Subsidy cut a bold move: Analysts

Malaysia surprisingly hiked fuel and sugar prices from today to reduce expensive subsidies, a controversial move that will save the government more than US$230 million this year alone.

But the decision could have serious political repercussions for Prime Minister Datuk Seri Najib Razak and it could spark a rise in prices of other goods and services, analysts said.

The government defended the subsidy cut, saying it was important to achieve development goals and promote healthier lifestyles.

“The government has made a difficult, but bold decision,” it said in a statement.

“By choosing to implement these modest subsidy reforms, we have taken a crucial step in the right direction towards meeting our commitment to reduce the fiscal deficit, without overburdening the Malaysian people.”

The cuts will save RM750 million, or US$234.4 million dollars, this year alone.

Malaysia will still be spending RM7.82 billion from now till the end of the year on subsidies for fuel and sugar.

“These measures are a demonstration of our fiscal esponsibility. They will enhance Malaysia’s financial stability, while also protecting the people,” the government said.

Khoo Kay Peng, a political analyst, said the move had caught consumers by surprise.

“The way it was announced has made many people unhappy,” he said.

“It will translate into votes against the government. Something is totally wrong with this government. The opposition will exploit and attack the government on this issue,” he said. - AFP

M'sian banks enjoy demand for foreign currency accounts

By ELAINE ANG and SHARIDAN M. ALI
starbiz@thestar.com.my

Higher deposit rates and strengthening ringgit among reasons
PETALING JAYA: Banks continue to enjoy strong demand for foreign currency deposit accounts despite the strengthening ringgit and higher local interest rates.
While interest rates have risen, they are still relatively low at 2.4% to 3.0% (up to 12 months duration) compared with fixed deposit rates of popular foreign currencies such as Australian and New Zealand dollars.
Depositors have zeroed in on the Australian dollar foreign currency account, say bankers, as that currency offers a higher yield than what local deposit accounts would pay as well as Australia’s popularity as an educational destination.

Ong Shi Jie ... ‘Our recommendation of currency is very much dependent on customers’ needs.’

OCBC Bank (M) Bhd head of wealth management Ong Shi Jie said customers were looking to diversify their investment portfolio to include other currencies to enhance yields given the low interest rates offered by ringgit-denominated fixed deposits and also the turbulent equities market.
“We anticipate an increased acceptance of foreign currency fixed deposits by Malaysians partly due to the Government’s liberalisation of capital controls as well as the tougher investing environment in the equities space.
“This has, not surprisingly, led consumers to look for other avenues in their efforts to enhance yields. The low interest rate environment in Malaysia has also helped spur the hunt for alternatives,” she told StarBiz.
However, Ong cautioned that currency movements could be very volatile due to many factors.
“Our recommendation of currency is very much dependent on the customers’ needs.
“The identification of customers foreign currency needs is a crucial component of our sales process as opposed to taking a view on which currency would offer the best potential in terms of foreign exchange gains,’ she said.
According to Bank Negara statistics, total foreign currency deposits grew to RM48.3bil in May from RM40.4bil a year ago. The highest foreign currency deposit recorded in the period under review was RM52.4bil in March this year while the lowest was RM36.1bil in June 2009.
Public Bank Bhd chief operating officer Datuk Chang Kat Kiam said demand for foreign currency fixed deposit has also increased substantially due to the depreciation of major currencies such as the Australian dollar, Euro, New Zealand dollar, British pound and the US dollar against the ringgit.
For example, year-to-date the ringgit had appreciated by some 8.87% against the Australian dollar, thus making it a good time to accumulate the currency in expectation of future foreign exchange gains.
“The bank’s foreign currency deposits have recorded encouraging growth in the past six months with an average monthly growth of 5.91%,” Chang said.

Moving forward, he foresees demand for the major currencies to remain strong amid signs of slower global recovery which will lead to further tightening of interest rates by policy makers of these major currency countries.
The bank’s most popular currencies are US dollar, Australian dollar and British pound.
“The highest demand is for US dollar for trade purposes. The Australian dollar and British pound is in hot demand for investment and overseas education,” Chang said.
EON Bank Bhd head of wealth management and liabilities Low Kee Fui said the Australian dollar was the most popular currency based on recent customer trends.
“This is driven by parents who intend to send their children to pursue their studies in Australia as well as by investors looking to invest in Australia,” he said.
Low said the bank’s foreign currency deposit balance has grown by more than 50% in the past six months as the economy recovered and investor confidence returned.
“Going forward, we expect to see above average growth on the back of growing demand,” he said.
Malayan Banking Bhd deputy president and head (community financial services) Lim Hong Tat (pic) concurred.
“Currently the most popular is the Australian dollar, where interest rates range from 4.3% for a one-week deposit tenure to 5.05% for a year.
“This is followed by the New Zealand dollar offering interest rates from 2.6% for a one-month tenure to 3.75% for a year. The other currencies offer rates up to 0.3%,” he said.

Make Your Money Grow

Assuming that you have good spending and saving habits, you would by now, have a rather substantial sum of money handy to do with as you please. So, what do you plan to do with all that money? Spend it all on a luxury item that you have had your eye on for over a year? Go for a vacation? Or do you do the wise thing and save?
It'simportant to have a goal when you embark on a savings programme because the goal encourages you to save - rather like dangling a carrot in front of the donkey, although you are far from being a donkey if you are clever enough to give yourself a motivation to save.

