Friday, October 14, 2005

A way of life

A way of Life: Spending, saving and living every moment

How to enjoy the present (carpe diem, seize the day, my friend) and save for future? Let us compare these three types of lifestyles summarized in three scenarios.

Lifestyle ONE

You walked into this expensive restaurant in Bangsar with your friends and family. You were a bit intimidated by the prices in the menu though you knew you could afford them. Uncomfortably you made the order and wondered how much the bill is going to be. You felt a little bit of tension every time before an item from the menu was mentioned. You forced yourself not to look at the prices and told yourself, hey, live for the moment, not for the money.

After the meal, though you had strong desires to order another Irish Coffees and a special dish of desert, you controlled and told yourself that delay gratification is the way to save for a better future.

At times, you wonder whether you really are living for the moment.

Lifestyle TWO

You walked into this expensive restaurant in Bangsar with your friends and family. You were not intimidated by the prices in the menu as you knew you could afford them should you visit such restaurant less frequently. Price did bother you when order was made but you knew better that, for now, you don't have to worry about money. You called the most delicious item (happened to be the most expensive as you accidentally peeped over the price) and two Irish Coffees for yourself. Why should I delay gratification? Live for today, you said (and unknowingly defined your version of "“live for today").

When you received your credit card statement a month later, you weren't really lived for that moment. Due to such consistent financial choices of instant gratifications in many expensive ways, you have cumulated quite an amount of credit card debts and you weren't really "“living for the moment"”, in the way you define the phrase, for many months later. The repercussion to "live-for-the-moment-and-spend"” was painful.

Lifestyle THREE

Up front, you made a conscious choice not going to that expensive Bangsar'’s restaurant. You walked into this nice restaurant (let's say one of those few restaurants beside Petaling Jaya States' UOB, half the price that of Bangsar's) with your friends and family. It was a little elegant air-conditioned restaurant with warm yellow lighting. You can choose to sit either outside for natural breeze or inside for cool air. You had a great time dining with your family and friends. You did not realize the prices in the menu as you knew it is really affordable. At the end of the meal you ordered few ice creams and deserts for your family and friends and two cups of coffee for yourself. You looked at the bill, "“so cheap,"” you thought. This was the first time you thought about money in the entire evening. You insisted to pay for the meal happily, oh, and gratefully, as you realised that things, recently, were so affordable to you. You reminded yourself to send a cheque to the charity that you were dedicated to.

Money wasn't an issue, not even crossing your mind through out the dinner, as it was simply so affordable. You fulfilled all your instant desires and gratifications. Everyone had a great evening and you were grateful that you could afford such a great meal even if you come here every week. Many years later, you think, "“I really lived in those moments."”

It is quality lifestyle and not high-priced lifestyle that you are going after. Due to such consistent financial choices, where decisions were made up front for a quality yet much cheaper lifestyle and habitat, you managed to save for your future yet without sacrifice in living the moment. There were always instant gratifications without the need to think about money now and when your credit card statement comes.


Many financially cautious persons choose lifestyle ONE. It is a lifestyle of control, rigid, packed with unsatisfied desires, unfulfilled gratifications and bitterness of others affluence, and eventually ended with regrets of not living for those past moments.

Many "living-for-the-moment-and-spend" persons choose the lifestyle TWO. The repercussion of such carelessness with money is painful. You could die broke.

I loathe lifestyles ONE. Every time we cut down our small satisfactions in life we increase our bitterness. This lifestyle always makes us feel poor. I fear of lifestyle TWO. I am afraid of dying broke, owe money and living on the street.

Lifestyle THREE is a lifestyle where money doesn't stand in the way for us to enjoy the moment. It is the way to live for today yet to save for future. It is not about "“scrooge"” at the moment when you need to spend for gratification. It is about sensible choice for completely different price range of lifestyles and habitats so that you can fill your heart desires and gratifications instantly and financially comfortably. When you keep realising things are so affordable everywhere you go, the only feeling you can have is gratefulness.

In a more conventional way of saying, yes, it is about live within your means. But the choice is made up front of choosing a lifestyle, not saving and penny-pinching at moments in live.

Make a wise choice right from the beginning and don't "“scrooge" for the moment. Live now, with efficacy.


* I am not saying you should not go to restaurants in Bangsar. I am stereotyping and conveniently using them to illustrate a point. I am saying you should not go to a place where the prices bother you, either when you spend or when you received your credit card statements. I am saying you should go to a place where prices are well below your affordability, and that you can spend to your heart desire without the issue of money, now or future. Even Restaurants in Bangsar can be such a place when you are financially affluent.

