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Half of year 2011 has already passed. Have you ever thought of your next tax filing yet ? If you only take a look by next year, then it may be too late for you to optimize anything anymore. Try below widget and see how much the impact may be for you ! Just enter your total annual income and see how much tax you can save simply by planning early !!
Showing posts with label Income. Show all posts
Showing posts with label Income. Show all posts
Tuesday, July 26, 2011
Sunday, October 3, 2010
The Right Truth behind Donation
From time to time we hear about how rich people donate their wealth away. Some donate whole of their wealth, some half and some donate just enough to optimize their tax planning.
Most people would think that the rich has too much, hence they want to give some away since they can't use it anyway. That ... would be 20th century mind set.
The fact is ... the rich who donates, is not only rich, but also smart rich. Whatever they have now, they can continuously have it at anytime. Hence it doesn't really matter if they give anything away tonight, they will have it again tomorrow morning.
That would be the ultimate power of passive income, or smart income.
Once you know how much you 'really' need, you 'find a way' to keep your needs fulfilled without doing anything much. Then whatever extra comes in is the one you can easily donate away without filling any pinch. Yet many will feel much appreciated because it means the whole world to them.
So in short, you can really see which rich man has smart income in him and which rich man is barely surviving with his active income, by seeing the way they donate.
Now, let me ask .... do you think USA rich men is smarter or China's rich men ?
Friday, September 24, 2010
Easy Retirement
This is an extract of what I read in today's newspaper. More and more people start to carry this type of alternative concepts about retirement especially in this 21st century. You can't say its wrong. As a matter of fact, its a rather SMART way to go. But lie within is a huge hidden risk.
The titles in above newspaper read:
- you don't need much during retirement, coz your liability has reduced
- living frugal is not hard, mentality is the key
- you don't need to prepare to retire ?
Basically the idea of save or accumulate enough so that you can STOP WORKING one day is solely base on the assumption you don't really LIKE what you are doing. You are just doing it for the sake of money or future retirement. Hence when you no longer need that money, you will want to stop working. But what if you REALLY LIKE what you do for a living ? Would you stop even if you have enough money for the rest of your life ? Be it Bill Gates, Warren Buffet or that happy old man by the street ... the answer is obvious. You will keep on doing what you like even if you retire or don't HAVE TO DO IT.
And if you have been doing something that you like for so long, the chance is that you don't really need to worry about living expenses since a long time ago. Incoming cash flow will persist and hence you don't really need to worry or prepare for a retirement. Coz you don't want to retire !!
What do you think about this easy retirement methods ? In contrast to the fundamental of save, invest and accumulate until you have enough to fight against the inflation etc. ?
Which do you prefer ?
Sunday, June 27, 2010
Recession over, what's NeXT ?
Sometimes I feel very depress when my prediction comes TRUE.
For those who don't know yet, zzzz is going through a transition where political power could potentially shared between 2 parties; instead of just one-side-say-it-all like the past 50 years. Unfortunately, the initial phase of this transition has ended in a way when our new Prime Minister has strategically resolved it.
At the moment New Economy Model was presented, I immediately sensed the game err they plan to play. Because exactly the same game plan has been played in USA before. While it is true that zzzz CAN become a developed nation by adopting those moves but it has also been proven that such finance structure is NOT sustainable. Just see what has happened in USA and what is happening in Europe.
Although as if recession is over now, actual effective inflation experience the SHARPEST rise in last 2 months, as high as 25% to 50% if you visit hypermarket often. That is not the worst. What is happening now is that major manufacturers are deceiving consumers in large scale openly. While their products have inflated severely, they run advertisements and promotions as if their products are ON OFFER ! All these are done as part of the exercise to smoothen the transition into a developed nation, hence they have government support behind the scene at all cost. Ahem ... at consumer's cost that is. While these are nothing new to those who have seen it all, but sadly ... there are more consumers falling into it than realizing it at all.
As mentioned in what can we do when bully by the big boys, there is probably nothing much we can do to STOP anything now. So there are just a few things we can probably watch carefully and ride on so that we can get a piece of the pie too ...
