How much is Enough?

In the world today, we are being brainwashed to think that we should have more and more. We should have more things, more money, more social media likes, more food, more gadgets, more of everything.

Success in life is often judged by external indicators like luxury items, popularity, salary, or status items. But, in reality, these external indicators are actually poor guideposts because they are not the real indicator of true wealth, contentment or positive lifestyles. The reality behind the shiny facade is often debt, money worries, stress, poor health, and dysfunctional relationships.

Understanding the reality, we need to reject this acquisition mindset and the consumerism that everyone is being caught up in. Thus, in order to restore balance as we pull back from our lifestyles of excess, we should strive for a more moderate lifestyle and care less about what other people think about us. With this, we may experience greater fulfillment and happiness.

Never enough

The problem with the current society is what we have is never enough. We would want more of everything. Collectively we are better off and have more than any generation before us, but it still isn’t enough. Even when we have everything we need, we are told that we must have better, upgraded versions of our endless possessions.

The race for more is a vicious cycle. The more we buy, the higher our expenses will be. Thus we need to work harder and longer to pay for these expenses, resulting in less time to enjoy life and more stress. Then, we would spend for more goods and services to compensate and make us feel better. And the cycle repeats again and again.

Striving for a more simple life

Instead of running the never-ending race for more, it would be better for us to strive for a more simple and moderate life. 

Life is not about how fast you get to the end. Rather, it is a marathon that we would take time to enjoy the scenery and companionship of your family and friends.

By understanding that more does not mean better is one of the first steps. There are many times that when we take things easy, we would be much happier.

Take a step back and stop everything that you are striving for. Take your time to look into all these goals and activities. Do you really need them or it is just a wants? Would it really make you happier? Does it improve your life by a large margin? Is there something similar that can give you just as much happiness?

Take an example of myself. My dream car when I was young was actually a Honda Civic. But the cost of buying that new car then was about RM 100,000 which is an exorbitant amount of money that I could not afford. So, instead of working endlessly to pay for the installments, I look into other alternatives that are more affordable. In the end, I bought a new 2003 Perodua Kelisa (which I still own until today). This Kelisa is still as good as it used to be and even until now, I am happy with it and have no thought of selling it, even if the one buyer is willing to pay double or triple the current price.

This article is first published in Radical Ringgit.

How to set a SMART Financial Goal

It is always a good thing if we could have goals for our personal finance. But a lot of times, many people (me included), does not know how to set our own financial goals.

Today, we would like to share how we can actually set a SMART financial goal.

The Acronym SMART actually stand for the following Specific, Measureable, Attainable, Relevant and Timebound. Let us look a bit more detail into each of them.

Specific: State exactly what you wish to buy/accomplish with the money you save.

Measurable: Indicate the exact dollar amount you need to accomplish your goal.

Attainable: Identify the steps necessary to reach your goal.

Relevant: The goal must be meaningful or you may lose motivation to stick with your plan.

Time-bound: By when do you want to meet your goal?

Now that you understand how a goal should be, you would no longer set a goal such as the following:

"I want to save a lot of money."

Instead, your goal should be something like the following:

S: I want to save for a down payment for a Honda City.

M: I plan to save RM 6,000 for the down payment.

A: I will reach my RM 6,000 goal by saving RM 250 from my monthly paycheck.

R: The commute to work takes more than 2 hours each way. Using a car, I can reduce the commute time to 1 hour only.

T: By saving RM 250 a month, I will save RM 6,000 in 20 months, or 2 years.

The SMART Financial Goal will be as follow:

“I plan to save RM 6,000 for a down payment on a new Honda City by saving RM 250 from each monthly paycheck for 2 years.”

Be sure to record your monthly savings for your SMART goals on your spending plan spreadsheet.

16 Ideas to Kickstart Your Finance in 2020

With the start of the new year, there are some actions that you can take to kickstart your finance on the right path. I have prepared 24 ideas that you can take for the year 2020.