* This is just an illustration of point using the difference between an expensive good restaurant and a cheap good restaurant. It is the same for other major items, between BMW 5 series and Proton Saga (Azizi Ali's favourite), between a 48"” Plasma TV and a 21"” cheap TV, between eat out regularly at restaurants and "“ta pao"” back home, between a home in Bangsar (again!? Hey chentong, what is your problem with Bangsar?) and a home in Shah Alam, between vacation in London and vacation in Bali, etc.

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Saturday, September 10, 2005

KWSP/ EPF for home loan

If your house is under your spouse's name, you can now withdraw your kwsp/ epf to reduce or redeem housing loan for your spouse.

Check it out here at kwsp/ epf web site, under Member Housing Withdrawal's Section G.

Sunday, August 14, 2005

Have you been to KWSP (EPF) web site recently?

It is quite amazing to realize how much the web site has improved over the years. We can now get many simple services and queries done without going through the hassle of queuing up in front of KWSP/ EPF's service counter. It is now one of the better government web site.

You can download KWSP/ EPF'’s Forms and guides for various types of withdrawals from the web site, i.e. housing withdrawal, retirement (50 years) withdrawal, etc.

By the way, when was the last time you withdrew your Account II to reduce your house loan? If it was more than three years ago, it is now time to make another withdrawal. It makes financial sense to withdraw your EPF money to reduce your home loan.
Same for the application for making periodical KWSP/ EPF payments, employers KWSP/ EPF payment, etc. you may find that the guides and forms are readily available for download.

There are tools to make financial calculations. You can calculate your KWSP/ EPF savings. You can calculate how much you can withdraw from your account II for you housing withdrawal.

With i-Akaun you can check your KWSP/ EPF account balance. Don'’t waste your beautiful Saturday morning queuing up to print out your KWSP/ EPF'’s statement.

1. A list of fund managers whom you can invest your money in Account I.
2. Types and guidelines of withdrawals.
3. Nomination of beneficiaries

and more...

Check out KWSP/ EPF member area.

Sunday, July 31, 2005

KWSP (EPF) for retirement

It is reported in today's Sunday Mail that in most cases Malaysians do not have sufficient savings in their Employees' Provident Fund (EPF) Or Kumpulan Wang Simpanan Pekerja (KWSP) for retirement. However, most of them are under the impression that their EPF/ KWSP contributions are sufficient for their old age.

"Studies have shown that most retirees finished their money within 10 years after their retirement, with the majority using up their money within three years, and from then on they depend on their children for survival."

This is interesting, read on.

"According to EPF, by the time one reaches 54 years old, which is a year before the retirement age of 55, the average Malaysian usually has RM92,000...

The latest survey on the ageing population has shown that Malaysian men live up to 78.6 years old and women 86 years old. This means that you have to make the RM92,000 last for 23 years if you are a man and 28 years if you are a women."

This is not a shocking truth. It is a question that majority of us, working as an employee, avoid at all cost. We simply do not want to face the brutal fact that, for most of us, our savings in EPF is simply not enough for retirement.

It is about the change of mind set. We can no longer see it as how much we have in terms of assets, but how much income we can earn from the assets that we have. RM92,000 in the form of hard cash will be quickly depleted by inflation and necessary spending. But RM92,000 in the form of income generating assets(i), with a return on investment (ROI) of, let's say, 20% will bring you annual income of RM18,400 year after year without depleting the original RM92,000.

Yes, the ROI of 20% is a bit too high even as an example and RM18,400 income per annum is still a bit too low for a decent living. Therefore, no matter how, EPF/ KWSP savings alone is not enough under the above brutal circumstances. Assets(i) building is the key to retirement. Even if we enjoy working as an employee, we must build income generating assets(i).

Find out more about what is available at KWSP's web site.

Top online banking portals

These are few of the popular online banking web sites
  1. Hong Leong Bank's ezbanking
  2. Maybank's
  3. Citibank's Citibank Malaysia

Thursday, May 26, 2005

Joint Bank Account for Married Couple

Yesterday Simon and Caroline from Light and Easy’s Light Breakfast Radio Show brought up a very interesting topic, “should a married couple hold joint bank account or should they keep their personal bank accounts separate?”

We are in favour of holding a joint bank account. It provided us the discipline to finish off our 20 -year home loan in 7 years. We understand the difficulties and we have solutions to overcome them.

Why joint bank account for married couple?

A carefully handled joint account provides a sense of common purpose for the couple. With a joint account it is easier to plan for many activities in life that involve both parties. There is no second guess of affordability which is crucial in managing family’s finances. It makes planning for future, especially for couples with double incomes, much easier. It facilitates the couple in making common financial goals and gives them perspective and a sense of control for the financial future of their family.