So if you don't have a goal, think of one. You don't have to confine yourself to one goal - have several goals if they help you save more, as long as they are realistic and worthwhile objectives.
Meantime, while you save furiously towards your goal or goals, where do you keep your savings? Stashed away in your drawer? That's not a wise thing to do, because there is this terrible thing called Inflation which, figuratively speaking, is just waiting to gnaw at idle savings. It sees your money just lying there in your drawer and wham! it's got your money in its jaws!
Inflation & Purchasing PowerWhat is Inflation? No, it's not an insect or animal. It's abstract. Inflation is the economic term for rising prices, or rising cost of living. Inflation is when the prices of things you buy are rising. Let me give you an example. Let's say your family takes grandmother out to dinner at your favourite Nyonya restaurant. It's your grandmother's first visit to Kuala Lumpur or to a city for that matter - she lives in a small town and she hardly ever ventures beyond her garden gate.
Of course, you have to order your favourite dessert - ice kacang! You can't resist that pile of crushed ice rainbow-coloured by syrups and milk, sitting on top of various beans, corn, bits of jelly, longan and what-else-have-you, and topped with ice-cream. When your father fishes out RM4.50 to pay for your ice kacang - watch out for grandma! She might fall off her chair in shock! Why? Because during the time she was a kid, ice kacang probably only cost 10 sen. TEN SEN??!! Now it is your turn to fall off the chair!
That's what we mean by inflation. Rising prices. Sixty years ago, an ice kacang cost 10 sen. Today it costs RM4.50 at a proper restaurant and RM1.50 from a hawker stall. Its price has shot skyward. Put in another way, inflation has reduced the purchasing power of money through time. Your granny's 10 sen cannot buy a bowl of ice kacang today, maybe only that bit of crushed ice. The 10 sen has lost a lot of its buying power; it buys less than what it did 60 years ago. In fact, today's hawker price of ice kacang won't stay RM1.50 forever. It will go up and you don't have to wait till you are a grandmother/grandfather to see this. By the time you are a mother/father, we'll bet an ice kacang would probably cost nearer to RM2 at the stalls.
That's inflation for you. And the sad news is that inflation does not only attack foods. It is pervasive, sinking its claws in all things and services that are part of living - clothes, furniture, bicycle, house, cinema tickets, taxi fares, park rides etc. etc. That's why it is called the rising cost of living.
So what does this mean for your savings? Simply that if you just stash away your savings - let's assume that you have saved RM100 - in a drawer, your RM100 just remains RM100 until you want to use it. Meanwhile inflation is nibbling away at the value of your RM100 so that when you actually use it much, much later, your RM100 is not going to be able to buy you as much as when you started to save it. This is because - depending on how long you keep your money - prices of things would have risen in the meantime. Of course, if you immediately use your savings, inflation probably won't have a chance to work yet. But then, we are talking about a savings programme here, and that means a long enough time frame for your savings to grow - and for inflation to kick in.
So what must you do? To fight inflation, you must make your savings grow in value, faster than the inflation rate. If you just let the RM100 (we are sure you have more!) of your savings stay the same, you know that through time the purchasing power of your RM100 will not be RM100, but less - because the prices of things are continuously rising. However, if your RM100 savings could grow to, say, RM150; then in future you can not only buy the same things that your RM100 could at the start of your savings, you can also buy more things.
Investing is the way to goTo make your money grow, you certainly do not leave your cash in your drawer or stuff it under the mattress or anywhere else where it just stays put, and forget about it until you want to use it. To make your money grow, you must do a second smart thing - your first smart move was to save - you must invest it.
Investing is defined as using your money (in this case, your savings) to make more money. Adults, the wise ones, do that. They invest to make money with their money and when this has grown, they re-invest the bigger sum and in the process of re-investing again and again, their money is doubled, tripled or multiplied many times more. That's how people get rich - not through winning the lottery (you have one chance in 7 million or something like that) but through saving and investing. You can do the same with your small sum of savings and watch it grow.
There are different ways to invest your money so as to earn a return. A return is the amount of earnings or income that you get from your investment. The easiest and most common way is to put your savings into a bank savings account or fixed deposit (and we are sure all of you know this!). Your savings will grow because the bank pays you a certain sum of money (your return) called interest, as long as your money stays with the bank. This way your savings grows until you want to use it and when you withdraw it from your bank account, the amount of money that you have now will be your original savings plus the interest it has accumulated. It is no longer just your RM100 but a bigger sum.
So bank accounts are one type of simple investment. Another is investing in the stock market by buying shares of companies. Many adults do this. People typically invest in shares, hoping to earn a return in two ways. One is from receiving dividends, which is simply the monetary reward that companies pay out to shareholders when the companies perform well. The second is from realising a profit when they sell off their shares. Profit is the gain in money between what you paid for the shares and what you get when you sell the shares. Simple Maths will explain profit. For instance, if you had a savings of RM600 and bought 200 shares for RM3 a share, and three months later, you sold your 200 shares at RM4 a share, you would make a profit of RM200.
Here's how:Cost of buying 200 shares at RM3 a share = 200 x RM3= RM600.
Amount of money received from selling 200 shares at RM4 a share = 200 x RM4 = RM800.
Profit = Sale minus Purchase = RM800 - RM600 = RM200.
The profit has made your savings swell from RM600 to RM800.
There are other ways of investing your money.

