Widget : How Much Tax Can I Save ?

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 !!

This is a FREE widget provided at http://howMuchTaxCanIsave.co.cc/

zzzz Best Rates 2011 July 25 Update

Fix Deposit

Affin Bank still offers the highest 3.6% for 12 months. 3.1% to 3.35% is common with all other banks. 1 month FD is mostly at 3% to 3.05%. Most of the foreign banks continue to offer lower FD rates.

Base Lending Rate

Most banks offers 6.6% now except JP Morgan Chase offers the lowest at 6.2%.

Saving Accounts

The Bank of Nova Scotia offers 2.05% while Bangkok Bank and Bank of Tokyo offers 2%

CIMB Air Asia Saver Account offers 1.6%

Don't forget you can get a simple widget

like above to show on your blog / web site.

Just visit here to see how.

Car Loan

Maybank continues to offer the lowest car loan rate starting from 2.7%. However, this is NOT a standard rate apply to all applicants. The actual rate can range up to 4.3%. Alliance bank on the other hand offers 2.8% to 3% which may be a better deal in general sense.

Bank Muamalat offers 2.85% for both New and Used cars but it requires an admin charges of RM600.

CIMB offers 3.25% for used cars.

Don't forget Car Loan rate is Fix Term Rate

which is effectively a MUCH HIGHER

than variable term rate

like House Loan and Fix Deposit.

House Loan

There are too many factors in considering a good house loan, so we don't think its fair to simply summarize them here.

Our advice is to source for at least 3 offers, preferably a mix of local and foreign banks.

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:

1. you don't need much during retirement, coz your liability has reduced
2. living frugal is not hard, mentality is the key
3. you don't need to prepare to retire ?

By the time you retire, you probably don't have any more house loan or car loan to serve. Your body does not allow you to earn that much anymore. Chicks don't get attracted even if you sit in a Porsche. The bigger house you live in the harder it is for you to take care of it. In short, many people plan to 'maintain' their CURRENT lifestyle when they play for their retirement. The fact is you WILL NOT live the SAME lifestyle even if you are financially able to.

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 ?

There is NO such thing as Passive Income !?

21st century personal finance is moving away from saving and focus into the income arena. In short, the gurus are now educating public that saving is NOT good enough, hence sourcing for passive incomes on the another hand is a BETTER solution, than just saving alone.

While the concept is definitely true and correct but unfortunately as the hypes go bigger and bigger, the idea of passive income has been abused and more scams started to appear in the market, as if they were the gurus as well. Except the 'passive income' they refer to is barely promoting their own original same old products. The personal finance market has become so competitive that even some real gurus have no choice but to go beyond the line in their marketing effort - Robert Kiyosaki is no exception in spreading "Saving is bad".

Although passive income is very well defined here using income ratio 1:100 but is there really such thing as Passive income ? When I looked up dictionary, these words come up

PASSIVE : not participating, inactive, not reacting, inert or quiescent.

None of these words correctly describe a well implemented passive income. I use my best judgement to find a good location, a value property and a pay master tenant. I setup a profit take target and an exit strategy in my investments before I leave and let them auto pilot. All of these are very participating, actively applying my knowledge and experience, reacting appropriately when necessary etc.

The word "Passive" also gives people a psychology of No Need To Do Anything; As if an easy to get rich scheme with a better cover.

Hence this article wants to pursue all readers to stay away from the term Passive Income. Its negative, misleading and now abusive by the over-stress marketing effect. Instead, think of Smart Income !

There is no hard and fast rules for Smart Income. Any income can be earned the regular way or the Smart way !

An employee can use minimum of his time effectively to earn the highest salary or benefits. A self employ can easily leverage on Internet to earn income repeatedly. A business owner can employ a system to run his business. An investor can setup an autopilot mechanism.

So no matter which income quadrant you are in, it is possible for you to turn that income into a smart one. Its a matter of HOW you earn your income, NOT WHAT you do.

Are you pursuing smart income ?

Should I buy that nice little dress/gadget ?

You may think the $1 spent is the same $1 earned. Its really NOT ! One of the fundamental flaws human cannot control their own spending habits is because they DO NOT UNDERSTAND the value of money at the first place. The $1 spent could be equivalent to as much as $7-$10 earning !!

For example if you earn $4,000 a month and you manage to save $400 every month. By year end you would have saved aside $4,800. This money is intended to be put aside earning interest as part of the MeM (Money earns Money) mechanism. So its not just $4,800. It will be more than that as time goes. The longer it is kept there the more powerful compounding factor is working for you.

Says you take out $1,000 from this saving at year end for an unplanned luxury expense. Its not just $1,000 you have used. You have actually dug a hole in your saving - a 21% hole. If you saving return is 3%, it will take more than 7 years for this hole to be refilled back to its original amount. So you have practically used up your future 7 years on this saving for this unplanned expense.

On the other hand, if it took you 2.5 months to save that $1,000; Out of your equivalent earning of $10,000. For every $1 you use from your saving, you will have to earn $10 to get that $1 back. So when you use that $1,000 its not just $1,000 you have to replace but actually a $10,000 worth of your earning.

