I cowrote this book with Amy Sipagal, who is also the cowriter of Teaching Your Kids about Money.

It is a list of frequently asked questions about personal finance.

Now, I would like you to post a personal finance related question here in the comment section (either with Facebook or WordPress comment, or both if you enjoy doing it). By simple posting a personal finance question, you stand a chance to get a complimentary copy of this brand new book : Top 93 Personal Finance FAQ in Malaysia.

One winner will be announced each week until end of February. Try your luck just by simply posting a question below.

This article is posted at: KCLau's Money Tips

New Book Contest: Top 93 Personal Finance FAQ in Malaysia

As the New Year has arrived, there is a festive cheer in the air. People also sound very determined to achieve their goals. This optimism is not only limited to personal goals like to quit smoking or loose 5 Kgs but they also set financial goals like to save enough money to buy a car at the end of the year or to pay up their credit card debt.

Whatever your goal, just resolving to do something is not important. What is more important is to follow through. Also while setting your financial goals you should not try to over-achieve. In such a scenario, it all breaks down like a house of cards. Therefore, it is important to stay realistic. In this article I will look at the top financial resolutions which should form a part of every person’s New Year resolutions to have a healthy financial situation.

MAKE A FINANCIAL PLAN. The most important resolution for a person should be to make a financial plan. A financial plan enables a person to put his finances in perspective. Once you know what your earnings, expenditure, savings and investments are, it is easier to plan the rest of your financial goals for the year. Financial plan enables you to take control of your money and to protect you and your family from any unforeseen calamities. It also helps you plan better how to achieve your financial goals. Therefore, having a financial plan should be every person’s number one financial resolution for the year.

MAKE A MONTHLY BUDGET. Your second resolution should be to make a monthly budget and stick to it. Once you know how much monthly inflow of cash you have, it is important to allocate how much you are going to spend and how much are you going to save. There is no point in living from pay cheque-to-pay cheque. And this is only possible if you stick to your budget. There are various online tools available to help you achieve the same.

PAY OFF DEBT. It is important to keep paying off whatever debt you have accumulated. This could be in the form of credit card debt or loans taken for various reasons. Also included in this category are your monthly bills. It is important to pay your monthly loan instalments on time. You should set a ‘bill paying date ’in your calendar. On that particular day it is helpful to look at all pending bills to make sure you have not skipped making any payment. If you have accumulated debt on many credit cards, it is best to start paying off the debt on the card that has the highest rate of interest. But at the same time make sure that you keep making the minimum payment due on each card.

GET INSURANCE. You should get the right insurance policy that works best to suit your needs. This is important to shield you against any unforeseen circumstance and to make your future and the future of your loved ones secure.

INCREASE YOUR SAVING. This in turn translates into paying yourself first. Like you set out an amount for each month to make payment for various needs, similarly you can set automatic transfer of funds to a separate account, so that as soon as your salary comes in, a part of it gets transferred to another account in the form of saving. This helps as when you do not see the money, there is no temptation to spend it. Similarly you may set up a retirement fund to help you ease into that phase of your life.

PROTECT YOURSELF FROM INTERNET THEFT. Even though at the outset this may not sound like it is relevant to you, and it won’t happen to you, but internet theft is as much of a reality as getting your chain snatched on the road. There are various types of financial frauds that take place on the internet. It is important for you to never give out your financial information. Also as more and more financial transactions are being done online it is important to safeguard your online identity. Keep changing your passwords to keep your money safe.
If you set your financial resolutions realistically and have an intention to keep up with them, it would ease the stress levels of everyday life. It would also mean having a more secure future.

This article is written by Mr. Mayank Gupta who blogs at NineMillionDollars.com who offers financial plan services

This article is posted at: KCLau's Money Tips

Financial Resolution for 2012

Here is the corrected, albeit more complicated, method to calculate investment return of SARA 1Malaysia by investing your own RM 5,000 in cash and not withdrawing the monthly RM 134 payment until maturity. Credit goes to Peter Lim who dropped his insightful comment in my original post,  An (Over-)Simplified Way to Calculate Investment Return of SARA 1Malaysia.

My gratitude also goes to Malaysia’s top financial blogger, KC Lau, for my blog post mention in KCLau.com –   Should you invest in SARA 1Malaysia Fund? (where my post was featured).

Peter Lim’s original comment

I think there’s a mistake in the assumption (thus causing a mistake in the calculation and the answer).

If you invest with your own cash of RM 5,000, you either get RM 134 per month OR RM 13,000 at the end of 5 years (if you choose Not to take the monthly withdrawal), Not both.

**********

Using the same online financial calculator, the parameters in Scenario 1 becomes much simplified, like this:

Present Value= -5,000

Future Value = 13,000

Payment at: End

Then, click on IR button. The interest rate is 21.06 percent per annum. This is the Annual Effective Rate (AER).

Now, we need to convert AER to Annual Percentage Rate (APR).  AER is the interest rate when you account for compounding, while APR does not. For a crash course on APR and AER, you can refer to a post I wrote last year,  Lesson 1: Annual Percentage Rate vs Annual Effective Rate – Can you differentiate?

AER to APR conversion mathematical equation (or use Conversion or CNVR function on a financial calculator) :

APR = n*[(AER+1)^(1/n) - 1], where n = number of times for intra-year compounding, and “^” represents “power of”

APR = 12 x [(0.2106+1)^(1/12) - 1] = 19.26 percent

Hence, simple interest rate = 19.26/12 = 1.605 percent per month. This is the monthly return of investment for not withdrawing RM 134 monthly.

**********

Now, we can do a double check of our calculation above.

Total capital after 1 year = 5,000 x (1 + 21.06%)  = RM 6,053

This is equivalent to:

Total capital after 1 year = 5000 x (1+ 1.605%)^12 = RM 6,053

My financial thoughts

After reading readers’ comments from my original post and KCLau’s post, it does seem to me that the workings of this scheme is quite vague to most people. For instance, the money you invested in is actually in the form of 5000 units of Amanah Saham 1Malaysia (subject to change, but what is actually subject to change – the units quantity or the price per unit?) with monthly payment eligibility if you have at least 100 units (does that mean I can sell some units within the 5 years? If not, how can an investor end up with less than 5000 units per entry price?).  The units are priced at RM 1 per unit, and it does seem the price is  fixed at RM 1 throughout 5 years but one reader didn’t think so. Besides, someone mentioned that we can only invest using loan, not own cash, and that single people are not eligible for the scheme.

If you have any insider information to share apart from what is stated in the official website, please drop your comments.

This article is posted at: KCLau's Money Tips

A Corrected Method to Calculate Investment Return of SARA 1Malaysia

How www.compare-insurance.com.my is injecting the interest back in insurance purchasing
By: N. Nathan

The first thing you’re thinking when you saw that headline must be, “how is insurance shopping different from any other shopping trip?” Well, here’s the answer.