You could even buy a house, if you have loads and loads of money (say, through inheriting a fortune from your favourite aunt who passed away). If you rent out your house, your return will be the amount of rental income you receive from your tenant. Which investment method you choose depends on factors like how much savings you have and how much returns you want to make. Each investment has its pros and cons.
For instance, investing in shares can earn you more returns than bank accounts, but it is riskier. If you put your savings into a bank account, your money is safeguarded. You can't lose it like you can lose your money in shares if you pick the wrong share to buy. Even if the bank gets robbed, or burnt down or goes bankrupt, the law of the country provides that you will get your money back. Not so with shares investing. However the return from the bank interest is rather small.
Investing in property like a house could earn you massive returns, but it is a long-term investment. It would be years and years before the prices of houses rise for you to sell your house and make a profit. (Remember? Profit equals Sale minus Purchase.) Getting your return from investing in shares is much, much faster but like we said before, you must be smart (and lucky enough) to select the right share to buy or else you could lose your money invested.
In fact with all types of investment (except perhaps for bank accounts), there is always a possibility of losing your savings, much less about getting a return. If you invest unwisely, you could lose both your original sum of savings and get no returns at all.
However, there's no mistake about this: investing is the way to build your wealth. You just have to invest wisely!

Determining Your Financial Net Worth

This article will look at how to determine your net worth. In order to compute the net worth of your assets, you need to know the two main components in deriving your net worth:

* Assets; and
* Liabilities.

What are assets and liabilities? An asset in simple terms, is something you own whereas a liability is something that you owe.

Understanding Assets
Assets can be categorised as investment assets and non-investment assets. Investment assets are assets that generate cash flow, and can materialise in the form of dividend, capital gain, rental or income. Examples of investment assets would include savings, fixed deposits, stocks, unit trust investments, EPF, investment properties as well as your businesses.

Non-investment assets on the other hand are assets that do not generate any cash flow. Examples of non-investment assets are the houses you purchase to live in or stay during vacations, as well as your car. Even though owning these assets have become part of our “must-have” items for each family, they do not unfortunately enough, help generate income or bring in any cash flow.

Understanding Liabilities
As mentioned earlier, a liability is something that you owe. This would naturally include your outstanding credit card payments, car loans and housing loans. Liabilities can dry up most of your income. As such, in order to obtain financial freedom, you need to first establish yourself as a debt-free individual. Having liabilities mean, you would need to serve interest on those liabilities. Thus, you would have to clear your liabilities as soon as possible. The longer you hold on to your liabilities, the more they eat into your reserves if you are unable to generate returns higher than the interest costs that you are obliged to serve.

Understanding Net Worth
Your net worth is how many assets you have left over after paying off all your liabilities. To a banker, your net worth is simply the difference between your total assets and total liabilities. However, in order to achieve financial freedom, you need to own enough investment assets that can generate sufficient cash flows to cover your daily expenses as well as your lifestyle. Hence, your net worth in the context of financial freedom is the difference between your investment assets and total liabilities.

The following is an example of net worth for someone who has been working for 10 years in Malaysia.

Mr. Ali’s NET WORTH
INVESTMENT ASSETS	RM		LIABILITIES	RM
Bank Accounts	10,000.00		Credit Cards	2,000.00
Stocks	10,000.00		Car Loans	65,000.00
Unit Trusts	20,000.00		Housing Loans	100,000.00
Property for investment	-		Other Debts	-
EPF	60,000.00
Business Value (net)	-
Investment Assets Subtotal	100,000.00		Total Liabilities	167,000.00
NON-INVESTMENT ASSETS
Home	150,000.00
Car	75,000.00
Others	-
Non-Investment Assets Subtotal	225,000.00
Total Assets	325,000.00		Net Worth	158,000.00
(Investment Assets Subtotal + Non-Investment Assets Subtotal)			(Total Assets minus Total Liabilities)
Total Assets	100,000.00		Net Worth	(67,000.00)
(Investment Assets Subtotal only)			(Total Assets minus Total Liabilities)

Mr. Ali is currently working as a manager in a company. Last year, as a result of his promotion to a managerial position, he decided to reward himself by buying a new car worth RM83,000 with a bank loan of RM65,000 to finance the purchase. This year, as a result of one-year’s depreciation, his car is now worth RM75,000, a total depreciation of RM8,000.

He has an apartment that is worth RM150,000 with an outstanding housing loan of RM100,000. As a result of the two big down payments on the apartment as well as his new car, he does not have much cash left for his stocks and unit trust investments. In fact, he has just withdrawn a portion of his unit trust investments for the new car.

As a result, his total investment assets of stands at RM100,000 only. In fact, the main portion of his investment assets is his EPF, amounting to RM60,000, which he needs to save for his retirement. In excluding the EPF, he effectively only has RM40,000 investment assets after 10 years of working.

