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Money Tips

Volume 1

How to Invest Profitably, Save More Money and

Retire Early in Malaysia, Even if You are in Heavy
Debt Now

by KCLau

The electronic version of this book can be downloaded free of

Feel free to republish excerpts from this book, as long as you
link back to for attribution. And its also okay
to share this ebook in its entirety with anyone you think might
be interested. In fact, Id be delighted.
The physical copy of this book can be ordered online through
my website.

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Published by KCLau Dot Com Sdn. Bhd.

Copyright 2015 by KCLau

All rights reserved.

Second Edition 26th November 2015

The strategies outlined in this book may not be suitable for
every individual, and are not guaranteed or warranted,
whether expressed or implied, to produce any particular
results. The advice, ideas and suggestions are written as
a general guide and specific professional advice may be
No warranty (whether expressed or implied) is made with
respect to the accuracy, adequacy, reliability, suitability,
applicability or completeness of the information contained
herein, and both the author and the publisher specifically
disclaim any responsibility or liability for any damages, lost
profits, losses or risks, whether personal or otherwise,
which is incurred as a consequence, whether directly or
indirectly, of the use and application of any contents of this

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A Note to the Reader

What you dont know about the Priority that can Hurt You?
Why Mortgage is the Cheapest Debt You Shouldnt Settle?
The Proper Sequence of Purchasing House and Car
The Shocking Truth about Smart Credit Card Users!
Is Life insurance Premium CHEAP?!
How to Make Extra Money While Keeping Your House
The Rich Peoples Secret to Make Tons of Money
The Tax Savings for Highly Knowledgeable People
How to Keep Score of your Financial Journey?
Paying Monthly Life Insurance Premium charge 10.80%
The 5 Common Types of Life Insurance Benefits Your
Agent Fail to Explain
How rich are you? Here is the Benchmark
Whats your real ASSET that Accountants get Confused?
Sum Assured = Level of Love
Sell + Fish = Selfish
How do You Feel Wealthy
Money Wont Make You Rich
Making You Rich Is Not a Financial Planners Responsibility
What does it take to SAVE money?
What Should You Look For in a Unit Trust Fund?
The Real ROI of Insurance
How Writing a Will Can Save You Lots of Money?
The Three Elements of Wealth Accumulation
Cash on Cash Return vs ROI
The Sleeping Partner Without Capital
Earning for the Past, Present and Future
Managing The Risk of Double Tragedy

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Child Protection: Setup Incentive Living Trust

The SECRETs of Investing in Unit Trust
Why You Should First Buy Investment-linked Insurance
Read This If You are still not Insured
How Should You Handle Traffic Offenses
How Much is Adequate for Emergency Fund
Question You Should Ask Before You Sign the Home Loan
Offer Letter
Simple Strategies to PAY YOURSELF FIRST
Do You Love Money?
Money or Beauty?
Dreaming about Financial Freedom
How to Settle Your Loans Earlier
Beware of the Lock-in Period of your Home Loan Offer
Time Is The Most Wanted Luxury
Personal Finance Should be Taught at Schools
Hacking your Cash Flow & Net Worth Chart
Money Patterns with Sound Advices

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A Note to the Reader

This book is a compilation of the articles and ideas Ive
published online, on my website, or on other peoples website,
newspaper, magazines or other types of publication.
You might have come across some of the ideas in this book.
The purpose of making this book is to give you the convenience
to access my writing in a more organized format.
Thats why Ive made the electronic version freely
downloadable. Meanwhile, the physical copy is only available to
be ordered through my website (, if you prefer
to read a REAL book.
Also for your convenience, Ive made the size of this book small
enough to fit into your mobile device screen, so that you dont
have to do excessive horizontal scrolling to read the pages.
I will be updating this book from time to time, since I am writing
new content on a regular basis. I really urge you to subscribe to
my e-mailing list in order not to miss out any future updates.

What you dont know about the Priority

that can Hurt You?
What do you think about these mathematical equations below?
Whats the major difference between these 2 similar equation?

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A. Income - Expenses = Saving

B. Income - Saving = Expenses
The answer is: what is the priority? spending or saving?
If your priority is to spend first, then only to save whats left, it is
most likely expenses>savings.
If your priority is to save first, then only spend whats left , it is
most likely savings>expenses.
Majority of wealthy people are the 2nd type. Saving and
investing is their priority!
If you find it difficult to delay your gratification, please engage
some system to help you, such as EPF, endowment insurance
plan or standing instruction on unit trust purchase. We can even
ask our mom to save for us.
Set your priority right and youll be on your way to financial

Why Mortgage is the Cheapest Debt You

Shouldnt Settle?
Cheapest means the lowest interest charged.
Bankers are willing to loan us money for buying houses
because that is the most secured collateral. Why bother to
settle the loan fast?
The interest rate is only BLR + / margin = 4% 5% (in 2013)

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I bought adequate life insurance to cover my liability ( including

mortgage). Thus, I never bother to settle the housing loan.
When I got extra money, or saving, I always invest it and make
sure that they generate more than 5% return per annum.
That means NOW we got the house, plus extra investment.
When I die, my wife will also get the house, my investment, and
the extra life insurance proceed. If I die young and fail to
achieve my financial goal, at least my wife can achieve her
financial freedom instantly!

The Proper Sequence of Purchasing House

and Car
Most young graduates hesitate whether to buy a new car first or
a house?
Lets see the pros and cons:

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You should buy the house first, then serve the installment for a
few years. After you build up more equity in the mortgage, you
can refinance the house to higher loan amount. The extra cash
you get at that time can be used to buy your dream car.
That way, you kill two birds with one stone. First, you save on
the interest because mortgage debt usually have the lowest
interest. Second, you delay the car purchase which will be a
long term liability anyway. At a later time, you would most
probably get a better models with the same amount of money.

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Just by doing this trick alone, you will be way ahead compared
to your peers who did the opposite - serving a car loan and
keep complaining about the high property price!

The Shocking Truth about Smart Credit

Card Users!
There are many advantages using credit card wherever,
whenever we can because:
1. Our expenses are properly recorded
2. The credit card statement can be used as proof of
payment when filing for income tax
3. Get rebate on our expenses
4. Emergencies: hospitalization, lack of cash when
traveling overseas.
5. The best advantage is that it increase our cash in hand.
Why do I say so?
Lets say your fix expenses is RM5000 per month. You use your
credit card to pay for all those fix expenses monthly. The due
date to pay back your credit charges is 20 days after the
statement date. Therefore, you can have the RM5000 put into
your own saving account to earn interest for 50 days.
Even better if you put the money in your homeloan-linked
account to reduce the interest charges! This means we actually
have extra RM5000 in the bank!
Credit card really helps! (Only if you know how to use it).

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Is Life insurance Premium CHEAP?!

There are many types of life insurance plans. If we categorize

them based on the premium paid and the protection we are
getting. Basically there are 3 types (refer chart):
Type A : High Protection, Low Cash Value.
Type B : Medium Protection, Medium Cash Value
Type C: Low Protection, High Cash Value
Imagine if there is a fortune teller who can foresee our life
expectancy how long we will live. If he says you can live very
long, you should buy type C insurance, e.g. endowment plan. If
he says your life is short, you should buy type A insurance, e.g.

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term life. However, in reality, who knows how long we can live?
So most people buy type B insurance, e.g. whole life
participating plan.
For Type B insurance, the total premium we paid will match the
total cash value of the policy at year 14th-18th. That means
after we had paid the insurance premium for 15 years, we can
still get back all the principal money if we surrender the policy.
If you are committed to show your love and responsibility to
your family, buying insurance doesnt cost much. It only cost 15
years of interest return! After 15 years, the insurance can be
considered FREE!

How to Make Extra Money While Keeping

Your House Clutter-free?
I am sure that most people can find something in the house
which are not used for a long time, such as used hand phone,
watches, books & magazine, CDs etc. Why dont we throw
them away since it is not useful anymore?
They take up extra spaces in our lovely home! I believe that we
dont throw them away because those things still worth a certain
I always liquidate the stuff that I dont use/need anymore. We
can sell them to others who need it. It is like selling your old
newspaper, selling other stuff is just as easy as we think.

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You can reach potential buyers at online auction site.