In a typical consumer purchase cycle, a potential customer would decide to get a product, go to the mall, look over the rows of brands and then select one over the others to purchase. This applies from buying toothpastes to cars and houses. The typical purchasing thought process would look something like this;
Stage 1: Decide need mobility. Option of transportation; bike, car, public transport
Stage 2: Decide buy car. Option of car types; SUV, sports, MPV, sedan, coupe
Stage 3: Decide buy MPV. Options of car brands; Toyota Avanza, Nissan Grand Livina etc
Stage 4: Decide buy Toyota Avanza. Buy!

Yet in the insurance industry, the common selling method is to sell the brand first, and then sell the product. The idea is you are supposed to choose the company first, and then narrow down your choices to the products that they have. That’s akin to walking into a shopping mall, picking out one shop, and limiting your choice to the apparels available in that shop.

Or imagine if you walked into a grocery store, and instead of seeing all cereals arranged in a row of shelves, the store had arranged shelves according to brands of products so that all of Nestle’s products from chocolates to instant noodles are in one row of shelf. To compare a couple of boxes of cereal, you’d have to comb through the entire store for all the brands to see which one sells cereals!

Rerouting the insurance purchasing process

If you’re happy with that arrangement, you’ll be satisfied with the current way the insurance industry works. If you’re a picky shopper, or just want to know all your options without having to spend weeks talking to one insurance agent after another to determine which plan suits you best, you may want to take a look at www.compare-insurance.com.my, an original, independent site where you can find and compare insurance policies from a list of insurance companies.

This first-of-its-kind website gathers as many insurance plans as possible and lists them according to category, which the user can then select based on needs. This reverses the purchase process back to the normal process where potential customers can make a selection based on needs first and narrow it down to the brand of product at the tail end of the shopping quest.

For example, if you are looking for an endowment plan for your children’s education, you can list and compare all available plans in just two clicks from two dropdown menus. The first menu determines if you are looking for something for retirement, your child’s education, protection or wealth enhancement. The second filters according to product type such as endowment, term, whole life, investment-linked or takaful.

Now there are hundreds of insurance policies out there. By filtering it down according to these two functions, you will be able to shortlist it to a handful. It is now easier for you to glance through each or research them diligently to finalise your selection.

With www.compare-insurance.com.my, you can also check the estimate cost of insurance and calculate some basic personal finance matters besides look up the glossary for unfamiliar insurance terms.

The site is also adding a listing of insurance agents so that potential customers who found plans they’re interested to know more about can be matched to the respective agents. (If you’re an insurance agent, visit the site and fill out the contact form so you can be listed as an agent in the customer-agent matching service.)

With this method, users get fast response and agents get customers coming to them instead of having to tirelessly beat down doors for business. Everybody’s happy.

More services

www.compare-insurance.com.my is constantly expanding its database of products and refining its services, searches and online capabilities. To check it out for yourself, visit www.compare-insurance.com.my and start browsing for the insurance policy you have always been meaning to get.

If you support the idea behind www.compare-insurance.com.my and appreciate having the opportunity to assess products, please link this site as Compare Insurance Malaysia to your own website, blog or social media front. As this is the first time such a service has been created, this will help spread the word to the public who would likewise want to know that such convenience exists and is available to them.

The author is (usually) a diligent shopper who likes to research, research, research before whipping out the wallet.

Note: The author is also the founder of www.compare-insurance.com.my on a public service mission

This article is posted at: KCLau's Money Tips

Insurance Plans Comparison Site: The New Way to Shop for Insurance

Our government launched the Skim Amanah Rakyat (SARA) 1Malaysia which is offering 32.16% return per annum on your investment. Is this too good to be true? 32.16% return is definitely higher than most of the investment vehicles available in the market right now.

How it works?

SARA 1Malaysia is a hybrid of a unit trust investment and a loan product aimed at encouraging low-income earners to save and invest.
1. Invest with your own money.
The investment is limited to RM5000 per household and you’ll receive RM134 dividend every month up to 5 years, according to PNB president and group chief executive Tan Sri Hamad Kama Piah Che Othman.
In this case, the effective rate of return is more than 30% per annum!

2. Invest with bank’s money (taking up RM5000 loan)
You’ll still receive a handsome dividend of RM134 a month and after deducting the bank’s monthly repayment of RM84, you get to enjoy a profit of RM50. But in this case you’re not forking out any money so the actual return is “INFINITY”. These is how rich people get rich by using other people’s money to invest.

For how to calculate the actual return, you can refer to this great article by LCF:
SARA 1Malaysia Return Calculation

Are you qualified?

The purpose of this investment scheme is to help the poor to start investing and saving.
You are qualified to invest the fixed amount of RM5000 if

• Malaysians aged between 18 and 58 years;
• Applicants must have a combined gross household monthly income of between RM500 – RM3,000;
• Applicants must not be declared bankrupt throughout the loan funding period
• Applicants and / or spouse(s) must not be a beneficiary of other Government special schemes managed by Amanah Saham Nasional Berhad (ASNB) i.e.”Program Pembangunan Rakyat Termiskin (PPRT)”, “ASB Sejahtera” and “ASW2020-Bandar”;
• Applicants and / or spouse (s) do not have any investments in ASNB unit trusts, OR, if there is, applicants and /or spouse(s) (household) have a combined aggregate investment totaling RM10,000 or less in all ASNB products;
• Only one household is eligible to obtain the loan funding

How to invest?

• Apply for loan from any of these 4 banks: Maybank, CIMB, RHB and Bank Simpanan Nasional 
• Applications open on January 30th 2012 and will extend for a year or upon full subscription. (I think it will be fully subscribed within the first few hours, if not days)

More information: visit the official website: SARA 1Malaysia.

Should you invest in SARA 1Malaysia Fund?

So now it comes to the big question of whether you should invest in SARA 1Malaysia fund?

I guess if you are eligible, the question should be “why not?”. Get the loan to invest. It is free money.

What do you think about this investment scheme? Are you eligible to invest?

This article is posted at: KCLau's Money Tips

Should you invest in SARA 1Malaysia Fund?

This is a guest post by Mr. Koon Yew Yin. He is a philanthropic investor whom I consider the Malaysia Warren Buffett. This article can definitely sum up his wisdom through years of experience in investing in stocks.

Risks in doing business:

It is important to stress that all businesses involve risk; hence the selection of shares is also a risky business. This is not the same order of risk as may be involved in going to the casino or betting on the four digits which in 90-99 % or even more of the cases, results in the patron losing his money, if not his pants.

Picking winning stocks means that we pick the companies that can meet the constant challenges of competition, supply and demand, change of fashion and style design, obsolete stocks write off, etc. There are also unforeseen factors such as variation in interest rates, import and export restriction, foreign exchange variation, change in Government regulations, etc. Inclement weather such as flooding affects production as we have seen in Bangkok so that even the most well run of companies such as Toyata and Honda cannot escape it.

Best form of investment

In my view, stocks are the best form of investment. They are tax free, have no management problem, and you can reduce or liquidate all your holdings at any time. There is a classical saying in the market – “You can buy the winning horse after the race”. This means that you can still buy a good share after the company has announced its profit. This does not mean that stocks are entirely risk-free.

