MoneyTipsEbookVol2V3 1

Money Tips Volume 2

How to Invest Profitably, Save More Money and
Retire Early in Malaysia, Even if You are in Heavy
Debt Now
by KCLau
http://KCLau.com
The electronic version of this book can be downloaded free of

charge.
Feel free to republish excerpts from this book, as long as you
link back to https://KCLau.com for attribution. And it’s also okay
to share this ebook in its entirety with anyone you think might
be interested. In fact, I’d be delighted. If you missed Volume 1,
download it here:
https://KCLau/lp
https://KCLau.com page 2/108

Published by KCLau Dot Com Sdn. Bhd.
Email: book@kclau.com
Website: https://KCLau.com
Copyright © 2019 by KCLau
All rights reserved.
Second Edition April 2019
The strategies outlined in this book may not be suitable for

every individual and are not guaranteed or warranted,
whether expressed or implied, to produce any particular
results. The advice, ideas and suggestions are written as
a general guide, and specific professional advice may be
necessary.
No warranty (whether expressed or implied) is made with

respect to the accuracy, adequacy, reliability, suitability,
applicability or completeness of the information contained
herein, and both the author and the publisher specifically
disclaim any responsibility or liability for any damages, lost
profits, losses or risks, whether personal or otherwise,
which is incurred as a consequence, whether directly or
indirectly, of the use and application of any contents of this
book.

A Note to the Reader 7
How to Make Wise Financial Decisions Based on your

“Time Worth” 8
Simple Method to Calculate Your Hourly Wage without
using the Calculator 8
Considering Tax 9
Knowing the Application 9
Relative Value of Money: When, Where and How Your

Money is Valued? 12
Should you Focus on Increasing Income or Reducing

Expenses? 15
The Non-Risky Way to Get Rich with Excessive Debts 20
Do You Have the Income-Generating Assets to Fund Your

Money-Sucking Liabilities? 24
Are you trading? Gambling? Speculating? or Investing? 26
Don’t spend the money you don’t have, to buy the thing
you don’t need, to please the people you don’t like! 28
The Most Important Payee of Your Entire Life That Most

People Forget Until They are Too Old 32
Top 5 Regular Monthly Expenses You Don’t Actually Need

33

How to Quickly Evaluate an Investment using the Rule of
72 38
Time Value of Money: Computing the Value of Single Sum

Investment 43
Time Value of Money: Finding the Rate of Return to Meet

Financial Goals 46
Time Value of Money: Computing the Value of a Fixed Sum

Invested Regularly 49
Time Value of Money: Computing the Retirement Fund in

EPF Account of an Employee 54
Time Value of Money: How to Calculate the Effective

Annual Rate (EAR) 58
How to Calculate Your Investment Portfolio Return? 62
Withdraw EPF Money for Home Loan Installment: How it

affects your Retirement Fund 64
How Recession Happens and 8 Tips to Prepare for it! 67
Knowing your Enemy – Inflation! 74
Financial Security: How do You Feel It? 77
What Do You Know About Bankruptcy? 82
Financial Consideration for New Parents in Malaysia 88
Cloning Your Life Values via Private Trust 96

Top 4 Methods to Enjoy Tax Relief for Education Purposes
98

A Note to the Reader
This book is a compilation of the articles and ideas I’ve

published online, on my website, or on other people’s website,
newspaper, magazines or other types of publication.
You might have come across some of the ideas in this book.
The purpose of making this book is to give you the convenience
to access my writing in a more organised format.
That’s why I’ve made the electronic version freely

downloadable. Meanwhile, there is no physical version
available at this moment. If you prefer to read a REAL book, I
have several books published, and you can find them in the
main bookstores.
Also for your convenience, I’ve made the size of this book small
enough to fit on your mobile device screen, so that you don’t
have to do excessive horizontal scrolling to read the pages.
I will be updating this book from time to time since I am writing

new content on a regular basis. I urge you to subscribe to my
e-mailing list in order not to miss out any future updates.
This is Volume 2. If you missed the previous Volume, which

contains entirely different money tips, you could download it
here:
https://KCLau.com/lp

How to Make Wise Financial Decisions
Based on your “Time Worth”
Value of money is always tied to the time element. If you work,

you need to understand the basic concept that you’re trading
your time for money. Time is a nonrenewable resource, but
money? You will be able to make much more money if you
understand the relationship between time and money. That’s
why one of the fundamental subjects of financial planning is
“Time Value of Money”.
Simple Method to Calculate Your Hourly Wage without

using the Calculator
Take your total gross income per year, remove the last three
zeros and halve the result, so RM100,000 becomes RM100,
which halved is RM50. So your wages is RM50/hour. This is a
very simple way to calculate your hourly rate in a blink.
It is based on 8 hours workday, five days work week, and four

weeks of working month. Try to calculate the real number, and
it won’t be too far away.
RM100,000 / (12 months x 4 weeks x 5 days x 8 hours) =

RM52.08
Hourly Rate = Annual Salary / 1000 / 2

Considering Tax
However, some portion of the money you make is contributed to
the Income Revenue Board (IRB) (Income Tax). If your hourly
rate is RM50 and your highest tax bracket is about 20%, your
actual hourly rate wages is RM42 only.
It will be more practical to use your net income to estimate your
time worth.
Knowing the Application
1. Should you outsource, or do it yourself (DIY)?

People love DIY. But we can’t be expert in every field. If you
DIY, it might cost you more than hiring an expert to do it for you.
In Malaysia, a cleaning foreign maid costs about RM8/hour.
Let’s say you are trying to save money by doing all the cleaning
yourself. You spend the whole day from morning till evening, 8
hours in total to complete the job. If your hourly rate is RM50,
you have just paid RM400 to keep your house clean.
On the other hand, you can employ a temporary maid and pay
her RM8/hour. She might get the job done in 4 hours. She is a
professional housekeeper, and probably she can do a better
and faster job than you can. You only spend RM32. If you make
use of your time for a productive job, you might have earned the
difference of RM368.
Most of the time, I would hire someone else to do the low-value

job and free myself up to do the things I love to do.

So ask yourself these questions:
- Should you cook or buy takeaway packed food?
- Should you wash your clothes or send it to laundry
service?
- Should you type the letter, print the invoice or hire a
secretary?
Forget about all those non-core functions that you hate to do.
Stop it immediately. There are people who are much more
skilful. By outsourcing them, you will have more resources to be
better utilised.
2. How many hours it worth?

When you buy something, you’re trading minutes or hours or
days of your life to possess that thing. So before you buy that
beautiful cloth, do a simple calculation using your hourly
earning to see whether it is worth your time spent (on working
for it, not the time spent buying it).
If you make RM10 an hour and something costs RM50, you can
figure that it takes five hours of your life to pay for that thing.
Next time when you are making a decision to buy something,
ask yourself, “How much time is it worth?”
Besides that, the hourly rate also applies to other things you do
that’s not productive.
Example:
- You spend one hour waiting for your turn to get that free toy

- You drive 30 minutes to a supermarket to get milk that is 50
sen cheaper than the groceries store just nearby your area.
- You spend an hour contesting an RM10 mistake on your
Celcom phone bill.
3. Increase your hourly rate, and build income on top of

others people’s time.
Since time is a limited resource, you should try hard to increase
your hourly rate. Tiger Woods earned $111 million in 2006
alone. His hourly wages is $55k per hour!
However, there is always a limit on a person’s earning. To grow

your income further, try to imagine that you have a bunch of
associates that make money for you. Let’s say whenever they
make RM10 they will make another extra RM1 for you.
I can see that now you are starting to think “rich”. Indeed,
helping others make money is one of the fastest ways to get
rich. I’ve been working hard to help others make money. The
more people I help, the more money I will get. When your
perspective change, it is a whole new world waiting for your
exploration.


Relative Value of Money: When, Where and
How Your Money is Valued?
The value of money relatively differ depends on where, when

and how you measure it. It boils down to the following question
to relatively determine the value of money.
#1. Where is your money?

Where you put your money determines how much value it has,
in the future. Put it in bank, your money is relatively lower
compared to putting it in investment. If you have your money
set aside long term in a great company, or in a real property
located at prime areas, the value of your money is relatively
higher.
For example, you have RM1000 in a fixed deposit giving you

4% return p.a., after 10 years, the value is RM1,480.24. If you
invest it wisely now, in an investment vehicle that gives you
15% average return p.a., the future value is RM4045.56. It is
much higher than putting your money in FD.
So, where you put your money really matters. The poor remain
poor if not poorer, just because they don’t know where to put
their money.
#2. Where do you earn and spend your money?

Let’s say you have RM1,000 in your pocket to spend. You can
do many things or purchase many stuff in certain parts of

China. But for merely RM1,000 in Australia, you may spend it
all on food within a few days.
That’s why you know some people work hard at other more
developed countries, and save hard so that they have more
money when they go back to their home countries.
Indonesians work in Malaysia as maids.
Some Indians workers are willing to work 12 hours a day, 364
days a year in Malaysia nasi kandar restaurants.
Some Malaysians work illegally in UK as kitchen helpers.
Filipinos, Indonesians, Indians and Sri Lankans work as
domestic helpers in Singapore.
Thais, Indians, Chinese work in construction industries in
Singapore and Malaysia as construction workers.
IT professionals from India, China, etc work in US, Singapore,
Europe for a number
of years before
moving back to their
home countries.
That’s why it is great

to free yourself, and
being mobile while at
work, so that you can
earn US or Europe
dollar, while living in
China. The relative
value of money is giving you a high purchasing power.
#3. When do you earn and spend your money?

Money’s value is correlated to time. That’s why there are
textbooks and courses about the time value of money. RM1,000
now may be many folds more in value than RM1k 20 years
later. The longer you can defer, or afford to defer, it is better in
terms of increasing the value of your money.
The rich know that you need to earn money as early as

possible, and spend it as late as possible. There is no secret
indeed. You just need to make and save a lot of money now,
and spend just a little portion of it. Later on, you will have more
money to spend even though you work less than you used to
be.
#4. How do you earn and spend your money?
John’s income is
RM500/hour. But Lim’s
income is RM10/hour.
John is better paid than
Lim. So John can easily
afford a new RM2500
mobile phone. But to Lim,
it is 250 hours of hard
work to have the
purchasing power for the same phone. So if you increase your
earning ability, you relatively have better value.
On the other hand, if John spends 150% of his income ( the

additional 50% on credit card debt), but Lim only spends 10% of

his total income, the value of money is different relatively. For
Lim, RM1000 made is equal to RM900 saved. For John,
RM1000 earned equals to RM500 owed to the credit card
providers.
Now, what do you know about the value of money?
Now you’ve learnt the relative value of money. If you want to be

rich and feel financially secure,
● put your money at a better investment vehicle, that gives
you better returns in the long run
● earn money of greater value and spend money at places
with lower living cost
● save your money now, and spend it later. (Later means
when you really need to)
● stop living from paycheck to paycheck. Live frugally and
earn abundantly.
Should you Focus on Increasing Income or

Reducing Expenses?
Cash flow chart involves simple mathematical calculation:

Saving = Income – Expenses.
Savings is the priority since it appears first in the equation. To

increase saving, you either increase income, reduce expenses,

or doing both at the same time. Which option requires your
most attention?
Focus on Reducing
Expenses
If your main focus is on
cutting down your expenses,
it is all about frugality. I found
that many of the personal
finance blogs preach about
how important it is to live
frugally. Is it worth your
effort? When you don’t know
how to increase your income,
cutting down expenses is the
easiest route to increase your net worth.
50 things you can do to reduce expenses

