Wednesday, November 21, 2018

How to Actually Save Money?

How to actually save money? It is not about packing your own lunch.

This article and video from Motley Fool stated that we simply need to focus on our three biggest expenses in our life, i.e. house, car and education. While I agree with the author, there are variations for Malaysians.

Here is the article from Motley Fool on How to Actually Save Money Below is the video from the same article.







In the context of Malaysians:

House
  1. Clear understanding of what is a good enough house for your family. Make careful decision based on affordability of house/ apartment, size, amenities and location, and its potential to increase in value over the years. 
  2. Finding an affordable house that will increase in value over time is important. It will help to fund your next bigger house. When you retire your children left home and you can sell the house and move to a smaller condominium. The extra money funds your retirement.
  3. Always compare your home loan interest rate with the market rate. Negotiate with your bank periodically. 
  4. Use Flexi Home Loan, so that when you have extra money you can pay down extra loan amount to reduce interest cost or shorten loan tenure. When you need money, you can also withdraw the extra loan payments you made to the Flexi Home Loan account. So instead of keeping fixed deposit which gives you 2%-3% interest income, keep this money in your Flexi Home Loan account to reduce your interest expenses which is at around 4.4%-5.5%.
Car
  1. Second hand simple model (e.g. MYR60,000 or less) vs brand new luxurious model (above MYR300,000)
  2. Use your extra payments made to Flexi Home Loan, instead of car loan, to fund your second hand car. (Home loan interest, as at today, is much lower than car loan. Note: Interest rate used for home loan is effective rate, interest rate used for car loan is flat rate. 3% flat rate of a 3-year car loan has effective rate of around 5.7%. The effective rate for home loan on the date of this post is around 4.4%.)
Education

Student loan was almost unheard of during 1980's. It is a ridiculous loan that exists only because the university's fees has gone extortionately high. Here are a few comparisons:
  1. Quality public school fee (FREE) vs private school fee (MYR19,000 - MYR85,000 per annum)
  2. Local public or semi government funded universities (around MYR50,000 for entire 4 year course) vs overseas universities (minimum MYR400,000 to study 3 year in UK). For courses like accountancy, students can even study and take the overseas professional exam in Malaysia.
  3. Low education fees means you can free yourself from the financial slavery of student loan or save your parents' retirement fund. 
Choose your lifestyle