Beruflich Dokumente
Kultur Dokumente
Volume 1
by KCLau
http://KCLau.com
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You should buy the house first, then serve the installment for a
few years. After you build up more equity in the mortgage, you
can refinance the house to higher loan amount. The extra cash
you get at that time can be used to buy your dream car.
That way, you kill two birds with one stone. First, you save on
the interest because mortgage debt usually have the lowest
interest. Second, you delay the car purchase which will be a
long term liability anyway. At a later time, you would most
probably get a better models with the same amount of money.
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Just by doing this trick alone, you will be way ahead compared
to your peers who did the opposite - serving a car loan and
keep complaining about the high property price!
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term life. However, in reality, who knows how long we can live?
So most people buy type B insurance, e.g. whole life
participating plan.
For Type B insurance, the total premium we paid will match the
total cash value of the policy at year 14th-18th. That means
after we had paid the insurance premium for 15 years, we can
still get back all the principal money if we surrender the policy.
If you are committed to show your love and responsibility to
your family, buying insurance doesnt cost much. It only cost 15
years of interest return! After 15 years, the insurance can be
considered FREE!
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www.Ebay.com.my
www.Lelong.com.my
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similar to yours?
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Calculate your net worth every quarter and you will find a
pattern. Make sure it only has one direction to go --- UP UP UP!
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Some people only have this type of policy. They never realize
that they actually go to war with underwear only, no armour, no
helmet, no nothing!
2. Hospitalization and Surgical Benefit (known as medical
card or health card)
This benefits can cover most if not all of your medical expenses
at hospital.
Adequate coverage: >RM150/day room and board benefit.
Yearly limit of >RM100,000. Lifetime limit of >RM500,000.
Health card is not a credit card and it does not have money in it!
If it is genuine cases, there will be not much trouble to get the
Letter of Guarantee from the insurer when you are hospitalized.
However, insurance company have the right to investigate
before they pay out the claim, especially when you do a major
claim within the first two years.
3. 36 Critical Illnesses (Cancer, Stroke, Heart Attack etc)
It is different from the health card. This benefit is paid in a lump
sum to your account, but not to the hospital. The purpose of this
benefit is to replace your potential income loss when you take
long leave for medical care.
Adequate coverage: 3 times annual income.
4. Total Permanent Disability (TPD)
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you are overpaying for insurance policies that dont suit your
need at the moment.
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If Mr. Lees net worth is RM50,000 only, which is less than half
of ENW, he is a UAW.
Lets calculate ours, which category do you belong to?
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is going to remarry anyway after she got rich, I dont think she
will wait until the day you die to make the decision.
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When you are financially illiterate, giving you more money is like
giving a gun to a child. Youll harm not only yourself, but the
people surrounding you too.
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2. Discipline
Saving money is all about discipline. You must have the
discipline to save, and also the discipline to spend less than you
make.
Imagine a bank account that does not give you any withdrawal
facility! Just like a piggy bank. You can only deposit money.
After opening such an account, you must deposit money into it
every single day. If you keep doing that for a very long time,
one day youll receive a call from the bank officer. Hell ask you
to clear the account because it is overloaded with cash!
This is the kind of discipline we are talking about. Spend less
and spend later. Save first and save more.
3. Time
It takes time to save money and accumulate wealth. The eighth
wonder of the world - Compound Interest will only work if we
have enough time for it.
If you do not spend the interest return of your wealth, the
biggest interest return will come at the later years. That means
the longer the time that you let the interest to compound, the
higher the interest youll get at the later stage.
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upfront load is high (more than 3% and most of the time 5%)
when the fund is invested in equity. Coupled with the regular
and recurring fund management fees and trustee fees, you will
find that most funds are not outperforming the market. As a
retail investor, you might be able to get better return by directly
buying the companies stocks. As for what to buy, assuming
that you dont have knowledge at all, start from looking at what
are the top funds buy. You can find it in the interim report of the
funds, which is publicly available.
Just by doing that, you immediately save the upfront fees when
investing in unit trust, which big chunk of it goes to the
marketing cost of the funds.
