Monday, September 1, 2014

10 Things You Don’t Do With Your Credit Cards

Credit Card
David, a 49-year old father of three, lives in Kuala Lumpur. He holds a high position in the Management of a large corporation in the city and his income is more than RM 90,000 every year. He lives a lavish life – driving luxurious cars, dining in expensive restaurants, living in an upscale area and sending his children to expensive private schools.

On the surface, it seemed like David’s family led a great lifestyle, filled with many international vacations and expensive materials. However, in addition to the family’s impressive collection of expensive assets, they have a less impressive collection of credit card debts; a total of RM 60,000.

A few months ago, David tried applying for a housing loan to purchase another house to add to his list of assets. The application was unfortunately rejected due to poor credit rating resulting from late bill payments.

He decided to come to AKPK to get some advice on resolving his financial position. Firstly, the counselor advised him to stop using his credit cards. He was also advised to practice discipline when using his credit cards and to live within his means. He was reminded that the more he uses his credit cards, the more debt he takes on.

David also shared that he never checked through his five credit card statements, he simply paid the minimum 5% amount required by the banks and moved on assuming everything was in order. He was advised against this practice because this will lead to him not knowing how much his debts actually are.

He figured that he could pay off half of the outstanding right away and by doing this, he could eliminate about half of his credit cards debt. He was given a budget he could work with to settle his credit card debts within a year due to his high income.

In addition to this, he also realized that his expensive “assets” would not be able to help him through his financial position and promised to make changes to his lifestyle to avoid getting into more debts. David was thankful for the guidance given by AKPK’s counselors and commented that if he had been equipped with knowledge on managing his personal finances earlier, he would not have been in debts now.

Source of this story: http://www.akpk.org.my/learning/success-stories/id/1005/story-42

A credit card is a great financial tool. However, it controls and destroys you when you are unable to manage it properly. Be smart and avoid these 10 things:  

1.      Incurring debt: Yes, a credit card gives you credit.  It is only temporary and you have to pay the outstanding amount when the statement arrives.  When you do not pay or delay payment, hefty interest will be added. The amount snowballs with compound interest the longer you postpone your payment.

2.      Paying the minimum: Always pay promptly and fully to avoid interest charges. While you are paying the minimum at the same time you are also adding more charges to your credit card account and the outstanding amount will become a much bigger sum. Over time paying the minimum amount may be beyond your financial means.
  
3.      Using it when you are already broke: When time is bad, more people use credit cards to charge their daily expenses. It is bad because you are already running short of cash and it is unlikely for you to pay what you owed. You will end up as a bankrupt.

4.      Ignoring the monthly statements: Look closely at the monthly statement to spot any fraudulently charges, do not just pay without matching all charges with your charge slips.

5.      Getting cash advances: It is another no-no because it attracts cash advance fee and also interest on the amount advanced.   

6.      Paying for annual fee: Get a card which is free for life. It is foolish to pay for the use of credit cards.

7.      Paying late: Pay promptly to avoid interest charges. Make it a habit to pay when you receive the monthly statement.

8.      Spending almost reaching the credit limit: As a general rule, you do not use more than 30% of available credit. It affects your credit score adversely. It is also likely that too large an amount can be out of your control.  
9.       Spending just to earn rewards points: It is another silly thing to do by charging more and spend unnecessarily just to earn reward points. Use your cards only when you need to.

10.  Spending more that you can afford: Avoid impulse spending to break your budget. Live within your means is a golden financial rule to stay away from debt and misery. 


Are you making these credit card mistakes? 

Thursday, August 28, 2014

10 Effective Ways of Debt-Free People

Statue Of Liberty 3
First a story:

One day . . . a wealthy family man took his son on a trip to the country, so he could have his son see how poor country people live.
They stayed one day and one night in the home of a very humble farmer.   At the end of the trip, and when they were back home, the father asked his son, "What did you think of the trip?"
The son replied, "Very nice dad."
Then the father asked his son, "Did you notice how poor they were?"
The son replied, "Yes."
The father continued asking, "What did you learn?"
The son responded, "I learned that we have one dog in our house, and they have four.  
Also, we have a fountain in our garden, but they have a stream that has no end.  
And we have imported lamps in our garden . . . where they have the stars!  
And our garden goes to the edge of our property.   But they have the entire horizon as their back yard!"
At the end of the son's reply the father was speechless.  
His son then said, "Thank you dad for showing me how poor we really are."
Isn't it true that all depends on the lens you use to see life?
One can ask himself what would happen if we give thanks for what we have instead of always asking for more.
Learn to appreciate what you have. Wealth is all in one's point of view.