Does this particular unplanned luxury expense really worth your future 7 years and/or your $10,000 earning power ?

They money you get in ( earn ) does not necessary carry the same meaning to you as the ones you get out ( use ). Especially when there are so many deductions and taxes in this modern world.

It is best to put aside another $100 saving every month for 'unplanned luxury expense' category. That way if you really have to use it, you will still have $200 left ( after a year of saving ). More if somehow you are able to put that aside and go for a better future good.

If you have no such ability for this new saving category, try to increase your income or else settle with NOT use beyond your means.

At the end, this is the ONLY concept that determine if a person is an investor or a consumer all his life. Everyone want to buy Porsche and LV bags, some did it diligently, some others cost in their lives.

Economy Politic Finance Quadrant

There are 2 BIG main external factors affecting our investment decisions

• Economy
• Politic

When the time is really bad (economy downturn and politically unstable), its best to park your money under something that is really stable, ie Gold. Which is by definition usable anywhere you go in anytime.

When its good time, invest direct to the stock market would yield very good return.

When the economy is not so good in a strong country, the government bonds or related money market would be able to yield higher return than just gold.

However, the most dispute solution in good economy unstable country is investment in property. This is mainly due to easier rental and higher chance of capital gain.

By simply moving money around depends on the political and economy situation, one was able to achieve more than 12% compound return for the past 20 years. That is equivalent to a 10X return.

But by no mean this is easily done. Some of the concerns include;

• how would one know exactly when economy/politic turns good/bad ?
• is Gold the ONLY option ?
• property may not easily liquidated
• how to choose which property or stock market ?

. . . which can be explored further.

Medium Income Retire Successfully

Gabriel Pang is 68 years old.  He is one of my most favorite personal finance friends.  As much as I am helping with his personal finance, I learn much more from his experience.

He started earning his first $100 at age 12.  That was $100 for the whole year washing cars for neighbours.  At that time he saved all his $100.  At age 16, he got a part time job earning $1,800 that year.  He saved $1,440 that year.  Later he could save less when he went to college.  For example, at age 20 he earned $1,100 but save only $550.

He got a proper job at age 23 earning $29,700 that year.  He managed to save $8.019 that year, about 30% of his income.  Then when he got married, he can only save 20% instead of 30%.

He started his own business at age 28.  At that year, his salary was $87,600 and side income $12,000.  He managed to save $12,312 that year.  Finally he quited his job at age 31 and worked full time on his own.  His total earning is less than his old salary but he also pay less tax so he ended up with similar NET income.

One thing he does consistently is his saving range from 5% to 30% of his income.  According to his past historical results, his saving has been giving him 5% to 12% return yearly.

At age 42, he retired.  But after resting for 3 years, some opportunities showed up and he earned another $30,000 to $80,000 incidentally a couple of times.  Then he retired for good at age 53.  He finished paying all his loan at age 58.

His last year expenses is $53,915, taken out from his $555,105 saving.

Below is his cash flow chart.  It may be a bit confusing but basically it shows his total income, the taxes and loan he has been paying and a cumulative saving with return.  Top part purple color is the one when he made a lost in his own business or when he retired, then he needs to withdraw money out from his saving in order to survive which happened at age 36, 39 for business lost and then since age 42 for retirement.

Some of the high lights of his life are shown in chart below.

It seems like curently he has half a million saving for his retirement.  His personal inflation for the past 20 over years average is 3% and also for the past 20 years his saving has been giving him an average of 12% return consistently.  So using these 2 figures, I helped him projected that he can live on his saving until he is 98 years old.

This calculation excludes the EPF he didn't take out at age 55 which he has left there by itself.  He stopped contributing to EPF at age 30 with about $50,000 insdie.  Right now there are about $928,849 in there.

(correction 25 March 2009 : $50k was his own contribution only, total balance at age 30 was $115,823.11)

So he can safely enjoy his retirement as the way he has been for the last 20 years.

He only worked for less than 10 years and his own business only lasts 13 years with some years making losts.  His average annual income is about $50,000.  

What has he done that he can retire the way he wanted so easily ?

( part 1, part 2 ,part 3)

Over Obsess Cost Optimizing ... KFC example

Today the line in KFC is longer than usual. I got bored and started analyzing the menu.



click here to view the spreedsheet

So the unit price gets lower the more quantity you buy. And the rate of getting cheaper is quite consistent. Which is good unlike Pizza Hut and Burger King.

The queue was still long, so I had to dig further ...



There you go ! Although the rate of unit price cut is quite steady, but there is a small dip when purchase 5 pieces of chicken !

Now its the tricky part, what does this mean and what can I do about it ?

I think what it is, is that if you were indecisive between 4 to 7 pieces, then its best to get 5 pieces.

Great ! I was just thinking 3 pieces were too few.

So I ended up buying 5 pieces, as analyzed.

Actually the queue wasn't that long, the whole order process was only 5 minutes. But then they don't have change for $50 and it took another 8 minutes for them to get the right change. So much about fast food huh ? They never promised fast change.