1. eliminate mobile phone (I know you can’t live without it,
me too)
2. cancel newspapers, magazine and other periodicals
subscriptions.
3. use energy efficient lamps
4. purchase generic prescriptions when possible
5. buy in bulk when shopping for grocery
6. terminate your gym membership
7. read books at library instead of going for movie
8. cut your vacation
9. stay at home whenever possible
10. stick to your budget

11. cancel your TV subscription
12. use email instead of phone whenever possible
13. compare before you make any purchase
14. plan menus for the week before you shop grocery
15. prepare shopping list to avoid impulse buying
16. go to the store just once a week
17. do not go to restaurant when you are hungry
18. plan the use of leftover food
19. buy clothing at the end of the season
20. shop at discount stores
21. buy used item whenever possible
22. use public transportation, if available
23. have good health habits
24. avoid smoking
25. avoid drinking alcohol.
26. play board and card games, they are cheaper
27. attend concert only if it is free
28. make your own home accessories
29. consider less expensive housing
30. Pack school and work lunches
31. review insurance coverage. Are you over insured?
32. reduce trips outside the home
33. use 10% less than usual
34. stop shopping… not even window shopping
35. change to cheaper brands
36. look for discount coupon
37. buy only when you are offered rebates
38. drink plain water only whenever you dine out.
39. don’t keep more than ten buck in your wallet
40. cut all your credit card except one

41. do your own car maintenance such as changing oil
42. stop going to a hairstylist
43. rides bike instead of car
44. avoid silly bank fees
45. don’t buy a car
46. just rent a small room to stay
47. share room and split the rent
48. stay with your parents
49. start blogging and it will cut all your other entertainment
50. ask for discount every time before you pay for
something
Hard work and no fun!

Wow !!! There is a lot of hard work. But do you really have fun
doing all those frugal things? I can only agree with item no.49,
which had saved me a lot of money.
How much can you save? It is limited.

No matter how hard you try, you can only cut down your current
expenses completely. Most people will celebrate if they can cut
10%. 30% is already too much for most people to compromise
their lifestyle. The crux of the matter is, by concentrating on
reducing expense, what you get is hard work, no fun, and only
be able to save as much as the amount you didn’t spend.
Focus on Increasing Income

If you change your focus to increase your income instead of
reducing your current expenses, you will see a whole new world
of opportunities.

25 things you can do to increase incomes
1. invest in stocks
2. invest in real estate
3. increase your knowledge
4. sell items you no longer need
5. get a part-time job
6. rent out spare room
7. join MLM
8. start a business
9. learn how to sell
10. make money online
11. get a raise or a second job
12. change your thinking
13. raise your rates
14. get extra work
15. get money from public aid or charities, if you are
qualified
16. go back to school to acquire additional skills
17. buy an established small business
18. arrange a better feng shui at your home and your work
place
19. start a make money online blog
20. invest in unit trust funds
21. take your company public
22. pay less tax
23. learn forex trading
24. invest in ETF
25. get sponsorship from family members, if you dare.
Tough job but a lot of fun!

How much can you probably earn and save? It is unlimited!
The sky is the limit.
Are you a great saver or an income pursuer?!

So, how much time do you spend in a day to increase your
income? 8 hours? 12 hours?
Is it viable to cut down the effort to live more frugal? And spend
the time saved to actually work out some plans to increase your
income?
I am definitely an income pursuer. How about you?
The Non-Risky Way to Get Rich with

Excessive Debts
Bad-debt-free makes you a freeman. But if you know how to

leverage with good debt, that’s the exact secret of wealthy
people.
Paying debt is like a nightmare to ordinary people. Most people

hate when it comes to the due date for mortgage installment,
car loan installment and credit card debt. Probably the reason
debt gets so much hatred is because it is associated with bad
consumer debt most of the time. Those are really bad debts
that we should hate and avoid. In order to get rich, make friends
with good debts instead.
How Good Debt Makes You Rich

For illustration purposes, I will show you two different scenarios
how a person handles debt that affects his financial situation.
John earns $10,000 each month, spend $5,000 and save the
other $5,000. Figure below shows his current cash flow and net
worth charts.

For easy illustration, let’s assume John’s only asset is his house
worth $200,000. His outstanding mortgage is $150,000, leaving
him a net worth of $50,000
Scenario 1: Buy a bigger house

John found a great deal to buy a bigger house which is worth
$500,000. So he sold his existing house, and use the $50,000
remaining cash for down payment. After buying the bigger
house, his mortgage installment increases. Moreover, all other
home related bills also increase because a bigger house needs
more electricity energy supply, more maintenance works, more
quit rent etc. This resulted in higher expenses – $8,000 per
month. His surplus dropped to $2,000 per month only.
The figure below shows his new cash flow and net worth charts.
Scenario 2: Buy another

house for investment
purposes
Instead of moving into a

bigger house, John
decided to invest in real
estate by buying another
house for rental income
and capital appreciation.
The new house is worth

$300,000 and he got a
deal that doesn’t require

any down payment. His monthly expenses rise and in fact it is
just the same as moving into a bigger house shown in Scenario
1. However, because the new house is rented out for $3,000 a
month, his income rises to $13,000. This allows him to continue
to save $5,000 per month. The figure below shows his new
cash flow and net worth charts after the investment.
Simply looking at the net worth chart, Scenario 1 and Scenario

2 are identical. But Scenario 2 will definitely makes John a
wealthier person because he has increased his cash flow. After
1 year, his saving is double
of the case of moving into
a bigger house.
This is the reason why you

shouldn’t be afraid of debt.
As long as you can
generate better return with
the money you borrow, you
should get more loan to
expand your investment
portfolio.
Bad-Debt-Free vs.
Good-Debt-Free
Good debt works for you.
Bad debt makes you its
slave.

Good debt increases your income. Bad debt decreases your
savings.
I know some people think that mortgage of the homes they are
staying in are good debts. But in fact, it is a bad one because it
doesn’t increase your income.
I want to be bad-debt-free. At the meantime, I want to learn how

to leverage my investment with good debt.
Please note that if John’s houses appreciate by 10% a year, it

is calculated from the total assets of $500,000. This means he
gets $50,000 return a year. But if he didn’t buy the house, how
much can he get for 10% return from other investment such as
unit trust funds? He can only invest with the monthly $5,000
surplus, which is just a small fraction of $500,000. If John
prefers to be totally debt free, he reduces the chances to get
rich faster.
If you want to be totally debt free, it might cost you a great

fortune!
Do You Have the Income-Generating Assets

to Fund Your Money-Sucking Liabilities?
As most people understand, the mortgage of their home is the

liability. You owe the bank money. In return, you need to charge
your house title to the bank as collateral. So you think you

actually have an asset to pay for your liability. You think your
actual home is the “asset”, that when you can’t afford the
installment, it can pay off your mortgage by being auctioned to
third parties. You are right, but it won’t get you rich.
For the rich people with higher financial IQ, they know that the
house they are staying in is actually a liability. It is a luxury item.
It takes money out of your pocket! In fact, it takes more money
than you think. Beside the mortgage installment, you are paying
for the renovation, electrical appliances, household bill etc.
Now, let’s come back to the golden question: DO YOU HAVE

THE ASSETS TO PAY FOR YOUR LIABILITIES?
A local entrepreneur in pre-school education wants to have a
new S-class Mercedes Benz. That’s a liability. He recruited a
new talented business partner and opened up another
kindergarten. In 3 months time, the child care and education
centre is giving him RM5000 net profit every month. His partner
is taking care of the centre, while he is shopping for his new
luxury car. That’s an asset.
I have some down line insurance agents who are very

independent and making sales week after week. I trained them
in the first few months in business, and they can practically do
business on their own after that. I got overriding commission
from every sale they make. They are my assets. They help to
pay for my car loan, my liability.
So, do you have the assets to pay for your liability?

Are you trading? Gambling? Speculating? or
Investing?
When you are speculating or investing, it involves trading.

Trading is the process of buying, or selling. We don’t know your
purpose behind the trade.
Gambling is an activity that may or may not involve trading. In

trading, a commodity can be bought and sold. In gambling, the
ticket or the bet you wager can’t be sold. Gambling usually
gives greatest outcome in the shortest duration if it succeeds.
Trading
Definition: buying or selling securities or commodities
Gambling
Definition: The voluntary risking of a sum of money on the
outcome of a game or other event.
Speculating
Definition: Trading with the purpose of making profits.
Investing
Definition: The act of using money to make more money
When I buy a company share, I can sell it at any time and it is

called trading.

When I buy a share without knowing anything about the
company, just based on mere rumors, it is called gambling.
When I buy a share and would definitely sell it weeks or months

later when it has appreciated in value, it is called speculating.
When I buy a share after understanding the company’s

business model, future planning, cash flow management etc
and I am very confident that it is undervalued, and will buy more
when the price drops, it is called investing.
Are you trading? Gambling? Speculating? or Investing?

Don’t spend the money you don’t have, to
buy the thing you don’t need, to please
the people you don’t like!
Do you find yourself spending more than you earn? Yet when
you look back, you find that you actually spent that money on
something that you could have done without. Worse still, you
spent that money on someone you did not necessarily have to
please.
How can you avoid spending the money that you do not have,
thus reducing incidences of overspending? Read on to find out.

10 Examples how you can overspend unnecessarily
1. A fresh graduate decides to buy an imported Japanese

car. As a result, he uses up 50% of his salary for the monthly
installments, car maintenance and petrol. He is then left with
another 50% for his other commitments and expenses.
2. You impulsively swipe your credit card to pay for the

latest Apple Macbook you always had an eye on. At the end of
the month, you find that you are unable to pay the amount due.
3. Your colleague just moved into a semi-detached house.

You sold your entire investment portfolio and existing
apartment, took up a bigger mortgage to buy the house next to
his.
4. An office lady uses her entire month’s salary to buy the

Louis Vuitton hand bag, just because her colleague shows off
one to her.
5. You want your boyfriend to propose only if he presents

you with a Tiffany’s ring.
6. A father took up a personal loan of RM10,000 so that he

can take his family for a vacation to Australia. Although he did
not need to take this holiday given his financial situation, he did
so because his neighbour just came back from New Zealand.
7. Have a breast implant to impress the man you are

interested in although he is not interested.

8. You bought an expensive set of home theatre system.
However, you rarely watch any DVD at home since you are too
busy at work. It is just to impress your friends who visit your
house once a while.
9. Bought a Rolex watch during your trip to Switzerland

just because your boss said that it was a great investment.
10. You spent lots of money on your wedding ceremony and

serve the best food, although all your wife wanted was a
honeymoon in Europe.
What is the money you don’t have?
Credit card – If you can’t afford to pay it in full when the charges
is due, it is the “future money”, not “current money” that you
already have
Mortgage – you use the bank’s money to buy a house and stay
in it, as long as you are able to pay it back to the financier.
Personal debt – getting a personal loan to spend on something

is the stupidest thing to do.
Loan shark – those who don’t have credit card, without proper
documents to borrow from banks will look for “favours” from
loan shark.
Easy installment plan to purchase consumer product

What are the things that you don’t necessarily need?
Car, a plush house, gadgets and other things that do not fall
within your budget. The rule of thumb is to spend less than one
third of your income on these items.
Who are the people you don’t like?