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After paying the policy for 5 years, he heard from his friend that
he shouldnt put money in an insurance policy. It is a waste of
money. So he surrendered the policy. The surrender value is
RM3900. Marks friend is right about losing money in
insurance. Mark had paid RM5297 and got back only RM3900
in return.
ROI = -26.37% in 5 years.
EAR = -10.04% per annum.
Conclusion: This policy is a bad investment according to
those who prefer to lapse policy.
Scenario 2: Mark was diagnosed cancer after 10 years.
He doesnt need to pay the premium anymore because of a
waiver premium rider attached to the policy. He recovered after
2 years of treatment and enjoy the benefit of the policy until he
surrendered the policy at age 55 at retirement. The surrender
value he is entitled to is RM30,000. The total premium paid is
RM10,594.
ROI = 652% in 25 years
EAR = 5.16% per annum.
Conclusion: This policy provide adequate return and
replace loss saving when suffering from major illnesses.
Scenario 3: Mark died at 3rd year due to heart attack.
His family is entitled to claim his death benefit of RM100,000.
The total premium he had paid is RM3178.20.
ROI = 3000.46% (yes! 30 times!)
EAR = 317.52% per annum (yes! triple every year!)
Conclusion: This policy is the best investment ever made
by Mark, according to Marks family.
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prove that you have more than the deceased estate. If his son
runs away with the estate money, you will need to compensate
the legal heirs with your own asset. Do you want to sign the
paper?
So, get your Will written as soon as possible. If things are
complex, you can engage a professional estate planner. If the
distribution is simple, you can find some templates on the
Internet and modify it to suit your needs.
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you are doing. Get higher return from your money! Put your
money into places where they can work really hard! And make
sure you know how to take good care of them.
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In order to put on a great child protection plan like this, you will
have to seek advice from a proper financial advisor. Make sure
the advisor has sufficient knowledge in living trust, life
insurance and also will writing. Email me if you need my
assistance to recommend a trusted associate to help you.
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Besides this report, you will also get the investmentlinked fund performance report annually.
2. Low insurance charges - For fresh graduates, age
around 23-25, it is normal for them to seek their first
insurance agent and also the first insurance policy.
When you are young, insurance charges are very
cheap. Investment-linked policy calculates the insurance
charges based on your age. They use a mortality table
and clearly provide the insurance charges schedule in
the policy. This means you can purchase a very high
coverage with relatively low premium when you are still
young. The premium might be even lower than a term
policy.
3. Flexibility Once you get older, promoted, married,
have kids, your protection needs eventually increases.
When you retire, your kids are independent, your
protection needs eventually decreases. Looking at this
circumstances which is substantially different at different
life stages, investment-linked policy provides the
flexibility to increase or reduce the premium, include or
exclude certain coverage rider, supplementary benefits
and sum assured. Put it simply, you can modify this
policy whenever and however you want it to be, of
course it is subjected to the terms and conditions
outlined by the insurance companies.
4. Integrated better health card - some insurance
company like Great Eastern and Prudential, they
provide better hospitalization and surgical benefits only
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Yes and No. YES because the police officer said the summon
will arrive in my mail box in two months time. NO because I still
have to wait two months to verify the YES. More about this
story later when I shared with you how I got away from traffic
offenses. Before you are stopped by a police for traffic offense,
here are some tips on how to keep your cash money safe in
your pocket.
Avoid breaking traffic rules this is obvious. If you dont want
a traffic tickets, just dont make any offense. Eventually, I still
broke it sometimes. What to do? When you drive a better car,
you will never realize that you are speeding unless you always
keep your eyes on the speedometer. If you can keep your eyes
on it, you will most probably see this number only: (dont drive
while taking photo)
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If you are putting more money at low risk and liquid account,
you are actually building an emergency fund out of that
practice. In other words, if you are investing most of your
money, you probably increase the risk to get better return,
hence reducing the liquid part of your portfolio.
So the question now is do you separate your emergency fund
account when you plan your investment portfolio?
Here are my opinions about this matter which also represent my
practice:
1. I dont separate them. I see the emergency fund as a low
risk portion of my investment portfolio.
