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.
Showing posts with label Savings / Retirement. Show all posts
Showing posts with label Savings / Retirement. Show all posts
Thursday, August 27, 2009
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
Wednesday, August 26, 2009
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!
Monday, June 22, 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.
.
● 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
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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