● Friends, colleagues and relatives who like to show off,
● those who look down on you,
● those who slap you on the back.
You can have a thousand reasons to hate and dislike

somebody, but you don’t have to hurt your wallet.
Have you ever done something like that?

We sometimes, unknowingly, spend money on instant
gratification, only to regret much later. We sometimes also give
in to our temptations to buy things that we don’t have much use
for or things that are impractical.
The next time, before you decide to blow your cash on

something, try to think about how many hours of toiling at work
that money equates to. This does not mean you need to stinge
on everything that you wish to buy. Only buy something if you
really need it.
Although this may sound like easy advice, we always end up

faltering. We spend more than that we can earn and in the end,
find ourselves struggling to make ends meet.

The Most Important Payee of Your Entire
Life That Most People Forget Until They
are Too Old
Your money comes in regularly as long as you are earning

money actively, or investing and getting money passively.
That’s called inflow of money.
As many other people on planet earth in this capitalist world, we

pay for something regularly in our life. Which one is your
priority?
Your credit card debt?
Your mortgage?
Your car loan?
Your parents?
Your children?
Your meal?
Your insurance premium?
Your astro bill?
Your electricity bill?
Your phone bill?
………………
The list goes on and on. Most people have a very long list. Mine
is one of the longer one too. But most people omit the most
important payee of their entire lives!
The most important payee

Who is the most important payee? You as the payer, who
should you pay first?
The answer is you! The future you! The retired you! The old
you!
A more healthy list of payees should consist of and not limited
the items below, as top priority:
● Your regular investment
● Your retirement accounts
● Your saving accounts
Please by all means, keep as much as 30% of your total
income for the future you.
Top 5 Regular Monthly Expenses You Don’t

Actually Need
It is undeniable that the living expenses in Malaysia are getting

higher at a much faster rate, although inflation reports that the
rate is low. Feeling the pressure of petrol subsidy cut, and rising
cost of almost everything, from toll charges to hawker food – life
is definitely getting harder.
Humans are extremely flexible. We can cope with the situation

with some compromise and sacrifice. When money is no longer
enough, we can always find ways to cut some expenses. Being
frugal simply means living below your means.

However, less money spent does not indicate lower quality of
lifestyle. Because of the advancement of technology and the
Internet, you can even spend less to enjoy the same benefit, if
not better than we used to have.
If you are living in Malaysia, here are top five monthly expenses
that can be cut from your budget:
1. Monthly Astro bill

I know most of us Malaysians have the Astro installed in our
home. I used to subscribe to Astro too a few years ago. Now
the cheapest package is more than RM50/month!.
After having it for a while, I found that it is really a waste of

money and time. To get your value back, you spend hours of
time watching TV. But in fact, time is wasted for unproductive
activities, that’s for pure entertainment.
If watching movies, TV series or live sports is so important to

you, there are many alternatives that’s free of charge. Youtube
has tons of entertaining videos and short films, even though the
video quality is not as good as other service providers. But with
the broad range of users and content providers, you can find a
wide variety of videos for your pure entertainment. Some even
provide video tutorial and educational materials there.
There are also new service like iflix (the Netflix of SouthEast
Asia) and the IP TV boxes like 1OTT. Check them out just for a
fraction of the cost you pay for Astro.

2. Monthly Newspaper Subscription
Do you still have the newspaper sent to your house every
morning? Newspapers in Malaysia publish controlled materials
and news. A typical Chinese newspaper is more than 100
pages! This includes advertisement, world and local news, but
most are reporting bad news and crimes.
Moreover, you need a place to stock your old newspapers and

wait for the recycle team to drive by and sell them of a few
ringgits. This is a pure waste of paper, and trees.
I opt for a more environmentally friendly option. I read the news

and articles on the Internet.
3. Monthly Fixed Line Home Phone

I am using the Unifi package now on the 20MBps plan – costing
RM250/month, due to business needs. Comparing this to other
developed countries, we are still paying a relatively very high
fee for broadband service. Nevertheless, I still use TM Unifi
because there are really no competitors all these time.
However, recently some mobile connection service providers
such as Maxis and Digi have come up with broadband plans.
Now, at least we have some choices to switch to mobile

broadbands, which provide unlimited usage anywhere, anytime.
If Streamyx is not going to absorb the fixed phone rental, I don’t
see any attractiveness in its broadband package anymore.
4. Credit Card Insurance

Bank telemarketers call you from time to time asking you to
subscribe for one scheme or the other. (hospitalization income
benefit, accidental plan, etc) Have you ever signed up for one? I
never do. But there are some who will sign up eventually, if not,
the telemarketers will be out of jobs.
Those who signed up probably are sold because of the

seemingly better benefits and limited offer. But don’t forget that
there are terms and conditions that you might have overlooked.
Every time you get this kind of sales call, ask for the black and
white of the terms and conditions. Ask the following questions:
● What are the terms and condition?
● How do you cancel it in the future?
● Who is going to help you, give you personal service
when it comes the time to make claim?
Another type of credit card insurance is one that helps you
cancel your credit card liability. This means that when the
cardholder passed away, the liability will be cancelled off.
This benefit requires a premium of a few ringgits depending on

what your credit card balance is. But do you really need this?
When you charge the purchases on your credit card, you are
supposed to have the money ready to pay it off in the first
place.
If you say it is for the estate creation, for the protection of your
family, it should be properly done with insurance planning, not
through a telemarketer who sells you this stuff. They probably
never purchase these protection for themselves.

5. Trips to the Banks
This is an activity that costs you petrol, parking fees, and most
importantly, a complete waste of time. Here is how I handle my
bank accounts, monthly bills, and also credit cards.
- Set up auto debit instruction to charge my credit card for
recurring bills, such as electricity, mobile phone,
broadband, life insurance policies etc.
- Use internet banking to do intrabank transfer (free of
charge), and interbank transfer ( cost RM0.11). Internet
banking lets you pay your bills and transfer money from
anywhere as long as you are connected to the Internet.
So, the only trip to banks is to withdraw a few hundred ringgits

cash for the whole month expenses, plus depositing cheque
payments that I receive. These two tasks can be done using the
ATM machines and cheque deposit machines.
However, if your transaction requires a personal service at the
counter, you can do it during OFF office hours too. How? Some
banks have branches inside shopping malls that open from
11am to 7.30pm. Just plan your trip and you don’t have to
squeeze yourself in the long queue anymore.

How to Quickly Evaluate an Investment
using the Rule of 72
The Rule of 72 is a basic investment rule that estimates the

amount of time it will take to double your money. It is generally
used as a simple and straightforward method for estimating an
investment’s doubling time or halving time.
How to apply the Rule of 72

These rules apply to exponential growth and decay
respectively, and are therefore used for compound interest as
opposed to simple interest calculations.
Years to double = 72 / Interest Rate

Take the percentage of interest on your money and divide it into
72.
For example, an interest rate compounded at 9% percent would

double in eight years (72/9 = 8).
If medical fees increase at 9% per annum, the “rule of 72″ gives

72/9 = 8 years later, your medical bill will double; an exact
calculation gives 8.0432 years. After another 8 years, you will
need to pay 4 times of the medical bill compared to present
situation.
When your unit trust consultant told you that a particular fund
gives 100% return in 6 years. You roughly know that the fund’s
annualized 72/6 = 12% return per annum.
If inflation rates go from 2% to 3%, your money will lose half its
value in 36 or 24 years.
A stock you bought 8 years ago is only worth 1/4 of its previous
value. Using rule of 72 twice, the share shrinks at a rate of 18%
p.a. (For the initial 4 years, it falls to half of its value. Wait
another 4 years, it falls further to only a quarter remaining)
When to use the Rule of 71, 70 and 69.3

The rule of 72 provides a good approximation for annual
compounding, and for compounding at “typical rates” (from 6%
to 10%). But there are situation where other rules will give more
accurate answer.

low rates – for lower rate than 6%, Rule of 69.3 will give a
better result than Rule of 72.
daily compounding – Since daily compounding is close

enough to continuous compounding, for most purposes 69.3 –
or 70 – is used
higher rates – a bigger numerator would be better (e.g. for

20%, using 76 to get 3.8 years would be only about 0.002 off,
where using 72 to get 3.6 would be about 0.2 off).
This is because, as above, the rule of 72 is only an

approximation that is accurate for interest rates from 6% to
10%. Outside that range the error will vary from 2.4% to 14.0%.
For every three percentage points away from 8% the value 72
could be adjusted by 1.
Millionaire’s Estimation
Felix’s Corollary provides a method of approximating the future
value of an annuity (a series of regular payments), using the
same principles as the Rule of 72. The corollary states that
future value of an annuity whose percentage interest rate and
number of payments multiply to be 72 can be approximated by
multiplying the sum of the payments times 1.5.
As an example, 12 periodic payments of $1000 growing at 6%

per period will be worth approximately $18,000 after the last
period. This can be calculated by multiplying 1.5 times the
$12,000 of payments. This is an application of Felix’s collorary

because 12 times 6 is 72. Likewise, 8 periodic thousand dollar
payments at 9% will result in 1.5 times the $8000, or $12,000.
The millionaire’s estimation is a simple savings calculator,

posing the question “How much must I save per year to have
saved $1,080,000?” Of course, the annual interest rate is a
factor. In the original challenge, the number $1,080,000 was
chosen due to its multiplicative relation to the number 72.
Using Felix’s corollary, one can estimate that by saving

two-thirds of the total, in periodic deposits, the interest will take
care of the rest (since 1.5 times two-thirds will equal the desired
goal). So the goal becomes to set aside $720,000 in equal
periodic deposits, such that it grows to approximate the target
amount of $1,080,000.

If you want to be a millionaire in 12 years, just save $60,000 a
year in an investment vehicle that gives you 6% a year.
If you want to be a millionaire in 6 years, just save $120,000 a
year in an investment vehicle that gives you 12% return per
annum.
Summary for Action

The ‘Rule of 72′ is a simplified way to determine how long an
investment will take to double, given a fixed annual rate of
interest. I bet you don’t want to bring your financial calculator
wherever you go. Just apply the Rule of 72 to quickly make a
rough estimate of a particular investment. Try estimate the
route your friends or family member can become a millionaire
using the Felix’s Corollary and the Rule of 72.


Time Value of Money: Computing the Value
of Single Sum Investment
In order to be smart and calculative in personal finance matters,
understanding the time value of money is an essential part of
the learning process.
Now, we will start with learning the calculation of the value of

single sum investment.
Common Problems
#1. You have RM10,000 in a fixed deposit account, giving 3.7%

return annually. If you don’t cash out the interest earned, how
much if the total money accumulated after 15 years?
#2. Ali borrowed RM5,000 from a loan shark 5 months ago. He

agreed to pay compounded interest of 3% per month,
calculated based on total amount owed. But Ali never made any
payment until now. How much should the loan shark claim from
Ali?
Theory
Before I learn the theory of time value of money (TVM), I used
to create spreadsheet using Microsoft Excel to automate the

repetitive calculations. Now, save yourself the trouble. Use this
formula:
FV (Future value) = future value of investment at the end of

period
PV (Present value) = present sum of money set aside for the
investment
i = rate of interest
n = number of periods
Solutions
Example #1:
You have RM10,000 in a fixed deposit account, giving 3.7%
return annually. If you don’t cash out the interest earned, how
much if the total money accumulated after 15 years?
PV = RM10,000
i = 3.7% per annum
n = 15 years
FV= ?
Using scientific calculator, substitute the values into the formula

FV = RM17245.72
The easier way is to use a financial calculator. You don’t have

to buy a physical financial calculator. There are many mobile
apps application. You can also search online with the keyword
“future value calculator” to use some free resources already put
up there.