1. Declutter your house (or room)

We may have not noticed but over the years, we may have bought many things that we might have forgotten now. So, take a weekend and start cleaning and decluttering your house.

Items that you no longer need can be categorized into the following:

1. Trash to throw.

2. Stuff to donate.

3. Stuff to sell.

The idea is really simple because, once you clean and declutter your house, you will have more living space and for that stuff that you can sell, you will get some cash back. 

More importantly, you will get to see the stuff that you have purchased and not using (making it a waste of your money) and would give you a reminder to think properly before your next purchase.

2. Automate your savings.

As I have written previously, many of us have a mindset where we will save whatever money that we have left at the end of the month. However, the reality sucks and even before the end of the month, most of our money would have been used up, making it not possible for us to save. The reason why this is happening is because of our habit. We can still see the money in our bank accounts, so we subconsciously think that it is still okay to spend.

So, to make savings works, we should set aside our savings at the beginning of the month and that is where automate your savings comes in. Set a certain amount of money to be transfer to another saving accounts (or investment like Wahed Invest) at the beginning of the month and live your life with whatever you have left. Truth be told, you will not miss that amount of money that you have saved, seriously.

3. Try budgeting for a month

If you have not tried budgeting yet, you should try it. The simple way is to track where your money went for the previous month and budget accordingly for the coming months. Again, it makes you more conscious about your spending and lowers the possibility of overspending.

4. Review your Budget

The only thing that is constant in this world is God and changes. So, our lives today may not be the same as last year. You might have changed to a new job or have a new baby in the family. So, your budget should change according to your current life.

5. Eat at home

If you have been tracking/checking your spending/budget, you would soon realize that a big portion of our spending is on eating out. A meal for a family of 3 would cost about RM100 and that is a lot of money. But if we are eating at home (not delivery from restaurants), the cost would be much lower. My family's meals at home usually cost not more than RM 25 per meal. That is a lot of savings and imagine doing that for 20 days, you will be saving about RM 1,500.

6. Cancel memberships/subscriptions

There are many things that we love in our lives and looking at that small cost, we would not think twice to sign up for membership or subscription. Gym membership and Netflix subscription are things that are good to have but do not necessarily need. Instead of the gym, go and run at the local park and instead of Netflix, watch videos on Youtube. It is just as good. 

7. Limit guilty pleasures

Every one of us has a soft spot for certain things that we have much pleasure with, even if we know that it may not be good for us. Items such as cigarettes, beers, chocolates, sweets, etc are such items. We know that it is not good for us but we still fell for the temptations. But instead of stopping it altogether, we can put a limit on it so that the temptation would not be too much to bear. Imagine the money you can save just by limiting your guilty pleasures. My chocolate addiction cost me RM 50 per week but by limiting my chocolate intakes, my cost for chocolates is down to RM 20 per month.

8. Save Your Spare Change

Whenever we use cash, there is a high chance of us getting some spare changes back. Many would take it that these spare changes are not much but over a certain period of time, we can actually save a significant amount of money. It has been my habit to save my spare changes and over a period of a year, I would have accumulated about RM150 just from spare changes. It is an easy thing to do. Every day when you get home, whatever spare changes that you have in your pocket, put it into a piggy bank (or whatever container you like) and leave it. At the end of the year, you will see a significant amount of money that you can use.

9. Use Cash Back Apps

Whenever you purchase something online, it is best to use a cashback app to get some cash back. We have Shopback in Malaysia and over the years, I have managed to get RM300 cashback with another RM 327 still pending. Use my link to sign up and get RM5 cashback bonus.

10. Make Your Home Energy Efficient

New technology means a new way to make our home more efficient. When we moved into our new home last year, we choose to use LED lightings, air conditioners, water heater and even oven that has a 5-stars rating which is more cost-efficient. And when we are more mindful of the usage, we managed to bring down our electricity bills from almost RM 90 per month to slightly more than RM 50 per month.