As far as a banker is concerned, there is no need to distinguish whether those assets are for investment or non-investment. A banker will consider his net worth of RM158,000, derived from his total assets which are worth RM325,000, with his total liability of RM167,000. However, for the purpose of assessing his net worth in the context of financial freedom - without considering the non-investment assets, he in fact has a deficit of RM67,000. He is still very far from securing financial freedom.

Hence, in order to attain financial freedom, the first objective of Mr. Ali would have to be clearing all his debts as soon as possible. By doing this, he would then be able to generate enough investment assets to cover his expenses.

Financial Planning Tips for The Single Parent

As a single parent, you have the same financial concerns as everyone else – only that you do not have a partner to share your financial burden. Because you are solely responsible for yours and your children’s needs, it is very important that you make sound financial decisions. By acting on some of the tips given here, you should be able to feel more confident when it comes to taking charge of your family’s financial future.

Budget
Everyone needs a budget planned out in order to better manage his/her income regardless of whether you are single or married. However, if you are a single parent, the need to draw up a budget is greater because there are more demands placed on your single income. Thus, it is even more necessary for you to pay close attention to how you spend your income. A single parent needs to have a household budget planned out and be disciplined in adhering to the budget.

Begin a Savings Plan and Start Investing
When you plan your household budget, remember to allocate some money each month to a savings plan. Sometimes this is called “paying yourself first”, that is, to include money to be put aside for yourself in your list of monthly expenses. These savings should be going into a safe, less risky investment vehicle because as a single parent, you cannot afford to take much risk since you are the sole breadwinner in your family.

Increase Your Financial Literacy
The biggest mistake a woman can make is to be ignorant. Educate yourself by attending seminars and workshops on smart investing, and financial planning, among others. This is to ensure you get on the right track in making informed financial decisions.

Build a Financial Safety Net
Having an emergency cushion of several months' worth of living expenses is even more important now that you are on your own. Some financial experts suggest you should set aside at least three month's worth of living expenses apart from some savings for emergency purposes. This money should be invested in a less risky investment vehicle or trust fund that you can easily access when the unexpected expense arises. The other important financial safety net is your insurance coverage, particularly your health and disability insurance. And if you are the main source of support for your children's education, you should ensure your insurance coverage is enough to support your children's education.

Start a Retirement Plan
Even single parents will retire someday. It is important that you start your retirement planning regardless or your age. Women should make their life expectancy an issue when drafting a retirement plan. The best advice is to start aggressively saving and investing your money now.

Your Children and Money
Teach your children about money i.e. how it motivates people, how it requires making choices, and how it can lead us to the wrong direction if we are not careful in handling our money. Children with single parents often have this deep-seated fear of what will happen to them if the parents are no longer around. Explain to your children about your financial plan, your investment in unit trusts, insurance, property or your will. This information will be assuring, as it teaches your children that making plans on finances for the future is very important.

Lastly, single parents need to have a financial plan laid out so that you and your children will have a better future. If you do not have a financial plan yet, maybe now is the right time to start planning. Start now! Do not delay anymore, for the sake of your loved ones!

Importance of Financial Planning

Why a financial plan? Well, if you want the best results out of any endeavour - be it going to battle or having a New Year party, you should have a plan. So it should be with investing your money.

It is often said, most people don't plan to fail, they just fail to plan.

Financial planning not only tells us where we stand financially right now, it also works out where we want to be in the future through setting our financial goals, and it enables us to reach our financial goalposts in an efficient financial manner.
This section helps you to put together a financial plan.

Assess Your Financial Situation
Before embarking on any investment plan, you need to assess your financial situation, i.e. take stock of how you are financially, so that you can decide how much you can afford to save and put aside for investments. It could be that right now you just spend on whatever you want and whenever you want, without any idea of how much or how little you end up with at the end of each month.
To determine your financial status, you have to:

First, compute your net worth
Your net worth is your personal equivalent to a company's balance sheet and tells you how healthy you are financially. To calculate your net worth, you need to list down your assets and your liabilities. Then subtract your liabilities from your assets to arrive at your net worth.

Your assets will include items like your cash, bank accounts, possessions, existing investments if any, like shares or unit trusts, and your fixed assets, such as properties.

Your liabilities include any loans that you have taken (car, house or even loans from family and friends), your credit cards and any other debts you might owe.
If your arithmetic works out to a negative net worth, then you are insolvent. Forget about investing for the time being and work on how to turn it positive. If your arithmetic gives you a positive net worth, that' s good but unless your net worth is already sufficient for all your future needs, you would want to improve the figure so that you can have more to invest.

How can you increase your net worth? One way is to reduce your expenditures. Any excess cash over expenditure can then be allocated among your assets to improve your net worth.

But which expense to cut? To determine this,

Do your cash flow statements next
You have to work out where your income goes to; in other words embark on a cash flow analysis of your earning and spending patterns. First organise all your salary statements, receipts, bills, tax returns and other financial data into a clear record of how much you earn and how much you spend each month of the year.

List down and scrutinise each item of your expenses to see which ones can be trimmed so that at the end, you will have a positive cash flow - that means more money coming in than going out.

