Many financial experts highly recommend a household budget in order to keep family spending and savings goals on track. It makes sense that proper money management for a household is a necessity to ensure financial security for all family members. For those who do not yet have families, it is equally important to establish a budget to prepare for the future as well as survive day to day, especially when single individuals are just starting out on their own, financially independent from their parents.
Why Singles Need Budgets
Overspending income is the reason why so many people are facing debt problems. With a budget you can properly account for where all of your money goes on a weekly or monthly basis. Without a budget, it can be all too easy to spend cash as a single person because outside of basic financial obligations, there are likely no other responsibilities to tend to such as children who need things or spouse who should have a say in money matters.
As a single person without a budget, it is also easy to lose sight of the big picture. Spending what you earn as you earn it leaves little room for saving for the future or building a truly solid financial foundation.
How to Start a Single Person Budget
A budget is simple to get started. Sticking with the methods is what gets many people who end up ceasing their good financial habits. It makes sense to develop a simple budget that allows you to make simple entries that doesn’t waste time. A weekly review of a budget is all it really takes to ensure you are on target.
Developing a budget requires that you gather all of your financial obligations for a month including utility bills, credit card bills, mortgage or rental payments, and any other monthly expense paid out on a regular basis. You will also need to gather your income statements so you know how much you bring home each month.
These amounts along with the creditors who receive your monthly payment should then be listed on a personal budget worksheet. Once all of the information is entered, the total amount of expenses should be deducted from the total amount of income. If the difference is negative, it is a clear sign that you need to make cuts to your budget or find a way to earn more money. If there is an overage, the funds that are ‘left over’ each month should be allocated into a proper savings account for emergency situations, vacations, or retirement.
In addition to the compilation of expenses and income, single consumers should also take a solid month to track the money they are spending and where they are spending it. This is for all expenses outside of regular financial obligations, including coffee stops, dining out, and transportation-related expenses. By tracking every penny spent in a month’s time, you are able to develop a more accurate budgeting system and as a result, establish a much more solid and reliable financial foundation for the future.
This is a guest post by Tisha Tolar.
Tampilkan postingan dengan label Personal Finance. Tampilkan semua postingan
Tampilkan postingan dengan label Personal Finance. Tampilkan semua postingan
Kamis, 15 September 2011
Minggu, 21 Agustus 2011
4 Steps to Set Your Investment Goals
Some people just feel lost in investment especially when they start investing in stock or when they don’t make a lot of money out of their investments. They will start wondering, what the hell am I doing here? This is all because of they don’t set clear investment goals.
When you do not have investment goals, you basically do not have measure of success.. When you do not have the measure of success, you do not know whether you’re at the right track. When you do do know whether you’re at the right there, you do not take actions (e.g. sell your stocks or mutual funds) and lastly you are lost because you simply do not know what to do. So, I hope this makes sense to you that why you must have investment goals for each investment that you make.
Let’s look at the following 4 steps on how you can set your investment goal. Check it out…
Step 1: Identify Your Personal Inflation Rate – X%
Well, before you even start thinking about setting your investment goals, you must first understand one of the most important elements in investing is to protect yourself from inflation killer. Thus, it is important to identify your personal inflation rate before you start investing. Let’s look at my previous article how you should get your own personal inflation rate rather than the reported inflation rate by your government:
You identify this as X% and don’t be surprise if your personal inflation rate is a lot higher than the reported national inflation rate especially if you’re a big spender. The chances this will happen is high too if you keep earning more and more every years.
Step 2: Identify Your Safest & Highest ROI – Y%
Your safest ROI could be your saving, fixed deposit (i.e. FD), or your retirement saving fund such as EPF in Malaysia, CPF in Singapore or 401(K) plan in United State. I don’t know what the rest of the countries call this. :) Usually the retirement saving fund (e.g. the EPF) has the highest ROI as compared to your FD or your savings. You identify this as Y%
Step 3: Identify Your Minimum Investment Goal – Z%
Once you have identified X% and Y%, your minimum investment goal that you set should be based on which one has the highest %. For example, if your Y% > X%, you minimum investment goal should be Y%. Hopefully your X% is less than Y%. If that doesn’t happen, you may want consider to change your lifestyle. If you don’t want to, that’s fine too. Then your minimum investment goal should be Y%. In short, Z% = MAX(X%, Y%). Hope this is not too engineering for you… :)
Step 4: Set Your Investment Goals
This is the final step is to set your investment goal after you have identified Z%. Basically, there are 2 types of goals that you can set. One is normal and another one stretch investment goals. If you achieve your stretch investment goal, you have basically exceeded expectation. Sound something familiar like your focal? Hahaha…
Well, no hard rules how you want to set the investment goal as long as you make sure it is > Z% but this is what I think normal and stench investment goals should be:
Let’s take myself as an example. If my Z% = 6% (based on the latest EPF data in 2010) , my normal investment goal will be 12% ROI. If my actual ROI is 12%, I’m meeting my goal. However, what if my ROI is > 18%? I’m basically exceeding my investment goal because I”m achieving my stretch goal. In order to meet these goals, I"m investing in mutual fund or unit trust, stock, gold, property and etc.