2. To me, liquid account is an easily accessible account
which can be cashed out within 30-50 days. Why 30-50
days? Isnt it too long? No, I dont think that it is a long duration
because I have several credit cards with enough limit to be
used as buffer. Nowadays, you can pay almost everything with
credit card except the debt itself. If the account can be
liquidated within 30-50 days, it is soon enough to pay the credit
card on due date.
3. Liquid accounts to me include unit trust (mutual fund),
bank accounts, flexible home loan accounts, fixed deposit,
and even shares. According to my past experience, not every
share counter I hold are having loss at the same time, provided
that the share portfolio is properly diversified. When it comes
the time you need to sell off some of the share for emergency
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Money or Beauty?
Many people associate a persons wealth with his appearance.
It is like judging a book by its cover. I believe that it shows some
truth because people only realized that you actually have that
amount of money only after you spent it!
You bought a Porsche and drive it to work. Your colleague saw
you in this sports car. This make you look wealthier. But is it
really the case?
You renovate your house gate, only the gate! Your neighbour
saw it when they are passing by. They thought that you must
have been promoted or granted a big bonus. This make you
appear richer.
You spent thousand dollars for hair replacement program. You
grow more hair. You appear more confident and more goodlooking. You also look healthier because your bald head has
been empty for too long. Yes! You definitely look better and
wealthier.
I just hope that you realize that the money spent is no longer
yours. However, those actions really do make you look
wealthier. Money or beauty?
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Notice that if I settle the loan within five years from the first
disbursement date, I will have to pay 3% from the original loan
amount or RM5000 whichever is higher.
For example, if my original loan amount is RM200,000, when I
choose to settle the loan or refinance it to other banking
institution, the amount I need to pay for penalty is:
RM200,000 x 3% = RM6,000
Before you sign the offer letter, there are two particular issues
that you need to understand:
1. Drawdown date or disbursement date
Drawdown date is the date when the bank release payment. It
is also known as disbursement date. For completed building,
this wont be an issue. But if you are financing home which is
still under construction, please be aware. For example, your
home is still incomplete, CF (Certificate of Fitness) is not yet
obtained. You bought it in year Jan 2005. The bank will release
a portion of your loan to the developer by stages, or what
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If the banker calculates the lock-in period from the 1st draw
down date, you wont be penalized if you refinance your home
loan on April 2010. If the period commences from the full
drawdown date, you would have to wait until 2012 Jan to fully
settle your loan penalty-free. That means you are actually
locked-in more than 5 years total.
Conclusion: Demand the lock in period commencement on
the first drawdown date, instead of the full disbursement
date.
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Financial situation:
always spend less than
they earn
save a portion from their
income every month
conservative passive
investors who mostly keep their
money in the bank
buy a house, buy a car,
go to work and wait for
retirement
net worth grow slowly.
they are very afraid of
debt and try hard to pay it off as
soon as possible
Being mediocre is definitely
better than being poor.
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Financial Situation:
at first, there is some
tiny saving left at the end of the
month
but they use the little
surplus to acquire more debt
buying stuff they cant afford
liability is greater than
the amount of asset, resulted in
negative net worth
excessive amount of
liabilities put more load to the
overall expenses because they
need to pay interest charges
Negative cash flow
when they finally got a
career promotion with higher
income, they use the tiny surplus to acquire more
liability switch to a bigger house, a bigger car etc
frugal is a word that doesnt exist in their dictionary
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Ideally, this is what we expect for average person. For the rich,
income shoot up at a higher rate. Their passive income is at a
very high level (proportionately). So the green line actually
didnt drop after they retire. Thats a perfect chart that
everybody dreams to have.
Now, lets zoom in to examine a shorter time frame. The short
term cash flow of 1-3 years might not have too significant
movement.
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major assets (house, car, theft protection etc), and also building
up an adequate emergency buffer.
4. Tightly monitor your cash flow. Review it often. Use some
software to help you and do it as frequently as possible,
probably every weekend or every first day of the month.
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----------------------- The End of Volume 1 --------------------------If you find any error in this edition, kindly send an email to
book@kclau.com
Do you want to get the next Volume of this ebook series? Visit
this page http://KCLau.com/lp/ebook to post a comment and
enter your emails to get on my e-mailing list.
Hear from you soon.
regards,
KCLau
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