Fundamentals of Stock Selection

The basic fundamentals for share selection are P/E ratio, NTA, Revenue, cash flow etc. How important are these factors?

The most important criterion is profit growth prospect. Never buy any share if the company cannot make increasing profits. You must buy shares that Fund managers are interested. They are the movers and shakers. Do not buy too much of illiquid shares because it is cheap. It is cheap for some reasons which may keep it at basement prices.

The main reasons why share prices go up include the following:
a. Exceptionally good profit growth prospect
b. Fund managers must be interested, liquidity, publicity etc.
c. Dividends are an important catalyst for moving share prices up
d. Unexpected good news of profit, bonus issues etc. will push up share prices.

When to Sell

When to sell? Do not worry about the daily share price fluctuation if you have a target price. Quite often the share you hold can move up rapidly and continues to go up. You must remember that no share can go up indefinitely for whatever reason. Sell when you are not willing to buy at the price or the reason to buy is no longer valid. Remember you must sell so that you can have funds to buy back during correction. If the fundamentals have not changed, the share price will go up again.

What to Buy

After having seen so many unexpected surprises in the stock market, I consider the safest shares to invest are undervalued oil palm shares. The reasons are:-

a. The production cost for CPO is about Rm 1,300 per ton and the average selling price has been more than double the production cost in the last 10 years or more. The average CPO price for 2011 is more than Rm 3,000 per ton. Which business can offer such big profit margins?

b. The demand and profit are sustainable due to population increase. Moreover, both China and India who are our buyers have been improving their economy. The financial problem in Eurozone and US has little or no effect on our palm oil market.

c. A palm tree will start fruiting after 3 years. It will continue to bear more fruits until it is about 16 years old after that age it will begin to bear less fruits. Only after about 22 years a palm tree needs replanting.

d. The land always appreciates in value.

e. There is good profit growth prospect and sustainable profit

I am obliged to tell you that plantation shares form the major part of my investment portfolio. If you decide to buy, I am not responsible for your profit or your loss.

How to become a super investor?

I started serious investing in public listed shares when I retired from executive work at 50 years old. I was not an accountant nor have I a MBA degree. I was just a civil engineer and I hardly knew how to read a balance sheet at that time.

I started by reading to understand the basic fundamental principles of share selection as practiced by Warren Buffet, Peter Lynch and other great investment gurus. These are the key traits to being a super investor that I picked up.

Trait 1: Be a contrarian investor, that is, the ability to buy stocks while others are panicking and sell stocks while others are euphoric. In 1983 when China declared that they wanted to take back Hong Kong, the people were selling as if there was no tomorrow because the Communists were coming. The Hang Seng Index plunged to about 700. Currently it is around 18,500.
In such a situation at that time, would you buy Hong Kong shares? I did.

Trait 2: Obsession in playing the game and wanting to win. Winning investors don’t just enjoy investing; they live it. They wake up in the morning and the first thing they think about, while they are still half asleep, is a stock they have been researching. They are thinking about selling, or what the greatest risk to their portfolio is and how they are going to neutralize that risk.
They are obsessed in enhancing the value of their holdings. I am that way.

Trait 3: The willingness to learn from past mistakes. Most people would much rather just move on and ignore the dumb things they’ve done in the past. I believe the term for this is repression.? But if you ignore mistakes without fully analyzing them, you will undoubtedly make a similar mistake later in your career.

Trait 4: An inherent sense of risk based on common sense. Most people believe analysts’ reports which are often ‘a buy’ recommendation. It is very seldom they recommend ‘a sell’ because they would lose the business from the company he has recommended ‘a sell’. You must always take any analyst report with a pinch of salt.
I believe the greatest risk control is common sense which is not so common sometimes.

Trait 5: Confidence: Great investors must have confidence in their own convictions and stick with them, even when facing criticism. Buffett never got into the dot-com mania though he was being criticized publicly for ignoring technology stocks. He stuck to his guns when everyone else was abandoning the value investing ship. He was proven right when the dot com bubble bust.

Trait 6: Clear thinking. When considering a share, you must try to understand the nature of the company’s business and its inherent difficulties so that you can evaluate your risk exposure. There are a lot of people who have genius IQs who cannot think clearly, though they can figure out bond or option pricing in their heads.

Trait 7: And finally the most important, and rarest, trait of all is the ability to live through volatility without changing your investment thought process. This is almost impossible for most people to do. When the market makes a severe correction, most people dare not buy more shares to average down or to put any money into stocks at all when the market is plunging. They would begin to doubt their own judgement.

Wishing you a season of happy and profitable investing!

This article is posted at: KCLau's Money Tips

How to beat the market and become a super investor

This reader wants to know if she can achieve her financial goal of saving the first RM50k within 5 years time. She provides her financial statement and I provide her the estimation and the method on how to calculate the saving rate in order to achieve her saving goal.
Watch this screencast for more details.

As part of a growing community, it is your contribution to the discussion here that makes this blog a great place to hang around for financial advice. Please tell us what you think this reader can do to achieve her financial goal, in the comment section below.

This article is posted at: KCLau's Money Tips

Question: Can you accumulate RM50k in 5 years by saving RM300/month?

Dr. Burzynski found a proven cure to treat cancer patients. It is not invasive, no side effect and comes with much higher success rate to heal cancer patients. The problem is:

• not many people knows about it because pharmaceutical companies tried to shut down his practice for decades.
• if his method is made popular, there will be a financial tsunami to the professionals and marketers who are currently involved in chemotherapy and radiation to treat cancer.
• many patience are dying…everyday.

I just watched this documentary on Netflix that tells the whole truth.

You can watch it here for free.

Or watch it at Documentary Channel, also for FREE.

Please click “like” button below or share this links to the people you care, especially those who are currently suffering from cancer.

This article is posted at: KCLau's Money Tips

Cancer can be cured, without radiation or chemotherapy

As you might have suspect, I in fact receive tons of email everyday. Although I read most of them but I just couldn’t get time to reply each and every one. When I do, it is normally worth sharing with you. This is an email from Don (of course not his real name)

Dear KCLau,
I need some advice. You can share this if you want to but I hope to remain anonymous. I am an engineer working in an oil and gas company with a fixed monthly income of RM6500 average. I am now 27 and graduated from the same university you came from 3 years back in 2007. Below are my monthly expenses:-

All in RM
EPF = 627.00
Tax = 600.00 average
MyVi Car Instalment = 492.00
House rental = 150.00
Utilities = 90.00
PTPTN = 210.00
Food = 500.00
Fuel = 160.00
Handphone bills = 250.00 (I help paying my mum’s, sister and fiancée’s line)
Insurance = 400.00
Misc spending (credit card etc etc) = 500.00 average
Mum’s monthly allowance = 1000.00

Total savings per month = 1500 average

To date, below is a list of my assets/savings in hand:-

Savings = RM 24000.00

House bought from developer in Dec 2009 and expected completion Dec 2011 = RM 398000.00
• Loan for RM350000.00 for 40 years with rate of BLR-2.25%
• Monthly instalment for 40 years duration is RM1300.00. Installment begins in 2012.