This is how my investment goals look like. So whatever I invest in mutual fund/unit trust, stock, gold, property and etc, my measure of success is based on 2Z% and 3Z%. What about you? If you don’t have any investment goal, probably you can start having one now…
Summary
What do you think of my formula? Sounds reasonable or unreasonable to you? If not, what do you think how one should set their investment goals? As mentioned before, setting investment goal is essential which as important as that you need to have clear financial goal. Without goals, you do not know your direction. In this article, I show you 4 simple steps how you can set your investment goals for both normal and stretch goals. Of course, you can define your own formula. Good luck!
P/S: Hope this is something useful to you guys. I”m going to take vacation off in 4 more days and will not be blogging for about 2 weeks. Yeah! Feel free to comment on this article and hopefully I can get back to you before my vacation. :)
When you do not have investment goals, you basically do not have measure of success.. When you do not have the measure of success, you do not know whether you’re at the right track. When you do do know whether you’re at the right there, you do not take actions (e.g. sell your stocks or mutual funds) and lastly you are lost because you simply do not know what to do. So, I hope this makes sense to you that why you must have investment goals for each investment that you make.
Let’s look at the following 4 steps on how you can set your investment goal. Check it out…
Step 1: Identify Your Personal Inflation Rate – X%
Well, before you even start thinking about setting your investment goals, you must first understand one of the most important elements in investing is to protect yourself from inflation killer. Thus, it is important to identify your personal inflation rate before you start investing. Let’s look at my previous article how you should get your own personal inflation rate rather than the reported inflation rate by your government:
You identify this as X% and don’t be surprise if your personal inflation rate is a lot higher than the reported national inflation rate especially if you’re a big spender. The chances this will happen is high too if you keep earning more and more every years.
Step 2: Identify Your Safest & Highest ROI – Y%
Your safest ROI could be your saving, fixed deposit (i.e. FD), or your retirement saving fund such as EPF in Malaysia, CPF in Singapore or 401(K) plan in United State. I don’t know what the rest of the countries call this. :) Usually the retirement saving fund (e.g. the EPF) has the highest ROI as compared to your FD or your savings. You identify this as Y%
Step 3: Identify Your Minimum Investment Goal – Z%
Once you have identified X% and Y%, your minimum investment goal that you set should be based on which one has the highest %. For example, if your Y% > X%, you minimum investment goal should be Y%. Hopefully your X% is less than Y%. If that doesn’t happen, you may want consider to change your lifestyle. If you don’t want to, that’s fine too. Then your minimum investment goal should be Y%. In short, Z% = MAX(X%, Y%). Hope this is not too engineering for you… :)
Step 4: Set Your Investment Goals
This is the final step is to set your investment goal after you have identified Z%. Basically, there are 2 types of goals that you can set. One is normal and another one stretch investment goals. If you achieve your stretch investment goal, you have basically exceeded expectation. Sound something familiar like your focal? Hahaha…
Well, no hard rules how you want to set the investment goal as long as you make sure it is > Z% but this is what I think normal and stench investment goals should be:
Normal Investment Goal = 2Z% (2 times of Z%)
Stretch Investments Goal = 3Z% (3 times of Z%)
Note: Z% is your mininimun investment goal.
Let’s take myself as an example. If my Z% = 6% (based on the latest EPF data in 2010) , my normal investment goal will be 12% ROI. If my actual ROI is 12%, I’m meeting my goal. However, what if my ROI is > 18%? I’m basically exceeding my investment goal because I”m achieving my stretch goal. In order to meet these goals, I"m investing in mutual fund or unit trust, stock, gold, property and etc.