Some sites that you might consider are:

Lowyat Forum (for electronics)

The Rich Peoples Secret to Make Tons of

Leverage means the use of credit or borrowed funds to improve
ones speculative capacity and increase the rate of return from
an investment, as in buying securities on margin.
Investing is already a high risk activity, for those not used to do
investment. If you use leverage in your investment, it means
that the risk involved is even higher. Youll be pressing the
nitro button of a race car which you cant handle yet.
But only with the proper use of leverage, a person can grow rich
even faster. You must have heard that most wealthy people
actually had gone through some difficult years prior to their
success. Normally, they are able to double their income every
year after those initial struggle. They certainly use some form of
leverage. Example:

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1. Buying property with banks money. In order to own a

RM100,000 real property, we only need to pay 10% down
payment of RM10,000 for residential property. When the
property appreciate to RM110,000, we made a gain of
RM10,000, which is a 100% return from our initial RM10,000.
2. Buying warrant instead of its mother share. Warrant itself is
a form of leverage. When the share price rises 10 sen, the
warrant will normally follow by 10 sen as well. Those who
bought warrants know that warrant is a derivative security that
gives the holder the right to purchase securities (usually equity)
from the issuer at a specific price within a certain time frame.
3. Borrowing money to do business. Thats how entrepreneurs
are able to build their wealth in a short period of time ( 3-5
years). They use the banks money by paying them 4-9%
interest, but are able to produce more than 20% return per
annum in their business.
If you can learn the art of using leverage, we will be able to
grow your wealth much faster!
But bear in mind that the key here is that you must know what
you are doing. Are you sure you can generate better return than
the financing cost you pay? If yes, go ahead. If no, keep
learning until you do.

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The Tax Savings for Highly Knowledgeable


When it comes to the end of the year, I will normally check

whether Ive fully utilized the personal income tax relief granted
by our government . It is the time we review our budget and tax
planning for the whole year.
One of the major relief is for book purchase. It used to be
capped at RM700, but it has been increased to RM1000 /
I am going to list down the advantages of using this tax relief:
1. Save a few hundred Ringgit of taxes. If your tax bracket is
20%, you will save RM140 if you fully utilize the relief.
2. Normally books can be bought at a discounted price at
Popular, MPH, Border etc. 10%-30%. If we include the tax
saved, the books we bought are further discounted for another

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3. I like to read motivational books, business books and

financial books. These books contain a lot of info and practical
tips to earn more and save more. Those info will eventually
increase my earning and my saving as well.
4. If you are a slow reader and find that you cant finish reading
the books you bought using RM1000 in a whole year, you can
consider buying books as gifts. There is always someones
birthday, anniversary, job promotion, Xmas celebration. Why
not giving them books as gift?
To be qualified for tax relief, original receipt must be kept. Any
books and magazine is qualified for the claim, including ebooks. Go and buy some books!

How to Keep Score of your Financial

Net Worth = Asset Liability
To increase your net worth, you must accumulate more assets
and reduce your liability (relatively). In order to acquire more
asset, you must have more savings. Remember:
Savings = Income Expenses.
In order to increase Saving, you must increase your income and
keep your expenses balance.

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Here is an assessment one should do periodically. You can

plan and plot your graph of Net Worth vs Age. Which one is

similar to yours?

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Calculate your net worth every quarter and you will find a
pattern. Make sure it only has one direction to go --- UP UP UP!

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Paying Monthly Life Insurance Premium

charge 10.80%
For traditional insurance policy, the life assured can either pay
yearly, half-yearly, quarterly, or monthly.
If the yearly premium is RM1000/year,
the monthly premium = RM1000 x 1.05/12 = RM87.50 (total 5%
the quarterly premium = RM1000 x 1.03/4 = RM257.50 (total
3% extra)
the half-yearly premium = RM1000 x 1.02/2 = RM510.00 (total
2% extra)
If we want to compare the interest rate with Fixed Deposit Rate
or Home-loan daily rest rate, we need to calculate the effective
annual rate (EAR). It can be calculated using the Financial
Calculator (I use HP 10B).
Lets start with the monthly premium
Payment mode = 12 times per year, use the BEGIN
PMT= -87.50
Calculate i = 10.80% (effective annual rate)(EAR)
Try to calculate the other payment mode:
Quarterly EAR = 8.03%
Half-yearly EAR = 8.16%

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If you cant afford to pay yearly, it is better to opt for quarterly

rather than half-yearly.
If you are confident to make an investment return of more than
10.8% a year, it is better for you to pay your premium monthly
even though you can afford yearly premium.
Every sen kept and saved will still make you richer by one sen!

The 5 Common Types of Life Insurance

Benefits Your Agent Fail to Explain
I am simplifying this so that you will know what can be insured
in a life insurance policy. There are 5 major benefits:
1. Accidental Care
This is usually a rider attached to a main policy. It covers
permanent disability, and death caused by accidents only.
Accidents include car accident, fall down, sprained ankle due to
sports etc. Normally it pays double the amount of sum assured
if accidental death happens at a public conveyance (bus,
passenger airplanes, LRT etc)
Adequate coverage: 5 times annual income
It is cheaper to get this accidental policy as a standalone plan
from General Insurance companies.

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Some people only have this type of policy. They never realize
that they actually go to war with underwear only, no armour, no
helmet, no nothing!
2. Hospitalization and Surgical Benefit (known as medical
card or health card)
This benefits can cover most if not all of your medical expenses
at hospital.
Adequate coverage: >RM150/day room and board benefit.
Yearly limit of >RM100,000. Lifetime limit of >RM500,000.
Health card is not a credit card and it does not have money in it!
If it is genuine cases, there will be not much trouble to get the
Letter of Guarantee from the insurer when you are hospitalized.
However, insurance company have the right to investigate
before they pay out the claim, especially when you do a major
claim within the first two years.
3. 36 Critical Illnesses (Cancer, Stroke, Heart Attack etc)
It is different from the health card. This benefit is paid in a lump
sum to your account, but not to the hospital. The purpose of this
benefit is to replace your potential income loss when you take
long leave for medical care.
Adequate coverage: 3 times annual income.
4. Total Permanent Disability (TPD)

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TPD is a very severe case. After a person becomes TPD, it can

be defined that he lost his ability to earn a living. There are 2
forms of benefit for TPD:
a) Lump Sum this benefit is normally included when you
purchase the policy for 36 Critical Illnesses.
b) Annuity This is a separate rider which will pay you a yearly
benefit. It is advisable to get the protection up to your annual
income. However there is a maximum cap of yearly payable
compensation per life assured per insurance company. If your
income is more than that, you can consider to buy several
policies from different insurer to get yourself fully covered.
5. Natural Death
No matter how you die, they will still pay your family this death
benefit, except committing suicide within the 1st year. Since the
life assured cant enjoy this benefit, it is up to the individual
commitment to their dependants to calculate how much
coverage they should get.
For instance, a father whose wife is taking care of his 1 year old
son full time, it is advisable to be insured for at least the
expenses of the family for up to 25 years.
Now you have a big picture of what can be insured on your life.
Your next question would be how much would it cost?
Here is a very simple benchmark for you:
Dont spend more than 10% of your take home pay for
insurance premium. If you spend more than that, it is likely that

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you are overpaying for insurance policies that dont suit your
need at the moment.

How rich are you? Here is the Benchmark

How rich are you? Most people are reluctant to answer,
because there are only 1% of the population are rich!
Anyway, if you are to answer such a question honestly, what
would it be? Would you answer I have 2 houses, 3 cars, a few
FD etc, or I am worth RM300,000, or I earn RM20,000 a
month etc.
There are many ways to state our wealth. In fact, wealth is
more appropriate to be stated by time, not the amount of
asset we have.
This is the formula:

Wealth = How long we can continue and

maintain our lifestyle without working?
According to the above formula, this is how we should state our
I can continue and maintain my current lifestyle for 10 years
without working.
How long would it be for you? How wealthy are you? 3 months?
1 year?

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I read the book The Millionaire Next Door back in 2001. It is a

marvelous book! Here is one of the gems:
Multiply your age times your realized pretax annual
household income from all sources except
inheritances. Divide by ten. This, less any inherited
wealth, is what your net worth should be.

Ones expected net worth (ENW) = Age X

(Realized Pre-tax Annual Household Income
exclude inherited income)/10
Example, Mr. Lees annual income is RM100,000, age 35.
Lees expected net worth = 35 X RM100,000 /10 = RM350,000.
According to Dr. Thomas J. Stanley (the author), there are 3
categories of wealth accumulator:
1. PAW Prodigious Accumulator of Wealth
2. AAW Average Accumulator of Wealth
3. UAW Under Accumulator of Wealth
If Mr. Lees net worth is RM800,000, which is more than 2 times
of ENW, he is a PAW.

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If Mr. Lees net worth is RM50,000 only, which is less than half
of ENW, he is a UAW.
Lets calculate ours, which category do you belong to?

Simply, just divide your age by 10, and multiple it by your

current income. This should give a rough estimate of your
expected net worth should be.
Special thanks to Ami Sek who pointed out the confusion caused by inherited wealth.
Ive updated this part after getting Amis input.

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Whats your real ASSET that Accountants

get Confused?
What is assets? According to dictionary, asset is anything
owned by an individual that has a cash value. This includes
property, goods, savings or investments.
In order to be rich, lets look deeper into the meaning of ASSET.
The definition of an asset according to Robert Kiyosaki is
something that puts money into your pocket on a regular basis
as opposed to something that takes money out of your pocket.
This is very much different from the asset we know in
CAR If we buy a car for our personal use, it might be a liability
rather than an asset. Even though we buy it using cash without
any a hire purchase agreement, we still have to pay the
maintenance, road tax, car insurance and petrol. Even worse if
we buy the car with loan.
The car is an asset of the bank but a liability of the car owner. In
contrast, if a taxi company buys a car and rent it to a taxi driver.
In returns, the taxi driver would have to pay a certain leasing
fees to the company. Thus, the car is an asset to the taxi
company, but a liability to the taxi driver.