11. Wait 24 Hours Before Buying

A lot of times, we would have an impulse to buy certain items. That is a reason we would have many items in our home that we hardly use and have to be throw away, donate or sell when we clean and declutter our home. But by waiting for 24 hours before buying, we may have a second thought about buying and high chances, we would choose not to proceed with the purchase. But if we still think we need to buy that item, chances are, we really need it.

12. Consolidate Your Debt

If you have debts all over the places, such as a few credit cards and personal loans, it is hard to keep track of all of it. A good thing to do is to consolidate the debts into one. There are two advantages to doing this. First, you only need to track one instead of many. Second, it is possible for you to get a lower interest rate and save money on your interests.

13. Use Savings To Pay Off A Loan

If you have a loan that is about to clean and you have enough savings to clear it, do it. You will be able to save on interest and for the coming months, you will have additional cash for other things. I would suggest you save or invest the additional cash.

14. Invest

The best time to start investing is yesterday. The next best time to start investing is today. The earlier you start investing, the better it is for your future. That is the magic of compounding interest.

If you were to ask me where to invest, I would gladly inform you that I would much prefer to invest in the US market. There are many ways to do that and the easiest way that I could find right now is to use Wahed Invest (look for the app in Google Play Store and use my referral code (limwei1) and you will get RM40 after you keep your investment (RM 100 minimum) for at least a month). Wahed Invest is a robo-advisor that provides halal investment and you can read more in my review here and here.)

15. Turn Your Hobby Into Cash

Everyone has a hobby and if it is possible for you to turn your hobby into cash, then you would be earning money while enjoying your hobby.

16. Refinance

Refinancing your mortgage is a great way to save thousands in interest and also potentially lower the monthly payment at the same time. For example, if you have a RM 200,000 fixed-rate mortgage at 4.5%, you will be paying RM 1,013 a month. Over a period of 30 years, you will be paying RM 164,813 in interest, and that is assuming you don’t make any extra payments along the way. But if you refinance the same loan into a new 20-year mortgage at 3.5%, you will only need to pay RM 719 a month and save almost $300 a month. Do note that this doesn’t take into account the interest savings you will get as well.

This article was first featured in Radical Ringgit.

Buying a car without a loan

Everyone believes that it is impossible to buy a new car without a loan but that does not mean that it is really impossible. What actually requires is patience, hard works, and the right method.

Why should we buy a car without a loan is because the interest that we have paid by the end of the loan period will actually amount to almost a second car by itself? Also, a car is the type of assets that would depreciate in value over time. So, why pay even more for something that is depreciating in value. 

Firstly, we must work on how much can we afford to pay for the monthly installment. Can you pay RM 500 per month or RM 1000? If you can afford to pay this amount for a monthly installment, you should pay it to yourself first before buying that car.

Instead of buying that dream car of yours straight away, look for a decent second-hand car (as a temporary car) with an affordable value. A second hand Perodua Kancil will cost about RM 4000 (at the time of writing) and the good thing about the car is how fuel-efficient it is. So, if you can pay yourself RM 500 per month first, you can buy it on cash after 8 months of paying yourself.

After purchasing this temporary car, continue to pay yourself the same amount every month. By doing this, you are accumulating your fund to upgrade your car to a better one.

Repeat as needed until you are able to buy your dream car. While it may take many years before you get your dream car, at least you would not need to pay for the interests.

This article was first published in Radical Ringgit.

Personal Income Tax

It is the end of the year. Have you maximize your tax reliefs?
Below is a simple guide regarding the tax rates and tax reliefs for those who are eligible.