This is how my investment goals look like. So whatever I invest in mutual fund/unit trust, stock, gold, property and etc, my measure of success is based on 2Z% and 3Z%. What about you? If you don’t have any investment goal, probably you can start having one now…
Summary
What do you think of my formula? Sounds reasonable or unreasonable to you? If not, what do you think how one should set their investment goals? As mentioned before, setting investment goal is essential which as important as that you need to have clear financial goal. Without goals, you do not know your direction. In this article, I show you 4 simple steps how you can set your investment goals for both normal and stretch goals. Of course, you can define your own formula. Good luck!
P/S: Hope this is something useful to you guys. I”m going to take vacation off in 4 more days and will not be blogging for about 2 weeks. Yeah! Feel free to comment on this article and hopefully I can get back to you before my vacation. :)
Kamis, 16 Juni 2011
6 Debt Reduction Tips to Keep You in Sound Financial Health
Debt is a curse. The sooner you put in efforts to reduce the level of debts that you owe, the better it is for you. To reduce your debts substantially, the debt relief programs are of paramount importance. This is nothing but partial or total elimination of debt as well as stalling debt growth. Here is a list of some debt reduction strategies that you can follow to curb your debts significantly.
(1) Don't incur debts
In majority of the cases, you fall into debt because of your own imprudent financial behavior. Don't use your credit cards recklessly. Take out loans only to purchase home or car. Try to live within your means. In fact, if you can successfully limit your spending below your income, you will never fall into a debt situation.
(2) Create a realistic budget
It is very important to build up a realistic budget. You categorize your items of expenditures and then allocate money to each category. Make sure that you don’t spend beyond the amount allocated to each category. This will indeed be helpful to keep a lid on your spending behavior. Your budget should be such that you are able to contribute some money to the emergency fund. The emergency fund can be utilized to meet unintended expenses.
(3) Be well aware of your liabilities
When you have fallen into debts, you have to be well aware of how much you owe to others. You should be well-acquainted with the monthly payments that you have to make, your interest payments as well as the outstanding balances. Don't default in making payments. Only regular payments on your debts can make you debt free.
(4) Close credit card accounts
It is not a wise financial behavior to keep many credit cards. And, if you already have many credit cards, it would be wise to close as many credit card accounts as possible. The underlying rationale to keep less number of credit cards is to curb the temptation to abruptly spend money using cards.
(5) Make more than minimum payments
Make efforts to pay more than your monthly payments. Use the additional amount of money to pay off your lowest outstanding debts. This helps you pay off your lowest outstanding debts even before the scheduled time period. And, once you have successfully paid off your lowest outstanding debts, switch your target to the next lowest outstanding debts. Persist with this process. This helps you clear off your entire debts in a relatively shorter period of time.
(6) Seek professional help
Sometimes, it is a good ploy to seek professional help to repay your debts. A debt relief company can negotiate a pay off strategy for you after working with your creditors.
These are indeed smart tips that you can start following from today only. Seriously following these tips, will keep you in good financial condition.
This is a guest post by Nancy.
(1) Don't incur debts
In majority of the cases, you fall into debt because of your own imprudent financial behavior. Don't use your credit cards recklessly. Take out loans only to purchase home or car. Try to live within your means. In fact, if you can successfully limit your spending below your income, you will never fall into a debt situation.
(2) Create a realistic budget
It is very important to build up a realistic budget. You categorize your items of expenditures and then allocate money to each category. Make sure that you don’t spend beyond the amount allocated to each category. This will indeed be helpful to keep a lid on your spending behavior. Your budget should be such that you are able to contribute some money to the emergency fund. The emergency fund can be utilized to meet unintended expenses.
(3) Be well aware of your liabilities
When you have fallen into debts, you have to be well aware of how much you owe to others. You should be well-acquainted with the monthly payments that you have to make, your interest payments as well as the outstanding balances. Don't default in making payments. Only regular payments on your debts can make you debt free.
(4) Close credit card accounts
It is not a wise financial behavior to keep many credit cards. And, if you already have many credit cards, it would be wise to close as many credit card accounts as possible. The underlying rationale to keep less number of credit cards is to curb the temptation to abruptly spend money using cards.