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Be smart to acquire income-generating assets. Wealth is

accumulated a lot faster if we are smart enough to buy assets
that give us passive income.

Sum Assured = Level of Love

Did your spouse ever ask you this question: How much do you
love me?
I think there is no simple way we can give a great answer. Is
your love deeper than the sea? Higher than any bird ever reach
up into the sky? (with advance technology, we got space
shuttles travel many light years beyond the sky limit).
If I am going to put the love level into a measurable number, I
think there is no other way than using your insurance sum
assured! And make sure that it is nominated to your love one!
The number not only shows the monetary amount of your love,
it also shows how much the love we are willing to afford.
One of the richest Chinese in the world, Li Ka Shing was once
asked about how much wealth he will distribute to his heirs. He
said it all depends on how much insurance he bought and
nominated to them.
Certainly, love comes in many forms. Buying life insurance on
our own life and nominate it to our spouse will ensure our love
stay on forever. Some husbands say his widow will remarried.
The fact is they leave no choice to the widow. Why remarry if
your widow receives a lot from your insurance proceed? If she

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is going to remarry anyway after she got rich, I dont think she
will wait until the day you die to make the decision.

Sell + Fish = Selfish

To simply give someone money wont make them rich. It is
similar to feeding the hungry with fish. They will take it for
granted and never learn to make better money. But if you teach
a person how to make more money, it is like teaching the
hungry how to fish. Some people prefer to be given fish rather
than taking the initiative to learn the skill to fish on their own.
This kind of people will forever remain poor.
There are salesperson who prefer to sell fish to their client.
They afraid that when the customer learn the fishing skills, they
will lose their job. If we add the 2 words sell and fish together
we get selfish. I dont like to sell fish. But I would love to teach
you how to fish on your own.

How do You Feel Wealthy

Wealthy means having an abundant supply of money or
possessions of value. I am writing from the financial planning
point of view. To some person, possessing RM1,000,000 is
regarded as wealthy. To some already affluent, billionaire might
be their threshold to be regarded as wealthy.
To me, to feel wealthy is to have the following comfort:
to have enough buffer in case of emergency
to be able to do whatever I like without worrying about
to travel to wherever and whenever I like comfortably

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to buy the things I need (not want - as needing a car

and wanting a Ferrari is totally different) without
hesitating on the price.
to help my family to achieve their dreams
How about yours? I think most of us will most likely have about
the same list, or a variation of it.

Money Wont Make You Rich

We might have seen some people suddenly acquired a
substantial amount of wealth in a very short time. Perhaps, they
suddenly inherited great wealth from their passed away
ancestors, or hit a lottery, or got a great contribution from Uncle
Lim (Genting Casino). But they became poor again in a few
years time. Some of them even became poorer than before
they got rich! How can this be?! It is because having a lot of
money is not necessary rich. It is what we do with the money
that determine how rich we are.
When Ken hit the lottery of RM1 million in year 2005, he bought
a BMW 7-series car with 20% down payment. He also bought a
house with market value of RM1 million with 20% down
payment. He quited his day job, and upgraded his lifestyle. He
dine at fancy restaurants. He change his girlfriend every two
weeks. Forgetting that the million he got is just a plain of luck,
he finally went broke again three years later . He was unable to
pay the installment for the bungalow mortgage and the BMW
car loan. You might have heard such story many times.
Giving you a lot of money will not make you rich. If Ken have
the proper money management skill, it will be a different story.

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When you are financially illiterate, giving you more money is like
giving a gun to a child. Youll harm not only yourself, but the
people surrounding you too.

Making You Rich Is Not a Financial

Planners Responsibility
What are the responsibilities of a financial planner? There are
many kinds of financial planners marketing their services. Some
are single-product planners: insurance agents, unit trust
consultants and will-writers. Some are multiple-products
planners they deal with insurance, will-writing, unit trust etc.
Some are fee-based consultants they are independent and
charge consultancy fees only. The latter kind of planner are rare
in Malaysia. In fact, I still dont know any whom only charge
fees and doesnt deal with any financial products.
No matter what kind of planners they are, their role or
responsibility to the clients might be similar to the list here:
provide proper advice on related financial matters
provide product information
recommend suitable products based on the clients need
engage clients with the suitable product supplier
( insurance company, unit trust company, will writing
company etc)
provide after sales services
help client to save
help client to invest for medium to long term
help clients to protect their wealth

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Their roles is to help on managing the clients financial

resources, which is $$money$$. As stated above, the list does
not include help the client to become rich. This is certainly out
of the job scope.
If meeting a financial planner and getting proper advice will
make you rich, you will certainly feel that the consultant fees are
too cheap to be true. In other words, dont expect the financial
planner to help you get rich. But if you meet the right one, he
might be able to show you how others get rich.
If you still havent got what I am saying, this is the conclusion:
getting rich (if and only if you really want to get rich), is your
own responsibility. It is not a burden or role of the financial
planner. He/she is just making a living after all.

What does it take to SAVE money?

The three basic requirements of saving more money:
1. Ability to earn
Your earning ability equals to your value. The amount of money
you earn equals to the amount of value you add to other
The crux of it is that we are always in control of the amount of
value we want to add to others.

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2. Discipline
Saving money is all about discipline. You must have the
discipline to save, and also the discipline to spend less than you
Imagine a bank account that does not give you any withdrawal
facility! Just like a piggy bank. You can only deposit money.
After opening such an account, you must deposit money into it
every single day. If you keep doing that for a very long time,
one day youll receive a call from the bank officer. Hell ask you
to clear the account because it is overloaded with cash!
This is the kind of discipline we are talking about. Spend less
and spend later. Save first and save more.
3. Time
It takes time to save money and accumulate wealth. The eighth
wonder of the world - Compound Interest will only work if we
have enough time for it.
If you do not spend the interest return of your wealth, the
biggest interest return will come at the later years. That means
the longer the time that you let the interest to compound, the
higher the interest youll get at the later stage.

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Do you have the time to save money? Congratulations if you

are very young. Sorry if you are too old or going to die soon.
Money Saved = Ability to earn x Saving rate x time
Examine the mathematical equation above. You will notice that
when any one of the variable is zero, the amount of money
saved = 0.
When you lose any one of the three basic criteria, you wont be
able to save more money. Major diseases will destroy your
earning ability. Premature death will take away your time to
save money. If you lack the discipline to save money, it is better
to engage some financial system to help you.

What Should You Look For in a Unit Trust

What do I look for in a unit trust fund:
1. No up-front charges or service fees.
2. Remuneration to agent based on a certain percentage of the
funds return which is realized through switching or repurchase.
3. No need to pay remuneration to agent/unit trust company if
my investment is making a loss.
4. Provide easy online switching and repurchasing service so I
dont have to trouble the agent to meet me just for my
As I know, there is no such unit trust fund in Malaysia. But I
wish that it will be available soon in the future. Currently the

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upfront load is high (more than 3% and most of the time 5%)
when the fund is invested in equity. Coupled with the regular
and recurring fund management fees and trustee fees, you will
find that most funds are not outperforming the market. As a
retail investor, you might be able to get better return by directly
buying the companies stocks. As for what to buy, assuming
that you dont have knowledge at all, start from looking at what
are the top funds buy. You can find it in the interim report of the
funds, which is publicly available.
Just by doing that, you immediately save the upfront fees when
investing in unit trust, which big chunk of it goes to the
marketing cost of the funds.

The Real ROI of Insurance

To calculate the ROI (Return on Investment) of your investment
is pretty simple. Lets say you buy a house at RM100,000. You
sold it after 2 years for RM120,000. The total ROI in 2 year is
RM20k/RM100k = 20%. The effective annual rate (EAR) is
9.54% per annum. EAR is the annualized return, something that
you can compare to the mortgage loan interest and Fixed
Deposit return.
Below I am going to show you how we can determine the ROI if
you buy an insurance policy. Mark bought an insurance policy
from Great Eastern Life Assurance. The policy he bought is a
whole life policy named Supreme Care which will mature at age
99. Mark is now 30 years old. The premium he pay is
RM1059.40/year for the sum assured of RM100,000.
Scenario 1: Surrender after 5 years

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After paying the policy for 5 years, he heard from his friend that
he shouldnt put money in an insurance policy. It is a waste of
money. So he surrendered the policy. The surrender value is
RM3900. Marks friend is right about losing money in
insurance. Mark had paid RM5297 and got back only RM3900
in return.
ROI = -26.37% in 5 years.
EAR = -10.04% per annum.
Conclusion: This policy is a bad investment according to
those who prefer to lapse policy.
Scenario 2: Mark was diagnosed cancer after 10 years.
He doesnt need to pay the premium anymore because of a
waiver premium rider attached to the policy. He recovered after
2 years of treatment and enjoy the benefit of the policy until he
surrendered the policy at age 55 at retirement. The surrender
value he is entitled to is RM30,000. The total premium paid is
ROI = 652% in 25 years
EAR = 5.16% per annum.
Conclusion: This policy provide adequate return and
replace loss saving when suffering from major illnesses.
Scenario 3: Mark died at 3rd year due to heart attack.
His family is entitled to claim his death benefit of RM100,000.
The total premium he had paid is RM3178.20.
ROI = 3000.46% (yes! 30 times!)
EAR = 317.52% per annum (yes! triple every year!)
Conclusion: This policy is the best investment ever made
by Mark, according to Marks family.