Author unknown

Debt-free people are master of money. They make the best of what they have to enjoy a care-free and debt-free life. Here are their wise ways of managing their personal finance:    

1.      Smart use of credit cards: They only keep credit cards which are free for life. They just want to take advantage of credit cards to earn reward points or pay less with cash-back offer. They totally avoid credit and pay promptly and fully every time.

2.      Pay themselves first: They understand that the source of their wealth is from their savings accumulated over time with compound interest. It is their habit to incorporate an amount for savings as part of their “expense” budget. They will do it by way of auto-transfer or they will set aside an amount regularly and consistently.  

3.      Read and learn: They are hungry for knowledge and the latest happenings in the financial world. The want to be on top of things to preserve their wealth. They learn and explore ways to invest their hard-earned money for maximum gain at risk levels they can tolerate. 

4.      Live within their means: They know that their financial resources are limited; they choose to live within their means to avoid their fund being depleted. Their lifestyle is tailored according to what they can afford and not how they want to live according to the standard of others.  It means they spend less than what they earn and so there is no debt to be incurred.  

5.      Have an emergency fund: They have ready cash to meet unexpected expenditures such as paying for a major repair of their house or car. They also foresee the uncertainty of job security and they are ready for it financially for a period of time.   

6.      Invest for retirement: They know that they need a replacement source of income when they are no longer capable of earning for a living. They invest their savings regularly while they are still at work and slowly build a stream of passive income for their golden years.     

7.      Monitor their spending and net worth: They use spreadsheet to record and monitor their spending and compare with what they have budgeted.  They review their net worth once a year to measure their effectiveness in accumulating wealth.

8.      Simple lifestyle: They are practical people with practical needs because they appreciate what they have. They don’t follow their neighbors and spend unnecessarily to match other people’s way of life.

9.      They are in control: They are patient people and impulse spending is not their way. They think first and spend later and not to allow money to control them.

10.  They have an ultimate goal: Financial freedom is their financial mission. They want to live a financially independent life. They want to be self-supporting. They do not want to live a miserable life at the mercy of others.    


Finally:

A man in debt is so far a slave. - Ralph Waldo Emerson

Monday, August 25, 2014

7 Ways to Make More Money from Your Job

Money
“The law of work seems unfair, but nothing can change it; the more enjoyment you get out of your work, the more money you will make.” -Mark Twain

According to an article, Only rich know wage gains with no worker raise in U.S. inflation, Five years of economic expansion have done almost nothing to boost paychecks for typical American workers while the rich have gotten richer.

What can you, as a wage earner, do?

1.     Ask for a raise: It is the easiest thing to do but you have to do a lot of homework. First you have to check career websites and find out the salary scale of your position; if you are getting less, you stand a good chance .If it is within the ranch or above you still can ask for a raise but proceed cautiously. Here are important questions to ask yourself: Are you performing and contributing to the company such as making increases in sales, cutting costs or improving productivity? Are you doing more than what your job description required? Are you in the good book of the boss? The most important issue is to find out whether the company is making money or running at a loss.

2.     Take on more responsibilities: Is there an opportunity to move up the ladder. Getting promoted is one good way to earn more money. Are you prepared to move up? Have you got the essential skills for the job? Have you ever assumed the responsibilities for the post you aim for in one way or another like temporarily acting on your boss’s behalf during his absence?  

3.     Move on to a new environment: With your experience and the skills perhaps you are in a position to get a higher pay package in a new company. Working in a new place within the same industry after a few years is another excellent way to get more pay. 

4.     Invest in yourself and hone your skills: There is nothing better than to obtain additional paper qualifications, learn new skills and add more value to yourself and the company you work for. Be more productive with you extra expertise. Ask for new assignments. Indirectly you are promoting yourself to be paid more.   

5.     Do more: Employers are always happy to take note of workers who are doing more than expected like helping up in another department or working overtime.

6.    Appearance: Though your image has nothing to do with what you can do at work, it plays a very important part when a boss decides to appoint someone to a higher position. When you dress smartly, display an image of confidence and you are always cheerful and happy you radiate an air of positivity.  It transmits a message to your boss that you can get the job done.  Are you projecting an image of success? Do it right and be the best candidate to get spotted and promoted.    

7.      Networking: Get connected with the right people at work so that you are on top of things and know in advance the latest development in the company. News about staff movement and new openings are important for you to decide and act before it is publicized.   