- Property will rise drastically. Wherever you are staying right now and despite how much you like it, it may become more worth while to sell it off in the next 10 years. So do plan ahead where you may want to stay 5-15 years later. This may become your LAST and ONLY ticket when the nation is developed and you are still under developing.
- Double your salary in the next 2-3 years. If you wait till the wave carries you, you will always stay behind. You salary WILL increase AFTER the effect of inflation fully kick in. But by then, your increased salary will mean much less. So you really have to think for yourself now. If you are really royal to your employer, your employer should have seen this coming too and take care of you but did it ?
Other than that, derived finance products like futures, options and forex will over shine proper financial planning so much that a lot of weird and ad-hoc theories will surface out. Most people will no longer be able to differentiate what the real proper investment is. On the other hand, that is due to more and more improper investments will actually obtain real returns for the new few years. So if all you care is to get more money, then it should fine temporary.
Hence, MalPF only has one advice to all. Be deviated all you want, just remember to engage an exit strategy and keep yourself in high cash flow condition.
Monday, March 30, 2009
The most long lasting business model
If not mistaken, it was 2,300 BC and 4,500 years ago (no, not a mistake, these are the actual years). Once upon a time ...
Caby is a smart man, he understands human nature very well and decide to make a fortune out of it. Today he is only focusing on the 'greed' part.
He collects $1 from every man he meets and promise to pay half of them $2. At first, people have doubts and only a handful people join. But when half of them are paid double the money they put in, words start to spread and everybody rush in like no one business.
Although it was clearly implied that another half will get nothing out of the $1 they paid, but soon the other half start to compalin that this is a scam. Caby is a smart man, he starts to alternate paying another half of the people double the return. As far as the people concern, they pay $1 twice and they are guarantee to get back $2 in second round anyway. So the worst is break even and if 'luck' is on their sides, they can get paid $2 for the $1 they put in. They can stop playing and immediately earn 100% return !
But who is happy with $2 ? Illogical but true enough, everyone realize they will keep on playing and all they will ever get is a break even, but everyone still think they can earn 100% return.
You are breaking even at best but
you still think you are winning 100%
at the same time
Finally, the business model works and sustain itself. Caby is a smart man but he hasn't earn a single cent doing this yet. He is calm, he waits, for the real phase to kick in.
Finally Greed kicks in. $2 is not enough anymore. People start to demand higher pay out. Caby is a smart man, he starts explaining how the system work. That if higher payout is made, less people will get paid. People agree. People still want higher pay out. 4, 8, 16, 32 ... very soon you start to see games like 3D, 4D, Magnum all over places. By now, the size is just too big that people cann't keep track of who play and who get paid. Caby is a smart man, he knows exactly how the money flow and start to get his share out of this whole business model. As long as there are people, this business model will continue and Caby is a rich smart man.
That is not the end, that is not even the main part of the story yet ... the story starts when there are some smart people among the players. They start calling this business model gambling and saying all the bad effects it can bring. Despite that it is a bad thing they say, they didn't say we should stop totally. They just say we should regulate it. Normally people would say, "Bad ! Don't do it !", what kind of people would ever say, "Bad, do it under my control, then its ok" ? - - - Yeap, Politician.
After regulation or in another word, under the umbrella of the protection of a country, this business model grows even bigger and sometimes its an international investment event around the globe.
Ok, now back to the good guys who say don't do it. Which is also the juice in this story. Caby is a smart man. He said to these anti-gambling guys, "what if I pay out according to who need it most?" Good guys ponder a little bit but after a long haul of exactly what need is and how to determine who need it first etc. They settle in. Now the business model has changed and become ...
You pay $1 a day, 365 days a year and should you has the 'need' one day, you will get $100,000 ! Different group of good guys have different needs so many different kind of variation of games are put in place. Some said the need is 'when I lost my income', others may say 'when I die, pay my family please'.
It turns out Caby is smarter than he think he is. Now he has one business model for all the greedy illogical guys and another model for the good guys. Both type of people think they are well taken care off. As long as there are people, no matter if all of them turns saints or evil, Caby is a rich baster !
Its the most long lasting business models ever built ...