Example #2:
Ali borrowed RM5,000 from a loan shark 5 months ago. He
agreed to pay compounded interest of 3% per month,
calculated based on total amount owed. But Ali never made any
payment until now. How much should the loan shark claim from
Ali?
PV = RM5,000
i = 3% per month
n = 5 months
FV= ?
Substitute the values into the formula, you will get

FV = RM5796.37
You should never mess with a loan shark.
Exercise
1. A unit trust agent told you that Fund A give a return of 10%
per annum. If you invest RM50,000 now, how much would you
expect the total fund value of your investment after 8 years?
2. The current inflation rate is about 3.5% per annum. Now you
pay RM10.80 for a cup of Starbucks coffee. How much would it
costs when you retire after 23 years?
3. Let’s assume the US dollar is depreciating at a constant rate

of 1% per month. Now, USD1 equals to RM4.20. After 8
months, how much US dollar can you get from RM5.00?

Time Value of Money: Finding the Rate of
Return to Meet Financial Goals
Now, we will learn to find the rate of return required to meet a
financial goal.
Common Problems
#1. You have set aside RM10,000 for your future dream home
down payment. You want to have at least RM15,000 after 5
years time to purchase your dream house. What is the rate of
return required if you were to invest the initial RM10,000 in
order to get RM15,000, 5 years later?
#2. You invested RM5,000 in a balanced unit trust fund that

gives an average of 10% return per annum. How long you must
keep the money invested in order to have RM10,000 to fund
your child’s tertiary education?
Theory
Use this formula:
FV (Future value) = future value of investment at the end of

period
PV (Present value) = present sum of money set aside for the
investment
i = rate of interest/rate of return
n = number of periods

It can be modified to determine the rate of return required. In
this case, we know the value of FV, PV and n. What we want to
compute is i.
You can use the interpolation method or the trial and error
method using excel spreadsheet. But I would prefer the easiest
route using financial calculator.
Solutions
Example #1:
You have set aside RM10,000 for your future dream home
down payment. You want to have at least RM15,000 after 5
years time to purchase your dream house. What is the rate of
return required if you were to invest the initial RM10,000 in
order to get RM15,000, 5 years later?
PV = RM10,000
FV = RM15,000
n = 5 years
i= ?
i = 8.45%

Example #2:
You invested RM5,000 in a balanced unit trust fund that gives
an average of 10% return per annum. How long you must keep
the money invested in order to have RM10,000 to fund your
child’s tertiary education?
PV = RM5,000
FV = RM10,000
i = 10% p.a.
n=?
n = 7.27 years
Exercise
#1. A unit trust agent told you that one of his customer who
invested 5 years ago had achieved 200% total return this year.
What is the rate of return per annum?
#2. Your mother told you that a cup of coffee at the local
kopitiam costs RM0.10 only when she is 20 years old. Now she

is retired at age 55. The price of a cup of coffee now is RM1.00.
What is the average inflation rate per year?
#3. Let’s say you have RM100,000 in your investment portfolio.

Due to consistent monitoring and investment research, you are
able to get an average return of 15% p.a. for the past 5 years. If
everything goes according to plan, how long will it take for you
to become a millionaire?
Time Value of Money: Computing the Value

of a Fixed Sum Invested Regularly
For instance, when you are setting aside a regular and fixed
amount for saving, or unit trust dollar-cost-averaging strategy,
there will be a constant sum of money invested at regular
intervals. This series of cash flows is also known as an annuity.
Common Problems
You initiated a bank standing instruction to deduct
RM200/month from your bank account for unit trust investment.
The rate of return is about 15% p.a. How much is the total of
your investment value after 5 years?
You bought an endowment policy, paying total premium of

RM988 per annum. Your agent told you that the insurance
policy will mature in 25 years just on time for your retirement

fund. The maturity benefit is projected at RM50,000. What is the
rate of return per annum?
You apply a housing loan to fund the purchase of your first

home. The house value is RM200,000. You paid RM20,000
down payment and finance the rest. Assuming the bank is
offering you a fixed loan rate of 5.8% p.a., how much is the
monthly installments for loan tenure of 30 years?
Theory
This formula gives the Future Value of an annuity (assuming
compound interest):
where r = interest rate; n = number of periods.

Payment amount is normally indicated using “PMT”

For annuity calculations, we must first understand the timing of
the payment.
Annuity due – An annuity with payments made at the

beginning of each period. Also called advance payment annuity.
Examples:
● unit trust dollar-cost-averaging strategy
● paying regular insurance premium
● paying tuition fees every month
Ordinary Annuity – A series of fixed payments made at the

end of each period over a fixed amount of time.
Examples:
● housing loan installments
● car loan or hire purchase installments
● periodic interest on bonds where the coupon rates are
fixed
Solutions
Example #1:
You initiated a bank standing instruction to deduct
RM200/month from your bank account for unit trust investment.
The rate of return is about 15% p.a. How much is the total of
your investment value after 5 years?
PV = 0
Beginning Mode
n = 5 x 12 = 60 months
i= 15% p.a./12 = 1.25% per month
PMT = RM200/month

FV = RM17,936.34
Example #2:
You bought an endowment policy, paying total premium of
RM988 per annum. Your agent told you that the insurance
policy will mature in 25 years just on time for your retirement
fund. The maturity benefit is projected at RM50,000. What is the
effective rate of return per annum?
PV = 0
Beginning Mode
n = 25 years
PMT = RM988/year
FV = RM50,000
i=?

i = 5.066% p.a.
Example #3:
You apply a housing loan to fund the purchase of your first

home. The house value is RM200,000. You paid RM20,000
down payment and finance the rest. Assuming the bank is
offering you a flat loan rate of 5.8% p.a., how much is the
monthly installments for loan tenure of 30 years?
PV = RM180,000
End Mode
n = 30 years x 12 = 360 months
FV = 0
i = 5.8% p.a. = 0.48333% per month
PMT = ?

Monthly installment is RM1056.16.
Exercise
You want to be a millionaire in 15 years time. Now, you already
have a lump sum saving of RM50,000 in cash. After some deep
consideration, you decided to invest the RM50,000 in a
single-premium investment-linked insurance policy, which has a
past history of giving 12% return per annum. Beside the
insurance policy, you will also set aside RM1000 per month for
unit trust investment using dollar-cost-averaging method. What
is the minimum rate of return of the unit trust portfolio, so that
you can achieve millionaire status in 15 years time?
Time Value of Money: Computing the

Retirement Fund in EPF Account of an
Employee

To calculate the total retirement fund in the EPF (Employee
Provident Fund), we have to make some assumptions in order
to compute the value
● the amount of deposit will increase over time at a
constant rate (the normal salary increment rate)
● interest are paid at year end and always at the same
rate
Common Problems
You started your career as an engineer at 24 years old with a
starting pay of RM2500 per month. Contractual bonus is one
additional month. The average salary increase during your
lifetime is estimated at 7% per year. EPF pays an average
annual dividend of 5% p.a. Your contribution to EPF is 11% of
your salary and 12% is contribution from your employer. How
much will you get when you retire at age 55?
Theory
Use the formula below:
where
i = EPF dividend rate;
n = number of years;
A = initial amount of deposit
g = rate of salary growth

FV = future value of EPF account
Solutions
You started your career as an engineer at 24 years old with a
starting pay of RM2500 per month. Contractual bonus is one
additional month. The average salary increase during your
lifetime is estimated at 7% per year. EPF pays an average
annual dividend of 5% p.a. Your contribution to EPF is 11% of
your salary and 12% is contribution from your employer. How
much will you get when you retire at age 55?
First step is to find out the various variables.

The initial amount of deposit, A = RM2500 x (12+1
months) x (11+12)%
A = 2500 x 13 x 0.23
= RM7475
The number of years, n = 55-24 = 31 years
The EPF dividend rate, i = 5% p.a. = 0.05
The salary growth rate, g = 7% p.a. = 0.07
Substitute the variables in the formula above.

The total fund in EPF, FV = RM1.379 million
In order to give you convenient tools, there are several

web-based EPF calculators developed. Just google for it.

Exercise
Tan started his career as an executive in a local firm at age 18
with a starting pay of RM1200 per month. The average salary
increase during his lifetime is estimated at 5% per year. EPF
pays an average annual dividend of 5% p.a. His contribution to
EPF is 11% of and his company contributes 13%. How much
will Tan entitled to withdraw at age 50? (Assuming EPF
withdrawal rules still remain the same as year 2007)
Time Value of Money: How to Calculate

the Effective Annual Rate (EAR)
This is probably the most important lesson everybody should

learn about - how to calculate the actual effective annual rate
(EAR).
Common Problems
If you have deposit money in a Fixed Deposit (FD) account, the
banker will ask you about the term of your deposit – 1 month, 3
months, 6 months, 1 year or longer? The bank gives different
rate for different tenure. Let’s say Maybank is giving 3.7% for 12
months FD, and 3.4% for 6 months FD, what is the EAR for
6-months FD? Is it better than 12-months FD?
Theory
Scenario 1 – 12-month FD

Referring to the situation above, let’s say you are depositing
RM10,000 in FD for 12 months tenure. At the end of the term,
you will get your initial investment (RM10k) plus the 3.7%
interest (RM370)
Return = 3.7% p.a. , which is also the EAR.
Scenario 2 – 6-month FD
If you opt to put the money in 6-months FD, after 6 months, you
will get
Return = 3.4% x (6/12) = 1.7% , which is equal to RM170
interest earned.
Then you renew the FD without withdrawing the interest

earning, you will have RM10,170 in the FD for another 6
months.
At the end of the year, your will get another earning of 1.7% x
RM10,170 = RM172.89.
So your total return is RM170+RM172.89 = RM342.89
The Effective Annual Rate (EAR) = RM342.89/RM10,000 =

3.4289%
To easily calculate the EAR, use the formula below:

where
i= nominal annual rate (normally stated);
n= number of compounding period (compounding
frequency);
For the above example
EAR = [(1+ 0.034/2)^2] – 1
= 3.4289%
Nominal Interest Rate

Nominal interest rate is what we usually see on financial
products. Most of the time, these rates may not be the actual
annual rate.
An interest rate is called nominal if the frequency of

compounding (e.g. a month) is not identical to the basic time
unit (normally a year).
Example:
interest rate on housing loan (EAR is higher when it is daily
rest)
published FD rates for different terms (1 month, 2 months, or 12
months etc)
The more frequent you compound, the higher the EAR.

When you want to compare plans, first you must calculate the
respective EAR for each plan. Then compare the EAR.
You can search Google for EAR convertor
Exercise
You have RM7,000 in Fixed Deposit with CIMB Bank. Your FD

is renewable every month and CIMB bank provides 3.2%p.a.
interest. You let the FD renewed for 2 years. From the 3rd year
onwards, the bank lowered the FD interest rate to 3.0% p.a. But
you don’t need the money, so you leave it there for another 3
years. What’s the final amount you will be able to withdraw at
the end of 5 years?