Such common financial goals include:
- planning for retirement
- planning to buy a bigger house for a better lifestyle
- paying off home loan
- a holiday vacation
- children’s education

Pitfalls and Solutions

Joint bank account seems to work best for couples that have similar spending habits and equally careful about spending. However, not many couples share the same spending habits and philosophies of life. Does this mean they should not have joint bank account?

The best arrangement for a couple is to have a joint account to pay for the family’s common expenditure and to have their own personal accounts too. The couple must decide a monthly amount to put into the joint bank account and more importantly they MUST agree on what expenses can and cannot be paid from the joint account. Anything outside the agreed expenses, unless mutually agreed, should not be paid from the joint bank account. Any expense that cannot be agreed to be paid out from the joint bank account should be excluded.

What should be in
  • monthly installment of home loan
  • monthly apartment’s management fees
  • pregnancy and hospital expenses
  • babysitter fees
  • children education fees
  • family vacations
  • home renovations (do your budget and agree on the budget first)
  • regular donations that you and your spouse are committed to
  • family investment that you and your spouse are committed to, e.g. a second apartment for rental, a family trust that hold stocks, etc.
What should be paid individually or shared fairly outside joint account (unless otherwise agreed by both parties)

  • gift to spouse (hey, it’s a gift from you.)
  • eat out (just pay and share unless you enjoy the accounting part to tie the number every time you pay)
  • eat out with each other's parents, brothers, sisters, friends, etc.
  • groceries (yes, it is regular expense, probably too regular and petty too. More over the amount is not fixed. There will be a lot of accounting headache if you use the joint account to pay. Just share out the payment on the spot or do the regular IOU netting with your spouse.) Alternatively, the husband can just give a monthly sum to the wife for groceries, outside the joint account.
  • DVD player that your spouse doesn’t think it should be paid out from joint account
  • your own investment portfolio that your spouse is uncomfortable with
  • your beauty saloon expenses
  • your treats to your friends
  • donations for the cause that you, but not your spouse, feel strongly about

The Theory
There are four “must haves” for a successful joint bank account

ONE: Define usage
Yes, one of the most important keys to a successful joint bank account is to define the usage of money in the joint bank account. Remember, joint bank account is meant for family expenditure. It involves both parties money. It has to be agreed by both parties before spending it. The right way, therefore is to have a pre-agreed REGULAR expenses that can be paid out from the joint account.

Any expense comes incidentally has to be discussed and agreed by both parties. Since many family expenses could come incidentally and if you foresee such discussions will lead to arguments, you may just want to exclude these items from paying out from joint bank account.

TWO: Simple and predictable
Keep the arrangement simple. Try not to involve the joint account with daily petty expenses. Besides creating accounting havoc for both of you, it may lead to argument since the nature and amount of such expenditure is unpredictable. You save the hassle from agreeing or arguing over petty expenses. For such expense you may just pay and share the cost fairly on the spot.

THREE: Build trust
Once agreed, never break the rules and you will never break trust. Ultimately what glues all the operations together is the trust that you have in each other that the money in the joint account will be handled carefully, by the agreed rules and treated with respect.

The worst comes from breaking the trust of your spouse by taking the money out for own use without his/ her knowledge. Once the trust is broken, any arrangement would be difficult to carry out. (Can I make you swear that even if you are personally financially ruined, you will not touch the money in joint account that provides security and future to your family?) :-)

FOUR: Fair share of input
Failure of a joint bank account could come from not being able to keep up your fair share of input. Value each other's abilities to earn and set a fair (the word is FAIR, not EQUAL) amount for each other to contribute into the joint account. If you or your spouse cannot put in that much, set a lower amount. Once decided, keep the promise to contribute.

With this, no matter how different a married couple’s spending habits and life philosophies are, they will be able to operate a successful joint bank account that provides the family financial certainty and a sense of togetherness. So do keep a joint bank account for your family and a personal bank account for your own joy of spending.

Saturday, May 21, 2005

Personal finance: The Principle

At different stages of life we need to make financial decisions, critical personal financial decisions that will have long term irreversible impacts upon our financial well being and quality of life, e.g. buying a house, going for studies, sending our children to college, getting a loan to start a business, etc.

These decisions are critically important due simply to one reason - we are not rich enough, yet. We need to be careful in making these decisions simply because it may cost us dearly. Sure, it is all about assets(i) building, wealth creation and to be rich enough one day so that error in such decisions will be affordable and will not require thinking too deeply. However, along the journey for affluence we must ensure these personal financial decisions will not lead to financial disaster that will hamper our wealth building efforts.

In short, the single most effective way to deal with personal financial issues is to be RICH enough that mistakes are always within our budget. When we are not rich, when we are still on our path in search of wealth, we must then be careful of making such personal financial decisions. We make these decisions in a way that they will not obstruct our wealth building efforts.

This is the basis of all personal finance ideas. This is THE principle of Personal Finance.