Wednesday, March 18, 2009
Insurance, Good or Bad ?
The most confusing financial vehicle in this blog is probably the Insurane element.
but then later I explain Insurance plays a 'supporting' role in protecting the goals you want to achieve or already achieved in life. ( read here )
Sometimes insurance was cursed here, sometimes this blog says you must have it ... Sometimes I say Don't Buy IT ! Then follow by Yea, You Should Sell Insurance ... "what in the world is your REAL standpoint on insurace !?"
First of all, "Insurance" doesn't even make it to my wealth pyramid.
I also touch on the "return" of insurance by Comparison among Insurance, Fix Deposit and Mutual Fund. Since my proposed solution in Personal Finance is to have your very own portfolio, on the insurance part, I propose Buy Term Invest The Rest. to get the best out of all from above comparison. ( but not suitable for everybody )
I also highligh some of the pit-falls in today's insurance industry
2. But then sometimes it is possible ( case 3 ) with a twist in it
and the solution is to invest monthly instead of yearly
(but not for traditional insurance)
Then confusion starts when I put up quite a funny article basically saying, "Want to settle your bad debt ? Sell Insurance !". When someone are in doubt, I even re-assure them with small talk.
So to sum all above up and hopefully can clearify somethings ...
Buy Insurance for Protection - Good !
Buy Insurance for Return - Bad !
Sell Insurance to earn Income - Good !
Don't forget I mentioned before Income is NOT a part of Personal Finance Plan. So if you have faith in that, you wouldn't have this kind of confusion. Buying insurance is a part of your finance plan, Selling it, is NOT ! It doesn't matter what the source of your income is, your life plan stay the same.
So recommending you to sell insurance has nothing to do with recommendation to buy. Different rules apply in Income topics. You need to be smart and hard working in generating income. In personal finance, its ok to be dump and lazy when its done the right way - the simple way too.
You may also want to check out other related articles
Thursday, March 12, 2009
Get Out Of Bad Debt
I briefly touched on how to reduce bad debt in a case study about a middle income guy. And most of us are the Average Joe, so no doubt the questions of How to Get Out Of Debt persist. Furthermore, there is a book saying that 21st century is all about Debt.
Ok, lets start with the boring, "You shouldn't have got into bad debt at the first place !"
Sorry but Honestly, personal bad debt is a pure mistake on greed and ignorance. Bad debt is not a personal finance problem. Its the opposite of personal finance. As mentioned before, the only thing you MUST do in Personal Finance is to setup an automated saving system right after your income. Bad debt is the reverse ! By using up more than your income even before the income comes in.
That would be the FIRST thing one must understand, realize and FEEL it ! Else it is not going to be any helps in reducing bad debt. It will just come back again and again.
Secondly ofcourse we can blame it on the education we received. Off the 12 long years of FREE and compulsory education, we didn't learn a single thing about bad debt, not to mention automated saving. Although its not a personal finance problem, it is a global trend and it becomes a national problem where it affects our daily social life. Crimes rate increase. You lose job, I die.
Ok, now that we take responsibility of the problem and we get someone to share the burden, we can now look at it face to face.
The problem originates from Income, so the real solution is within income as well. But before that, lets review some of the common advices :
1. categorize debt by different interest rates
12-18% Credit Card or Ah Long debt4-8% Car Loan ( car's actual rate is 1.9x of published rate )5-7% House Loan
2. work on the highest interest rates category first
including transfer all the high interest rate loan to lower rate like using house loan to pay for credit card debt
3. within the same category, pay off the smallest amount first !
4. call up banks and ask for waiver or reduction
other than that, there are some uncommon methods and services offered by private agency. Basically they work around these methods:
1. Pay a little more monthly, cut down total number of years to save on total sum
2. Instead of paying 18% to credit card, borrow from them and you pay only 16% etc.
3. Changing interest calculation method from daily rest to monthly rest etc.
It is possible to have some businesses out there sincerely come up with plans to help people reduce debt. Afterall, the ultimate benchmark for world best stock investors is only 15%. So it makes more sense to run a Ah Long business than starting a company like Warren Buffect's BERKSHIRE HATHAWAY
However there are more businesses out there taking opportunity out of these ignorant debtors and further exploit them to the limit by squeezing every penny out. So my advice is approach these agencies with care, only work with those who can provide you clear figures / numbers how the system works and then you send the figures to me for verification.