How to Calculate Your Investment
Portfolio Return?
Investing in various asset classes and never bother to track and
monitor its return, is like flirting with several girls at the same
time and never bother whom will ultimately be your wife. Don’t
blindly invest and forget. It is like flirting without knowing what
you will get.
You just need an extra step to calculate the return of your

investment portfolio.
Let’s say you invest in several asset classes. Your gold

investment gives over 100% return last year. Your stock
investment turned sour after the recent General Election. The
apartment you rented out gives you a consistent return month
after month because of your loyal tenants. Many type of
investment, all with different return. So how do you know your
overall investment portfolio is doing? Is it on track?
This is a simple tutorial on how to compute your portfolio return.

Return of portfolio = (W1 x R1) + (W2 x R2) + (W3 x R3) +
…..(Wn x Rn)
Where W1, W2, W3 and Wn stand for the weightings in % of

assets, for asset 1 to n, in the portfolio. Whereas, R1, R2, R3
and Rn are returns for the respective assets, 1 to n, in the
portfolio.

Example 1:
More than half is invested in real estates.
Weight of stocks = 50k/293k = 17.06%

Weighted return of stocks = 25% x 17.06% = 4.27%
Overall portfolio return = 4.27 + 0.44 + 1.01 + 4.10 = 9.82%
Example 2:
This is a very conservative asset allocation. about 73% invested
in fixed deposit.
Example 3:
This is an “balance” portfolio, invested in four asset class with
equal share.

Download the excel spreadsheet: investment-portfolio-return
By tracking your portfolio return, you will be able to construct a
proper asset allocation to get the desired return.
Withdraw EPF Money for Home Loan

Installment: How it affects your
Retirement Fund
EPF was started for the sole purpose of forcing employees to

set aside a certain percentage of their income for their
retirement. It was generally perceived that if the contributions
were to be used for other purposes, this would have a
detrimental impact on the size of the retirement nest egg.
However, using these contributions to finance outstanding

housing loans is also another form of long term saving as the
property is likely to appreciate after the mortgage is settled.
How it Works?
This type of withdrawal involves you withdrawing money from
your Account 2 to finance your monthly installments for your
housing loan, which was taken up either to buy a new house or
build a new one.

Contributors need to go to the EPF to apply for the monthly
withdrawal only once, and subsequent payments would be
directly credited to their personal accounts every month.
Please note that this type of withdrawal is credited to your

personal bank account. It is not a lump sum withdrawal that is
paid directly to the financier, which is also another option of
withdrawal.
How Does Withdrawing EPF Affect Your Retirement Fund?
If contributors withdraw their EPF for housing purposes, they

will in turn have fewer funds for their retirement. However, at
least they can be sure that they have a roof to live under. For
now, property is affordable in Malaysia, but one never knows
what will happen to the property market in the future. Looking at
Korea and Taiwan, it is almost impossible to own a decent
home at big city if you are not rich.
The move to allow withdrawal of EPF to finance housing loans

would benefit most EPF contributors. Contributors who
previously found it monetarily tight to buy a property can now
consider doing so with this new withdrawal scheme. This way,
some contributors would be able to own better houses and yet
be able to lessen their monthly financial obligations.
Contributors who are currently homeowners and are paying

mortgage can also experience better cash flow as less money
is spent out of hand for the loan.

This new withdrawal scheme is also good for those who know
how to manage money. They can use this facility to grow their
wealth. For instance, consumer debt in the form of credit card
loans, personal loans can be paid off; they can invest for better
return or even fund higher education.
However, for those who are financially illiterate, more money

equals more trouble. They will spend for instant gratification
without thinking of future needs. This may cause a social
problem in the future when retiree has inadequate funds to live
on.
5 Suggestions to channel EPF withdrawal back to your

retirement fund
With proper knowledge, you can take advantage of this

withdrawal facility and grow your retirement further. Here are 5
suggestions to channel your EPF money back to your
retirement fund:
1. Buy unit trust fund that will outperform EPF dividend –
by applying ringgit cost averaging strategy
2. Invest in shares – buy undervalued stocks with good
dividend payout
3. buy another property – to receive rental income after
retirement
4. buy an annuity plan – to receive yearly income during
retirement
5. Pay towards the principle of your housing loan, thus
shorten the loan tenure and save on interest charge.

How Recession Happens and 8 Tips to
Prepare for it!
An economic recession is simply defined as a significant

decline in the economic activity spread across the economy that
usually lasts more than a few months. More economically
speaking, a recession is a decline in a country’s Gross
Domestic Product or a negative real economic growth for two or
more successive quarters in a year. The latter is a widely
known definition of recessions as well as a widely-accepted
one.
A severe or long recession is referred to as an economic

depression. A devastating breakdown of an economy
(essentially, a severe depression, or a hyperinflation, depending
on the circumstances) is called an economic collapse.
Is Malaysia heading towards a recession? We’ll never know

until it happens.
What causes recession?

The reasons behind economic downturns remain largely
unsolved. However, there are several traditional explanations to
the phenomenon.
The traditional explanation – Economy-wide changes

The traditional explanations postulate that recessions are
caused by events that have an economy-wide impact, such as
an
● increase in interest rates
● decline in consumer confidence.
● Firms reduce output and lay off workers, which further
decreases demand, and the economy slows even more.
● Caused by events that hurt particular firms or industries
Economic recessions can be caused by events that would have

an impact on specific companies or industries. For instance, a
major innovation can adversely affect some firms, causing them
to reduce production. This would in turn lead to a retrenchment
of workers. On the other hands, positively impacted companies
would need extra hands and seek additional workers.
It naturally takes time for the displaced workers to find new

means of employment. During this phase of “reallocation” a
situation of recession may occur.

What happens during recession?
#1. Rise of Unemployment rate

During a recession, there is a general trend of rising
unemployment rates and decreasing overall output. With fewer
people contributing to the economy, the overall economy is
bound to be affected. Income growth would be stalled. While
there would be more people in the market looking for
employment, the demand for recruiting people is far lesser.
When people are earning lower incomes, their spending power

decreases. As such, there is a reduction in spending.
Businesses are limited in their ability to pass along any
increases in expenses in the form of higher prices. In order to
move goods off the shelves, businesses are more likely to
reduce prices. This eventually causes deflation.
With prices drifting downward and commodities becoming more

affordable, consumer spending will once again kick off and
increase. The increase in consumer spending, over time, leads
to an increase in industrial production. This in turn improves
corporate profits leading to increased employment and
improved earnings, etc. This is how the economic cycle takes
place.
That’s why people say economy won’t growth continuously
without recession.
#2. Stock market plummet

People are generally conservative during recession. Those who
lose their jobs because of recession start selling off their

investments because they need money to sustain while they get
another job. The increased number of people selling their
stocks causes the stock market to fall sharply
#3. Real Estate plummet

During a recession, people turn to fiscal conservatism. This
affects the real estate industry as well, as there is lesser
demand in the real estate market. People put off buying and
selling of property during the periods of economic recession.
Another scenario is where the increasing levels of
unemployment during a recession cause affected homeowners
to sell their home to accommodate changing job demands.
On the other hand, because of the higher supply of houses on

sale as compared to the low demand, an economic recession
will forcefully reduce the selling prices of homes. As such, the
economic recession has a positive impact on potential
homebuyers. This is also because there are lower mortgage
rates that are caused by changes in interest rates.
How A Recession Impacts Your Daily Life?
#1. Lose your job

Newspaper columnist Sidney J. Harris distinguished terms this
way: “a recession is when you lose your job; a depression is
when I lose mine.”
#2. Can’t afford to pay back your mortgage

A sudden loss of job can cause retrenched employees to
experience a negative monthly cash flow. A similar situation can

also happen if your employers go bankrupt suddenly. Arrears
on mortgage can also causes homes to be auctioned. In a
worst-case scenario, sometimes, even after the homes are sold
forcefully, people still owe the bank, money.
#3. Watch your investment portfolio shrink in value

High exposure in equity will result in a sharp fall in the stock
market. When people are Investing too aggressively in a bubble
economy, it is extremely risky that one day your stock portfolio
just shrink 50% within a few days.
How to prepare for recession?

#1. Create a worst-case scenario
Create a worst-case cash flow forecast. Predict how bad it
could be if you lost your job or if your business dropped in sales
by about 50%.
#2. Build up an Emergency fund

Prepare an emergency fund with enough money to cover at
least 6 months of expenses.
#3. Have a consistently rebalanced investment portfolio

This ensures that you lock the capital gain of certain asset
classes when it is booming.
#4. No matter what field of your profession, always strike to

be the best
Always strive to be the best. Avoid becoming redundant or “fat”
in your company. If you do not prove your worth, you will be the
first to be led to the exit door during a recession.

#5. Diversify your income source
Please beware if you are in a business that serves just 1-2
major customers. You will be at a great risk during a recession.
For employees, work out some forms of alternative income
besides the main employment.
#6. Know your funding sources and manage the

relationship properly
Another way to prepare yourself for a slowdown is to know your
funding sources and manage the relationship properly.
Remember, when funding sources tighten they do so selectively
and this applies to their sources of business as well as the
credits.
#7. Learn to live on less than your income

You may see pay cuts in your job during an economic
recession, so look now for ways to trim your budget as much as
possible.
#8. Last resort – compromise on your lifestyle

When everything doesn’t seem to work out for you, go for the
last resort: try reducing your lifestyle dramatically. Sell that
luxury car. Move to a smaller house. Cut down on expensive
dining.
Cash is King
Cash is king during recession. It is only in your best financial
interest to acquire assets (stocks, real estate) during a
recession.

Changes in interest rate levels are made by the central bank
regulator (Bank Negara, Federal Reserve etc) as a way to
regulate the economy. In a period of economic downturn,
interest rates are reduced in an attempt to revive the economy.
This is because reduced interest rates are usually attractive to
businesses and for people who want to borrow money or
refinance existing loans at a reduced level. Consequently, lower
interest rates will result in lower mortgage rates, which produce
monthly mortgage payments that are advantageous for home
buyers.
Conclusion
There is a possible recession looming. Some people will be
harmed and subsequently, the economy will be blamed. They
are probably right now maintaining the status quo and simply
hoping it doesn’t happen.
Prepare now and you will find that you will not be affected very
dramatically. This will leave you in a better edge. Preparation
for a recession will enable you to react to changing times and
take advantage of select opportunities.
Knowing your Enemy – Inflation!
After a heavy meal at a local nasi kandar restaurant, I bought

10 sen of Hacks (yes, the candy). I still remember that I could

get 3 candies for 10 sen. Later on, it is 5 candies for 20 sen. It
has been a long time I didn’t spend money on candy. So I
asked the cashier in case it is more expensive already. And it is
lucky that I asked, because it is selling 2 for 10 sen nowadays.
The price rise 50% after 20 years. That’s inflation! However,
Hacks candies are still very affordable.
Inflation is the rise in the general level of prices of goods and

services in a given economy over a period of time. It may also
refer to the rise in the prices of some more specific set of goods
or services. In either case, it is measured as the percentage
rate of change of a price index.
In layman terms, several explanation of inflations is how fast

prices rise, or how fast your money becomes less valuable.
What cause inflation

There are two camps that disagreed strongly on the main
causes of inflation
- Monetarists – argued that money supply dominated all
other factors in determining inflation
- Keynesians – argued that it is real demand that causes
inflation
But economy is such a huge subject that there is no one sure
thing that causes the other.
How to calculate inflation

A variety of inflation measures are in use, because there are
many different price indices. Two widely known indices for
which inflation rates are commonly reported are the

- Consumer Price Index (CPI) - measures nominal
consumer prices,
- GDP deflator - measures the nominal prices of goods
and services produced by a given country or region.
Inflation is causing your money to become less valuable, if you
do nothing about it.
Based on US CPI, what cost $1000 in 1997 would cost

$1309.22 in 2007. Also, if you were to buy exactly the same
products in 2007 and 1997, they would cost you $1000 and
$785.20 respectively.
How to outstrip inflation

For sure, if you do nothing to prepare for inflation’s effect, your
buying power may drop in the future.
#1. Living below your means
Human being is a very flexible creature. When the certain
products get more expensive, and it finally hurts our wallet, we
will be flexible enough to use less of it. You can either
buy less of the more expensive stuff, and more of the less
expensive stuff OR let your standard of living fall
#2. Invest for better returns

You just have to get your money to work harder, and get a
return that’s higher than inflation rate.
In the area of wealth accumulation, inflation is an enemy that

approaching you step by step quietly. By the time you notice
that and feel the pain of its attack, it is probably too late. The
last resort is to see your standard of living fall underneath.