(5) Make more than minimum payments
Make efforts to pay more than your monthly payments. Use the additional amount of money to pay off your lowest outstanding debts. This helps you pay off your lowest outstanding debts even before the scheduled time period. And, once you have successfully paid off your lowest outstanding debts, switch your target to the next lowest outstanding debts. Persist with this process. This helps you clear off your entire debts in a relatively shorter period of time.
(6) Seek professional help
Sometimes, it is a good ploy to seek professional help to repay your debts. A debt relief company can negotiate a pay off strategy for you after working with your creditors.
These are indeed smart tips that you can start following from today only. Seriously following these tips, will keep you in good financial condition.
This is a guest post by Nancy.
Minggu, 29 Mei 2011
Check Your EPF(KWSP) Nominations of Beneficiary
If you do not know what EPF or KWSP is, you can safely ignore this post...
Around few years back in 2007 I think, it had been rumours saying that EPF(KWSP) may screw up your nominations when they upgraded their system to the new one. A friend of mine also told me that recently he went to check and found out that his nominations are no longer there. What a crap?
So, I made up my mind to go and check last week. Fortunately, all my nominations of beneficiary were there. BUT, today I look at it carefully again, I notice one of my nominations I/C number is incorrect. What a crap again? Guess I have to go back to EPF office gain to correct it. :(
This is what you need to do to apply for checking your EPF nominations:
Good luck to you! or else you need to go to the EFP/KWSP office to correct it again like me. You know what, even all your nominations are correct, I suggest you to check again perhaps after 2 years.
P/S: But, I feel like kind of stupid to check this in every 2 years. Is that necessary? Why can’t they do a better job? Some say they do it in purpose, what do you think?
Around few years back in 2007 I think, it had been rumours saying that EPF(KWSP) may screw up your nominations when they upgraded their system to the new one. A friend of mine also told me that recently he went to check and found out that his nominations are no longer there. What a crap?
So, I made up my mind to go and check last week. Fortunately, all my nominations of beneficiary were there. BUT, today I look at it carefully again, I notice one of my nominations I/C number is incorrect. What a crap again? Guess I have to go back to EPF office gain to correct it. :(
This is what you need to do to apply for checking your EPF nominations:
- Go to the KWSP/EPF office, tell them you want to check for your EPF nominations. They will give you a form.
- After you fill up the form, go to the queue up again and they will give you a number.
- Wait for your number, after that they will print out all your EPF nominations for you.
Good luck to you! or else you need to go to the EFP/KWSP office to correct it again like me. You know what, even all your nominations are correct, I suggest you to check again perhaps after 2 years.
P/S: But, I feel like kind of stupid to check this in every 2 years. Is that necessary? Why can’t they do a better job? Some say they do it in purpose, what do you think?
Senin, 02 Mei 2011
Useful Top Personal Finance and Investment Blogs in Malaysia
If you’re looking for very useful and informative personal finance or investment blogs in Malaysia, this is the right place for you. Having said so, you won’t able to find all the personal finance or investment blogs in Malaysia here because I’m only going to list those that I follow very closely.
But please don’t get me wrong that for those blogs that are not listed here are not the good one. I’m sure there are many good personal finance and besides blogs out there in Malaysia besides that the one I listed here.
Well, I don’t want to list down the whole bunch of personal finance and investment blogs here because it will be too overwhelming. That may defeat the purpose for readers to find this article useful or informative. In fact, I still do read some of the blogs that I don’t listed here. Again,it doesn't mean the other blogs are not useful or informative.
P/S: I will continue to make this article up-do-date from time to time. For example, I may remove some of the links here if the bloggers are no longer active or I will add more links here if I found some noteworthy personal finance blogs especially those blogger who I interact a lot. :) Happy reading!
But please don’t get me wrong that for those blogs that are not listed here are not the good one. I’m sure there are many good personal finance and besides blogs out there in Malaysia besides that the one I listed here.
- Journey to Become Financially Independent by ChampDog - I like this blog because this is my own blog which I share everything that I think is useful to my readers towards my journey to become financially independent and achieve financial freedom.
- Personal Finance Money Tips by KC Lau – He is probably the pioneer of personal finance blogger in Malaysia because when I started to blog, he was there already until today. If you want me to vote for who is the most successful personal finance blogger in Malaysia, I probably will vote for him! He did a lot of stuff lately to increase his influence. :D
- Malaysia Personal Finance (MalPF) by Michael Tsen – This is the blog that I enjoy to read and learn a lot. Some of the articles in this blog are very interesting and the author always use an unique way of bringing up his ideas.