Most countries have also setup proper agency to provide similar helps like above private ones. That is a must know for poor debtors. In zzzz, you must go to AKPK personally and ask them to help you face to face.
Ok, lets get back to this blog. Just a reminder that all above are the common methods debt adviser would have shared with you. They are effective ... to contain the problem, not really solving it. This blog stresses that personal bad debt is NOT a personal finance problem. Its problem is from income and the solution is to work on income.
So what you really need is to focus on Getting More Income to pay off the debt.
No one can go back and change a BAD beginning
but everyone CAN create a successful ending !
And you bet double the effort is needed to correct a small mistake.
Some may curse by now what a stupid recommendation.
"If I could earn more money, I wouldn't be in this debt at the first place !!"
Well, thats why and how this article is written. You must first admit and take resposbility for your own mistake, then you can also blame someone for it and now you should face it to solve it yourself. Including thinking positively how every single suggestion comes in, despite how stupid some of them may sound.
Fortunately, there are proven methods on how to increase income to solve debt. All you need is as mentioned above, expect double extra effort to come.
Statistically 3-5% of people who started a business end with great finance success. The unique difference in this 3-5% of people is their smartness and ability to adapt to changes. Lets face it, how smart we are is something imprinted within us. Its not something we can change overnight. By the time we are as smart as we should be, debt rate has already compounded to sky level. Afterall, if we have the smartness in us, we wouldn't have reach this bad debt situation anyway, would we ?
On the other hand, people who 'join' a human network business has 20-30% success rate. Off the other 70% who didn't make it even though they are in the same human network business as those who make it, is because they didn't spend enough effort on it.
A Human network business that you can 'join' includes multi level marketing, insurance and mutual fund agents.
If you are serious about solving your bad debt which you admit was a mistake on your part. Then you better focus on increasing your income. And if you don't know how to increase income on your own. You better temporary forget about all your preception on MLM and insurance agents. Join them and really spend a good amount of effort on it for 2-3 years. I guarantee you will solve your current debt problems.
Forget about morale, forget the right thing to do, forget about helping others, you have to even forget about finance planning as a matter of fact. Your focus should be on solving your debt and you are just 'working' toward it. You don't have to 'like' your work in this case as long as it can get you off this bad debt which is killing you. You probably don't like your current job anyway. And since you are already in bad debt, you probably been brain wash by some incorrect ideas. So what's wrong being brain wash by this MLM and insurance ? While your brain is already filled with get into bad debt procedures.
After all, both income and bad debt is NOT a part of personal finance planning. One is the pre-requsite and another is the oppositive.
Among the 3 choices above, insurance is the safest and best choice if you don't know which to pick.
Although MLM is perfect in concept but in practical world, MLM is still new and there are still a lot of bad apples in MLM industry. Since insurance industry is older and better regulated, there are really no BAD insurance companies out there, there are only less good choices. Mutual fund is more toward finance planning or investment ideas, immediate and short term reward on mutual fund sales are less encouraging. So to sum all up, insurance industry is the most suitable human network business for people to join to reduce their debt.
Take an example to solve a $20,000 bad debt. You probably need to make a total sales of $60,000. Assuming each sale is $2,000 then you will need to make 30 sales. In order to make 30 sales, you may need to make 150 attempts. Assuming each attemp needs 4 follow ups, then you need to prepare for 600 sessions of work. Assuming each session is 2 hours, you will need to spend 1,200 hours in order to solve your $20,000 debt. Now, if you spend 3 hours a day, 7 days a week, your debt can be settled slightly after a year.
If above example is not acceptable, then you will need to have the smart in you to entrepreneur about how to get the extra income you need. But just to beware, the 'smart' you think you have in you may be is the 'smart' that gets you into bad debt at the first place. Just beware ... but don't let any wild imagination stop you when pursuing income.