Financial Security: How do You Feel It?
Does financial security simply mean not having to worry about
money?
That’s too simple to define such a broad meaning of “financial
security”. You might not have to worry about money during a
great time where jobs are everywhere, and your country’s
economy is doing very well, and earning money is so easy. But
will you start worrying when it is recession time? Would you
worry about money if your family members were hit by a deadly
disease? Would you worry about money if suddenly you are
unable to climb off your bed in the morning and need to stay on
bed for the rest of your life?
Financial security is about knowing and feeling safe that

whatever disaster arrives, you know you won’t have financial
trouble. Except for some extremely rich folks, financial security
does not seem to be that simple.
Can we define financial security simply by putting up a number?

Would a million dollars give you security? Or you won’t be
feeling financially secured unless you have 10 million dollars
assets?
I think merely giving it a number doesn’t define it fairly neither.

Ask These Questions to Test Your Financial Security Level
● What happens to my children, my parents, my spouse
and my family if I passed away suddenly?
● What if both you and your spouse passed away at the
same time? Will everything be well taken care of?
● Am I prepared for the next recession?
● What happens if I lose my job today?
If you are able to answer all the questions above in a positive

manner, congratulations! You are definitely financially more
secure than 80% of the population in the world.
Five States-of-mind of Being Financially Secured

Financial security consists of four things:
● Being debt-free
● Being in control of your expenses
● Consistently increasing your savings/assets/net worth
on a monthly basis
● Not being forced to work at a job you dislike just to pay
the bills
For a broader and more comprehensive definition of being

financially secure, I would like to add another important
state-of-mind: being well thoroughly protected.
When you know and feel that you are financially secure, here is
what happens:
#1. Never worry about debt

You don’t have to be debt-free to feel secured. But knowing that
no matter what happens, you will be able to pay off your debt
makes you feel safe. Let’s say you still owe a lot of mortgage
payment. If you lose your job today, can you still pay the
mortgage for the next 24 months? The answer is yes, if
● you have a substantial reserve fund.
● you are a capable person and finding a new job just
require a few weeks time
● you have other source of income
● What if a car hits you today and you lose your ability to
earn an income? Can you still afford the loan
installment? The answer is yes if you are well protected
with life insurance.
#2. Being in Control of Your Expenses

It is a very dangerous statement if you say “I can’t control my
expenses”! Yes, I know you can control your expenses.
Some people say:
● I need to spend the money to please my wife
● I need to buy those things to please my kids
● I need vacations because my jobs is too stressful
If money is spent on anything that’s not within your budget plan,
you have lost control over your spending habit. All the above
are just cheap excuses.
Another situation is when a family member needs that money

which is not within your budget. For examples:
● your mother need medical aid

● your child needs a lot of money to study overseas, but
all you had saved for him is just enough for local
colleges.
● your brother needs to borrow from you because his
business is going south.
These are problems that cannot be tackled easily. But with

proper planning, wise decisions can be made to prevent that.
Why should your brother risk your money to rescue his
company? Why can’t your child compromise to enter local
colleges? Why didn’t you buy medical insurance for your
mother in the first place?
#3. Consistently Increasing your Net Worth

The best reward of proper budgeting is to see your net worth
grows day by day. When you know that you are getting richer
every minute, it just motivates you to do even better.
#4. Not being forced to work at a job you dislike just to pay
the bills
Work takes up 1/3 of your weekdays. If you are stuck with a job
you hate, I can imagine how miserable your life is. If you want a
joyful life, you should have a job you are passionate about,
beside having a spouse you are deeply in love with.
The freedom to do whatever you want (legally) is so precious. I

am not yet rich, but I feel secured in this area about jobs. I have
a full list of what I can do to make money, and none of them are
things that I dislike.

The fact is that I don’t worry about losing my job, because I
have many jobs that I like to do. Here is my list:
● Financial planning services – I really can’t see how it
may fail because I have hundreds of clients. This
business is a long term relationship between the planner
and clients. My customers are so diversified that some
of them are engineers, lawyers, businessmen,
managers etc.
● Music production – I do music arrangement. Sometimes
I am selective about the projects I want to work on.
● Making money online – This has become my full time
business now.
● Live performance – one of my best friend, who is a
professional pianist often asks me to play gigs. Now I
seldom perform because I want to spend more time with
my son and wife at night. But if everything turns into a
disaster, I can still go out to perform, and give music
lessons.
Please don’t feel that I am bragging. I am certainly not earning
a lot at this moment. But I have fun all the time, during work and
out of work. I just want to urge you to build up your own
financial security, in your own passionate fields. You should
turn your passion into money making machines, and never
worry about losing your job anymore.
#5. Being well thoroughly protected

When you are well protected, you can be rest assured that all
your dependents can still live on at the same lifestyle if you
passed away suddenly. Some areas that people often overlook:
● Have your Will well planned and written up

● Have a living trust set up to provide education,
maintenance, guardian allowance in case of double
tragedy
● Have your business well protected with key person
assurance, liability cancellation plan, and also a funded
buy sell agreement if necessary
● Have your own insurance properly planned, and get the
best benefit with the most affordable premium
● Have all your dependents insured as well. Please
realize that a seriously ill family member will eat up your
nest egg too.
Would you feel financially secure after doing all the above
suggestion?
What Do You Know About Bankruptcy?

Bankruptcy is a word that immediately brings a negative vision
to our minds. It happens everywhere in the world and is not
partial to a certain country, race or nationality.
In Malaysia, the total number of bankruptcy cases nationwide

has risen over the year to hundreds of thousands individuals.
Bankruptcy law exists to help both the bankrupt and the
creditor. It will stop the creditor from harassing the debtor and it
safeguards the rights of both parties.

What is Bankruptcy?
Simply said, it is a legal process initiated by an individual or a
company due to the inability to settle his debts. Bankruptcy
happens when a person is unable to settle his debts (known as
a debtor) owed to the people or party who loan him the money.
The people or party who gave out the loan is known as the
creditor. Creditors can be a banking institution or even a
company giving out hire-purchase schemes.
To protect himself against possible harassment or from any

other legal actions by the creditors, the debtor may file for
personal bankruptcy.
On the other hand, the creditors may take action first against
the debtor by serving him a bankruptcy notice to recover the
money owed by the debtor.
Before filing a bankruptcy petition either by the debtor or

creditor, the following criteria have to be met:
● The sum involved is RM30,000 or more
● The sum of money must be ascertainable (liquidated
sum)
● There is a default period of six months for the act of
bankruptcy to have occurred
● Before the petition date, the debtor must have reside in
Malaysia for at least one year
How Does a Person Become a Bankrupt?

Generally, a person falls into bankruptcy due to several
reasons. Those mentioned below are not uncommon in
Malaysia.

#1. Taking Up a Loan
There are various loans available to cater for different needs
and wants. These loans can be personal loans, study or
education loans, housing loans and even buying a car under a
hire-purchase scheme.
#2. Acting As a Guarantor

A guarantor can be a social guarantor or a corporate guarantor.
A person who stood as a guarantor for loans like education,
house, car hire purchase, scholarship and also third-party loans
is known as a social guarantor.
A corporate guarantor is a person who stood for loans relating
to business loans, for example in a business partnership.
A guarantor is also liable to face bankruptcy when summoned

by the creditors. The creditors will go after the borrower first and
if that fails to recover the amount owed, they will go after the
guarantor to settle the debts.
#3. Defaulting On Credit Card Payment

The inability to pay up the amount owed in the credit card
account is also one reason to go bankrupt.
What Does It Mean To Be a Bankrupt?

When a person has declared bankruptcy, the court will appoint
the Director General of Insolvency (DGI) to administer over the
bankrupt’s assets in order to settle the outstanding debts. The
DGI will initiate an investigation to find any assets or properties

that belong to the bankrupt and to sell or dispose them to repay
the creditors.
For a Malaysian, being a bankrupt is tough for the individual.

Among other things, the individual faces the following hurdles or
restrictions:
● He has to give up all his belongings and assets.
● He is not allowed to open a bank account without the
approval of the DGI.
● He is not allowed to travel outside from the country
without first getting approval from the DGI or the court.
The DGI will hold his passport.
● He is not allowed to do any business nor become a
company director nor even be part of the company’s
management.
● He has to sacrifice a certain percentage of his monthly
income to the DGI to repay his debts.
How To Avoid From Becoming a Bankrupt?

A straightforward answer to avoid becoming one of the statistics
is simply to take responsibility for one’s financial affair or
well-being. It means not to take huge loans to purchase
something if you do not have the ability to pay back the monthly
installments. It also means being in-control of one’s spending
habits and not to over-commit on too many loans including hire
purchase.
The same goes for the social guarantor who does not have the
resources and means to settle the debts on the borrower’s

behalf. So think rationally (not emotionally) and act carefully
before signing on the dotted lines.
For those intending to open a business, do your research work

properly and thoroughly. Ensure that you have enough financial
resources and stamina for the start-up and for the first few
years. Most businesses do not make money initially and may
take a few years to show a profit. Imagine the worst scenario
happening and whether you can survive financially. Having just
the start-up capital is not enough, you need to have backup
plans and support available.
There are cases however when ill-fate strikes and a person

becomes bankrupt due to unforeseen circumstances such as a
serious illness, a debilitating accident or being cheated in a
business partnership.
Then there are cases where a person willingly files for

bankruptcy for the sole purpose of wiping off all his unsecured
debts. These ‘non-genuine bankrupts’ take advantage of the
legal process to ‘write off’ their bad debts and the amount can
run up into the millions but is still living a luxurious lifestyle.
How a Person is Discharge From Bankruptcy

A bankrupt will be discharged from bankruptcy when
● He has settled his debts in full to the creditors.
● If the creditors accept the repayment scheme offered by
the bankrupt, then the bankrupt can make an application
to the court to get an order of discharge.
● Certificate of discharge:

The DGI can also use his discretionary power to
discharge the bankrupt by issuing a certificate of
discharge. This is possible after a period of five years
from the date of bankruptcy even though there still
remain unsettled debts. However, the DGI will have
certain criteria to evaluate before making his judgment
such as the bankrupt’s conduct or behavior, the age and
the financial status.
● Order of discharge:
The bankrupt can make an application to the court to
request for an order of discharge. The court will refer to
the DGI’s report before any decision is made to grant a
discharge or not or to grant a discharge with conditions
attached.
When faced with debts, a person should seriously consider

before choosing to file for bankruptcy. There may be other
better options to choose from. Besides the restrictions
mentioned above, the bankrupt may face other personal
challenges. His future plans and personal development may be
negatively affected due to his “bankrupt reputation”. Society
naturally will see him in a different light and treat him differently.
In addition, it may affect his ability or opportunity to apply for
future loans in order to advance himself in his career or
business.
Therefore, consider yourself to have been forewarned on this
subject matter.