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Scenario 4: Nothing bad ever happen in Marks life.

He continue paying the premium up to age 65. Thinking of not
needing the insurance protection anymore, he surrender the
policy to enjoy the cash value. Total premium paid is
RM37,079. Total guaranteed surrender value is RM46,600.
ROI = 26% over 35 years
EAR = 1.23% per annum.
Conclusion: The cost of the insurance policy is only the
lost of potential interest the premium can generate. If Mark
put the money in an FD instead which gives 3.7% a year,
the cost of the premium is 3.70-1.23% = 2.47%.
Buying insurance is for the protection. It is a noble idea
everyone should embrace, even when you are very rich. But
you are buying insurance for savings or investment, please
dont put high hope on it to produce magnificent return.

How Writing a Will Can Save You Lots of

Anybody with assets and loved ones needs to have a Will. But
why is there still many Malaysian do not have their Will written?
There are 40 billion Ringgit worth of estate unclaimed, and the
amount keeps rising over the years.
Anyway, dont bother with those who didnt write their will. Just
start to get yours written for these benefits:
Save money!

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Without a will written, the person is called die intestate. This

require his heirs to apply for the Letter of Administration (LA)
instead of Grant of Probate (GP). The legal fees is higher for LA
application because of the longer process and more documents
required. Dont believe? Ask your lawyer.
Your wish vs Governments wish
You state your wish in your Will: Who should get your asset?
How much your wife should get? Should you give your sister
some money as well? If you have the same thinking as the
government, just follow the Distribution Act 1958 (amended
1997). Without a will written, non-muslims assets will be
distributed according to the Distribution Act.
Executor vs Administrator
You can appoint an executor in your will. If none appointed,
many people can apply to be the Administrator of your estate.
Those people eligible include your legal heirs, your creditors,
your not-trustworthy-relative.
Appoint Guardian
Yes! If you have minor children (age below 18), you ought to
write your will now! There is no other way to appoint a legal
guardian except by writing a Will.
No need 2 sureties
2 sureties (someone act as a guarantor to your estate
administration) are needed for application of LA (Letter of
Administration). Imagine if your best friend passed away without
leaving a will. His son asks you to be one of the sureties
required by court. You will have to disclose all your asset to

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prove that you have more than the deceased estate. If his son
runs away with the estate money, you will need to compensate
the legal heirs with your own asset. Do you want to sign the
So, get your Will written as soon as possible. If things are
complex, you can engage a professional estate planner. If the
distribution is simple, you can find some templates on the
Internet and modify it to suit your needs.

The Three Elements of Wealth

There will be no complicated mathematical equation because
accumulating wealth is not rocket science. Thats why you dont
need to be super smart to be rich. To accumulate wealth, you
just need to maximize the below most important elements.
This is how much you are able to keep the hard earned money
to yourselves. Can you save RM300/month, or RM2/day, or
RM50,000/year? Pay yourself first!
You must give enough time for your money to work for us. The
younger you are to start saving, the better it is.
Rate of return is normally associated with the amount of risk we
are willing to take. If you know an investment instrument well,
you will eventually bear lower risk as long as you know what

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you are doing. Get higher return from your money! Put your
money into places where they can work really hard! And make
sure you know how to take good care of them.

Imagine the box in the picture is the amount of money we

accumulated. Increasing the value of the 3 basic elements, we
will certainly get a bigger box -> more wealth!

Cash on Cash Return vs ROI

CCR vs ROI : Normally these 2 terms are always used in real
estate investment. For example, Mark bought a residential
apartment in KL for RM100,000.

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After 1 year, the property appreciated to RM120,000. To

calculate the ROI, which is the return on investment.
ROI = (120,000 100,000)/100,000 = 20%
Lets assume that Mark only paid RM10,000 (10%)
downpayment for his initial purchase. After including the legal
and transaction fees about RM5,000, and also paying the
installment of RM600/month for a whole year, the total amount
of cash he put in is:
Total cash invested = RM10,000 + RM5,000 + (RM600 x 12) =
The Cash on Cash Return (CCR) is
CCR = (120,000 100,000)/22,200 = 90%
By using the leverage effect, CCR is normally greater than ROI.

The Sleeping Partner Without Capital

No matter you run your business in partnership, or Sdn. Bhd.,
or sole proprietor, you will find a great sleeping business
partner. This partner will come into your business when you
start making profit. He will share a portion of your hard earn
profit. You have to pay him his share of the profit regardless of
whether you like him or not. Worse still, he is not going to pump
in any money into your business. He will not contribute any
effort to build your business either. He is your sleeping partner
no matter you like him or not.
His name is government. The money you pay him is called
income tax.

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So, if you already found a good business partner at this

moment, please appreciate his existence.

Earning for the Past, Present and Future

There are 3 parts of your money spent according to three time
1. Spending for the past
If you committed some debt in the past, such as housing loan,
car loan or credit card debt, there is a portion of your present
income set aside to pay for all these. Those are the expenses
committed in your past.
2. Spending for the present
This includes our daily meal, petrol, and other current
3. Spending for the future
This is the portion of your income kept for future needs, like
retirement, education, vacation etc.
It is fair to have a balanced portfolio : 1/3 for each and you will
have a balance financial statement.

Managing The Risk of Double Tragedy

Buying insurance will not ensure that all the problems of the
deceased are well taken care of. There are some unforeseen
problems after buying the insurance. I had helped some clients

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to solve the following problems which usually never being

thought of by most parents with young children.
Parents with young children normally bought adequate life
insurance policy to replace the income loss in case something
happens. Usually the father nominates the wife as the sole
beneficiary. Meanwhile, mother nominates children as
Most of the time both parents travel together, whether on
vacation or just driving to the nearby shopping center. What
happen if both parents cant make it home? .
Who will get the policy money? In such situation, a simple
nomination of your policy cant really solve the above problem.
Who shall be the guardian of your children? How do you
provide a constant cash flow (example: RM2000/month) to the
guardian to pay for the living expenses of your children?
Writing a simple will is certainly not the perfect solution for the
above situation. When we are taking care of our children, we
make sure they are provided with the best education. We also
try our best to make them study hard. We wish that someday
they will get a degree, master degree, etc, and earn a good
living. How do you ensure all that if you are no longer around
anymore? Leaving a lump sum education fund for them cant
really ensure that they will study hard.
In fact, all the above challenges can be somehow overcome to
a certain degree with proper arrangement. Moreover, it is so

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affordable! If you can afford to have a hand phone, I am sure

that you can afford this arrangement.
The solution: Set Up a Private Living Trust.

Child Protection: Setup Incentive Living

I will use a story to illustrate how to protect your children by
creating a private living trust.
Jim is a caring husband, and also a good father. Being married
to Susan for two years, they own a lovely home with a six
months old son. Both parents are working very hard for the
future of their family well-being. Realizing their economy value,
Jim and Susan just increased their life insurance coverage to a
total of $500,000. As usual, Jim nominates Susan as the sole
beneficiary and vice versa.
One weekend evening, Jim and Susan met with a terrible road
accident. Jim died on the spot and Susan also passed away
after two days in the hospital intensive care unit. This is known
as double tragedy at the newspaper headline.
This is a tragedy indeed. Lets look at the possible problems
Who should be the guardian of their son, Patrick?