Lastly, if you setup an automated saving system, then you are more likely to solve your bad debt problem too. Exactly why would probably require another long topic on human psychology. But in short, setting up such a saving system implies you already solve the 2 most original fault in bad debt, greed and ignorance.
Good luck all, I know this is a tough topic and not many people will agree but nevertheless its already proven solving many bad debts again and again. Although these people never come back and help me propagate the right finance planning ideas, but they did get their debts solved.
Friday, February 27, 2009
Why do Rich People commit suicide during recession?
This is one of the articles publised in our latest FREE ebook ( eMoney Tips Apr 2009 edition). Click here to download now ! There are many more interesting articles in there.
old note :
Just want to leave comment ? click here !
Allow me to start by expressing my sincere condolences to …
Adolf Merckle (March 18, 1934 – January 5, 2009) was a businessman, and one of the richest people in Germany.[1] He was educated as a lawyer but spent most of his time investing. He lived in
Patrick Rocca seemed to have it all. A poster boy for
Outside
René-Thierry Magon de la Villehuchet, also known as Thierry de la Villehuchet for short (born in Saint-Malo, France in 1943, died in New York City, New York USA 23 December 2008) was a French nobleman, money manager and businessman, and one of the founders of Access International Advisors (AIA Group). The AIA Group is a research analyst investment agency that specializes in managing hedged and structured investment portfolios that involve commercial physical and biological research.[1][2] On 23 December 2008, de la Villehuchet reportedly committed suicide.[3] He was found dead in his company office on Madison Avenue in New York City.[4] His left wrist was slit[5] and de la Villehuchet had taken sleeping pills, in what appeared to be suicide.
The list just goes on and on …
Don’t get me wrong, it is not like ALL rich men go kill themselves when things go wrong. People who lost their life during this Great Depression are mostly NOT rich people actually. Neither is there any disrespect to these people here. These souls were all once great men and some were even indirect great mentor to me personally. It takes a very special and strong characteristic for a person to reach this big, this rich and this successful in life! A very strong driving force indeed. Unfortunately, sometimes this same characteristic drives them over the edge also.
Of course each of them would have a very personal reason for what they did and the absolute truth is that we will NEVER know what really happen! However, knowing some of them personally and even served some of them before, they probably won’t mind if these of their recent LAST stories can be used to instill some good for the rest of us.
Some people would say the cause is Greed. Some would say just a bad day, One Big Bad Turn. Some surviving financial experts even blame the deceases with all kind of cursing words. However, the most neutral comments come from psychologists who study human and society behavior and most of them said, “A block in mind that is stronger than all other beliefs at that particular moment”. There are many possibilities for the ‘block’. It could due to pride, lost of confidence or many others. But the fundamental is THEY THINK They Lost More Than They Could Afford in whatever they care most !
Well, whether they think wrongly or they really lost that much or they lost what they care most …
… that is all due to Lack of a Personal Finance Plan!
One may have great passion, great forecast and great business plan which include one of the world’s best financial plans for what they do best, but unfortunately NOT a PERSONAL one. As a matter of fact, most of their decisions were correct and that was how it got them to where they were – a large empire! Sometimes in business it takes guts to overcome risks. And every cycle in a business major decisions making may mark a new era or fall flat on their faces to start all over. Like a rolling snow ball. It gets bigger and bigger rolling downhill but it only takes one small valley to slow it down or sometimes completely shatter it.
Take a step back, it is actually NOT fair to claim they DO NOT have personal finance plans at all. They do have insurances and investments, what more could they possibly should have had? Sometimes it’s the little difference that makes a big impact.
Its due to Lack of a REAL SOLID Personal Finance Plan !
Income shouldn’t matter in your personal life long plan because they changes and may change out of your control! If you follow the model shown below, income is NOT a part of personal finance plan. Income is a pre-requisite but it is not a PART IN your personal finance plan. So no matter how much or how little income you are earning now, you can practice personal finance planning and you should. The first step to start is to setup an automated way to save your income, either in percentage or a fix amount depends on how consistent and the type of your income. ( read more in forexguidehowto.blogspot.com ). So no matter how much you are earning, if you do not have this first step setup, you are most likely NOT have a REAL SOLID Personal Finance Plan yet even if you have bought insurance, mutual funds, stocks and properties.