Financial Consideration for New Parents in
Malaysia
Only after being “promoted” to fatherhood, I got to learn that a

child really takes up a lot of my time and also money.
Pregnancy and delivery cost

The regular check-up during pregnancy is between RM50-300
per visit at a private hospital in Malaysia, as frequent as once a
month.
My wife had to go through caesarean because my son didn’t

turn his head down during delivery. I stayed in the hospital for
about 10 days together with my wife and my son. To keep the
story short, we spent about RM13,000 in total of hospital bill.
Luckily her company covers the medical bill in case of
complication during delivery, we ended up paying only about
RM3,000.
Usually, a normal delivery will cost about RM3000 at private

hospital. It costs a lot less if you go to the government hospital
which is fully subsidised. Of course the only difference is the
level of service. You may only need to pay less than RM100 for
delivery in a government hospital.
Maternity Insurance Coverage

In Malaysia, the normal Hospitalization and Surgical benefit
insurance (a.k.a. Health Card or Medical Card) does not cover
pregnancy-related hospitalization.
There are two exceptions:
1. Your company may provide group insurance benefits that

covers maternity claim. Normally you can get these benefits if
you are working for MNC (Multi-national Corporation like Intel
etc)
2. Some lady care insurance plans especially designed for

lady-related illnesses and maternity may give some minimum
coverage for child delivery, neonatal death or some other
pregnancy complication. But these insurance policies normally
won’t pay the medical bills as charged.
Confinement Month
It is a tradition for a Chinese mother to be confined for 30 days
after giving birth. This period of time allows the mother to rest
and rejuvenate.
1. Staying at confinement centre

A typical confinement centre charges about RM2500-3500. My
wife stayed at Ai Xin confinement centre at Batu Maung,
Penang. They employ local babysitters to look after your baby.
You will be served 5 meals a day.
2. Employ a confinement lady

This will cost about RM3000 and above. You will need to
prepare a place for the confinement lady to stay. Normally she

will help to take care of the baby and cook some special food
for the mother. Most confinement ladies don’t do house works.
If your mother or mother-in-law can replace the confinement
lady, you will be able to save a few thousand ringgits.
Insurance for the child

The most important coverage for your baby is the medical
insurance. For a standalone medical card, the premium may be
a few hundred ringgits per year. Some people like to buy the
packaged plan where there is life coverage, including 36 critical
illnesses, medical card plus some savings for future education.
Depends on your budget, you can start a plan as low as
RM100/month.
Medical bills
For a healthy baby, parents will still pay medical bills for:
1. Normal sickness - RM25-100. It costs more if you are
seeking consultations from paediatrician.
2. Vaccination - nowadays, there are so many vaccination

needed to be injected into your baby’s body. It causes pain on
our baby and also our pocket. Roughly over RM2,000 needed
to be spent on full vaccination at a private medical centre. Of
course, everything is likely to be free of charge if you bring your
kids to government clinics or hospitals.
New Tax relief for parents

With a new born baby, you can pay less tax. Several tax
benefits you can get include:
1. Child relief – RM1000 (only for one of the parent)

2. Child Education policy – RM3000 (for both parents)
3. Skim Simpanan Pendidikan Malaysia (SSPN) – RM3000 (for
both parents)
Family Protection Planning

I have had many clients who top up their life insurance
coverage after they have a baby. Most will write a will or rewrite
their WILLs to include the newborn baby as the beneficiary.
One thing most parents usually neglect is to set up a family

protection trust. This is a very useful and powerful arrangement
in case of double tragedy (where both parents pass away due
to accident).
A normal private trust cost around RM1000. A simple WILL is

around RM500. Financially, be prepared to spend about
RM2000 one time fees for thorough protection, plus a few
hundred ringgits a month to top up life insurance.
Caring for the baby

After the confinement period, you will have a new member at
home. A baby needs a lot of caring. You will have to arrange
one of the following:
1. Employ a babysitter
You can send your baby to the babysitter. It will cost
RM550-800 for weekday daycare only, or RM800-1200 for 24
hour care. I will prefer to have my baby sleep under the same
roof with us. My baby is so cute and lovely. I wouldn’t want him
spending most of the time at other people’s home. A baby will

bring a lot of joy to your family. Why would you give most of the
happiness to an outsider, right?
2. Being a full time stay-at-home-parent

Some new mother will resign from work for a few years to look
after their baby. This really makes sense because the first few
years are very crucial. The baby grows so fast! If you go to work
too early (when your baby is still asleep), and come back too
late (when your baby already asleep), you will only see him/her
grow longer, not taller.
3. Maid service
Another possible arrangement is to employ a foreign maid, and
have a senior at home to watch over the maid. Upfront fees of
about more than RM10,000 needed to be paid to the foreign
worker agency to engage a maid. Please expect the maid to
arrive about 2 months later. You can choose maid from
Indonesia, Myanmar, Vietnam, Cambodia, and Philippines.
Some experienced maids who are previously trained or
experienced to take care of baby requires more than
RM1000/month wages.
Prepare for leave from work

In Malaysia, a new mother will be given two months paid
maternity leave. But there is no such leave for the father. You
may need to do the necessary preparation to be away from
work for quite a long while.

Another consideration is not to waste your annual leave. If you
are an employee, somehow you will need to take emergency
leave to bring your baby to the doctors from time to time.
Things for the baby
1. Food
Since my son was born, the milk powder has increased in
prices several times. Some branded milk powder such as
Enfalac A+ cost RM70/tin. One can only last about a week. Be
prepared to spend over RM250/month for the best baby food if
the mother can’t or won’t breast-feed. Later on, when the baby
grows over 6 months, you can buy the “step 2″ milk powder and
it will be a little cheaper.
2. Clothes
I actually see clothes as a waste of money. If possible, get used
clothes from your relatives and friends for your baby. Used
clothes are not so nice-looking, but softer and more
comfortable. If you buy too many pieces of clothes, most of
them will be worn a few times only because the baby really
grows rapidly. When your baby is 3 months old, buy the 6-12
months clothes. When he/she is 6 months old, buy the 12-18
months clothes.
3. Diapers
There are super cheap diaper like Tesco brand, and also the
most expensive branded diaper like MamyPoko. If possible, you
can use cloth diaper which will save some money in long term.
We actually use all the diapers mentioned above.

We use MamyPoko at night, which can absorb urine efficiently
and last for 12 hours. We use the cheaper diapers during
daytime when we can help my son to change regularly. Our
babysitter uses the cloth diapers.
4. Toys
I don’t know about other babies. But my son doesn’t really like
his toys. He plays a new toy for a few minutes and he will be
bored. What he likes the most is my iPhone and my books.
However, some toys are worth investing. Inevitably, you will

have to allocate some budget for toys.
Prepare to sacrifice your own personal time

A baby is so demanding. My son needs a lot of attention. Last
time, we used to work or enjoy some free time at night and
weekend. But with a baby at home, all your non-working time is
devoted to your baby.
Anyway, every minute is worth spending on your baby. You

won’t realize the wonder and magic moment until you have a
baby.
Do you need a bigger home?

We used to stayed in a single storey terrace house. But
because of having a baby at home, we felt that there is not
enough space anymore. We had moved to a semi-detached
house when he is 2 years old.

Put it brief, if your current home is not baby-friendly, you might
need to consider a more suitable house. You may need more
rooms, more space, bigger garden etc.
Some parents also purposely move to some better

neighbourhood in order to give a healthy environment for their
children. Some even consider the possibility of getting into a
specific well-known school. This is because the address printed
on your baby’s IC is going to determine which public school
he/she will go to in the future.
Total cost of having a baby

The numbers below is just an estimation. It is for the purpose of
giving you a financial guideline if you are planning to have a
new baby.
One time cost:

1. Delivery - RM3000
2. Will Writing - RM1000
3. Living Trust Setup - RM1000
4. Confinement period - RM3000
Regular expenses (per month)

1. insurance for the baby > RM100
2. babysitter/maid > RM550
3. baby food ~ RM200
4. medical bills ~ RM100
5. clothes/diapers/toys ~ RM200

So, be prepared to have a net worth cut during delivery and
confinement, and then a cut of at least RM1000 every month
from your cash flow.
It is true that raising a child might cause more than a million

ringgits. But is it worthy?
My answer is a big YES! You can’t buy the happiness of being

a parent. It certainly can’t be measured in monetary terms.
Cloning Your Life Values via Private Trust

There is a movie about cloning human beings made in 2000
titled The 6th Day starring Arnold Schwarzenegger. In the
not-too-distant future, when cloning plants, pets, and human
organs is accepted, a sinister corporation has begun illegally
duplicating entire human beings. Before that happens, cloning a
person is still not possible no matter how much money you
have. Here, we will discuss the possibility of cloning your life
values, which is an essential part of leading a person’s life.
At the moment you leave this world — when it is unplanned and

unexpected — your heirs’ understanding about your life values
cease. Wouldn’t it be nice to have a series of life tutorial videos
made and passed on to your children, so that they can watch it
at the suitable time just in case you can’t make it? Before you
turn on the video camera, let me show you how you can pass
on your life values via living trust.

