Concepts To Save Your Retirement Fund & Life

(A) Highest Norm: Protect Your Asset, Low Down The Risks

If you were invested in the market and affected by the economy crisis, now what you can do is “Protect Your Current Assets”, today our topic is try to low down the risk and invest in those products that can help to protect your assets.

(B) For Those Who Retired, First Low Down You Monthly Expenses

Recommendation for those who are retired, if you want to save your retirement fund::

(i) First, calculate your current assets after the economy crisis

(ii) If your current asset not much, please do not think that want to win double back by invest in those high risk investment

(iii) Try to low down monthly expenses, then only invest in those products which can help to protect your assets, and earning stable income for the rest of time.

(C) Going To Retire: Consider to Increase Retirement Fund

For those who are going to retire soon, try to calculate your retirement fund, and think that it can long for how many years of your retirement life? Some people might prefer to save their money into bank, they think that is the safest way to protect their money, but do they think that the interest rate that giving to them is enough to withstand for the inflation? The interest rate is 0.5% – 2.2% annually, but Malaysia inflation is as high as 6% – 7%. Does it make sense to you? So, You might choose to invest in those products which can help to you to have the “2nd Retirement Fund” and protect your assets.

For Example, invest in gold. Invest in gold is always the token to protect the assets for those who are going to retire or already retired, it always can bring some earnings from it. According to past 10 years gold price statistic, it is stable and average returns as high as 14%. You might invest directly through bank and don’t need to keep the gold, and there is another financial tools for the retirement people.

**CLICK THE PICTURE TO ENLARGE

(i) Returns of investment you desire

(ii) Risk level that you can endure

Q: Is the investment always contain risk?

A: Risk = % of loses in an investment. As an investor, you can’t avoid from risk, but you can control or minimized it. This concept is, when you deal in an investment market, use the calculated risk to help you to make money but not lose. Different investment market contain different level of risk. Normally, for those investment that contain high level of risk, it will bring higher returns compare to those low risk investments. For example, the returns of investment in stock / shares is higher than invest in Unit Trust, because the stock / shares market contain high risk than Unit Trust. So, you have to know the risk level that you can endure before you invest in a certain market. If you are able to endure high risk, you might use an Aggressive Investment Strategy to earn higher returns. On the other hand, if you only can endure low risk, then you might only invest in those markets which are more safe and earning stable returns. So, please consider carefully before invest, choose the investment with the risk level that you can endure, and earning better returns.

Q: What kind of risks i will face in investment?

A: Below is the risk that frequently face by investor:

1. Mismatch Risk – The risk that an investor has chosen investments that are not suitable for his or her circumstances

2. Inflation Risk – The returns of investment is lower than inflation rate, it will cause to slow down your purchasing power.

3. Interest Rate Risk – The risk borne by an interest-bearing asset, such as a loan or a bond, due to variability of interest rate.

4. Market Risk – The risk of an investment will decrease due to the change in value of the market risk factors.

5. Market Timing Risk – Missing out on beneficial movements in price due to an error in timing. This could cause harm to the value of an investor’s portfolio because of purchasing too high or selling too low.

6. Non-Diversification Risk – Investor will face the risk when they are only focus or depend on one investment market only.

7. Liquidity Risk – The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly  enough to prevent or minimize a loss.

8. Gearing Risk – You use loan to invest, but the returns of investment is lower than your loan.

9. Legislative Risk – The risk that legislation by the government could significantly alter the business prospects of one or more companies, adversely affecting investment holding in that company.

So, did you learn something through these Q & A?

Q: What is the relation between my goals and my investment?

A: As a investor, you must know how to protect your fund, and fully utilized of it, then use it to turn into your highest profit. This is why you need to set a clear plan for your investment target. If your plan is to use the returns of investment on your life goals and other specific purpose, then this will be more easier plan. This is include of financial protection / independent for you and your family,  make sure that that is sufficient of saving when there is needed, children education fund, plan for retirement life, your dream car / house, or round the world. It is tough to accumulate your wealth and achieve your goals in a certain period of time only by saving. So, you need to start invest. In your plan, you might indicate the amount, when and what to invest, and targeted returns of investment.

Q: What is financial plan?

A: A financial plan is very important to an investor, it just like a coach(financial consultant) of a soccer player. He know what his player wants (Champion), then he start to train them, and set up strategies for them to work towards their target (champion). Beside that, the coach also need to help them to prevent some injury / interruption (loses) during the tournaments or training.

Q: Can someone help me to set up my financial plan?

A: Of course, you can get a financial consultant to assist in set up a workable & stable financial plan. He can assist you to set the target / goals, set up the strategies to achieve goals, and understand which saving plan or investment tools is more suitable to you. The financial consultant need to build up a good relationship and understand what is your wants. But please remember that, a responsible financial consultant will not force you to invest in certain investment project, he have to respect / listen to your comments before making decision, it is because that is your fund and you have to responsible for your financial situation.