Tax residence status of individuals

An individual is regarded as a tax resident if he meets any of the following conditions, i.e. if he is:

• in Malaysia for at least 182 days in a calendar year;
• in Malaysia for a period of fewer than 182 days during the year (“shorter period”) but that period is linked to a period of the physical presence of 182 or more “consecutive” days in the following or preceding year (“longer period”). Temporary absences from Malaysia due to the following reasons are counted as part of the consecutive days, provided that the individual is in Malaysia before and after each temporary absence:

                               - business trips
                               - treatment for ill-health
                               - social visits not exceeding 14 days

• in Malaysia for 90 days or more during the year and, in any 3 of the 4 immediately preceding years, he was in Malaysia for at least 90 days or was resident in Malaysia; or
• resident for the year immediately following that year and for each of the 3 immediately preceding years.

Rates of tax

1. Resident individuals

• A qualified person (defined) who is a knowledge worker residing in Iskandar Malaysia is taxed at the rate of 15% on income from employment with a designated company engaged in a qualified activity in that specified region.
• An approved individual under the Returning Expert Programme who is a resident is taxed at the rate of 15% on income in respect of having or exercising employment with a person in Malaysia for 5 consecutive YAs.

Personal reliefs for resident individuals

Types of relief	YA 2020 (RM)
Self	9,000
Disabled individual - additional relief for self	6,000
Spouse	4,000
Disabled spouse - additional spouse relief	3,500
Child:
· per child (below 18 years old)	2,000
· per child (over 18 years old): receiving full-time instruction of higher education in respect of: - diploma level and above in Malaysia; or - degree level and above outside Malaysia OR serving under articles or indentures in a trade or profession in Malaysia	8,000
· per physically / mentally disabled child	6,000
· physically / mentally disabled child (over 18 years of age) receiving full-time instruction at institution of higher education in respect of: - diploma level and above in Malaysia; or - degree level and above outside Malaysia OR serving under articles or indentures in a trade or profession in Malaysia	14,000
Life insurance premiums (Note 1)	3,000*
EPF contributions (Note 1)	4,000*
Private Retirement Scheme contributions and Deferred annuity scheme premium (until YA 2021)	3,000*
Insurance premiums for education or medical benefits	3,000*
Expenses on medical treatment, special needs or carer expenses for parents (evidenced by medical certification)	5,000*
Parental care relief (until YA 2020): father mother	1,500 1,500
Employee’s contribution to Social Security Organisation (SOCSO)	250*
Medical expenses for self, spouse or child suffering from a serious disease (including fees of up to RM500 incurred by self, spouse or child for complete medical examination) or expenses incurred on fertility treatment (w.e.f YA 2020)	6,000*
Fee expended for any course of study up to tertiary level other than a degree at Masters or Doctorate level, undertaken for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications or any course of study for a degree at Masters or Doctorate level undertaken for the purpose of acquiring any skill or qualification	7,000*
Purchase of supporting equipment for self (if a disabled person) or for disabled spouse, child or parent	6,000*
Lifestyle relief consolidated with the following:       purchase of books, journals, magazines, printed newspaper and other similar publications for the purpose of enhancing knowledge       purchase of personal computer, smartphone or tablet       purchase of sports equipment and gym memberships, and internet subscription	2,500*
Purchase of breastfeeding equipment	1,000*
Fees paid to child care centre and kindergarten (Note 2)	2,000*
Deposit for child into the Skim Simpanan Pendidikan 1Malaysia account established under Perbadanan Tabung Pendidikan Tinggi Nasional Act 1997 (until YA 2020)	8,000*

Maximum relief
Note:
1. For public servants under the pension scheme, combined relief up to RM7,000 is given on Takaful contributions or payment for life insurance premium
2. Previously the relief was limited to RM1,000 in YA 2019

Tax rebates for resident individuals

Types of rebate	RM
Individual’s chargeable income does not exceed RM35,000	400
If husband and wife are separately assessed and each chargeable income does not exceed RM35,000	400 (each)
If husband and wife are jointly assessed and the joint chargeable income does not exceed RM35,000	800
Rebate for Zakat, Fitrah or other Islamic religious dues paid	Actual amount expended
Rebate for departure levy paid for performing umrah and pilgrimage to holy places (w.e.f YA 2019)	The actual amount expended (twice in a lifetime)

The above rebate granted is deducted from tax charged and any excess is not refundable.