Own 2 cars. Proton Saga bought with cash at RM9600 after grad with money saved during uni days. MyVi bought RM49700 in 2009 loan for 8 years due to loan conversion from company loan to AmBank loan. Still have 6 years to go
counting from June 2011. Down payment paid RM12700.

Total invested in stocks = RM8900. I just started to get active again after 2 years remaining dormant. Lost a bit of money previously due to stupidity, laziness and greediness. However, I have learnt my lesson and educated myself to learn to research before buying any stocks. So far, I am holding it due to its potential and have yet to lock any gains. In other words, I am doing okay and if I sell it I will get a bit of money.

ASW 2020= RM900

Current family financial situation which you may want to know:-

1. My dad lost his job. So he does not have any income. Total combine FD, my dad and mum, is just a mere RM30000.00.
2. My mum fetches children to school with a net income of RM2000. Minus all the expenses (utilities, insurance, food, sister’s education etc) and the monthly RM1000 allowance I give to her. Nothing’s left. Expected to lose her job by 2012 due to no school children to fetch.
3. Sister’s ambition to study aviation. Finish Form 5 in 2012. RM250000 is needed to complete aviation courses.
4. Brother’s working in oil and gas with an average income of RM3000. Contribute RM500 monthly to mum’s allowance. Rest is for him to save till he can own a house. He just graduted.
5. Fiancée monthly income is RM4000. RM1000 savings per month.

My target:-

1. Planning for marriage in 2012. Wedding dinner etc.
2. To buy a 2nd property, looking a condo/apartment, to be rented out.
3. To start an engineering business with my trusted friends by 2015 or earlier.
4. To earn my first million by 35.
5. To have 2 kids by 2015
6. To be able to support my parents

Why I can’t sleep every night that I felt like I am going nuts:-
1. By 2012, my parents will be solely depending on the RM1500 monthly allowance my brother and I give. I may end up paying them more for disposable expenses!

My reply:
This is unavoidable ..when the day comes, you still need to live with it. However, human can easily adapt to a situation. There are people living in the arctic that proves no matter how bad is the situation, lives still go on. Your parents may have to adjust to a more frugal lifestyle when the time comes.

2. I can’t save enough for my wedding dinner and I am thinking to just abort the dinner alone and, perhaps, just go for a honeymoon trip to have a good time together. However, I feel guilty for not doing it for my fiancée.

My reply:
You will get angpow from the relatives and friends you invite to the dinner. Invite more richer friends and you may have extra fund leftover after deduct the dinner cost. From my experience, some best friends and wealthier relatives give bigger angpow. I don’t think you will lose money in your wedding dinner.

3. Because of point 1, I may lose a chance to buy a 2nd property so it is affecting my plans to increase my net worth.

No choice. You need to make more money. You can also look into the possibility of buying properties without money down (through auction or desperate sellers). If your rental yield is enough to cover the installment, it means you don’t need money to buy your second property.

4. My parents’ house is in Sunway and it’s close to Taylor’s. I believe it may fetch good rental value and I am thinking of moving my parents to my new house while converting this existing house for rental. However, due to previous modification, I may need to fork out some money to add an additional toilet and to add new partitions all over the house for rental. Due to my personal plans, I do not have the money to finance such modification. How do I go about it?

You can refinance your parents’ house for more cash. The excess fund can be used for the renovation. This assuming that your parents’ house is fully paid off or has substantial equity built up. As long as your rents still cover the new mortgage payment after refinancing, it is a worthwhile investment.

5. Setting up a family with no parents support proves to be tougher than it looks. I fear that I may let down my fiancée due to my current financial burden and that I may not be able to support 2 children expenses.

Undeniably, children cost a lot of money. I can buy a bungalow and pay the installment from the money I spend on my son. But anyway, there is too much fun being in parenthood. Just adjust along the way and you will be doing fine. When I look back at my parents, they manage to raise 4 kids with only average RM1000/month income. It is amazing, isn’t it?

When you have more commitment, you will learn to adjust to the situation either by spending less or making more money or both. You are motivated to do so.

6. I am an ambitious person. I love making money. And I came to realize that I could never be rich if I work in an organization. I got to go beyond the boundaries. But I fear that with this entire financial burden, my plans fall apart.

You already have planned to start a company with your friend. Focus on that. I think you will succeed. Wish you all the best! When you see a successful organization or company, it means that once upon a time, there was someone who made a tough decision and taking risk to call the shot.

KC Lau, with my current practice,
Do you think I can achieve my dreams and goals?
What can I do differently?
Is it advisable to convert the Sunway house for rental purposes and abort my wedding dinner for the renovation and to buy new furniture for my new house?

Please feel free to ask me more questions. I am so worried of my responsibility as an eldest son, a brother to my younger siblings, a husband who loves his wife so much that he wants to ensure that she is happy and worry-free, a father who gives good life to his children and a man who is financially free and rich.

Below is his email reply after mine:

First and foremost, thank you for sharing your insights and experiences about personal finances. I take your reply “I think that you worry too much.” that I am currently managing my finances good enough to achieve my goals. And all I needed is to adjust myself as I am going thru life along the way provided that I am prudent on my spending and desires.

I had previously thought about your reply in blue. But I am seeking some reassurance because it does seem to me that I am rolling my hard earn money without savings surplus. This does shake me up a little as I don’t see property or stocks as savings due to its time needed to liquefy it. For example, my nett savings for year 2010 has been hovering in between RM25000 to RM30000. My target was to save RM30000 per year making it RM60000 for 2010. However, I did not make it due to the increase in my parents allowance, the down payment for my new house and jewelries for my wedding.

Anyway, I hope I can share with you once more when I have achieved all of my goals and is financially free. Thank you KC Lau.

To you as a reader of our emails:
What does this story remind you of? What advice do you have for Don?
Post a comment below.

This article is posted at: KCLau's Money Tips

Financial Burden: Can the eldest son of retired parents achieve his financial goals?

A person protects his personal wealth or estate by writing a Will. Similarly, a business owner who wants to ensure his business is protected against unforeseen or unfortunate circumstances, for example death, critical illness, bankruptcy or total permanent disability (TPD) can create a Business Value Protection Trust (BVPT). Having a BVPT also protects the interest of the other business co-owners.

A BVPT ensures a proper exit strategy is in placed for a business owner. It ensures his business value is protected and the continuation or smooth transition of the business interest to the other co-owners.

Important issues to address

If something happens to a business owner (e.g. untimely death or TPD), various issues arise that have to be addressed.

* Inheritance by heirs
When a business owner dies, his share of the business interest will be passed on to his heirs who may or may not be interested in the business.

* Difficulty in selling the business interest
The business share of a private limited company must first be offered to the existing shareholders for purchase before it is offered to a third party. The heirs who inherited the business may also end up selling the business share at an undervalued price as they are not knowledgeable of the real value of the business.