Q: How do i set aside the money for investment purpose?

A: You need to have a good financial discipline. You have to come out a plan with budget such as income, monthly expenses, control your debts, and then start saving (every month).

Q: What is the Smart Investment?

A: Smart investment is mean a consciousness decision, which use your budgeted amount of money, invest into an investment market which you have do some research and go through a serious consideration on it, and monitor closely in order to protect your investment and get the returns than you want.

Q: If i am a small investor, is it worth for me to learn it?

A: No matter how many is your investment, learning the right concept and knowledge is a MUST for you. You only can choose the right investment when you have the knowledge ( it is not only cost consideration, but also the risk of losing). If you manage it carefully, even though it is just a small investment, it also can growth and help to earn more than your expectation. So, please do not under value the potential of an investment value.

Q: Do i need a high education level to invest with smart?

A: You don’t need a Bachelor Degree / Master to help you to make a smarter choice or decision in investment. But the most important is, you have to read or find out more about the investment. You have to learn for long life, no matter you are the “veteran” or newbie in the investment market, it is because by reading it can help you to increase your knowledge and skills day by day. Sometimes mistake also will give you a valuable lesson too. If you are losing some of your money in this progress (sometime even “veteran” also will make mistake), you can find out the problems and learn from the mistake.

According to the latest research, among 100 people who already pension, there is 95% of people still worried of their saving and living cost for the rest of their life, 4% achieve financial independent, and 1% is the rich. Actually, these people suppose to enjoy their life with those passive income from IGA (Income Generating Assets), but remember that, just invest in those low risk and conservative investment tool will be enough. Besides that, it also the time to went through the your own RMP (Risk Management Portfolio), to make sure that yourself is in protection and safe. This is important because many of illness will follow you due to your age increment year by year. Your kids starting to go for college / university, they need a pool of money to finish their study, other than that, your spouse’s also will become older and the medical fee will be increase too!!

You can ask yourself: Am i in this stage?

I already achieve financial independent?

If no, what is your plan?

Are you cleared you debts?

Is your work stable?

How is your current financial status?

At here, we have to congrats to those people who already achieve financial independent, but don’t forget to educate your next generation about the financial planning  knowledge. For those who are not achieve, don’t be dejected. At least you still learning for now, and you can pass the knowledge or help your next generation to plan in the future!! Thank you.

On the other hand, if you have a well and stable financial plan in the earlier stage (age 18 – 25), and having your own IGA on that time, then your life now would not be so tough but more relax, beside that you also know that what you want to achive and also what are you working for? Remember that, do not increase your debts during this time, it is because most of the people will start to purchase cars & houses at this time, this is not wrong, but you have to know your own financial ability.

Try to ask yourself if you’re fall in this stage, you have a plan? you are now heading towards your plan? How much your income / debts is increase? Is your financial consultant assisting you to observe your plan? Is your plan need to be improve on? etc. These questions are important, because some people think that they already have a plan and just put the plan aside, but plan will changed due to time & any emergency cases, so we must check and update our plan every 6 months.

So, for the people fall in this range, how they going to plan? Actually, it is just the same in the earlier stage which is stick to 5 principles. What we need to do is improve your plan when any problems are occurring. Let me repeat again the 5 principles:

a) Have a clear plan (To have a clear goals / targets)

b) Plan / state clearly how many resources you have now (How many assests? How much debts? How much income? etc.)

c) Get a professional financial consultant’s feedback (any consultant will do, as long as they can help you ; If you sure that you can D.I.Y, they you can do it yourself)

d) Have a fixed period (e.g. every 3 / 6 months) meet up with your consultant to discuss, survey, or update your current investment, saving, or insurance plan.

e) Lastly is to set up your own IGA (Income Generating Assests)

Discussion 2:

Danny, 23 years old, came from a normal family, he got a sister age 20. Danny is in relationship with a beautiful girl, and they plan to wedding after 3 years. Danny is an obedient boy,  every month he will give RM500 to is parent (still working) as pocket money. Before that, Danny do not have any financial plan when he is in age 18 – 25, he is very regret on it, now he wanted to start to plan for himself, can anyone help him to plan?

General Expenses:

1. Cloth: RM 150

2. Food: RM 200

3. Phone: RM 100

4. Entertainment: 300

IGA:

1. Saving Insurance: RM 120

2. EPF: RM 12490

3. Income: RM 3500

4. Bank: RM 4000

Income Tax:

1. Personal: RM 80

Debts:

1. Credit Cards: RM 2500

Family Expenses:

1. Parent’s Pocket Money: RM 500

Transport:

1. Car Installment: RM 600

2. Petrol: RM 250

3. Roadtax: RM 60

4. Car Insurance: RM 55

5. Maintenance: RM 20

6. Toll & Parking: RM 55

So, for people who are fall into this level, try to ask yourself these few question:

i) what kind of life you want for the future?

ii) You want to achieve financial freedom at what age?

iii) Who is going  help you to build up / implement your financial plan?

