’t have much left after that big monthly payment.
What if there are several of these payments? With the sudden downturn in the global economy, many companies find their sales and exports zooming down, leaving them with little recourse but to cut working days, freeze salaries and bonuses.
In view of the protracted economic downturn, it may be timely for companies to look into suggestions for weekly or fortnightly salary payments, depending on the needs of their employees.
Some worry that it may be even more difficult to plan with weekly wages as sizeable items such as rentals are usually paid monthly here. Again, with modern technology, arrangements can be made for deductions via Internet banking.
In fact, with so much gloom and doom outside, the excitement of receiving wages on a more frequent basis may be an event to look forward and become a motivating factor. This is especially so for those who were used to receiving bonuses, allowances or ex-gratia payments in between. Nowadays, there doesn’t seem to be much to look forward to apart from fixed salaries.
Even as investors, many have turned risk averse and learned to accept very low savings rates. Once in a while, they rush to snap up some savings bonds, whenever they are offered.
Even as investors, many have turned risk averse and learned to accept very low savings rates. Once in a while, they rush to snap up some savings bonds, whenever they are offered.
There is also a large group out there who can’t be bothered with small wage payments every week or once in two weeks. They could be the more disciplined group who stick to an overall budget allocation for specific items every month. Some suggest monthly salary payments are more feasible for this group which are likely to have surplus funds and therefore, may not need to budget so tightly.
In fact, some may have used up their surplus funds in the stockmarket; those who got burnt may want to opt for weekly wages to help them tide over! In the long run, it is personal discipline and good spending habits that will help curb debts which can be incurred as a result of addiction to drinks, gambling and other vices.
Many also have a tendency for showing off, living beyond their means and keeping up with the Joneses, which can be difficult in the current economic situation.
● Senior business editor Yap Leng Kuen advocates careful spending amidst hard times as the debt spiral can be disastrous in terms of ballooning payments and damage to otherwise, enduring relationships.
Saturday, June 20, 2009
Planning for retirement
Only 34% of Malaysians putting aside money regularly for retirement funds
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YOUNG parents Xavier Arumugam and Kavitha Nair has been putting aside a fixed sum every month into their savings accounts as part of their retirement nest egg after deducting expenses for the household, medical insurance as well as education plans for their children and house loan installment.
YOUNG parents Xavier Arumugam and Kavitha Nair has been putting aside a fixed sum every month into their savings accounts as part of their retirement nest egg after deducting expenses for the household, medical insurance as well as education plans for their children and house loan installment.
Both of them had also voluntarily increased their employees contribution to 15% for the Employees Provident Fund (EPF) compared to the usual contribution rate of 11%. Loke Kah Meng ... 99.9% of the contributors will withdraw their EPF savings in a lump sum and 70% will use up money in 3 years. “We are aware though, that we do not have a formal retirement plan in place besides the EPF,” Kavitha admits.
According to Great Eastern Life Assurance (M) Bhd executive vice-president and chief marketing officer Loke Kah Meng, only 34% of Malaysians are putting aside money regularly for their retirement funds, but these may not take into account inflation, the rising cost of living and medical expenses in future, which could be a major financial burden.
“Although EPF savings is one of the main channels to provide for retirement, 99.9% of the contributors would withdraw their EPF savings in one lump sum once they reach 55 years of age and 70% of them would use up all their EPF savings in just three years post-retirement,” Loke notes.
Loke adds that longer life expectancy, delayed marriage and having children later would leave the retirees in a vulnerable position in their old age as they need to need to set aside medical funds for themselves and education funds for their children.
Meanwhile, Prudential Assurance Malaysia Bhd chief marketing officer Thomas Wong, survey findings shows that although Malaysians have a high propensity to save (72% claimed that they do save for retirement), 41% do not have a concrete plan on how to build their retirement fund.
“They just save as much as they can now and hope they will have enough to cover their retirement needs,” Wong says. Wong adds that among those who save for retirement, 77% are putting their money in low-yielding savings vehicles such as bank fixed deposits and savings accounts to accumulate their nest egg.
“Contrary to the common belief that keeping our money in the bank is the best way to preserve our capital, this instrument may not be good enough given that interest rates of bank deposits can hardly outrun inflation,” Wong says.
He also notes that most Malaysians do not segregate their savings for retirement, which made matters worse.
He also notes that most Malaysians do not segregate their savings for retirement, which made matters worse.
“This means, all their monies are lumped together as general savings. More alarmingly, out of those who consciously separate their savings for retirement, 83% have said that they would use the money should other needs arise,” he says.
This is indeed a risky situation because if they are not careful, they may not have enough money for their retirement, Wong explains.