* Financial difficulty for the family
The deceased business owner’s family will need to settle all existing debts and meet other financial obligations such as living expenses, medical and education expenses. If the business owner is critically ill or suffers from TPD, the family has to cover all the medical treatments required.

* Serious disruptions to the business
When a business owner passed away and his business interest or share goes to his heirs, the business may be disrupted. For example, the unqualified heirs may wish to get involve in the business or may even dispose the business share to a competitor.

* Closure of the business
Closing down the business may be the recourse taken by the surviving business owners if the existing business is disrupted too much. For example, the inexperienced heirs want to participate in running the business and causing complications to the other business owners.

Benefits of having a Business Value Protection Plan

The main advantages of having a Business Value Protection Plan are

* Guarantees full and fair value
The business share or interest can be sold at a fair price agreed upon by all parties. Unqualified heirs are prevented from disrupting the business and also avoids the disposal of the business share to other parties.

* Pre-agreed pricing
The price is pre-agreed upon by all parties and averts problems later on between the surviving business owners and the heirs.

* Quick and smooth transfer
All parties are protected including the deceased business owner and the surviving co-owners with the implementation of a Trust Deed. Having a plan ensures a smooth and efficient transfer of the business to the co-owners. Major disruption to the business can therefore be avoided.

* Conversion to liquid income
The non-liquid stock/interest is converted into liquid income ensuring funds are available to the outgoing business owner or his loved ones (as contained in the Trust Deed).

* Independent referee to execute the necessary transfers
The appointed Trustee is responsible to ensure that the outgoing business owner’s interest is transferred to the surviving business owners as well as the proper distribution of the sale proceeds.

* No disruption to the existing business
The business continues to run smoothly with no major interruption or interference providing reassurances to everyone concern, for example the suppliers or creditors as well as key employees.

* Prevent wastage of the sale proceeds
Each business owner leaves specific instructions in the Trust Deed that instructs the Trustee on the proper distribution of the sale proceeds and to ensure that the beneficiaries do not misspent the sale proceeds.

It is obvious that having a Business Value Protection plan gives all parties concern the peace of mind to conduct business together without worries should anything happen to one partner.  Now, let’s look at the relevant documents essential to creating a Business Value Protection plan, the trigger events and the insurance policies.

Relevant documents

The important documents required in a Business Value Protection plan are

* Buy-Sell Agreement or Cross Option Agreement
The terms and condition of the sale are stated clearly in the agreement as well as the share value of each party, the specific events triggering the buy-sell and the funding for purchasing the business interest (life insurance and cash).

* Irrevocable Power of Attorney by each business owner
This enables the Trustee to act upon the written instructions to transfer documents of the outgoing business owner to the surviving business owners.

* Trust Deed
The Trustee will distribute the sale proceeds of the share to the Trust Beneficiaries named in the Trust Deed.

* Life Insurance
This is used to fund the purchase of shares of the outgoing business owner.

Trigger events

The trigger events such as death, total permanent disability (TPD), retirement (optional) and critical illness (optional) must be clearly defined. These events will trigger the sale and purchase of the business interest. The business owners concerned must determine which event shall be used to trigger the buy-sell of the business interest. The events with exception to retirement must be the same as stated in the insurance policies to trigger a claim.

Insurance policies

The business owners are required to purchase first party insurance policies on their own lives and from the same insurance company. This ensures consistency especially in the definition of events triggering an insurance claim. The sum assured should be proportional to the value of their individual business interest.

The payments of the insurance premium can be made through the dividends to the shareholders or the Director’s fee if the shareholder is one of the Directors or it can be made by the individual business owners. All the insurance policies are assigned to the Trustee to ensure a smooth process where the insurance proceeds are used to settle the sale and purchase price of the outgoing business owner’s interest and to distribute the proceeds to the Trust Beneficiaries.

Business Value Protection Scheme

Below is schematic flowchart that illustrates the idea of a Business Value Protection plan, provided by Rockwills.

This article is posted at: KCLau's Money Tips

Business Value Protection Trust: Estate Planning for Business Owners

This is a guest post by Jenna

When your company asks you to relocate, can you really refuse? Unless you have something else lined up in this arid job market, then the answer is probably no. With that said, you do not need to accept relocation based solely on the terms being offered by your company. While you want to avoid alienating your employers, asking the right questions about critical aspects of such a move is a normal and above all expected reaction. But what should you be asking? Consider the following questions – some you ought to be asking them, and others you can find the answers to yourself:

What is the tax rate in this new location?

If you’re being asked to move out of the country, then chances are the tax rate is going to be different. On the whole, the difference shouldn’t be staggering, but if you live in state with a particularly low or non-existent income tax, it’s critical that you find out what it will be in the new location, for salary purposes.

Who will be our new insurance provider?

Health and dental insurance companies vary from region to region across the company. Because of the likelihood of changing companies, demand to know what the new plan will be like and and request from-the-source facts immediately. Co-pays and deductibles are sure to vary, which can mean big changes in your cost expectations when medical attention is needed.

Will my moving costs be covered?

If a company is asking that you relocate, then it is ethically their responsibility to cover the costs of your move. It’s not a legal requirement, so it’s important to ensure that they will compensate you before you agree to relocate. There is no way a company can justify refusing to cover the costs of a move, so re-think your loyalty if they do not wish to help you financially.

Will travel back home be covered?

Compared to getting your moving costs taken care of this is a debatable demand to make, but try and have your travel costs compensated if you are leaving friends and relatives behind. Inform them that you will expect to return home at least once a year, and that since your travel is due to being relocated, they should pay for your round-trip travel. They won’t offer this so it’s important to ask.

What is the cost-of-living difference?

Skip asking your employer this directly until you’ve seen for yourself via online cost-of-living calculators, as you don’t want to bring it to their attention that you are moving somewhere you should be paid less. But in the event that your prospective new location is a costlier place to live, then you must ensure that your company is willing to increase your salary accordingly. Even if you are not expecting to own a home, it’s not as though the increase in property value isn’t passed on to renters. Do not budge on this issue – being paid less than is fair in a given geographical location is asking for financial trouble.

Do not agree to any request for relocation without finding the answers to these questions. Whether that means some dedicated Internet research or a no-nonsense approach with your employer, ensuring you aren’t walking into a new place with more hassles than are inherent is a vital aspect of such a work-related situation. Never pass up opportunities to grow with a company, but always validate the practicality of such opportunity before you proceed.

This article is posted at: KCLau's Money Tips

What to Ask When Asked to Move for Your Job

This is a guest post by Andrew Brusnahan © 2011

The United States appears to be a haven, sought after by outsiders from all over the world. With the housing market there down lower than it ever has been, purchasing real estate there would probably be a wise investment. With a population of more than three-hundred million people, the United States is home to a wealth of real estate investing opportunities and will probably continue to grow as more and more time progresses. Therefore, now may be the best time to invest!