Some of the items that go into, and questions you should ask, while doing your cash flow exercise include:

• On your income: What is your salary? Do you have any other sources of income - from part-time jobs, dividends, rental income, bonuses. If you are doing the analysis for your whole family, you want to include your spouse's incomes too.
• On the outgoing flows: These cover your household and living expenses like food, clothing, and utility; your car maintenance and petrol; loan repayments for car, credit cards or house mortgages; insurance premiums; education and medical expenses, entertainment and holiday expenditures; income tax payments, etc. etc. You get the idea; the list is a long one.

Here is where you have to decide which expenses are necessities and which are just plain frivolous - and cut the latter out of your spending habit, so that you can save more.

• Draw up a budget to keep your expenditures in line. The budget will be a check on what you can afford. For instance, you can't afford fine dining in posh restaurants on a weekly basis if what you have is a coffee shop type of a budget; although on a rare occasion like your wedding anniversary, you might want to treat yourself so also budget for the occasional splurges. But keep these to a minimum.
• If you are drowning under voluminous financial data while trying to get organised, be aware that you can get a helping hand from computer technology. The mainstay to organising your finances in today's world is computer software packages, which are designed to help you control your finances. Most programmes will help you create a budget and track your expenses, even calculate how much you should save for investments and monitor your investments.

Once you have your finances under control, the next step of financial planning is to:

Set your Financial Goals
A simple way to setting financial goals is to plan ahead for two years, five years, 10 years, 20 years and so on. Next, think of the needs and wants you (and your family) have, and translate them to become a specific goal for each of the time frames.

Your goals could range from the obvious (like a house in five years, or your children's university education in 10 years or a nice nest egg upon your retirement), to things you keep promising yourself but you never did have them (like riding the Oriental Express train on your next holiday abroad). However your goals should be specific, appropriate, worthwhile and not pipe dream fantasies.

Next, compute how much money each goal is going to require. Don't be intimidated by the sum. Unless you have massive sums saved up, most of us are going to have to earn the additional funds to realise our goals - and these funds will be acquired through your investing efforts.

After all, this is what this website is all about - to learn how to invest wisely so that we will earn the returns to realise our goals.

Develop Your Investment Programme
Now that you have set your goals and have cleaned up your finances to produce some true surplus money for investing, there's one more thing to do before you take the plunge. Many financial planners advise us to set aside at least three to six months expenses to take care of financial emergencies (like losing your job) or unexpected cash flow problems, before venturing out to invest in anything. A man with a family is sometimes advised to save up to one year's cash reserve.

Once this emergency buffer is in place, you can consider how much of your surplus income to use for investing so as to achieve your financial goals. You could start small and increase the amount once your surplus funds build up, or you could start with a portion of your big savings and increase your funds for investing, once your confidence builds up.

Asset allocation: Divvy up your investment pie
The next question that confronts you is what assets to invest in? Should you buy shares or bonds? How about government securities? Unit trusts? Property? Or be adventurous and dabble in futures?

Well, you have to do your homework. First, find out what investment products are available to you, how each works and how risky it is. When you are researching an investment, you are typically researching a company or organisation, because they are the ones issuing the stocks, the securities, the unit trusts, the bonds etc. There are masses of information out there, in the media and online and from the corporations themselves that enable you to take a closer look at them. It is essential that you know their product, performance, market, competition and industry so that you can make a fairly good prediction as to their future prospects. Why? Because your investments are based on the future.

You should not just invest in one specific asset; to make your investment work, you should choose a combination of asset classes or a selection of specific assets within one asset class (like investing across different sectors if equities are your one asset choice). In other words, diversify. Determining how much of your investments you are putting into each asset class to make up your investment portfolio is called asset allocation.

For you, the overall right asset mix will depend on your goals, the time span to reach those goals, the amount of money you have available to invest and your age. If you have a long-term plan with a goal of seeing your primary school kids to university, you can start with an aggressive approach where you place a higher percentage of your investments in equities. But if your time horizon is shorter, you would want to be moderate and lean towards an even split between equities and the safer bonds. If your investible fund is pretty small, it will dictate that you chose unit trusts. Your age counts too. Generally the older you are, the more conservative you should be in your investments, and your focus should shift to income-producing investment products like bonds.

Underlining all these considerations and which investment approaches you should take is the biggest determinant of them all - risk - and hence your tolerance for risk as an investor is very significant. In fact your investment into the specific assets within each class is driven to a large extent by your ability to stomach risk. So please refer to the section on Risks, Rewards & You to understand this very important investment concept, before you finalise your investment choices.
Finally do also ensure that you have sufficient life and health insurance so that your family has a financial safety net, should you become very ill or die and cause your investment plans to be in disarray.

Put your programme into action
If you are all set to put your investment choices into action, when is the best time to kick off?

The earlier the better. The whole idea is to start early so that you have more time to make your investment grow. If you are young, you have the head start. If you should be in mid-career, you can still reach your financial goals - it is just going to require more ringgit to get there. Even if you are close to retirement, don't think it is too late. Remember, better late than never!

When you start, don't invest blindly. Catching the right train at the right time is most important if you want to arrive at the right destination at the right time. Buy what you know. If you don't understand a particular investment, don't dive into it yet until you have grasped all the concepts. Think and act rationally to buy low (and sell high). Don't let greed overcome your sense of reality, for example, buy shares at too high a price, (or refuse to sell because you want more profit).