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In Malaysia, either one of the parents is the legal guardian of

the child. But now Patrick has become an orphan. The
grandparents are too old to take care of Patrick.
Who shall inherit their wealth?
Being a young couple, Tim and Susan do not have substantial
wealth. But dont forget that they had their mortgage covered by
Mortgage Reducing Term Assurance (MRTA). Now their home
is mortgage-free. Also there shall be a large sum assured paid
out from their existing life insurance policy. But both the
nominees passed away. According to Malaysian distribution
act, both the grandparents and also Patrick will get a portion of
the deceased wealth.
Who can continue to mentor their children?
Besides proper academic education, being a parent, isnt it our
main responsibility to mentor our children to be a great person
in term of spiritual, mental, and social skill development? Since
Tim and Susan had passed away, there is no other medium for
them to communicate their core value to Patrick. If Patrick is not
lucky enough to get a good mentor, he might end up on the
street crime scenes.
If you are caring enough to set up a proper incentive living trust
for your children, I am sure that there is a certain level of
protection predetermined. Here is the solution you can adopt:
Write a WILL
Tim and Susan shall have their own WILL written. The WILL is
the only way to appoint a guardian for our children. Before you
appoint any person as a guardian, talk to them to get their

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consent. It is even better to provide certain level of regular

salary to the guardian as a compensation for their time and
Create an Incentive Living Trust
Beside the will, you should also have a private trust set up.
There is a lot of things you can mention in the trust deed.
1. To provide compensation to the guardian appointed
in the WILL - you can pay a lump sum of thousands
dollar or you can state an amount to be paid monthly to
the guardian for the time they spend to take care of your
2. To provide the maintenance of your childrens living
expenses - estimate the childrens daily living expenses
and pay them monthly into their trust bank account. The
guardian will be able to use this funding for your
childrens living expenses.
3. To provide education fund - Your children will need
thousands of dollars when they study in college or
4. To provide incentive for your childrens hard work have you heard the story of the donkey and carrot? You
hang the carrot in front of a donkey and it will be
motivated to keep walking because it is chasing for the
carrot. If you simply throw a carrot to the donkey, what
do you expect? You will get a lazy donkey. It is the
same for our child. In the case above, Patrick is going to

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get hundred thousands of cash when he reaches age 18

when he is no longer a minor. If I know there is a lot of
cash sitting somewhere for me to grab when I grow up,
why would I study hard? As parents, we cant just give
money to our children like that. Please, set the
conditions and terms so that your children accomplish
something before they get the incentive. Example:
$50,000 if he gets a degree in first class honor.
Fund the living trust with your life insurance
A trust without a trust fund is not valid. For young couple, I
know there is not much wealth accumulated to put aside as
trust properties. But because you are young, and still healthy,
you have the luxury of using life insurance as a funding method.
You can create a substantial amount of cash from your death if
it is going to happen. Paying premium of a few thousand a year
you might get a million dollar policy. Instead of nominating your
spouse, you can assign the policy proceed into the trust. Let the
professional trustee manage your money.

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In order to put on a great child protection plan like this, you will
have to seek advice from a proper financial advisor. Make sure
the advisor has sufficient knowledge in living trust, life
insurance and also will writing. Email me if you need my
assistance to recommend a trusted associate to help you.

The SECRETs of Investing in Unit Trust

There are three common strategies used in unit trust

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1. Ringgit Cost Averaging

Regularly invest a fixed amount in a unit trust fund regardless of
market trend is called the Ringgit Cost Averaging strategy. The
actual market performance is fluctuating. When the equity
market is high, you buy less unit with the same amount. When
the market is low, you buy more unit. For long term, you will get
much more unit in the lower price range.
2. Switching
Switching will lock in the gain you made in your unit trust
investment. Switching fees are low and definitely lower than the
upfront service charge. When you are making profit from an
equity fund, you can switch it to some lower risk fund to lock the
gain instead of selling it for cash. When the market turn low,
you can switch it back to equity fund.
3. Portfolio Re-balancing
Portfolio re-balancing is the process of bringing the different
asset classes back into proper relationship following a
significant change in one or more. In simple words, it is
returning your portfolio to the proper mix of stocks, bonds, cash
and other asset classes when they no longer conform to your
You start investing 50% in equity and 50% in fixed income fund.
1 year later, the equity rises and now your portfolio consist of
80% equity and 20% fixed income fund.

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To re-balance your portfolio, you should sell 30% of your total

fund in equity and invest it in fixed income fund so that the
portfolio is maintained.
Therefore, portfolio rebalancing is the more effective use of
switching. Rebalancing your portfolio once a year is adequate
to log in the return and smoothen your portfolio return.

Why You Should First Buy Investmentlinked Insurance Policy

There are so many types of life insurance policies in the market.
There are more than a dozen life insurance companies in
Malaysia and most of them provides more than 10 products. So
how do you choose your first insurance policy to buy?
Most likely when you are approached by an insurance agent,
you are presented with Investment-linked policy.
It actually makes sense to buy investment-linked policy as the
first policy you should own. Here are the reasons and
1. Transparency Unlike the traditional policy such as
whole life or endowment plan, an investment-linked
policy reveals all your premium allocation clearly. This is
what I call transparent policy you can actually
understand and see where your premium is used.
Policyholder will receive a periodic statement that clearly
and precisely lists all the premium allocation, relevant
insurance charges, investment value and fund unit price.

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Besides this report, you will also get the investmentlinked fund performance report annually.
2. Low insurance charges - For fresh graduates, age
around 23-25, it is normal for them to seek their first
insurance agent and also the first insurance policy.
When you are young, insurance charges are very
cheap. Investment-linked policy calculates the insurance
charges based on your age. They use a mortality table
and clearly provide the insurance charges schedule in
the policy. This means you can purchase a very high
coverage with relatively low premium when you are still
young. The premium might be even lower than a term
3. Flexibility Once you get older, promoted, married,
have kids, your protection needs eventually increases.
When you retire, your kids are independent, your
protection needs eventually decreases. Looking at this
circumstances which is substantially different at different
life stages, investment-linked policy provides the
flexibility to increase or reduce the premium, include or
exclude certain coverage rider, supplementary benefits
and sum assured. Put it simply, you can modify this
policy whenever and however you want it to be, of
course it is subjected to the terms and conditions
outlined by the insurance companies.
4. Integrated better health card - some insurance
company like Great Eastern and Prudential, they
provide better hospitalization and surgical benefits only

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for investment-linked policyholder. For instance, Great

Eastern lets the investment-linked policyholder to attach
a better health card (no co-insurance, cheaper
insurance charges) in his policy. But if you only want a
standalone health card, the available product is not as
good as the one offered in an investment-linked plan.
5. All-in-one benefits All sorts of coverage can be
included into your investment-linked policy. This
includes accidental benefit, hospitalization income
benefit, critical illnesses benefit, health care benefit, lady
care benefit etc. Almost all available protection riders
can be included. You will find it easier and cheaper to
have one insurance plan that can give you all the
possible benefits you need.
6. You control the investment strategy Did you ever
think that investment-linked policy is risky because it
involves investment? Actually, you have the right to
control the risk you can bear for your investment. You
can choose which fund to invest, which strategy to use,
which portfolio allocation to apply, and even when to do
the switching from fund to fund which is normally free of
charge. If you are skeptical about investment risk, just
put all your premium into a fixed-income fund!

Read This If You are still not Insured

You should really read this if you are still not insured, meaning
that you still havent own any life insurance. There are probably
many reasons why you as a working adult, generating income

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every month but still fears to pay insurance premium. Let me

help you to make the excuses:
No money
My income is not stable.
I have to pay car installment and house mortgage. Too
much commitment lar...
There is no money left every month. Ive got no saving
at all.
RM150/month premium? I cant afford that!
I still have a few thousand credit card debt
No Need
I am single. I dont see any necessity to get insured
Aiyahhh, just enjoy first. Dont worry, be happy!
My family can take care of me.
No Trust
Insurance company always find loophole not to pay
My insurance agent ran away with my money last time
I will lose money if I never make a claim
Despite all these reasons not to buy a life insurance plan, I was
shocked by a prospects decision quite a long time ago. I dont
even know her name before she approached me for advice.
She worked in a restaurant that I frequently bring clients to dine
and discuss about personal finance matter. So she knew what I
was dealing with.

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One day she just asked me to meet her when I am free

because she needs some advice on insurance. I allocated the
time and met her in a sunny afternoon. After going through all
the insurance concept and benefit explanation, I asked her how
much her budget for insurance premium is.
She answered, RM150 per month. Surprisingly the case is
closed on the spot, at the first time we talked about insurance!
But what really shocked me is when she disclosed her income.
As I said before, a person should allocate about 10% of her
income for wealth protection planning. In her case, to be able to
afford RM150/month, she probably earns RM1500/month. In
fact, her monthly income is only RM850/month! After knowing
the facts, I told her she is over insured. I had to salute her for
the answer - She said, I cant do much if I have additional
RM150/month. But the RM150,000 medical limit and thousands
ringgit death benefit should be able to ease my mind when I
ride to work.
If you earn more than RM1500/month but still cant afford to
have an insurance plan, you should be ashamed of yourself.

How Should You Handle Traffic Offenses

I was blocked by traffic police quite a few times over the years. I
think you do encounter this if you have been driving in Malaysia
for many years.
There was one time that let me uncover this fact. I was stopped
by a police officer for an offense. Did I get a traffic summon?