First and foremost, America as a whole is a relatively stable country when compared to the rest of the world. Aside from that, there is a literal melting pot composed of a multitude of different ethnicities, nationalities, languages, cuisines, etc. It is because of this that there is no shortage of homebuyers and renters in the States, so any home investment made there is may yield a high return.

Of course, whenever there are any financial dealings in another country, one must abide by the taxation guidelines set forth by that country; it is no different in the United States. Those of you who have grown used to their own income tax software will have to trade it in for an American version. For those who choose to reside in the United States, they will have to file income tax accordingly. Houses in the United States also incur a property tax, that can sometimes be a bit steep, but when the house sells or rents, it will all be worth it.

Most of the time, the United States is looked as a place where dreams can come true. For a lot of people, the States are, in fact, a place where dreams can come true because of all the opportunities available. Even though the housing market is down, the unemployment rate is down with it and now is the time to find work. Or, an ambitious entrepreneur has a significant chance of making a name for him or herself in the States. Therefore, purchasing a home can work as one of two types of investments. One type is simply investing to get a decent return. The other type would be an investment in one’s own future, or new future or should say, living in America.

So, if you are looking for an investment that has a significant chance of yielding a high return, then consider investing in American real estate. For several years now, the housing market in America has been on a steady decline and that downhill slope is only going to last for so long before it begins to rise again. Therefore, now might be the time to buy. A low cost of living, excellent tourism market, and multitude of home buyers and renters, are powerful motivators.

This article is posted at: KCLau's Money Tips

Is the United States real estate worth investing now?

After launching my fifth book, Roadmap to Financial Freedom in 2010, I was overwhelmed by how well it was received. We sold thousands of copies and many readers and attendees at my talk and seminars shared with me that they’ve been inspired by the roadmap concept and are fully committed to achieve financial freedom.

I still often get asked “how do I get started?” The market is flooded with books, audio CD’s, podcasts and YouTube videos offering concepts on how to achieve financial freedom. The choices are overwhelming! With this in mind, I wanted to create my own financial freedom model. I decided to deliver a simple financial freedom model that EVERY Malaysian can understand and act on immediately. The model is by a Malaysian for Malaysians and cuts through all financial jargon and strip the concept to its bare bone. The model is simple to understand yet comprehensive, relevant and applicable for all Malaysians. Most important of all, it provides easy and friendly tools to guide Malaysians to take the necessary steps to achieve their own financial freedom

Thus, the creation of  the “YMH Model to Financial Freedom,”  a definitive 4 step financial guide designed to uplift financial consciousness amongst Malaysians and empower them to achieve financial freedom.

The YMH Model to Financial Freedom is THE solution Malaysians need now today in light of the government’s Budget 2012 announcement, which has failed to address to the country’s middle-income group,  a key demographic in Malaysian’s race to becoming a high income nation.   

The lack of commitment to push private sector’s retirement age to 60, the failure to lower personal income tax rate and address the rising living cost for middle income families in urban areas, and the lack of preparation to help this group of people face the possibility of a series recession due to the US and European financial crisis, are but some of the tell tale signs why Yap believes that the Budget 2012 will not support middle income Malaysian families to achieve financial freedom. In fact, middle-income Malaysians may have to help themselves by managing their personal finance like a CFO!

The situation can be best summarised as the poor gets the government help, The rich gets business incentives, while the middle-income group gets nothing!

THE YMH Model to Financial Freedom can be used as a framework for middle income Malaysians to put them on the path to financial success. In addition, the model can also help address some of the most common mistakes Malaysians made while planning for their financial freedom. These common mistakes are;

• No financial goals
• Unaware of where they stand financially today!
• No investment strategy
• Fail to seek professional advice
• Unsure of where to start

Simply put, The YMH Model for Financial Freedom is best summarized as a simple yet comprehensive working, evolving model which supports Malaysian families to take necessary steps to achieve financial freedom.  The 4 steps in the YMH Model to Financial Freedom are defined as:

Step 1 : Define A Good Life

An effective financial freedom plan must start by defining what is your “good life”. Why? The main reason for us to achieve financial freedom is so that we can enjoy a ’good life’. Some may say that their financial freedom objective is to be a multi-millionaire or to be rich beyond their wildest dreams. However, they often forget that this is merely a means to an end. What is the point of being rich but not living the life you really desire. We must be very clear of our purpose before starting the journey to achieve financial freedom.

Once that’s done, you need to identify the financial resources to support your goals. For example, if your “good life” requires you to stop working at 50, you need to have enough assets and income to support your lifestyle after 50.

Therefore, one of your financial goals is to be able to retire at 50.

For this, I have developed the YMH Good Life Worksheet to help you develop your “good life” definition and dated personalised financial goals.

Step 2:  List Your Asset

Assess your current financial resources by listing all your assets, liabilities, income and expenses. You must know your financial position before you can capitalise on them to achieve financial freedom.

It may sound easy, but I can assure you it is often overlooked. Many people are not aware of the assets they own and as a result, don’t deploy their assets to achieve their financial freedom goals.

For this, I have developed the YMH Financial Wealth Inventory. This will assist you in listing all your assets and will result in a personal income statement, personal balance sheet and detailed asset list.

Step 3 : Optimise Your Asset

The next step is to ascertain whether you have enough resources to achieve your financial goals. Optimising your assets is about matching your current financial resources with your future financial goals and reviewing the outcome. Here you will calculate, analyse and plan your journey to achieve holistic financial freedom. If there is any gap in your plan, you can take measures to bridge that gap.
By optimising your assets, you will know where you stand TODAY and this will allow you to take corrective action if required. Otherwise, your financial freedom efforts are at risk.

For this, I have developed the YMH Roadmap to Financial Freedom, which is designed to show where you stand today on your journey to financial freedom. The tool also helps you to develop a financial freedom action plan to guide you on your next course of action.

Step 4:  Grow Your Asset

Today, growing your assets is not a choice but a must. Even if you have enough financial resources, the reality is that you still need to grow your assets to protect them against inflation.

To effectively grow your assets, invest based on your financial goals and risk tolerance, not on the latest trends or ad-hoc advice from investment salespersons. By optimally growing your assets, you will have an array of options to achieve your financial freedom goals.

To help you grow and protect your assets, we’ve developed the YMH Holistic Investing Approach. By using this tool, you can produce your own asset allocation statement, investment action plan and performance monitoring system to help you invest your money based on your financial goals and risk tolerance.

By following the steps under the Model, you will be on track to achieve your financial freedom. You can either apply the Model on your own or engage an independent financial adviser to help you.

To DOWNLOAD some of the tools that i have created for each of the corresponding steps, please visit the FREE DOWNLOADS section at www.yapminghui.com

This article is posted at: KCLau's Money Tips

Framework for Financial Freedom

I received a circulated email from Jackson & Sim (thanks for the info):

Kindly be informed, that the email claiming that an EPF member has to re-nominate his or her beneficiary upon turning 55 years of age is only true if the EPF member had made an Age 55 Withdrawal before 1 February 2008. Therefore, if this member were to continue to contribute to the EPF, he or she would need to make a new nomination.

