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Book Review - TOP MONY TIPS FOR MALAYSIANS
Author : KC Lau
Publisher : True Wealth Sdn Bhd
Published Date : August 2010
Edition : Second Edition
Section 1 Smart Money Tips
What is the definition of rich. Each person had its own definition of rich. Some says I have net work of 500 thousand dollar I am consider rich while other considering net worth of 1 billion to consider rich. Section 1 explained that Net Worth = Total Assets – Liabilities and show the net worth against age chart for three different type of people: financial idiot (person who have no saving), financial disciplined (person who save) and financial genius (person who invested their saving). Most people are in financial disciplined state, which is negative net worth at the beginning of career these is because whatever they save are use to pay the study loan. As getting older, they manage to climb up the corporate ladder, hence the net worth will be start accumulating and increasing. When retired at age 60 there are no more income hence the net wealth will start decreasing until their is no net worth anymore. However if someone want to be rich and have their money grow even they have no active income (retired) they must be in financial genius category. They must sets aside a certain amount of money to invest and hence their wealth can grow exponentially. Financial genius able to live their lifestyle after retirement as if they are not retire because their investment is able to provided passive income more than or equal to their last salary. Besides that, we also must know what is our time is worth. Our hourly rate can be estimated using these simple formula :- Horly Rate = Annual Salary / 1000 / 2. We shall not do everything by our self because we want to save money because the time we spent might worth more money than the expenses we spent to outsource our work to an expert. We can use the time to do stuffs that able to earn us more money. By knowing what is the time worth, a person can decided whether want to outsource the work or Do it yourself (DIY). Sometimes we have to lets the task for specialists which able to complete the task in short period of time compared to do it our self which might take 2 or even 3 times longer. The time spent for the task is not worth the money we save.
Many people nowadays become the slave for debts either home mortgages, credit card debts or student loans. We shall learnt how to let debt and compounded interest working for us and not becoming slave of the debt. It is importance to keep track with all the expenses to prevent us from overspent. With today technologies people today able to track expenses easily. Lastly, it shows the investor how to estimate their future investment revenue using the Rule of 72. With these rule of 72 a person can roughly estimate how much shall set aside from the pay check (pay yourself self) for investment to become financial genius category.
Section 2 Money-Making Tips
People go to office everyday to make money, businessman do business everyday because of money. everyone in these world work because we have money as a motivation. Without money we would rather stay at home and sleep everyday. Imagine we can make money works for us when we are sleeping or going on vacation, there are many website such as hubpages, ebay, and etc which allows us to earn passive income everyday. I beg everyone house had some items which does not used for months but refuse to be throw away because it had some value in it. If we can use the value to trade into money is it a good idea? We can sell the unused household to others people who might want to use it in our bedroom now day what we need is just an internet connection. When going shopping a credit card promoter trying to promote credit card to you, what you would do refuse to applying them, worrying going into big debt. Well don't worry you are not alone, most people afraid of credit card because afraid to dug them self into a big debts hole. By using credit card we are actually borrowed interest free loan from the bank provided we pay them before the due date. Credit card is also good for emergency purpose and save our trip to ATM. I believe everyone had a passion in them either music, investing, writing, drawing, sports etc, we shall start to use our passion to earn us some more money. Finally the author shares 38 essential rules to be learn before investing.
Section 3 Money-Saving Tips
As always pay yourself first, why shall we pay someone if we cannot afford to pay our self. What do pay yourself first mean? Always set aside a certain amount of money to save for investment from your pay check before any expenditure (you are advise to save 20% of your salary every months). You are able to open an account and auto debit to the another account for investment or auto debit to a mutual fund. How to save 20% of the salary, in these third section of the book it shares some greatest money saving tips that everyone can follows that reduce the monthly expense immediately. Imagines that we able to get our first car FREE by using the car insurance no claims discount. Besides that, we also able to get tax relief from the government annually for education purposes so make sure we make use of that. We can buy a book as gifts or rewards to our children instead of toys as by buying a book the government of Malaysia is giving us tax relief.
As for unit trust (mutual fund) investors, I believe some of your guys is buying balance fund. Balance fund is paying the most upfront cost compare to growth fund and fixed income fund. Instead of buying a balanced fund, we create our own balance fund by invest 50% in growth fund and 50 % in fixed income fund. By doing these we can save about 50% of the upfront cost.
As we always pay advance payment to our mortgage loan when we got extra fund. These is not a good ideas because mortgage loan usually has a low interest rate. We always able to use our extra fund to invest in other instrument to gain a profit more than the interest save on mortgage loan if we pay advance.
Section 4 Money- Protection Tips
What if one day, a person lost it capability of making more money (active income). Can his/her net worth still increase will maintaining their lifestyle. In this section, the author explains how we can protect money by buying insurance.
There are the two different type of insurance available in Malaysia, traditional insurance which guaranteed to increase to double of initial protection over 30 years and investment link insurance which we can choose the sum insured. Traditional insurance and investment link insurance had it own pros and cons. A person is allowed to switch between these two insurance policies. Finally, this book shows simple calculation on what is the effective annual rate (EAR) if we pay the insurance premium, monthly, quarterly, semi-annually or annually.