This is indeed a risky situation because if they are not careful, they may not have enough money for their retirement, Wong explains.
In addition, a staggering 73% do not seek advice from financial professionals – a behaviour that compounds Malaysians’ poor retirement planning ability further.
“All these could probably explain why about 39% of those surveyed see themselves working beyond the mandatory retirement age, citing income boost as the main reason for doing so,” Wong adds.
“All these could probably explain why about 39% of those surveyed see themselves working beyond the mandatory retirement age, citing income boost as the main reason for doing so,” Wong adds.
Loke advises that instead of relying solely on one’s EPF and personal savings, Malaysians should consider early financial planning, which would save them the stress of dealing with insufficient retirement funds or seeking prolonged employment to ensure financial stability.
“We could plan ahead with investment-linked insurance plans to counter the effects of inflation. In addition, there is also the need to consider providing for your medical needs after you have retired and would be no longer entitled to medical coverage provided by your employer,” Loke says.
“We could plan ahead with investment-linked insurance plans to counter the effects of inflation. In addition, there is also the need to consider providing for your medical needs after you have retired and would be no longer entitled to medical coverage provided by your employer,” Loke says.
Meanwhile, Wong advises that there are a variety of choices available when it comes to building your retirement fund.
“Depending on your risk appetite, investment horizons and affordability, you can invest in properties, equities, unit trusts and investment-linked insurance to name a few. The key is to have a sound investment strategy that is the ability to balance risks and returns effectively according to the desired investment tenure,” Wong says.
Nevertheless, it is always advisable to contact a professional financial advisor or a wealth planner who can provide advice on how to best go about securing your retirement based on your financial circumstances, priorities and needs, Wong adds.
“Depending on your risk appetite, investment horizons and affordability, you can invest in properties, equities, unit trusts and investment-linked insurance to name a few. The key is to have a sound investment strategy that is the ability to balance risks and returns effectively according to the desired investment tenure,” Wong says.
Nevertheless, it is always advisable to contact a professional financial advisor or a wealth planner who can provide advice on how to best go about securing your retirement based on your financial circumstances, priorities and needs, Wong adds.
Four ways to stay debt-free
It's important to avoid being highly indebted as it can leave you financially vulnerable in tough times. Here's how to keep your credit card account in the black.
1) Mind your debt
When it comes to problems in managing debt, your mind may be the first area you need to conquer. Mohamed Akwal Sultan, CEO of the Credit Counselling and Debt Management Agency (AKPK), notes that debt is a psychological problem, whereby some people would resort to spending when they are depressed. Dr Goh Chee Leong, vice-president of Help University College, says the basic principle that explains why people spend without thinking on their credit card is attributable to the desire for instant gratification. “We tend to want short-term pleasure even though it means long-term pain,” he says. “We think, if ‘I pay less now, I’ll have more money and it doesn’t hurt me now’. It’s the same principle as to why people procrastinate — have fun now and suffer later,” explains Goh, who lectures in psychology at Help. Another factor that contributes to mindless spending, notes Goh, is the lack of control over desire. “Some lack the will-power to say no to what they feel they want. So, this is a matter of heart versus head.
Is there an antidote for this? “Focus on your limit,” he advises. “Don’t get distracted and compare yourself with other people. If you want to spend the same amount of money that others are spending, you either have to increase your income or decrease your expenditure. Although it is a cliché, it is important to live within your limit.” The good news is that like many things in life, delaying one’s gratification can be attained through practice. “Discipline is a mental muscle. It’s willpower that makes us do something we don’t feel like doing, such as jogging and saving money,” Goh explains.
2) Know your limits
You can’t control debt if you don’t know what you are spending your money on. In Mohamed Akwal’s opinion, budget is one of the most important tools in financial planning. Tabitha Tan Boon Nie, 25, makes it a point to come up with a budget each month. “I only have one fixed income. If I do not budget, then I might be spending more than my income. This is very dangerous!” Each month, she deducts her monthly fixed debts and expenses such as her housing and car loan instalments as well as her parents’ pocket money from her income. “If you’ve just started working, then, in two to three months’ time, you should have a rough idea of how much you need for meals, petrol and toll. If your expenses are more than the balance, then you’ll have to look at how you can reduce them,” she says.
Ruban Thomas, 30, a senior business development executive, took almost three years to clear his credit-card debt. But the experience has taught him how to manage his personal finances better. He now drafts a monthly personal budget planner, putting together a very basic list of monthly income and expenses. “You can just give it your best guess. Stick to the list of things that you can easily identify, such as rent, car payment, insurance and utilities. As time goes by, you can add more details.” Ruban makes it a point to pay himself a minimum of 20% every month when he gets his pay cheque. Next, he sets aside money for “unavoidable payments” such as car and housing loans, PTPTN (National Higher Education Fund Corp) loan and utility bills. Nelson Ng, a banker, does something similar. “The housing and car loans are my main priorities. I spend what’s left of my income after deducting 20% to 30% for savings,” he says.