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Yes and No. YES because the police officer said the summon
will arrive in my mail box in two months time. NO because I still
have to wait two months to verify the YES. More about this
story later when I shared with you how I got away from traffic
offenses. Before you are stopped by a police for traffic offense,
here are some tips on how to keep your cash money safe in
your pocket.
Avoid breaking traffic rules this is obvious. If you dont want
a traffic tickets, just dont make any offense. Eventually, I still
broke it sometimes. What to do? When you drive a better car,
you will never realize that you are speeding unless you always
keep your eyes on the speedometer. If you can keep your eyes
on it, you will most probably see this number only: (dont drive
while taking photo)

Smile, silent, and dont offer fellow Malaysians know that

there are many sleepy traffic policemen. When they are sleepy,
they need coffee. Coffee is expensive. You can go to Starbuck
to verify the price. Being under-paid for a very long time, they
will ask your help to donate some coffee money. If you think
that you can save summon ticket by offering coffee money, you
are definitely wrong! Thats called bribery, not a wise money

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saving move. From my past experience, I always use this

strategy. Let me share the stories with you.
1. Traffic offense No.1 In year 2005, I made a right turn
which is prohibited at a T-junction. A sleepy police
officer came out from nowhere and stopped my car. I
smiled, showed him my driving license and identity card.
Then silent. He asked,Do you know what is your
offense?. I answered yes and silent. He
continued, This will cost you RM100 you know?. I
answered oh. Then silent. He finally let me go by
saying,I see, you are not local folks. Ill let you go. Drive
safely next time. because the address in my identity
card shows Kedah, not Penang.
2. Traffic offense No.2 In year 2006, I made a U-turn at a
traffic light. A police officer stopped my car and his
colleague came up to me. I was bringing some friends
from Johor to have lunch near Penang Mega Mall. I still
use the same technique: short answer, smile, silent and
the most important thing, dont offer a bribe! He hinted
that they are doing Raya (festive) operation, the
summon is the maximum rate. Anyway, I was released
again without ticket issued. Reason he gave: Dont want
to spoil my visitors mood.
3. Traffic offense No.3 - The police officer said that I
exceeded the speed limit. My speed at the time of
offense is 88km/hour. Still the same strategy: smile,
silent and dont offer. He let me choose whether to
receive the summon on the spot or wait for the letter. I
asked how long does it take for the summon to arrive in

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my mail box. He said two months. Ok, I will wait. But

eventually, the summon never arrives.
If a summon is inevitable, appeal for discount Finally, if the
above strategies dont work for you, you can still appeal for
discount at the police head quarter. I got a 30% discount for
one of my previous summon.
Conclusion, never ever bride a police officer, you might end up
paying more. Dont act for sympathy. Dont beg the police to
give you a chance. Dont give yourself excuse that you cant
afford the summon. Thats cheap and so wrong! Just smile,
keep quiet and DONT EVER OFFER to BRIBE!

How Much is Adequate for Emergency Fund

Emergency fund is the amount of liquid money set aside for
unexpected circumstances. The emergency fund must adhere
to the following three requirements:
1. Must be liquid and easily accessible through common
instruments like cash or checks.
2. There should be a sufficient margin of safety built into it
3. It should be held as risk free as possible.
Your ideal emergency fund should be able to cushion the worst
possible scenario (specific to your personal situation) that you
can imagine. Add a 20% margin of error to that estimate and
aim for that emergency amount.

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If you are putting more money at low risk and liquid account,
you are actually building an emergency fund out of that
practice. In other words, if you are investing most of your
money, you probably increase the risk to get better return,
hence reducing the liquid part of your portfolio.
So the question now is do you separate your emergency fund
account when you plan your investment portfolio?
Here are my opinions about this matter which also represent my
1. I dont separate them. I see the emergency fund as a low
risk portion of my investment portfolio.
2. To me, liquid account is an easily accessible account
which can be cashed out within 30-50 days. Why 30-50
days? Isnt it too long? No, I dont think that it is a long duration
because I have several credit cards with enough limit to be
used as buffer. Nowadays, you can pay almost everything with
credit card except the debt itself. If the account can be
liquidated within 30-50 days, it is soon enough to pay the credit
card on due date.
3. Liquid accounts to me include unit trust (mutual fund),
bank accounts, flexible home loan accounts, fixed deposit,
and even shares. According to my past experience, not every
share counter I hold are having loss at the same time, provided
that the share portfolio is properly diversified. When it comes
the time you need to sell off some of the share for emergency

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purpose, the main concern should be which stocks are

appropriate to be sold: the losing ones or the gaining ones?
4. Is insurance considered for emergency? Yes and no.
Without insurance, there is no use for the emergency fund. It is
just wasting your money if you put it into an emergency account
but not insuring the most valuable assets you own, including
your own life. Yes, insurance will act as an emergency if you
have medical card for hospitalization, or in the event of dreadful
disaster where insurance is claimable. But the answer is NO if
you are facing emergency situation where insurance doesnt
cover the event such as unemployment. The fact is not
everything in life is insurable.
5. It is better to control or avoid the risk of depending on
emergency fund. If you are employed, or actively involved in
some business activities that will cease providing incomes at
the time you stop working, emergency funds are so important to
you. You might need a substantial amount. Thats why it is so
important to work on getting passive income. Regardless of
whether you have the emergency fund or not, when disaster
come unexpected and not covered under insurance, it will still
eat into your net worth. Better to avoid it and minimize the risk
rather than setting aside money to prepare for it.

Question You Should Ask Before You Sign

the Home Loan Offer Letter
When you refinance your mortgage, there are two important
documents you need to sign: the offer letter, and the loan

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agreement. Every bank offers different terms and conditions on

home loan package. Most of the time, you will be too busy to
read the offer letter and loan agreement.
The loan agreement is pretty standard and you cant change
anything. But as for the loan offer letter, it spells out your
specific terms and conditions. So I recommend that you read
every word in the offer letter.
If you cant get the time to read it, make sure you asked the
following questions before you sign the documents. Get the
mortgage officer to show you these details in the offer letter.
Frequently Asked Questions on Home Loan
1. Can I make capital repayment anytime?
There are banks that require you to produce one month notice
before you make repayment to reduce the principal portion of
your mortgage. It is better to choose the bank that doesnt
require that. Just imagine that you excitedly bring your hardearned bonus to the bank, but the officer asks you to fill up a
form, go home and come back one month later to pay.
2. Can I make advance payment? Does it require notice?
Advance payment is some small amount that you pay before
the due date of your regular installment. It is paid in advance.
Understand the minimum amount required for advance
payment. The lower the better it is.
3. Is there any redraw facility? How long does it take?

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Most banks offer redraw facility on capital repayment anytime.

Some take longer time to process. Possibly choose the bank
that can let you withdraw anytime, flexibly and immediately.
4. Daily rest interest calculation?
Daily rest interest calculation based on daily loan balance is the
best choice. You will save interest charges immediately after
you make advance payment or capital payment. Avoid monthly
rest interest calculation, you will eventually end up paying more
interest. As banking system has make tremendous progress
over the years, all banks now use daily rest calculations.
5. How long is the lock-in period?
Industry practice is 3-5 years. The shorter the better. Some
might not have the lock-in period but will come with higher
interest charges.
6. When do you start counting the lock-in period?
When you are borrowing loan to buy a property that is still
under construction, the bank will pay the developer
progressively. Only until your home is completed, the bank will
fully release the mortgage amount. Choose the bank that start
calculating the lock-in period from the first drawdown of the
loan. Avoid those banks that count it starting on the date the full
amount is released. You will end up with longer lock-in period.
7. How much is the early settlement penalty?
You might be able to settle the loan during the lock-in period.
Early settlement will occur also when you refinance mortgage
during that period. Normally the penalty is 3%. Of course, look
for the lower penalty.

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8. How do you calculate the early settlement penalty? On

the outstanding loan amount or the loan limit?
Lets say you borrow RM100,000. After 2 years, your
outstanding loan is RM50,000. If you want to settle the loan,
and the bank calculate the penalty base on the loan limit, you
will be paying 3% of RM100,000 instead of RM50,000. The
amount is doubled!
9. Is there any set up fees or monthly account maintenance
Try to get those package without service charges. This normally
apply to flexi home loan, where you have a current account with
cheque book, linked to your home loan.
10. Do you absorb the moving fees (loan agreement fees
and stamp duty)?
Usually banks offer different package with lower interest rate if
you pay the charges of loan agreement, house valuation fees,
and stamp duty. The latest practice is that customers will have
to pay the legal charges involved in financing a property
11. Do you provide optional payment mode: single or multitier?
Lets say your loan interest is first year 2.5%, thereafter 6%.
You shall pay lower installment on the first year, and higher
installment thereafter. This kind of multi-tier payment option is
not popular anymore nowadays. In fact, it can be dangerous
when you evaluate your affordability based on the first few
years of lower monthly repayment. What happen when you find

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yourself having a hard time when the installment amount is

increased in the future? Thats why happen before the subprime
crisis in 2008. Homeowners pay low mortgage installment
during the first few years. But when the installment keep rising,
banks end up with many non-performing loan.
12. Do you require me to buy MRTA from your bank?
There is no rule that the borrower should fork out extra money
to buy Mortgage Reducing Term Assurance ( or MATI RUMAH
TETAP ADA = MRTA) to protect the bank. If you buy the
MRTA, the insurance policy will be assigned to the bank.
It is the most affordable way to get insured and sometimes
banks let you finance the premium together with the mortgage.
Banks offer slightly lower interest too when you take up their
MRTA plan as a form of discount.
An alternative is to get your personal financial planner to work
out a flexible protection plan for you instead of buying MRTA
from the bank.
13. Ask for their customer service call center number.
Try calling their customer service call center. If the bank provide
good service, you will definitely realize it by calling the number.
Talk to the customer service representatives to have a feel.
Bear in mind that you will be engaged with this bank for years.
Avoid those banks that had nobody answering the phone, or
keep you on the waiting line for very long!