Avoid acting on rumours. Very often there is market talk about certain share prices on the rise. Everyone then jumps onto the bandwagon "pushing" the shares. The strong buying causes the prices of the shares to rise significantly, allowing the parties that started the rumours to unload their shares at a higher price. Can you guess who is left holding the shares at a high price?

7 Common Money Mistakes to Avoid

“I have been working for 20 years, yet I have very little cash in my savings. Sometimes I wonder where all of my money have gone to” - Mrs Chong, Executive

Does the above statement sound familiar? If you ask around, you are sure to find at least one person you know, who share the same sentiments as Mrs. Chong.

If you are thinking of improving your financial health, first, you need to be able to recognize your financial mistakes so that you can learn not to repeat them.

Here are some commonly made money mistakes that everyone should avoid:

Mistake #1:
Failing to Plan

If we carry out a survey on the people around us, we would be sure to find that not many of us plan our finances. The most common response that we can anticipate would be the classic excuse “We are just too busy with work and family that we hardly have any time left to do the planning”. As a result, most of us end up paying higher taxes, leave our savings sitting silently in lousy investments for years or overpaying for financial products. Since there are always deadlines to be met at work, we tend to let our finances run its own course, thinking that it is of lower priority as there are no deadlines to meet nor is there anyone to force us to look into our financial plans, unless of course we run into serious deficit.

However, the important point to note here is that PLANNING is typically found to be a strong habit among people who have successfully accumulated wealth, even with just a modest income.

Mistake #2:
Spending Beyond Our Means

Nowadays, we constantly overspend due to peer pressure and consumer temptation that surround us on a daily basis. We are, to a certain extent, exposed to mild brainwashing with TV commercials, newspaper ads, sale circulars, and flashy shopping malls promoting the lifestyles adopted by the rich and famous, which of course involves having the latest mobile phone models, the latest luxurious cars, latest fashion trend. All these tempt us into spending exorbitantly and unnecessarily. The signals we get from not jumping on the bandwagon is that we will be considered left out of today’s scene. However, in order to do so, far too often, we end up spending way beyond our means. We will find that at the end of each month, the net salaries that go into our bank account are usually meagre, after servicing our car loans, housing loans, credit card bills and other utility bills.

Mistake #3:
Spending Future Money

Buy now and pay later! This has become a norm nowadays and the credit card has become a must-have item in our wallet. In fact, a lot of us carry more than one in our wallets. No doubt it is a convenient item to have around, however, some of us misuse it and treat it like a vehicle to spend our future money at will. It has become a common phenomenon where, by just settling the minimum payment at the end of the month, you will buy more now. As a result, the credit card bad debt snow-balls to an extent beyond our control. According to the bankruptcy report, the percentage of people declared bankrupt due to default in credit card payment has increased in the last few years especially among the younger age group. Be wise when using credit card. Making minimum monthly payment on credit card debt allows you to buy more now, but it will cost you dearly in the future.

Mistake #4:
Delaying Saving for Retirement

Most of us aim to take up early retirement. In order to achieve this, we need to plan our finances to make sure that we have enough savings to sustain the life style that we desire even after retirement. However, many of us find that even when we approach retirement, we still struggle to meet the savings target that we have set for ourselves earlier. As our income grows, our savings are supposed to increase as well, instead, we more often than not, have big items to spend on, i.e. house upgrading, new car purchase, club membership to keep up with our peers, etc., that prevents us from depositing more into our savings.

Mistake # 5:
Investing in the Wrong Products

There are various kinds of financial products in the market. However, in order for us to identify the right product that suits our risk and return profile, we need to equip ourselves with some basic investment knowledge and do the homework ourselves. Instead, most of us end up investing in some products, simply because we rely too much on the financial advisers, who might have the agenda of pushing higher sales for their products and therefore providing misleading information to us. It is always important to study the product characteristics or the management team track record before investing.

Mistake #6:
Not Saving for a Rainy Day

Some of us think that purchasing insurance is a waste of money. However, we are vulnerable if we and our family do not have insurance to cater for any loss of income. In the event of some unfortunate incident, especially those affecting the family’s bread winner, without any cash reserve or insurance, it will be devastating to the whole family. By then, it would be too late to start thinking of income replacement.

Mistake #7:
Focusing Too Much on Money Matters

All the above tell us to focus on our finances. However, on the other extreme, we must also not be too engrossed in accumulating our wealth to the extent that we lose sight of other priorities in our lives. While we plan our financial health, we must not neglect our own health, family and friends, career satisfaction and fulfilling interests. Without these, even with tons of money, we will not be happy.

Lastly, we need to remind ourselves of the importance of planning our finances. If we are not fully, totally and truly committed to creating wealth, chances are wealth will remain estranged to us.

How to Set S.M.A.R.T Goals

In financial planning, the most important thing that you need to do is to set financial goals. Your goals could be controlling your spending so that you could pay off your study loan or buy a home/car. Regardless of what your goal is, ensure that it is SMART i.e. specific, measurable, realistic and can be achieved within a certain time frame. So learning to identify and set clear goals is key to your success in life. Your specific goals will depend on a number of factors-your values, age, financial situation, and interests.