These questions are important because you can’t really plan when you don’t know what you actually want.  So, how we going to set up our  own IGA? We need to stick to 5 strategies:

a) Have a clear plan (To have a clear goals / targets)

b) Plan / state clearly how many resources you have now (How many assests? How much debts? How much income? etc.)

c) Get a professional financial consultant’s feedback (any consultant will do, as long as they can help you ; If you sure that you can D.I.Y, they you can do it yourself)

d) Have a fixed period (e.g. every 3 months) meet up with your consultant to discuss, survey, or update your current investment, saving, or insurance plan.

e) Lastly is to set up your own IGA (Income Generating Assests)

**To achieve “Fully Home Paid + 6 – 12Months Saving Expenses + Income Generating Assests (IGA) = Financial Freedom”, you might need to stick to the above strategies and insist on it. On that time, it is not a “MUST” for you to work, you can choose either you want to or not. The earlier you achieve financial freedom, the earlier you can enjoy you life.

DISCUSSION: (you are always welcome to present your own opinion. How to help David to update his financial plans & problem?)

David, 22 years old, came from a poor family, dad (63) & mum (62) with low education level, so that they can’t get a good job in the society. Due to Davis just started to work,so that his salary is really low, and his brother is in national service now. So, the whole family expectation and hopes is on David. Then David think that he want to give their family some financial protection and plan, just in case any accident is happen on him. Below is some data for the David’s family financial data:

Expenses:

1. Electric & Water bill – $80

2. Internet – $40

3. House repairing / renovation – $20

4. House loan & insurance – $255

5. Land tax – $30

IGA:

1. Saving Insurance – $30

2. EPF – $2168

3. Income – $1200

Income Tax:

1. Personal – $0

Family Expenses:

1. Food – $250

2. Cloth – $50

3. Family Midical Plan – $0

4. Pocket Money for Parents – $300

Personal Expenses:

1. Food – $200

2. Cloth – $50

3. Phone Bill – $30

4. Transport – $100

Few days ago, i heard from my colleague that there is a rich but single uncle (don’t know why,didn’t discover the reason), his hobby is saving. He love to  work hard and accumulate his “money bag” become bigger and bigger. Beside, this uncle has a goals in saving, is to purchase a unit of high class condominium and enjoy for his retirement life. He is plan to pay by cash, because he is not so believe with those financing / loan firms  and banks.

After few years, the saving is become more but he still can’t afford to buy the condominium (due to inflation, products / housing price increase). He never find out the problems behind and keeping work harder and save more. The time passed by really fast, the value of the money he save is keep decrease but the inflation is keep on increase year by year, but he still don’t know what is happening. Then he go to looking for my colleague. Finally, the uncle understand that the interest rate  given by the bank can’t against the inflation rate. But he already wasted a lot of time in saving, and now he have to buy the condominium by loan.

In this story, we can see that the uncle using most of his lifetime is saving, but at last he still can’t withstand the inflation. So, for the younger generation like you all, what have learn in this story? Saving is a tool to accumulate your wealth, but beside that you still need to accelerate your wealth in order to against the inflation.

Mr.A is a busy businessman, he spent most of his free time to do research and monitor about the investment portfolio or online to look for the update of investment market. Slowly, Mr.A has getting some good return from his investment and he also expanded his business. Beside the business & investment, he also have a happy family – a pretty wife & 2 cute kids. But unfortunately, an serious accident is happen to Mr.A in a night. Because of the accident, Mr.A become total permanent disability and nobody is monitor his investment portfolio.

Furthermore, the share of Mr.A is slowly taking over by the other shareholder. His wife and child can do nothing to stop it and let the shareholder do anything at will. After that, his wife and childs have to work in the hawker center for the living cost and the education fee of his children. All of their friends feel sad and pity of them. Do you think that Mr.A is a responsible husband or father to his family??

For Mr.B, he is a totally different with Mr.A. He is a normal working adults with introversive and fainthearted. He work as a manager in a company and his wife is a insurance agent. So, when it come to the end of months, his wife will ask him to take out some money to help her to hit the sales target. For Mr.B, his goals is to save some money every month and invest but his investment plans were delayed because of helping his wife to hit the sales target. So, actually his wife is earning a lot Mr.B money, and most of their money is allocate in the protection part, and it doesn’t help them to gain the higher returns. How they going to achieve their financial freedom??

From this story, we can know that NO PROTECTION or OVER PROTECTION will not help in you financial plan. Only with the SUITABLE PROTECTION, GOOD STRATEGY, & WELL CASH ALLOCATION then you are able to achieve your goals in your financial plan. So, you are Mr.A or Mr.B??