A trust is an arrangement which you can set aside certain
amount of assets to a party called trustee, to be used for the
benefits of the beneficiaries. The beautiful part of a trust is that
you can determine the “terms and conditions” which the
beneficiaries must fulfill before they are entitled for the
incentive. Thus, you can call these type of trust the “Incentive
Trust”. Some examples:
To Have Time with Family

Trust provision: Each child shall receive a monthly distribution if
she can engage in such a profession that allows her to work
from home.
To acquire knowledge and wisdom

Trust provision: Each child shall receive a distribution indicated
upon achieving tertiary education – Bachelor Degree $100,000,
Doctorate $200,000.
Personal Achievement & Hard Work

Trust provision: Each child shall receive an annual distribution
equal to 50% of his earned income reported officially the
previous year.
To be creative and innovative

Trust provision: Each child shall receive $100,000 for every
successful patent filed.
To appreciate music
Trust provision: Each child can claim for reimbursement for all
the fees with the proof of participating in music lessons

Above are just a few examples. Be creative! And make sure
you share about your life values when you are discussing the
issue of setting up a trust with your estate planner.
Top 4 Methods to Enjoy Tax Relief for

Education Purposes
We all hate to pay tax. Ironically, the more taxes you pay, the
wealthier you are. However, it might not necessarily so.
Because a person earns more than you might be paying less
tax money with proper tax planning. One of the area that you
can get a tax relief is for education purpose.
Education is a liberal concern because it is about empowering

people with the skills, knowledge, attitude and aspiration to
develop themselves. Some believe that in order to have a
brighter future with better earning capability, higher education is
a must. Here, you will find the complete guide for a Malaysian
on how to enjoy tax
relief or tax deduction
for education
purposes.
There are four areas

that you can take
advantage of tax relief
for education
purposes:

1. Child education insurance policy – Maximum RM3,000
2. Skim Simpanan Pendidikan Nasional – Maximum RM6,000
3. Post graduate education – Maximum RM5,000
4. Book purchase – Maximum RM2,500 in the lifestyle tax relief
#1. Child Education Insurance Policy

A child education policy is a life insurance product specially
designed as a savings tool to provide a lump sum of money
when your child reaches the age for entry into college. If you
opt for a payor benefit rider, an education policy provides the
assurance that, in the event of an untimely demise of the
parents or legal guardian, the child will have access to funds to
help finance his/her education expenses. Under a child
education policy, the child is the life assured, while the
parent/legal guardian is the policy owner.
Types of child education policies available

There are two main types, i.e. an endowment or
investment-linked policy. The difference between the two lies in
the structure as well as the nature of investments.
1. Endowment Policy
An endowment policy combines a savings component with
protection coverage. Endowment policy may be either
participating or non-participating . As the name implies,
non-participating policy do not participate in the life insurance
fund’s profits but all insurance benefits are fully guaranteed. On
the other hand, for participating policy, a portion of insurance
benefits are guaranteed. However, the ultimate amount of
benefits at maturity are not guaranteed as these depend on the

performance of the insurance company’s participating life
insurance fund.
2. Investment-linked policy
An investment-linked policy combines the elements of
investment and protection based on your requirement as the
policy owner. It offers flexibility as you are able to increase or
top-up your monthly premium contribution as your income
improves. If you wish to be more aggressive with the
instruments of investment, an investment-linked policy will also
allow you to choose the types of funds your money will be
invested in. However, like any other similar investment, there
are higher risks involved and there are no guarantees on the
returns, which may be higher or lower than projected.
Tax incentive of RM3,000 for Child Education Policy

One of the benefits of using life insurance as a savings tool for
a child’s education policy is the tax advantage. Insurance
proceeds are tax-free and you can also obtain an annual tax
relief of up to RM3,000 for the payment of premiums for
education insurance, subject to approval by the Inland Revenue
Board. In order to qualify for tax relief,
● the education plan must be taken up by the parent/legal
guardian and it must mature when the child reaches the
age of between 13 to 25.
● It is also important that you opt for a payer benefit rider
throughout the life of the policy.
● Make sure the policy has a the word “education” printed
in the policy title

another method is to purchase an endowment policy that the
life assured is the parent, but the beneficiary must be
nominated to the child and mature before the child reach 25
years old.
Remember, if your wife elects for separate assessment, she
can also claim the same amount of relief on her life, education
and medical insurance premiums but not on the same child.
#2. PTPTN Skim Simpanan Pendidikan Nasional
Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN)

introduced a savings scheme which puts emphasis on ‘Savings
Towards Higher Education’. Besides ensuring annual dividend
returns, the SSPN also provides special financial incentives in
the form of Matching Grants especially for low income
depositors.
In addition, insurance coverage and payment of death

compensation is provided free of charge to all eligible
depositors.
How to Open a SSPN Account

To open an account, the application form must be submitted to
PTPTN counter and any collection agent along with the
following documents:
● A copy of the depositor’s MyKad/Military/Police Identity
Card;
● A copy of the child’s MyKid/Birth Certificate/MyKad; and
● Certification of adoption (if the SSPN account is meant
for an adopted child).
For a family whose household income does not exceed
RM2,000 per month, the latest income statement of the family
must be submitted along with the application form and a copy of
the spouse’s MyKad/Military/Police Identity Card.
The minimum total deposit for purposes of opening an account

and increase of deposit is RM20 for each nominated
beneficiary’s account. Deposit increase can be made as soon
as the membership card is received.
Eligibility to apply for PTPTN education financing

● For household income exceed RM2,000 per month, a
minimum deposit of RM3,000 is required
● For household income does not exceed RM2,000 per
month, a minimum deposit of RM500 is required.
Benefits:
● Tax relief on savings up to RM6,000 per year.
● Free insurance coverage up to RM50,000 (dollar to
dollar) for depositors who have an accumulated deposit
of a minimum of RM1,000 (Eligibility for insurance/death
compensation is only for depositors between 18 and 65

years, whereas death compensation is awarded only to
beneficiaries aged 1 to 28 years)
● Matching grant with a maximum endowment of
RM10,000 per family (A family whose household income
does not exceed RM2,000 per month is eligible for a
matching grant when the child is accepted into a higher
learning institution)
● Deposit as low as RM20 at any time deemed necessary
and government guarantee on savings
● Competitive dividend rate and tax exemption on
dividend
Withdrawal
Withdrawal of savings can only be done after one (1) year of
saving in the SSPN. The withdrawal of 10% of the balance in
the account or RM500 (whichever is lower) once annually is
allowed (after one year of becoming member). Withdrawal of up
to 100% of the balance of the account is allowed if the
beneficiary fulfills one of the following criteria:
● Is accepted to any government recognised IPT;
● Withdraws voluntarily from the education system or is
terminated for specific reasons;
● Chronic illness with no hope of recovery with doctor’s
certification;
● Permanent disability; or
● Death
#3. Post Graduate Education

To promote a culture of lifelong learning among Malaysians, the
Government proposes tax relief of up to RM5,000 on education

fees be extended to all post-graduate studies (Masters and
Doctorate leve), effective from Year of Assessment 2008.
Every individual are eligible to claim a RM5,000 relief each in

respective tax returns provided that the post-graduate studies
are at institutions or professional bodies in Malaysia that are
recognised by the Government or approved by the Minister
undertaken for the purpose of acquiring law, accounting, Islamic
financing, technical, vocational, industrial, scientific or
technological skills or qualifications.
#4. Book Hunting

To further inculcate the reading habit and in line with lifelong
learning, the Government provides tax relief on the purchase of
books, journals, magazine and printed materials up to RM2,500
per year included in the lifestyle tax relief. All the textbooks for
your children, or your own post graduate studies are eligible for
tax relief. Even the Harry Potter And magazine you buy from
bookstores can be used to deduct tax. But you must keep the
book purchase receipt for tax audit later, if you are lucky. The
total RM2,500 relief a year includes other lifestyle-related
category such as internet subscription, sports equipment, gym
membership, smartphone, personal computer and tablet. So
plan it wisely to optimise your relief.
Some reminders
buy books and magazine from chain bookstore, such as
Popular, MPH, BORDERS etc. You will notice the receipt
provided by Popular have [BK] printed for book items.

You can even order your book via the internet – Amazon,
Barnes and Noble.
Normally, there won’t be any receipt produced when you buy

magazines from local book stall. If you want your expenses to
be tax deductible, avoid this.

If you fully utilized the tax relief for the above elaborated 4
areas:
1. Child education insurance policy - Maximum RM3,000
2. Skim Simpanan Pendidikan Nasional - Maximum RM6,000
3. Post graduate education - Maximum RM5,000
4. Book purchase - - Maximum RM1,000
There is a total of RM15,000 tax relief to be claimed. I will

definitely use up item no.1, 2, and 4. But for item no.3, there is
no clear definition of post graduate study and list of courses that
is eligible. It would be nice if colleges and universities can
indicate the tax relief eligibility when promoting their courses for
working adults.
If your tax bracket is 21%, you will save up to maximum of

RM3150 tax payable yearly. Last but not least, I would urge that
you take advantage of them all during year end.
● Purchase your child insurance policy and pay yearly in
December - the premium paid will be eligible for tax
relief immediately. Do note that some insurance
company have offer for certain credit cards that you pay
yearly upfront with credit card, but pay back the bank in
12 installment without interest.
● Open SSPN account in December, and max it up to
RM6,000.
● Consolidate the receipt of book purchase, and use up
the RM1,000 if you enjoy reading books. If not, try buy
books as gift to others whenever possible. Books are
great birthday gift.

By using this "year-end" strategy, you have kept the money with
you for a full year and already reap the full investment return.
----------------------- The End of Volume 2 ---------------------------
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, so I can send you
Volume 3 when it is done!
Hear from you soon.
regards,
KCLau

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Money Tips ​Volume 2

The electronic version of this book can be downloaded free of

https://KCLau.com page 2/108

Copyright ​© 2019 by KCLau

All rights reserved.

Second Edition April 2019

The strategies outlined in this book may not be suitable for

No warranty (whether expressed or implied) is made with

https://KCLau.com page 3/108

How to Make Wise Financial Decisions Based on your

Relative Value of Money: When, Where and How Your

Should you Focus on Increasing Income or Reducing

The Non-Risky Way to Get Rich with Excessive Debts 20

Do You Have the Income-Generating Assets to Fund Your

Are you trading? Gambling? Speculating? or Investing? 26

The Most Important Payee of Your Entire Life That Most

Top 5 Regular Monthly Expenses You Don’t Actually Need

https://KCLau.com page 4/108

Time Value of Money: Computing the Value of Single Sum

Time Value of Money: Finding the Rate of Return to Meet

Time Value of Money: Computing the Value of a Fixed Sum

Time Value of Money: Computing the Retirement Fund in

Time Value of Money: How to Calculate the Effective

How to Calculate Your Investment Portfolio Return? 62

Withdraw EPF Money for Home Loan Installment: How it

How Recession Happens and 8 Tips to Prepare for it! 67

Knowing your Enemy – Inflation! 74

Financial Security: How do You Feel It? 77

What Do You Know About Bankruptcy? 82

Financial Consideration for New Parents in Malaysia 88

Cloning Your Life Values via Private Trust 96

https://KCLau.com page 5/108

https://KCLau.com page 6/108

This book is a compilation of the articles and ideas I’ve

That’s why I’ve made the electronic version freely

I will be updating this book from time to time since I am writing

This is Volume 2. If you missed the previous Volume, which

https://KCLau.com page 7/108

Value of money is always tied to the time element. If you work,

Simple Method to Calculate Your Hourly Wage without

It is based on 8 hours workday, five days work week, and four

RM100,000 / (12 months x 4 weeks x 5 days x 8 hours) =

https://KCLau.com page 8/108

Knowing the Application

1. Should you outsource, or do it yourself (DIY)?

Most of the time, I would hire someone else to do the low-value

https://KCLau.com page 9/108

2. How many hours it worth?

https://KCLau.com page 10/108

3. Increase your hourly rate, and build income on top of

However, there is always a limit on a person’s earning. To grow

https://KCLau.com page 11/108

The value of money relatively differ depends on where, when

#1. Where is your money?

For example, you have RM1000 in a fixed deposit giving you

#2. Where do you earn and spend your money?

https://KCLau.com page 12/108

That’s why it is great

#3. When do you earn and spend your money?

https://KCLau.com page 13/108

The rich know that you need to earn money as early as

#4. How do you earn and spend your money?

On the other hand, if John spends 150% of his income ( the

Money Tips Volume 2

Copyright © 2019 by KCLau