Sample of financial goals controlling your money so you have a little left over every month paying off debt having an emergency cushion in case of car break down or medical emergency buying a home buying a car saving for retirement purchasing "big-ticket" items, like electrical appliances planning a vacation

What is SMART goal?

Example: Johan's goal: To save for a vacation in Pulau Redang that costs RM1, 000 in 4 month's time. He needs to save RM250 per month.

Specific To go for a vacation in Pulau Redang – NOT want to go for a vacation Measurable Need to have RM1,000 – NOT need to have money Attainable Must save RM250 per month – NOT waiting for someone to give free traveling gift voucher Realistic To go to Pulau Redang in 4 month’s time – NOT to go to London in one month’s time based on RM250 savings per month Time-bound To buy it in four month’s time – NOT when I have money

Examples of goals based on certain timeframe:

• Short-term goals can be done in a week or a few months, but no longer than a year. Buying new clothes and saving for a vacation are short-term goals.

• Intermediate-term goals can be accomplished in one to five years, such as buying a new car or paying off debts.

• Long-term goals are five years or more, like buying a house or saving enough money to put your children through college/universities.

Remember, you may have all three types of goals, but keep them realistic. Goals that are set too high will frustrate you and you will be tempted to abandon them. Goals that are vague will not motivate you at all. Rigid goals will not work especially when your situation changes. Whatever your goals are, leave some space for adjustments. Prioritise your goals based on which are the most important to you as an individual and which are the most important to your family? Good luck!

Recession-proof your money

Published: 2009/05/14

There are steps we can take that are well within our control to weather the bad times, says Securities Industry Development Corp

"ECONOMIC crisis" or "recession" - these are words you have heard of over and over, be it on the television or the radio and read in the papers. The financial headlines and where the economy is headed are things beyond our control. However, it isn't all bad! There are steps we can take that are well within our control to weather the bad times. All you need is just a little bit of foresightedness to prepare yourselves for the worst case scenario.

How to keep your head above water

Many of you out there have been asking this question, or variations of it. People are interested in the ways of surviving hardships that they foresee await them. Here, we list some of the things you can do; things that are definitely within your control to weather such hardships.

* Manage your expenses - watch what is going out of your pocket!

* Manage your expenses - watch what is going out of your pocket!To start with, scrutinise your expenses; identify your fixed and variable expenses. Variable expenses will include meals at your regular eateries, gourmet coffee breaks, shopping trips, which can be reduced and adjusted with a just a bit of self discipline and restraint.

How about fixed expenses then? These are the regular expenses that you cannot avoid or immediately reduce with your changing financial situation. Items that fall under this category are usually the big ones on your spending list.

Examples of fixed expenses include:

* Mortgage payments for your house, car loan or student loan

* Mortgage payments for your house, car loan or student loan* Insurance payments

* Insurance payments* Utility bills and service contracts, such as water, electricity, phone and internet services

* Utility bills and service contracts, such as water, electricity, phone and internet services

While you cannot really eliminate these expenses, there certainly are ways to reduce the spending in this category.

* Be an intelligent consumer!

* Be an intelligent consumer!During an economic down turn, what a government typically does is to take stimulus actions, such as reducing interest rate to encourage public spending. You can certainly benefit from this by shopping around for cheaper rates and better deals to refinance your mortgages. A variety of packages are offered by commercial banks and all you need to do is to choose the best deal, one that can cut down your interest payments. This move alone can save you quite a bit of money in the long run.

The same goes for other items. As the business environment gets more competitive, you will find an array of special deal packages and promotions being introduced in the market. You need to mould yourself into an intelligent consumer. Practice scouting around for the best deals available and make sure that every ringgit you spend is worth it.

* Resist! Resist! Resist!

* Resist! Resist! Resist!While you're busy trying to cut down on interest payments and looking for value for money alternatives, make sure you resist the temptations of further spending. Any efforts made to help you save will be meaningless if you deplete your cash and land yourself with additional commitments. So, Resist! Resist! Resist! Remember! Only spend on what is necessary and delay those that can be delayed!

* No More Credit Card Mania!

* No More Credit Card Mania!If you are one of those people famous for saying "Charge it!" with no qualms whatsoever, then it's high time you drop that habit.

As the market is flooded with credit card offers, it is quite common for a person to own a handful of credit cards. While credit cards provide convenience, it can work against you if you lack discipline.

Charging purchases to your credit card is basically spending future money. The more you spend and owe the bank, the more you have to pay as the interest builds up. Therefore, in order to manage your expenses more effectively, limit yourself to just a card or two and keep track of your monthly balances. Refrain from letting your credit card debt build up and, if possible, clear all your card balance every month at one go.

Failing to settle your credit can lead to dire consequences. If you look at the number of people who have filed for bankruptcy in Malaysia, you will discover that the number is rather alarming with many of the younger adults contributing to the statistics.

* Build up your reserve - keep the money in your pocket!

* Build up your reserve - keep the money in your pocket!Once you are able to manage your expenses, you will find a pleasant surprise - all of a sudden, you have extra cash! Use this to build up a reserve. This reserve needs to support you for at least 6 months of living expenses. If you have been laid off recently, don't use the compensation to renovate your house or buy a new car. It is meant to be your reserve. So keep it for the rainy days! If you have extras from the savings, then you can move on to the next step.