So if you are still responding, “I could have easily earned more in my business/investment” when someone is “selling” you personal finance vehicle, you are most probably do not have a REAL SOLID ground at a PERSONAL level yet. You are still focusing too much on Income and not your life long plan.
If you are still comparing and deciding whether to buy a property or mutual fund, gold or insurance etc. You may still not able to distinguish the difference between income and personal finance plan.
If you still think multi-millionaire is your main target now and thinking hard all sort of ways to get rich without setting up the First Step mentioned above, you are still missing one big point in your life. One that may save your life and retain the happiness of the people who love you … ONE day !
So go now to setup a standing instruction transferring part of your income into another account that you have limited withdrawal capability. Then forget about it most of the time in any particular year.
The 65-year-old Frenchman, an aristocrat and professional investor, was deeply shamed and depressed, friends and family said. He felt he had ruined the lives of his clients, many of whom were friends. His brother, Bertrand, called his brother's suicide an honorable act. "At first he thought he'd be able to get the money back," Bertrand said in a
old note :
This is an article written and will be published in a FREE ebook in the making in respond to kclau .... once the ebook is released or my submission is rejected, the content of this article will be released in this post. Stay tune .... while enjoying the other contents.
Thank you for your time !
Wednesday, February 18, 2009
Best Income Range for Income Tax planning
Income tax act mentions that Income Tax Rates For Resident Individuals (personal income tax ) With Effect from Year of Assessment 2002 is as follow
So income tax calculation is as simple as determining your chargable income after minusing all the income tax deduction you are eligible for.
The blue graph shows the effective tax rate you pay based on your chargable income on X axis.
| Chargeable Income | RM | Rate | Tax (RM) |
| On the first | 2,500 | 0% | 0 |
| On the next | 2,500 | 1% | 25 |
| On the first | 5,000 | - | 25 |
| On the next | 15,000 | 3% | 450 |
| On the first | 20,000 | - | 475 |
| On the next | 15,000 | 7% | 1,050 |
| On the first | 35,000 | - | 1,525 |
| On the next | 15,000 | 13% | 1,950 |
| On the first | 50,000 | - | 3,475 |
| On the next | 20,000 | 19% | 3,800 |
| On the first | 70,000 | - | 7,275 |
| On the next | 30,000 | 24% | 7,200 |
| On the first | 100,000 | - | 14,475 |
| On the next | 50,000 | 27% | 13,500 |
| On the first | 150,000 | - | 27,975 |
| On the next | 100,000 | 27% | 27,000 |
| On the first | 250,000 | - | 54,975 |
| Exceeding | 250,000 | 28% | - |
After calculating the actual paying tax verse your chargable income, you can find out the actual effective income tax rate you are paying. Below show a list of effective tax rate
| income | tax | effective rate |
| 2500 | 0 | 0.00% |
| 5000 | 25 | 0.50% |
| 7500 | 100 | 1.33% |
| 10000 | 175 | 1.75% |
| 12500 | 250 | 2.00% |
| 15000 | 325 | 2.17% |
| 17500 | 400 | 2.29% |
| 20000 | 475 | 2.38% |
| 22500 | 650 | 2.89% |
| 25000 | 825 | 3.30% |
| 27500 | 1000 | 3.64% |
| 30000 | 1175 | 3.92% |
| 32500 | 1350 | 4.15% |
| 35000 | 1525 | 4.36% |
| 37500 | 1850 | 4.93% |
| 40000 | 2175 | 5.44% |
| 42500 | 2500 | 5.88% |
| 45000 | 2825 | 6.28% |
| 47500 | 3150 | 6.63% |
| 50000 | 3475 | 6.95% |
| 52500 | 3950 | 7.52% |
| 55000 | 4425 | 8.05% |
| 57500 | 4900 | 8.52% |
The obvious fact is that the more your chargable income is, the more tax you pay.
However, there is a small 'gap jump' due to the way the tax rate is implemented, so called step rate.
The blue graph shows the effective tax rate you pay based on your chargable income on X axis.The bar belows shows the differences between 2 effective tax rate, or so call the increase gap.