What else can you do to get more money from your job?

Thursday, August 21, 2014

7 Objectives of Personal Finance

Financial News
The goal of personal finance is financial freedom. There are 7 objectives to achieve this goal:

1.      Income: Your earning power is limited by what you can do with the ideas and skills you have. There are also other factors that contribute to the amount that you can earn. Among other things, luck plays an important role. Money may not bring you happiness but without money you cannot survive. You can try to make more money but the point is that money is one of the scarce resources. This brings us to the next point.   
 
2.      Expenses: Your lifestyle is determined and limited by your financial resources. It does not matter how much you earn, if you don’t live within your means, you will incur debt and end up as a bankrupt.  The objective here is to spend less than what you can earn so that you can achieve your next objective.    

3.      Savings:  The objective of saving money serves many purposes. Having an emergency fund is on top of the list. You need an amount sufficiently to meet unforeseen circumstances such as getting retrenched or meeting an exceptional expense like a major repair to your plumbing system. It is also prudent to save enough for a big ticket item or an oversea trip.  Needless to say you need to save for down payments to purchase your dream house and your dream car. One important objective of savings is to accumulate and build an investment fund.  

4.      Investment: The objective of investing is to grow your wealth to serve two important purposes. You need money for your children’s education and for your own retirement. Investment provides a source of passive income when you are no longer working to earn a living. It is all so well and good but life is full of unexpected events. That is the objective of the next topic.

5.      Insurance protection: Accidents do happen. You may suffer from one of the lifestyle deceases because your life is so stressful that your body cannot cope with it anymore. You need a life policyto compensate your earning capability when you are disabled because of an accident or a critical illness. You also need insurance protection for your assets like your home and your car against unforeseen perils.
        
6.      Estate planning: When you are alive, you are there to manage your wealth, but you are not going to live forever. The objective of estate planning is to take care of your wealth when you are no longer around.  Drawing up a will is the sensible thing to do and a hassle-free way to distribute your wealth to your loved ones.   

7.      Constant monitoring: Life can present opportunities for you to earn more; you have to be prepared and ready for it. On the other hand you have to control your spending and avoid over spending and getting into debt. You have to closely monitor your investment to meet changing environment for the purpose of wealth preservation. You may also need to rewrite your will to reflect current situation. Personal financial management is not a one-off thing; review your financial standing periodically. 

Conclusion

You can be financially independent when you achieve the seven objectives. 

Monday, August 18, 2014

MAS Plans to Strengthen Oversight of Credit Bureaus

Monetary Authority of Singapore
The Monetary Authority of Singapore (MAS) has published a consultation paper outlining proposals to strengthen oversight of credit bureaus so as to safeguard sensitive credit information and protect the interests of consumers.
The plan to subject credit bureaus to formal oversight under a new Credit Bureau Act comes as such entities collect more detailed borrower information from members such as banks, finance companies and credit card companies.
MAS on Tuesday (Aug 12) said a key focus of these requirements will be for credit bureaus and their members to ensure data confidentiality, security and integrity.
For example, members of licensed credit bureaus will be required to provide to a consumer a copy of his credit report at no cost within a specified period of approving or rejecting a credit application. MAS said this is to better enable consumers to access and verify the accuracy and completeness of their credit records.
MAS also said the proposed Credit Bureau Act will impose a legal obligation on licensed credit bureaus and their members to adopt clear and effective procedures to facilitate investigation and rectification of credit data when consumers dispute the accuracy of their credit data.
In addition, as part of good governance, a licensed credit bureau will be subject to annual audits by an MAS-approved auditor and will need to seek MAS' approval for changes to its substantial shareholders, board of directors and chief executive officer.
The consultation paper on credit bureaus is available on the MAS website and comments should reach the central bank by Sep 12.
Currently, there are two credit bureaus in Singapore - Credit Bureau (Singapore) Pte Ltd and DP Credit Bureau Pte Ltd - that are recognised by MAS to collect and disclose credit data to members.

Credit Bureau Singapore (CBS) said in a statement on Tuesday that "the role of the credit bureau will also become increasingly important now that new measures on unsecured credit have been introduced." It adds that "on the consumers' end, the regulatory oversight will boost consumer confidence in their credit bureau".