- KnowThyMoney by Kris – Well, he is probably the blogger that I interact the most among all the authors listed here. I think we share a lot of common things. We both engineers who interested in not only finance or money but also girls too! lol…
- Malaysia-Finance Blogspot by Salvatore Dali – This is probably the most difficult blog to understand because my standard is not there yet. He analyses the market like a fund manager and you may not able to follow unless you have a depth investing knowledge. Thus, many fund managers are actually reading his blog too.
- 1-million-dollar-blog – I think he means his blog worth 1 million. So if you read it, you may get 1 million! lol. I look up for a lot stock information from this blog. Hope you will find it useful too.
- Kampung Investor (link is removed due to website is down) by Kampung Boy – A very unique name and he likes to call people “Brother”. At least he is calling me that which makes me feel warm can comfortable. lol. Want to know the kampung way of achieve financial freedom? Visit his blog….
Well, I don’t want to list down the whole bunch of personal finance and investment blogs here because it will be too overwhelming. That may defeat the purpose for readers to find this article useful or informative. In fact, I still do read some of the blogs that I don’t listed here. Again,it doesn't mean the other blogs are not useful or informative.
P/S: I will continue to make this article up-do-date from time to time. For example, I may remove some of the links here if the bloggers are no longer active or I will add more links here if I found some noteworthy personal finance blogs especially those blogger who I interact a lot. :) Happy reading!
Sabtu, 26 Februari 2011
Latest FD, EPF, Inflation, BLR and Saving Interest Rates History Trend in Malaysia
If you wonder where to get the latest FD (Fixed Deposit), saving interest, EPF (Employee Provident Fund) dividend, BLR (Base Lending Rate) and inflation rates history trend in Malaysia, this is the place for you. I wrote about a similar topic in my previous post (almost 3 years ago) and apparently it is out-dated. The latest data was only up to 2007.
I will use this post to keep track of the latest interest rates. As you can see from the graph or chart below, I put the inflation rate as reference – green line. Any interest rates above the green line is good to go and this is where you want to put your money into. However for those who are buying house, you need to look at the BLR – brown line, any investment return that higher than BLR is where you want to put your money into especially if you don’t like Flexi loan package.
[Updated: 26 April 2014]
What can we conclude from this trend?
[Updated: 26 April 2014]: Update data up to 2013, inflation has moved down (lower than FD) and EPF is till performing good!
P/S: Well, to summarize: don’t put your money in saving and use FD as emergency fund. EPF dividend rate and BLR are very important because that is the investment goal that you want to set (i.e. Any of your investment return from stock, mutual fund, and bonds should be more than 6%).
I will use this post to keep track of the latest interest rates. As you can see from the graph or chart below, I put the inflation rate as reference – green line. Any interest rates above the green line is good to go and this is where you want to put your money into. However for those who are buying house, you need to look at the BLR – brown line, any investment return that higher than BLR is where you want to put your money into especially if you don’t like Flexi loan package.
[Updated: 26 April 2014]
What can we conclude from this trend?
- Saving rates is getting lower and lower. Thus, you shouldn’t put your money in saving at all. For instance, if your monthly expenses is RM3K, you just need to make sure that you have RM4K in your saving account every month. RM1K extra is for backup.
- FD is as useless as saving but it is still better because it is higher than inflation rate in most of the years. But keep in mind that personal inflation rate is the thing that you want to look at (not the inflation rate reported by the government!)
- As expected, EPF is the best investment vehicle (of course only compared to FD and saving) and it is catching up the BLR rate (but still below BLR). This tells you that withdrawing your EPF money to pay your house loan is the right choice. How about withdrawing your EPF for Mutual Fund? Yes, but do this only when you believe the mutual fund return could be higher than 6%.
- 6% is a important value (based on EPF dividend return and also BLR). You will use your extra money to invest (after you have enough emergency fund) and your investment return should at least more than 6%. If not, you’re making a bad investment.
[Updated: 26 April 2014]: Update data up to 2013, inflation has moved down (lower than FD) and EPF is till performing good!
P/S: Well, to summarize: don’t put your money in saving and use FD as emergency fund. EPF dividend rate and BLR are very important because that is the investment goal that you want to set (i.e. Any of your investment return from stock, mutual fund, and bonds should be more than 6%).
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