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Simple Strategies to PAY YOURSELF FIRST

It is well-known that the most effective way to accumulate
wealth and see your net worth growing day after day is paying
yourself first!
The three simple steps to pull off this only saving strategy youll
ever need are:
1. Pay yourself first from every paycheck
2. Dont touch funds from step 1.
3. Invest and grow the funds
These steps look simple and obvious, but human being is
emotional. It takes high discipline to procrastinate your
spending. Impulse buy happens every single day. So for fellow
Malaysians, here is a few simple strategies that might help you
to pay yourself first and pay all the other bills later.
Pay-Yourself-First Implementation Suggestions
1. Save your money in a saving account without ATM card.
It makes withdrawal difficult. You would have to queue at the
teller counter to withdraw your cash. Which means you need to
park your car, get into the bank, press the number machine,
wait for your turn, fill up form and sign some documents.
Moreover, you had to do this during weekday only during office
hour. To save the hassle of withdrawing money, just leave it
2. Dont activate the internet banking service for that
account, so that you can only transfer money in, but not out.

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3. If possible, open the saving account jointly with your

spouse, or mother or anyone who is more disciplined then
you. Both party must be present to withdraw fund.
4. Buy an endowment policy. You will lose money if you stop
halfway. This is the feature of forced saving which will keep you
paying the insurance premium until the policy mature. You will
be surprised that you actually save a lump sum for your
retirement when the policy mature. The problem is that an
endowment policys actual annualized return is too low. It is
around 3-5% return per annum, hardly beat inflation.
5. Invest in investment-linked fund using the top up facility
or some high premium allocation plan. The advantage of
investing in your insurance policy account is that it can be paid
by your credit card auto charge.
6. Pay all your insurance policy with credit card. This will
make sure you pay the premium-expenses which is actually
your saving. Especially those policy which had reach the critical
years. It is better to keep paying those policy because 100% of
your money will be debited into your insurance account.
7. Invest in unit trust fund using dollar cost averaging. Ask
your agent to remind you to invest monthly when you get your
paycheck at the end of the month. Isnt it nice to have someone
reminding you to save money? You can also opt for the
standing instruction facility where banks will automatically
deduct the fund from your bank accounts for unit trust

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8. Contribute more into your EPF account. Instead of

contributing 11%, you can opt to contribute more if your
employer is willing to assist you on the process. You will get
more tax relief and less money on hand to spend.

Do You Love Money?

When you love someone, how do you show it? Imagine doing
the same thing if your lover is money $$$
get some money quote Tattoos on your body: Ive seen
people tattooing their lovers name.
sleep with your money: You should sleep with your lover
every night.
give your lover more money: Since your lover is
money, give it more money certainly help to show your
speak your love: Tell people how much you love money!
show your love through your actions: hug it, kiss it and
caress it dont let it sit in the boring saving account.
spend more time with your lover: You should seriously
spend some time regularly for budgeting, planning and
reviewing your financial goals.
appreciate your lover: When your money leaves you one
day, you will feel sorry for not treasuring it before.
I am not asking you to be a money slave. Just manage your
money well and most of your life problem will be solved.

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Money or Beauty?
Many people associate a persons wealth with his appearance.
It is like judging a book by its cover. I believe that it shows some
truth because people only realized that you actually have that
amount of money only after you spent it!
You bought a Porsche and drive it to work. Your colleague saw
you in this sports car. This make you look wealthier. But is it
really the case?
You renovate your house gate, only the gate! Your neighbour
saw it when they are passing by. They thought that you must
have been promoted or granted a big bonus. This make you
appear richer.
You spent thousand dollars for hair replacement program. You
grow more hair. You appear more confident and more goodlooking. You also look healthier because your bald head has
been empty for too long. Yes! You definitely look better and
I just hope that you realize that the money spent is no longer
yours. However, those actions really do make you look
wealthier. Money or beauty?

Dreaming about Financial Freedom

When I first started working as a financial professional, I am so
amazed to find that most of the prospects I approach dont have

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a single idea about financial freedom. Some thank me for telling

them about the concept. Some just ignore the fact and think
that financial freedom will come and it is called retirement. Most
people think that retirement is when you are forced to stop
working and nobody will hire you anymore. Some people even
told me that they will never want to retire because they enjoy
working so much and dont know what to do if they are going to
retire someday. This obviously shows that they dont
understand financial freedom at all.
When you are financially free, you can choose not to retire. It is
all up to you. Financial freedom just means that you dont have
to work for money anymore. You can work for fun. You can
work for your own passion. You can fulfill your dream without
ever worry about money. You dont have to trade your time in
exchange for cash. You can go to live at the place you like. You
can even have your flat nose fixed with plastic surgery. You can
practically do what you dream to do provided that you plan for it
as part of your dream after you achieve financial freedom.
Is it a dream? Even with a realistic plan, it might still be a dream
if you dont have the burning desire.

How to Settle Your Loans Earlier

There are some ways to actually settle our home loans earlier
than the original tenure. I am sure that you are practicing some
of them. However, I am going to share with you more in depth
here. Basically there are three ways to settle your loan earlier:
1. Refinancing

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Refinancing works like a charm when you have banks

competing with each other to grab new customers.
The trick is to make use of the better rate offered by competing
banks. With the lower interest rate offered for new customer, it
might be worth it still if you refinance your existing home loan by
paying the early settlement penalty. But before you do so,
please seek professional advice to calculate how much you can
actually save.
2. Lump sum payments using EPF funds
EPF allows you to withdraw your money from Account 2 to
reduce your housing loan. If you dont care about reducing your
retirement fund receivable from EPF in the future, it might be a
wise move to withdraw it to settle some debt.
EPF also offer another option of withdrawing Account 2 fund to
use as monthly installment for the mortgage. I prefer this way
because the money will be credited to your bank account,
instead of settling the principal of the loan amount. Then I can
use that money to invest for higher return than what Ill be
getting in EPF dividends or mortgage loan interest.
3. Paying extra
Extra payment means you pay more than the required
installment. There are actually two kinds of extra payment
acceptable if you are servicing home loan. Please note that the
financial jargon used might be different among banks.
Advance Payment (AP)
Lets assume your installment is RM1000 per month. If you
have extra money, maybe from your mid year bonus or other

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savings, you pay RM1500 on that particular month. The extra

RM500 will be treated as advance payment. It will be used to
reduce the principal outstanding loan amount. You will
immediately save the interest charged due to the daily rest
interest calculation.
Lets say you did this 3 times consecutively so you actually
made an extra payment of RM1500 in total. On the next
payment due date, you suddenly run out of money because of
some emergency. Some banks will deduct RM1000 from your
extra payment and treat it as your regular installment. So your
record is clean. Nothing will be submitted to CCRIS or CTOS.
But if you need to withdraw that RM1500 extra for emergency
use, that is not allowable.
So I conclude the feature of advance payment as:
automatically offset due installment if it is not paid on
no withdrawal facility
for extra payment of less than RM1000, it will be
automatically treated as advance payment
Oh then what happens if you pay extra more than RM1000.
In this case, lets say you pay RM3000 that month, the extra
RM2000 will be treated as Capital Repayment instead. This
lead us to the next form of extra payment: Capital Repayment.
Bear in mind that you can actually opt for advance payment
instead for the extra RM2000.
Capital Repayment (CR)

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As explained above, when extra payment is more than

RM1000, it will be treated by default as capital repayment
unless you opt for the advance payment option. CR is similar to
AP, they both reduce the principal part of your outstanding loan.
But the features is opposite:
When you are unable to pay installment in the future,
CR wont be used to offset the installment, unlike the AP
In case of emergency, you have the flexibility to
withdraw the CR.
There will be processing fee, about RM10 per
Extra payment must be more than RM1000 to be treated
as capital repayment.
Mortgage is still the cheapest loan I know up to date. It is the
cheapest in the sense of lowest interest charges to the
borrower. I personally dont bother to settle home loan fast,
even the mortgage of the house Im staying in. It is because as
long as I can use that money to generate higher return, it is a
good debt to keep forever.

Beware of the Lock-in Period of your Home

Loan Offer Letter
When you are taking up home loan to finance your house
purchase, I urge that you take the time to read every words in
the offer letter before you sign it. If you find that there is too
much details for you to look at them in depth, ask these
important questions for thorough explanation before you sign
the mortgage offer letter.

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One thing to be aware of is the lock-in period. Lock-in period is

the time frame when you do a full settlement of your loan in the
first few initial years of your loan tenure, the lender (or the bank)
can impose a penalty. This is a sample of the full redemption
clause taken from my first home loan offer letter.