Source:MAS Plans to Strengthen Oversight of Credit Bureaus

Thursday, August 14, 2014

10 Soul Searching Questions about your Personal Financial Position

10 Soul Searching Questions about your Personal Financial Position

How often do you review your financial standing? It is good to scrutinize your personal financial figures at least once a year. Ask yourself these relevant questions. If your answers are mostly affirmative, rejoice and keep up the good work. If you are getting nowhere and you are unable to break you bad habits to improve your net worth, you can always start now.  It is not too late.  

1.       Paying yourself first: Are you putting aside an amount monthly from you income? The habit of paying yourself first will pay off handsomely in the long run because of compound interest. When you have accumulated a substantial amount you can invest and make more money.   

2.       Reducing your debts: Are you paying off your debts consistently to reduce the outstanding amount?  A smaller amount will attract less interest charges and faster for you to clear your debt. It is wonderful feeling to be debt-free.

3.       Growth in your Investment: Do you see an improvement in your investment? Does it appreciate in value? Have you increased the size of your investment? In other words is your wealth growing?  

4.       Net worth:  Is your net worth improving? It means your assets are growing and your liabilities such as your outstanding loans are shrinking.

5.       Earning power: Are you making more and taking home more money than before? The ability to get a pay rise or earn more is a positive sign of success.  

6.       Living within your means: Are you able to live within your means? Are you able to discipline yourself and avoid getting more material things? Avoiding spending unnecessarily is the way to stay out of debt and live within your budget.

7.       Giving: Are you donating and giving to charity? The amount is immaterial; it’s kindness and compassion that count.

8.       Insurance: Are you reviewing your policies regularly? Is the sum insured adequate? Doe the coverage meet your requirements? A life policy will be able to replace your earning power in case of an accident or critical illness. A houseowner policy and a householder policy provide a comprehensive coverage against unforeseen perils and compensate you for your losses.

9.       Kick your bad habits: Have you stopped smoking? Do you still have the urge to go for it one more time and bet for it? Are you able to moderate your drinking habit? Are you watching less TV and spending more time outdoors exercising? You will be able to save a tidy sum to replace your bad habits with good ones.  

10.   Learn: When is the last time you read a book about personal finance? Be wise, read and learn more to be knowledgeable in money matters.


"Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this." - Dave Ramsey

Monday, August 11, 2014

10 Productive Habits to Enjoy Financial Freedom

Freedom
Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones. – Benjamin Franklin

Is your daily habit of managing your finance helping you to grow your wealth or depleting your financial resources? Here are ten ways to get away from debt, protect your nest egg and be financially independent.   
 
1.      Savings: Did your parents teach you about savings while you were young? If you have consistently followed the habit of savings, the magical power of compound interest will make your savings to grow substantially over time. Following this habit persistently is vital because the source of your wealth is from your savings.    

2.      Think: Every time when you want to spend money, think and ask yourself this question, “Is this a want or a need?” Be wise to resist spending unnecessarily.   

3.      Investment: It is not wise to keep your money in the bank; the inflation rate is much higher than the rate of interest that you can earn from your bank. You can keep your emergency fund in a bank but invest the extra cash for a higher rate of return. Do it regularly and take advantage of average cost of investing.  (dollar-cost averaging – DCA)

4.      Budget: Do you have the habit of doing budget and stick to it?  How about preparing your monthly cash flow forecast to see that you have sufficient fund to cover an exceptional expense item in a particular month? Read “Why you need to do a personal cash flow forecast” to find out more.

5.      Live within your means: The habit of not spending more than what you have requires self-discipline. It is the only way to stay out of debt and avoid bankruptcy.    

There is no dignity quite so impressive, and no independence quite so important, as living within your means. – Calvin Coolidge

6.      A simple life: In line with living within your means, a simple life is developing the habit of not getting more material things in life.  Live with what you need and not what you want. 

Wealth consists not in having great possessions, but in having few wants. - Epictetus

7.      Learn: Get into the habit of learning more about personal finance and the latest business news to see what is trending globally. Stay abreast of the latest development in those sectors that you hold investment.      

An investment in knowledge pays the best interest. – Benjamin Franklin 

8.      Insurance: It is important to review regularly your insurance policies to ensure adequacy in the sum insured and  the scope of coverage to meet your requirements  

9.      Health and fitness: The habit of following a balanced diet and doing daily exercise is to maintain optimum health. You will avoid incurring medical expenses.  

10.  Giving back: When you have a roof over your head and are not missing your three meals daily you are better off than many others who are destitute in this world. Be charitable and donate regularly to relieve the sufferings of those in need.


Do you have other good habits relating to personal finance? Please share your story. 
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