Basically it means if your chargable income suddenly go above certain range, your effective paying rate will S U D D E N L Y increase more than usual as shown in the pink bar above. Namely everytime when it goes beyond the step income, ie. RM 5,000 RM 20,000 RM 35,000 etc. However this gap increase becomes less significant when it goes beyond RM 35,000.
If you look carefully at the effective income tax rate graph, you may observe it has a curve pattern like below.
This curve confirms that the B E G I N I N G of the curve has a S T E E P E R rate than the E N D of the curve.
So the B E S T income for your income tax planning is when your chargable income is close to but not exceed
RM 5,000
RM 20,000
RM 35,000 etc.
The W O R S T income is when you go slightly beyond;
RM 5,000
RM 20,000
RM 35,000 etc.
So when you are in the worst category, perhaps you can buy more books or donate some money ?
Sunday, February 8, 2009
MUST DO in your Personal Finance
A lot of specific personal finance topics have been covered recently but NONE of those are absolute truth hard cast in stone. As a matter of fact, ALL those are merely some methods you may consider adopting only after you have done the NUMBER 1 and ONLY thing you Should Have DONE in Personal Finance - Automatic Saving.
The Number 1 thing you HAVE TO do and MUST do is to setup an automatic system saving a portion of your income into a seperate account.
Any money you receive is an income, no matter active or passive; no matter if you work for it or not. You should even treat pocket money like Ang Pao as an income, housewife should keep some household expense aside for personal finance purpose etc. as describe in an old post. Review the early post about income here and a controversial discussion about income with reference to Rich Dad Poor Dad.
This is not a normal personal finance post asking you to save first and use later. The focus is on Automatic Saving System and This is the CRITICAL turning point whether you will make it or NOT !
Understanding this concept doesn't count, excusing you don't have a job now also doesn't count. You are already saving some money in some mutual funds manually or you are already buying golds also doesn't count. Nothing else count unless you already have it setup.
Finance consultants who are still asking you to make finance goals, asking you to be more discipline etc. all are less important from praticality perspective. Because history has proven all those people are still failing to become finance independant despite all the goals they set and discipline they tried to improve.
On the other hand, people who started without any goals nor any discipline, do not understand mutual fund, property, gold nor stocks investment; but setup such an automated saving system immediately increasing their chance to reach finance independance by 80% !!
Wednesday, January 14, 2009
The Rich, Poor and The Average
Everybody talks about getting Rich. Most often people just categorize between the Rich and the Poor. Sometimes if we hear too much of it, we may forget the majority are actually the Average.
The gap between the Rich and Poor is also getting wider and bigger. That is because more and more people become the Average everyday.
The Poors think they have no money and therefore do not need Financial Planning.
The Richs think they do not need to worry about Finance right now.
So most of the people who believe in and are actively practising Financial Planning are the Average !
The Averages and the Poors are usually easier to define as they are closely relate to each other. The Rich however is a bit tough because the 'richness' gap among themselves are huge !
Lets try look at this from the income point of view in this writting. In zzzz and in MYR$ units, a Rich guy would probably earn more than $20,000 a month, an Average guy earns from $2,000 to $6,000 and a Poor guy earns below taxable income and usually below $800.
And below shows some stereotype figures of total monthly usage from them.
Since there are more people among the Average perform Financial Planning, not many of the Average would drop back to the Poor, a few even make it to the Rich. And some of the Rich did not manage their wealth properly and often drop to the Average within a short period of time, if not straight to the Poor sometimes.
It is easier for the Rich to drop back to Average than the Average to drop to Poor.
More Poors become Average than Average become Rich.
Eventually the Average gap grows wider and bigger.
People usually move from one range to another by increasing or decreasing Income. Those are the ones who may be upgraded or downgrade again once their income changes. But if you change 'group' not by changing your income but by a good finance plan, you will most probably never be downgraded anymore.
No matter which group you are in, as long as you have a solid finance plan, you can achieve finance independant within your own life style.
So achieving Finance Independance is not to become Rich, its simply by identifying your own life style and come up with a solid finance plan to support it Forever.
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