However, for EPF members who have made Age 55 Withdrawals after 1 February 2008, their nomination remains valid until a new nomination is made.

So if you are over age 55,

1. If you haven’t withdrawn your EPF money, your previous nomination still valid.
2. If you had taken out your fund, and still contributing to EPF (due to post-retirement job etc), you’ll need to redo your nomination if your withdrawal was before 1st Feb 2008. If your withdrawal is after 1st Feb 2008, your previous nomination is still valid. However, I suggest that you redo your nomination to avoid any complication if you are not sure.

What’s the possible complication?

This article is posted at: KCLau's Money Tips

Redo your EPF Nomination after 55, or else…

by Koon Yew Yin,  the philanthropist tycoon.

Recently the leading state newspaper in Perak carried an article which contained details of the Perak State Government’s budget for 2012 which was tabled before the State Assembly on 21St Nov. 2011 (The Ipoh Echo, Issue 133, 1-15 December 2011).

Among the key items of planned allocation in what is clearly a pre-election budget aimed at buying votes for the present state government in the coming elections, the most problematic is the RM 60 million fund set up to assist first time house buyers by providing the 10% deposit as required by Banks to purchase a new house.

I sympathise with the plight of first time low income house buyers and agree on the need to assist them in helping with home ownership.  I can also understand the populist intention of the programme.  However, this programme – as it is currently designed – is not only likely to fall short of its noble goal but will result in grief to the Perak administration.

I can already foresee the following difficulties:-

1. What will happen if the buyers cannot pay the monthly instalments to the banks? A Housing Loan Manager of one of the leading banks told me that the bank can issue the first letter of demand after the defaulter fails to pay up only after 3 months.  Also that the bank is able to initiate legal action only after 3 letters of demand have been sent out. In all likelihood, the legal procedure to recover the property will take 6 months or more.  Hence, it could take more than one year at least for the Bank to evict a defaulter. By the time the house is reprocessed, it would be in such a deplorable condition that the Bank will not be able to recover its loan and administration cost in most of the cases. To sell a reprocessed property, the bank also has to advertise to invite bids. In most cases, the Bank will not be able to get the reserved price in the first auction. If this happens, the bank will have to reduce the reserved price by 10%.  If the second auction is not successful, the reserved price will have to be reduced by another 10%.

2. What will happen when a buyer cannot pay back the 10% to the State Government? Does the Government have the necessary machinery to recover the debt? As you can see above, there are laws to protect the poor men. Even the commercial banks with all the rules and regulations in place, still have difficulties to recover their money, how can the Perak State Government expect to do better?

The administrative cost to recover the debt is not only likely to be considerable but could also exceed the 10% loan outlay.  This will further impoverish the state by diverting resources to unproductive expenditure.

What this means is that any recovery of loan funds will be much less than what has been dispensed, leading to a short life span for the so-called “rolling” fund.

I hope all members of the Perak State Assembly will consider these comments seriously and delay the implementation of the scheme until a later date when all the design and operational kinks and problems are fully understood and accounted for.

A better planned and more stringent housing loan scheme is needed for the state if it is to be sustainable.  The unseemly haste with which this poorly designed scheme is being pushed through for the coming elections will surely backfire on the state government and all Perak subjects.

This article is posted at: KCLau's Money Tips

A Badly Conceived Election Budget Allocation

Now, you can learn a new language without paying any tuition fee. See the video to learn how it works.

Watch the founder’s talk on TED.

This article is posted at: KCLau's Money Tips

Learn a new language for FREE, while and simultaneously translate the web

by Koon Yew Yin,  the philanthropist tycoon.

Since my retirement from active business, I have been more and more concerned about our increasing financial profligacy and irresponsibility. Every day new details emerge about how spendthrift we are as individuals, as households and as a nation.

At the national level, the Auditor-General’s recent report pointed out that Malaysia’s national debt rose 12.3 percent to over RM407 billion in 2010. The amount is equivalent to 53.1 per cent of gross domestic product (GDP) and is the second straight year that the national debt has exceeded 50 percent.

At the micro level, details of how ordinary Malaysians who have accumulated huge debts and are hotly pursued by Ah Long (loan sharks) fill the papers. These stories sit beside constant advertisements urging Malaysians to apply for credit cards with generous spending limits – ads which we have not been able to resist. At last count, there are more than eight million credit card holders, owing over RM30 billion. About one quarter – over two million of card holders – earn less than RM3,000 a month, meaning that many are unlikely to be able to settle their debts.

As for household debt, this has also been rising steadily. According to recent estimates, household debt had reached RM560 billion by the end of August 2010. Household debt-to-GDP ratio had increased sharply from 66.7 percent in 2004 to 76 percent in 2009 making it amongst the highest in Asia. What is especially worrying is that this rate of household debt increase is rising more quickly than the level of increase of household income or wages, meaning that most households are spending more than what they are earning and making up for the difference through borrowing.

Fostering culture of financial insouciance

Besides borrowing from Ah Longs, family members, friends, pawn shops, credit card companies and banks, Malaysians are heavily indebted to the government.

Borrowing from the government for many Malaysians start at an early age and is in the form of loans from the National Higher Education Fund Corporation (PTPTN). Between 2000 and 2009 over 1.3 million young Malaysians in the public and private higher education institutions had received loans ranging from RM8,500 to RM20,000. In all, a total of RM20 billion, RM39 billion and RM71 billion were allocated to the PTPTN for loans to students for the 9th, 10th and 11th Malaysia Plan periods respectively.

Whilst it is encouraging that many young Malaysians are prepared to pursue higher education even though they may not be able to afford it, what is worrisome is the widespread failure to repay the loans taken for the purpose. Authoritative data on loan defaults is not easily available but estimates from a World Bank study in 2007 indicate that the PTPTN management estimates that it recovers only 25 percent of the total amount it should be receiving. As until 2004, the number of graduates making their repayments was only 44 percent of the total number of loan beneficiaries.

In my opinion, some of the blame for the culture of financial profligacy and irresponsibility in our society is traceable to this government policy aimed at providing cheap and easily accessible loans to higher education of our young. Providing low interest loans for educational purposes is in itself an admirable policy. But its noble intentions become subverted when implementation is seriously flawed as students from well-to-do families who can afford the tuition fees are provided access, and there is an inability or unwillingness by the authorities to enforce the repayment of loans.

Once young people learn that they can get away with not paying back their loans or are able to get access to credit despite being ineligible, the bad apples amongst them graduate to scamming the public exchequer and private financial institutions in other ways after they obtain their degrees and diplomas. How else does one explain the massive loans given out to finance businesses in every sector of the economy which have gone sour and have not been repaid?

Readers can identify a sector –  whether agricultural or non-agricultural; hi-tech or low-tech; rural or urban – and I am willing to donate a large sum to any charity of their choice if they can show me proof that the repayment of loans provided by the government has been able to exceed more than 70% in that sector.