Anyway, it ended up only 4 pieces were consumed. The last piece turned out to be my late night supper. And since we are not suppose to sleep 2 hours after meal, I blog about my obsess calculative experience with KFC .... :)

do you know that it is possible to take a bath in KFC dish washer ?

Blogged with the Flock Browser

Calculate your monthly tax deduction

Just in case some of you zzzzn do not know yet, you can go to this site to calculate how much your monthly tax deduction should be.

In the old time, good employer may help you by assuming maximum deduction so that you pay less monthly tax and then at year end you yourself pay the due amount.

However, in the new system, employers are required to assume basic deduction only while others not. So most of you may ended up paying more tax monthly.

What you need to do is to go to this site and calculate for yourself how much tax you should pay monthly. Print it out and show it to your employer to adjust the figure.

This basically means if you want to pay less tax, you need to plan early and meet the targets of what you plan ie.

RM 5,000 Take responsibility and proactiveness in your parent's health

RM 5,000 Take a MBA course etc. Deduct educational fee from it ( for kids originally )

RM 1,000 Learn more, buy more books

RM 3,000 Buy a new computer every 3 years

RM 300 Sport gears

RM 3,000 Save for kids education in SSPN

RM 3,000 Your own medical insurance

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. 

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 Germany with his wife and four children. Merckle made a speculative investment based on his belief that Volkswagen shares would fall, when, in October 2008, a support of Volkswagen by Porsche SE sent shares on the Xetra dax from €210.85 to over €900 in less than two days, resulting in losses estimated in the hundreds of millions of dollars for Merckle. Adolf Merckle committed suicide on January 5, 2009 by throwing himself in front of a train near his hometown of Blaubeuren

Patrick Rocca seemed to have it all. A poster boy for Ireland’s Celtic tiger economy, he lent Bill Clinton his helicopter whenever he was in Ireland for a round of golf and rubbed shoulders with Tony Blair at gala dinners. Mr Rocca, 41, died from a single gunshot to his head at the family home in Holmeleigh, an exclusive residential enclave on the edge of Dublin’s Castleknock Golf and Country Club. His end was as swift and dramatic as the reversal of fortunes for some Irish banks, including Anglo Irish, which the Government is nationalizing and in which Mr Rocca was said to be heavily invested. He waited until his wife took their children to school before he shot himself in the head.

Outside Chicago, real estate mogul Steven L. Good was found dead in his Jaguar, apparently from a self-inflicted gunshot wound. Good was the chairman and chief executive officer of Sheldon Good & Co., a major U.S. real estate auction company. The death comes amid great turmoil in the country's real estate industry. In his role as chairman of the Realtors Commercial Alliance Committee, Good commented on tough conditions last month at a business conference.

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.

Livermore told anyone who'd listen to follow his Wall Street strategy -- increase your position as the market moves in your direction, and quickly cut your losses. But he often failed to heed his own advice. He lost two fortunes, accumulated a third, and lost that, too. In 1940, in the bar of the Sherry-Netherland Hotel in New York City, he shot himself to death, leaving $365,000 in debts and a rambling, 8-page suicide note to his second wife. "I am a failure. I am a failure. I am a failure," it said.

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 Paris phone interview with The Associated Press after his brother's death. "Gradually he realized he wouldn't be able to. He trusted Madoff completely."

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 !

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.

click the image below to review what needs to be done

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% !!

emphasize on Automated Saving again

Some of you who has been reading my blog may have seen this picture below many times.

Basically this diagram is almost all about what I preach about in personal finance.

The first thing to do is not to buy insurance nor any investment plans.  The first thing to do is to transfer money from your income into a "Money earn Money" (MeM) acount.

It should have a few unique qualifying features:

1.  It always have a positive interest, no matter how low it gets.

2.  has limited convinience to withdraw money out from this MeM acount.

So it could even be just a normal saving account with low interest.

The 'flow' from Income to MeM should be Automated.  Once setup, you should forget about this MeM account too.  That way this MeM is really passive, definitely accumulating and safe from weak EQ withdrawal.

Buy Term Invest The Rest

In one of the old post I shared how to best use of your money among insurance, fix deposit and mutual fund ( click to see old post).

Basically it says if bad thing happens within the first 5 years, insurance is the better choice because you get $100,000+ while your FD/Mutual Fund saving is only starting to accumulate at $10,000+. However for the next 10-20 years FD and mutual fund are clearly better choices because they are more flexible and provides better returns, $300,000 and $600,000 respectively.

So the answer is to build your own portfolio !

I went back to insurance company P and asked for a Term Insurance quotation for $100,000 which costs only $313 a year for 5 years. So I minus out $313 from my yearly saving $17,920. On year 1-5, I would only save $17,607. And because I am greedy so I pick mutual fund over Fix Deposit as my saving vehicle.

Wa lah ! If I die within the first 5 years, I will get more than $100,000 which is slightly more than the insurance plan earlier - actual amount would be $ 119,016 even for the 1st year where $100,000 paid out by the Term Insurance, and the rest is from my own saving.

If I survive through the 10-20 years period, I will still have all my saving plus its earned interest !!

Best of BOTH WORLD !! Isn't it ?

This is called

Buy Term Invest The Rest