You can’t control debt if you don’t know what you are spending your money on. In Mohamed Akwal’s opinion, budget is one of the most important tools in financial planning. Tabitha Tan Boon Nie, 25, makes it a point to come up with a budget each month. “I only have one fixed income. If I do not budget, then I might be spending more than my income. This is very dangerous!” Each month, she deducts her monthly fixed debts and expenses such as her housing and car loan instalments as well as her parents’ pocket money from her income. “If you’ve just started working, then, in two to three months’ time, you should have a rough idea of how much you need for meals, petrol and toll. If your expenses are more than the balance, then you’ll have to look at how you can reduce them,” she says.
Ruban Thomas, 30, a senior business development executive, took almost three years to clear his credit-card debt. But the experience has taught him how to manage his personal finances better. He now drafts a monthly personal budget planner, putting together a very basic list of monthly income and expenses. “You can just give it your best guess. Stick to the list of things that you can easily identify, such as rent, car payment, insurance and utilities. As time goes by, you can add more details.” Ruban makes it a point to pay himself a minimum of 20% every month when he gets his pay cheque. Next, he sets aside money for “unavoidable payments” such as car and housing loans, PTPTN (National Higher Education Fund Corp) loan and utility bills. Nelson Ng, a banker, does something similar. “The housing and car loans are my main priorities. I spend what’s left of my income after deducting 20% to 30% for savings,” he says.
3) Keep a tight rein on the ‘extras’
Budgeting helps to identify your regular expenditures, but it doesn’t help if you blow the budget regularly on big items. Ng points out: “You must always remember to not overspend and indulge in impulse purchases, especially during sales.” Credit card issuers tend to give a credit limit that is two to three times higher than one’s earning capacity. This can give you the illusion that you are able to afford a lifestyle that is two or three times beyond your means. Hence, make sure you have the money to pay for each purchase. You could have a little ‘savings accounts’ set aside for treats like travel or large purchases like a handphone. After purchasing the items, use the money to pay the charges in full.
Budgeting helps to identify your regular expenditures, but it doesn’t help if you blow the budget regularly on big items. Ng points out: “You must always remember to not overspend and indulge in impulse purchases, especially during sales.” Credit card issuers tend to give a credit limit that is two to three times higher than one’s earning capacity. This can give you the illusion that you are able to afford a lifestyle that is two or three times beyond your means. Hence, make sure you have the money to pay for each purchase. You could have a little ‘savings accounts’ set aside for treats like travel or large purchases like a handphone. After purchasing the items, use the money to pay the charges in full.
4) Limit temptation
When Ng managed to settle his outstanding debts after around two years, he decided to cancel four of his credit cards to avoid the temptation of overspending. Currently, he only owns two credit cards — one for petrol transactions and the other for daily use. “There is always the temptation to overspend when we have too many cards in our wallet,” he opines. “With a minimal payment of 5%, the monthly payments seem to be small, but the bigger debt is always waiting for us at the bottom of the statement. Clear your credit card debts as fast as possible because every month, there will always be additional bills being credited and your debts will accumulate very fast, with the high interest of 18% per annum.”
Similarly, Tan owns two credit cards and does not intend to apply for more. “The interest rate is way higher than the interest rate your saving account is giving,” she points out. “Furthermore, my credit limits are already over my monthly income. I really wouldn’t want to get into such debt that will take me years to clear.”
When Ng managed to settle his outstanding debts after around two years, he decided to cancel four of his credit cards to avoid the temptation of overspending. Currently, he only owns two credit cards — one for petrol transactions and the other for daily use. “There is always the temptation to overspend when we have too many cards in our wallet,” he opines. “With a minimal payment of 5%, the monthly payments seem to be small, but the bigger debt is always waiting for us at the bottom of the statement. Clear your credit card debts as fast as possible because every month, there will always be additional bills being credited and your debts will accumulate very fast, with the high interest of 18% per annum.”
Similarly, Tan owns two credit cards and does not intend to apply for more. “The interest rate is way higher than the interest rate your saving account is giving,” she points out. “Furthermore, my credit limits are already over my monthly income. I really wouldn’t want to get into such debt that will take me years to clear.”
This is an excerpt from an article which appeared in Issue 90 (February 2009) of Personal Money, the personal finance magazine published by The Edge Communications Sdn Bhd
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