The bigger the loan that is provided by the Government, the surer it appears to become transformed into a bad debt – this appears to be another financial axiom of life in Malaysia.  Recently during the Dr Ling Liong Sik cheating trial, we heard that the Port Klang Authority (PKA) cannot afford to pay back its RM4.6 billion loan for the Port Klang Free Zone (PKFZ) project to the government. This was according to the prosecution’s witness, Adnan Abidin.

Mind you, this was a project in which the development cost ballooned from RM1.088 billion to RM4.6 billion in 2007 and which the cabinet, according to Dr Ling’s lawyers, had given their retrospective approval. It is not surprising therefore that the cabinet is not concerned about the small fry of student loan defaulters when it is blind to other possible financial scandals that involve billions of dollars.

Publish the names of all govt debtors

Clearly too, those who are likely to have access to government loans are those with the most powerful political strings such as happened in the RM250 million cattle-farm scandal linked to Minister Shahrizat Abdul Jalil’s husband and children.

Although I am critical of students who have taken out loans for their education and have refused to repay them, it is unfair for the government to put their names into a blacklist for public consumption as has been done periodically.

However if the government intends to continue carrying out this measure, I would like to propose that it also publishes the names of other Malaysians who have obtained loans for their projects and businesses and failed to repay them, especially those with large multi-million ringgit loans.

Only if this non-discriminatory public disclosure of all Government debtors (and not just of student defaulters) is undertaken can justice be said to be equally meted out. Needless to say, it would be especially revealing to read the names of these large debtors and the amounts that they owe to the government – or actually, to the people of Malaysia.

This article is posted at: KCLau's Money Tips

Malaysian Malaise: The govt as everybody’s cash cow

I just bought one of this, just to play my part in reducing the CO2 emission that keeps harming the Earth.

Watch this video about how this project is started.

This article is posted at: KCLau's Money Tips

WindowFarms: Vertical Food Garden without Soil that’s Hanging on your Window

If a couple passed away, who will look after the children? Normally, the grandparents will apply to become the guardian ad litem (appointed by court) in the case where a couple dies intestate (have no written Will). If one parent passed away, the surviving parent is left to take care of the children. Generally, the surviving children will be taken care off in the following order, surviving parent, testamentary guardian and guardian ad litem (appointed by court).

The importance of personally selecting a guardian

The future can be unpredictable. For example, a couple may meet with an unfortunate accident while travelling or on holiday leaving the children behind. Similar situations may also happen to a parent or a single parent who is divorced or a widow or a widower. It does not have to be an accident but a fatal illness that can take a parent away. These are unfortunate circumstances that negatively affect any child’s life especially if he is still a minor (underage).

If no guardian has been appointed by the parents, the grandparents will step in as mentioned above. A serious problem may arise if both paternal and maternal grandparents fight for custody of the children. Once the parents are gone, who can determine and select the right guardian who has the children’s best interest in mind?

If the parents left behind a significant amount of money or fortune for the orphaned children, this could attract dishonest people. An uncle, aunt or a distant relative or cousin may view the guardianship as super-attractive with a fortune attached to it.

All parents want the best outcome for their children, good health, happiness and a comfortable life. Therefore, parents should not ignore their rights to appoint a trusted person to become the guardian of their children should the unthinkable happen. The appointed guardian does not become the “guardian of property/inheritance” belonging to the children automatically unless legally specified, for example by a court order or as stated in the Will.

Generally, the appointed Executor/Trustee will be responsible to manage the minor beneficiary’s assets or inheritance until he reaches the legal age of 18 years old. This way, the legal and financial interests of the children are protected.

Allowance for guardians

Providing some allowance for the appointed guardian is recommended. Taking care of one’s own children is not an easy job, what more taking care of other people’s children. This is what the guardian is going to be responsible for that is taking care of someone else’s child or children. The responsibility is huge and requires a tremendous amount of patience and sacrifice.

Hence, giving some money helps to make the job or responsibility easier to bear. The monetary reward is also a show of appreciation towards the appointed guardian for taking on an important role.

To recap again, it is important to appoint a guardian for your young children and state it in your Will. As a parent, you can choose a suitable guardian that has your children’s best interest in mind. It is equally important to leave some money or allowance for the guardian and stated in the Will, to reward him or her.

This article is posted at: KCLau's Money Tips

The Importance of Appointing a Guardian for your Children

Here is a reply from one of my email subscribers, after she received my email about using credit card the smart way:
(she has pointed out many advantages and I think it is great to share it here with you)

YES with credit card there are so many advantages as well..besides disadvantages. Just like Knife..a kitchen is not complete without knife…but at the same time people misuse knife for robbery and stabbing someone…anything in this world has pros and cons…same goes for credit card..we may use that benefit us and as well create damage to us..I have a life experience that I have learnt, I was financial idiot (in your word) once..but I learnt from my mistakes. Now I have cut down my unnecessary expenses and living a better planned financial life.. with free advice from financial experts like you,life has become even more better and safe to leave with balance financial freedom…I have learnt with proper planning and mindset knowing the value money..anyone can have a better and balanced life…

Since I’m in credit card department for more than 3 years in my bank, I give you some tips on credit card advantages as long we does transaction with credit cards:

• when travel, credit card provides full coverage of travel insurance for you and immediate family
• instant redemption for spend and redeem promotions
• IPP- installment payment plan..for example instead paying for Ogawa massage chair with RM 3-4K, just pay RM 45 monthly for 2 or 3 years. Isnt’ that good? You can have a good massage at home just by paying RM45!
• more items can be purchase with IPP and pay less..this is good planning as well
• balance transfer your credit card available balance to another bank…we have period of 6th to 12th months interest free period
• if you’re movie lover…take Citibank for TGV or Golden Screen – EOn bank, no need to queue & reserve…ticket is there for you even you are late and get free movie tickets with certain amount of spending
• pay your hospital bills when it’s emergency
• when you are at overseas,  credit card is the best way as you can bring less cash…
• enjoy privileges like golf clubs, gym with certain amoutt of discounts
• dining privileges with discounts and offers
• branded products comes with discounts (this one I like most)
• insurance plans to cover for snatch thief and ATM withdrawal for ladies (certain banks only with lady card)
• pay your school or tuition fee for those wants to further studies while working
• your spending turn to miles for traveling with MAS
• your spending turn to redemption of cash voucher and other exclusive redemptions
• temporary increase when you’re traveling when you need extra fund and pay back once you’re back to Malaysia
• discounts from 50-70% of hotels stay when you travel overseas…for example..Asiawebdirect.com or agoda.com
• on going and continuous promotion offered by banks depends on what credit card and type….

I love credit cards because of all above reason. Once I did overspent, you know right women and shopping can’t be resisted…but after I become a mother I started to control and plan my expenses..I use my extra funds for my child development and invest for her education. SO being a parent does make change to someone’s life…

that’s all from me…examples of merchant names given is only for purpose of sharing of knowledge with no intention. hope it helps…

let’s shine!

 

This article is posted at: KCLau's Money Tips

List of Credit Card Benefits You might have Missed