Notice that if I settle the loan within five years from the first
disbursement date, I will have to pay 3% from the original loan
amount or RM5000 whichever is higher.
For example, if my original loan amount is RM200,000, when I
choose to settle the loan or refinance it to other banking
institution, the amount I need to pay for penalty is:
RM200,000 x 3% = RM6,000
Before you sign the offer letter, there are two particular issues
that you need to understand:
1. Drawdown date or disbursement date
Drawdown date is the date when the bank release payment. It
is also known as disbursement date. For completed building,
this wont be an issue. But if you are financing home which is
still under construction, please be aware. For example, your
home is still incomplete, CF (Certificate of Fitness) is not yet
obtained. You bought it in year Jan 2005. The bank will release
a portion of your loan to the developer by stages, or what

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commonly known as progressively. Lets assume that it takes

2 years for your home to be completed.

If the banker calculates the lock-in period from the 1st draw
down date, you wont be penalized if you refinance your home
loan on April 2010. If the period commences from the full
drawdown date, you would have to wait until 2012 Jan to fully
settle your loan penalty-free. That means you are actually
locked-in more than 5 years total.
Conclusion: Demand the lock in period commencement on
the first drawdown date, instead of the full disbursement

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2. Penalty on outstanding loan or original loan amount

Some bankers calculate the penalty on the outstanding loan
plus all the capital repayment. Some bankers charge penalty on
the original loan amount. Let say you intend to settle your loan
earlier after 3 years, the former will impose less penalty
compared to the latter.
Original loan amount = RM200,000
Outstanding loan amount at the time of settlement =
Calculate from original loan amount: penalty = RM200,000 x 3%
= RM6,000
Calculate from outstanding loan amount: penalty = RM180,000
x 3% = RM5,400
Conclusion: Demand penalty to be calculated based on
outstanding loan amount plus capital repayment instead of
the original loan amount.
You can always try to negotiate a better deal for your home
loan. No harm trying right?

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Time Is The Most Wanted Luxury

The Consumer Research Center of the well-respected
Conference Board surveyed almost 2,000 affluent consumers
around the world and found that luxury is defined as time.
Here are some main points worth mentioning:
Luxury is having enough time to do whatever you want
and being able to afford it
75% of affluent consumers rank using a personal
computer, the Internet, or a cell phone as the mostparticipated-in lifestyle activities
69% say traveling
Luxury is about the feelings the consumers get rather
than the brand.
Before we get there, I would say that luxury is simply the life
experience that we cannot afford at this moment. When you
already achieve that, it is no longer a luxury, but simply
something that you can afford.

Personal Finance Should be Taught at

It has been suggested the British government should include
personal finance as one of the school subjects.
This would ensure that young people in Britain become as well
versed in savings and loans as they are in algebra and
Pythagoras Theorem.

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Robert T.Kiyosaki wrote in his book If You Want to Be Rich &

Happy: Dont Go to School! about the education flaws. One of
the reason Robert suggested that we skip school education is
that school actually produces knowledge workers for the
business world. In school, we are taught about algebra but
never apply the simple mathematic plus and minus function in
our money affair.
Do you find that some of your schoolmates who previously
performed poorly in academy who are now doing financially
better than you? Most probably they only know simple algebra.
There are countless highly-educated people who are in deep
debts and poor in money management.
You can have a head start when you have good education and
a good degree. But thats just a head start. Financial success is
a long term endeavour.

Hacking your Cash Flow & Net Worth Chart

I will show you three charts consist of cash flow and asset vs.
liability. Learn to hack the charts and you will be on your way to
the riches.
First, lets look at the chart of the mediocre.
Hacking the Charts of the Mediocre

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Financial situation:
always spend less than
they earn
save a portion from their
income every month
conservative passive
investors who mostly keep their
money in the bank
buy a house, buy a car,
go to work and wait for
net worth grow slowly.
they are very afraid of
debt and try hard to pay it off as
soon as possible
Being mediocre is definitely
better than being poor.

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Hacking the Charts of the


Financial Situation:
at first, there is some
tiny saving left at the end of the
but they use the little
surplus to acquire more debt
buying stuff they cant afford
liability is greater than
the amount of asset, resulted in
negative net worth
excessive amount of
liabilities put more load to the
overall expenses because they
need to pay interest charges
Negative cash flow
when they finally got a
career promotion with higher
income, they use the tiny surplus to acquire more
liability switch to a bigger house, a bigger car etc
frugal is a word that doesnt exist in their dictionary

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Hacking the Charts of the Rich

Financial Situation:
they are definitely the
Millionaire Next Door
normally they work hard
to increase their income
they earn better than the
mediocre but still spend like the
they save a lot from every
paycheck which is normally
invested, in the area they are
familiar of, probably in their own
some ultra rich know how
to use the leverage of good debt.
They might get into deeper debt,
but at the same time the debt is
being used to acquire justifiably
greater assets. Assets
contributes more earning and
improve their cash flow chart.
financially, they are
They are the prodigious
Accumulator of Wealth
How do your cash flow and net
worth charts look like?

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Money Patterns with Sound Advices

Here, we analyze the movement of incomes and expenses with
line chart illustration. Watch the movement closely and plan
ahead for unforeseen circumstances. Examining the pattern of
your cash inflow and outflow is the most essential part of
determining your financial well-being.
Ideal Income & Expenses Flow
Lets look at chart below. It shows an ideal movement of income
and expenses of a persons entire life.

Section A: Learning Phase

Learning phase started since the day you were born. In fact, it
never ends because learning is a lifelong journey. But in this

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case, lets say a person need 20-25 years of education to be

equipped with the skill to earn a decent living. During this
phase, our life is sponsored mostly by our loving parents. There
is no income generated and most people find that it is the best
time of their life. No worry about money. No major commitment.
This result in:
Outflow > Inflow
Section B: Accumulating Phase
When we started our first job on the first day after graduation,
most of us got excited when the first paycheck came in. If you
are money smart, spend less than you earn so that you can
build up your net worth. This is a period when you work hard for
a good career or business. Expenses increase later as we get
married, own a bigger house, buy better cars and provide
education for our children.
Lets call it the accumulation phase. It ends when we retire, or
at the time we achieve financial freedom around age 40-65. For
those who didnt fall into credit card debt:
Inflow > Outflow
Section C: Retirement Phase
When we finally retire, or forced to retire, active incomes drop to
zero. We carry on our life with the passive income generated
from our previously accumulated assets. We have to do proper
budgeting so that we wont be spending too much. If we spend
the principal sum from our retirement funds, the nest egg might
decrease hence reducing the passive income generated. In
order to stay financially independent:
Outflow = Inflow

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Ideally, this is what we expect for average person. For the rich,
income shoot up at a higher rate. Their passive income is at a
very high level (proportionately). So the green line actually
didnt drop after they retire. Thats a perfect chart that
everybody dreams to have.
Now, lets zoom in to examine a shorter time frame. The short
term cash flow of 1-3 years might not have too significant

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Unforeseen Circumstances that Affect Cash Flow

The ideal plan is a plan that goes exactly as pre-determined.
But life is full of uncertainties. Life is also full of risk. We never
know what will happen tomorrow. This is what makes life the
greatest adventure we wont miss. There are many unforeseen
circumstances that will affect our cash flow

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During economic down turn, a person might lose his job

unanticipatedly. Income suddenly drops to nil. At the other
hand, outflow still goes on. Instead of having a net saving at the
end of every month, there is a deficit that eats into our nest egg.
Preparation: Build up an adequate emergency fund. Losing a
job is just a temporary issue. If you still have your ability and
skill set, getting a new job is just a matter of time.
Illness or Disability

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This is something even worse than unemployment. A person

will lose his earning capability, at least temporarily if lucky
enough that it is not a permanent disease. Saving is replaced
by even higher deficit. Having an adequate emergency fund
might not be enough. The better solution is to transfer the risk
to someone else who can afford it.
Preparation: Insure yourself, and all those family members that
depend on your earning to survive.
Besides the above unwelcome events, there are many other
major issues that is not mentioned here, including natural
disasters like flood, fire, earthquake etc. Dont underestimate
the risk of your family members too. When your next of kin need
your help, you can hardly refuse to lend a hand. Your hard earn
accumulated wealth might not be yours after all if these risks
are not transferred to the insurance companies.
Summary for Action
1. Draft the ideal income & expenses flow chart. You must plot
it the way that you want it to be. It is better to even include the
exact amount of income desired and compromise on expenses.
Mark the details such as earning $50,000 at age 25, $100,000
at age 30, $200,000 at age 40 etc.
2. Study and analyze the past history of your cash flow chart.
Create a proper budget that you can live with. Find out the
unforeseen event that had impacted your financial situation
before. Learn from your own experience.
3. Get prepared for any unavoidable impact on your cash flow.
This includes getting your life insurance reviewed, insuring your

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major assets (house, car, theft protection etc), and also building
up an adequate emergency buffer.
4. Tightly monitor your cash flow. Review it often. Use some
software to help you and do it as frequently as possible,
probably every weekend or every first day of the month.

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