* Generate additional income - make your money grow!

* Generate additional income - make your money grow! "Inside of every problem lies an opportunity" - Robert Kiyosaki

If you are no stranger to the world of investing, then you can relate to what Kiyosaki is saying. Most people fail to see the silver lining behind a crisis; it is during the bad times that you will find plenty of good deals in investment, be it in the stock market, real property or other investment products.

As such, if you have the extra money, make it a point to study the market and look for investment opportunities within your risk tolerance level.

The bottom line is, you have to be more careful with your investment decisions, especially when dealing with your hard-earned money in times like these.

With careful planning and self discipline, you should be able to keep yourself afloat regardless of the economic situation.

Securities Industry Development Corporation (SIDC), the leading capital markets education, training and information resource provider in Asean, is the training and development arm of the Securities Commission, Malaysia. It was established in 1994 and incorporated in 2007.

For more tips on wise investing, log on to www.min.com.my

Is there a future for tax havens in view of recent developments?

Tuesday May 12, 2009

Tax Insights - A column by Kang Beng Hoe

THE meeting of heads of state of the G20 countries in London in early April 2009 reached agreement on initiatives against tax havens on the issues of lack of transparency and lack of exchange of information.

The upshot was that the Organisation for Economic Cooperation and Development (OECD) issued a “blacklist” of jurisdictions considered to be tax havens and deemed not cooperative in exchanging tax information. Labuan’s initial listing has now been removed in view of the timely positive response by the government.

This latest effort represents a second “bite of the apple” as slightly over 10 years ago, the OECD issued the 1998 report, “Harmful tax competition: an emerging global issue”, which called for the elimination of harmful tax practices through the use of offshore tax havens.

This initiative met with considerable resistance and in some ways has fallen short of its aims.

The current economic downturn means that governments have suffered from the loss of tax revenues.

This coupled with the recent large-scale tax evasion scandals involving UBS, the Swiss bank which fell foul of the US tax authority, and Liechtenstein whose private bank LGT was used by clients in some 13 countries to evade taxes, have galvanised action by these large economies to crack down hard on tax evasion involving tax havens.

They recognise that exchange of information is essential if their national tax authorities are to confront their nationals who have evaded taxes.

Thus the thrust of the message is that bank secrecy and other confidentiality laws are no longer considered appropriate as they are not in line with non-tax laws such as those against money laundering, terrorism financing and corruption.

Countries, which do not commit to changing such laws to comply with the “internationally agreed standard” of information exchange for tax purposes could be subject to sanctions.

So how will all this affect the operations of the global community of tax havens?

The OECD views a tax haven, also known as offshore financial centre, to have the following features:

·Nominal or no taxes,

·Lack of effective exchange of information,

·Lack of transparency,

·No substantial activities.

They also say that “no or only nominal taxation combined with the fact that a country offers itself as a place, or is perceived to be a place, to be used by non-residents to escape tax in their country of residence may be sufficient to classify that jurisdiction as a tax haven.”

Users of tax havens fall into two broad groups. One group is made up of taxpayers intent on evading taxes of their home country. They use the secrecy available in the tax havens to hide part of their income transactions.

They also rely on the fact that their tax officials cannot extend their investigative reach to the offshore location where if all the facts are known, the transactions would be set aside.

The other group of taxpayers are those who wish to remain within the law but would be prepared to argue their position if challenged by their tax authority.

They are involved in legal tax avoidance and hope to take advantage of the varying laws of different countries plus loopholes in their own tax law to minimise their taxes.

The most common vehicle used by both groups of taxpayers is the offshore company. The following features make them popular:

·Tax free or nominal amount;

·Anonymous ownership – no public register of shareholders and in many instances bearer shares are allowed;

·Flexibility – broad objects are allowed and so any business activity can be carried out with some exceptions;

·Ease of use – less administrative requirements but an annual fee payment is required; and

·Quick incorporation.

The first group of taxpayers is the prime target of the OECD initiatives.

Tax evasion is a crime and governments are right to pursue those they suspect of committing it.

The insistence on transparency and information disclosure will not only make their task easier but serve to deter others from doing it.

The second group of taxpayers would find the new landscape particularly challenging.

Tax authorities of the industrialised nations dislike offshore centres and this is evident from the undue and continuous pressure they have experienced in the last few years.

The removal of secrecy and anonymity would likely reduce incentives for using offshore companies for legitimate tax avoidance.

Developments in a number of countries have further served as dampeners on the use of tax havens.

In the US a bill has been proposed to allow its tax authority to have more time to review tax returns where “offshore secrecy jurisdictions” are involved.

Mainland China’s tax authorities are seen to be revamping their domestic tax rules to counteract the abusive use of tax treaties, which often requires using offshore structures.

Despite all this, going offshore will remain possible but it will require detailed knowledge and careful planning. The days of easy and quick use of offshore centres are over.

Kang Beng Hoe is an executive director of TAXAND MALAYSIA Sdn Bhd, a member firm of the TAXAND Network of independent tax firms worldwide.

The views expressed do not necessarily represent those of the firm. Readers should seek specific professional advice before acting on the views.