Wahed Invest - First Impression Review

The first third robo-advisor in Malaysia was officially launched last week. Wahed Invest, is the first Halal robo-advisor that provide investors a chance to invest with shariah-compliant companies and bonds.

In comparison to MyTheo and Stashaway, I felt that to invest in Wahed Investors my preference as I have always wanted to invest in those largest companies in the USA, such as Apple, Facebook, Microsoft, Google, etc. But to invest directly will be very cost-ineffective. To invest via the only US Dollar-denomination ETF, MyETF Dow Jones US Titans 50, that invest in these same companies, you have to open a US dollar account with one of the local banks and the process is tedious. 

Highlights from Malaysia's Budget 2020

Below are the highlights from Malaysia's budget for 2020:

• 10 yr tax break for the electronics sector that shifts towards 5G and Industry 4.0.
• Shorten procedures to register a business.
• Allow delayed payments at customs to speed up trade.
• MYR 250m on rural connectivity.
• MYR 50m for the 5G ecosystem.
• MYR 550m grant for companies to automate, promote smart manufacturing.
• MYR 20m for e-sports.
• MYR 30 in credit to open e-wallet.
• MYR 500m guarantee for women entrepreneurs.
• Grants to improve financing access for Bumiputeras.
• MYR 2bn industry transformation.
• Special task force for Islamic Finance.
• Extension of the tax break for Sukuk issuance through 2025.
• Extends tax break for Syariah funds through 2023.
• Extends tax break for green tech investments through 2023.
• Solar industry 70% income tax break for 10 years.
• MYR 550m for palm oil farmers replant.
• MYR 810m for FELDA settlers.
• MYR 524m for the public R&D sector.
• A 10-year tax break for intellectual property.
• MYR 1.1bn on tourism targets 30 million tourists in 2020.
• Special investment incentive to attract Fortune 500 global companies.
• Incentives to help unemployed graduates for >12 months, top-up MR 500 for the employee, MYR 300 to the employer for hiring the employee.
• Increase maternity leave to 90 days.
• Higher minimum wage MYR 1,200/mth in main cities.
• SME tax threshold raised to MYR 600k (from MYR 500k), taxed at 17%.

Looking at the list, I felt that it has actually ignored the M40. A lot of the budget is for the B40 and companies. Nothing much for the rest of us. A reduction in income tax will be much appreciated. With living expenses on the rise, less income tax will be helpful. Only happy that we are getting RM30 in our e-wallet. Now, I wonder which e-wallet will the government transfer the RM30 to, since most of us have Boost, TnG eWallet, Bigpay, Setel, etc.

Still, if you already have a financial plan ready, just continue with the plan. Any additional stuff that the government gives is a bonus.

KWSP i-Invest: Review

A few days ago, the Employees Provident Fund (EPF) has launched its i-Invest platform which allows its members to invest in unit trust funds with their EPF savings. The great thing about this platform is that it is almost zero cost.

With this platform, members can invest with a sales charge ranging from 0% to a maximum of 0.5% of the transaction amount. As a comparison, offline and traditional transactions through agents are usually charged at 3%.

The conditions for investing via i-Invest are under the Members Investment Scheme. Members may transfer from their EPF Account 1 up to 30% of the amount in excess of Basic Savings, to be invested in the qualified funds. The platform is very user-friendly and there is a lot of information given regarding each fund. 

For members aged 55 and above, they can also use i-Invest using Akaun 55 or Akaun Emas through i-Akaun as a mode of withdrawal. It is also subject to a minimum balance of RM1,000 in their account.

EPF has strict guidelines for Fund Management Institutions (FMI) to safeguard the integrity of the scheme and the interest of participating members. There is a total of 389 funds from various categories (equity, mixed assets, bond, money market, and property trust) that were approved under the EPF Members Investment Scheme for the period of 2019/2020.

You can get started by logging in to your i-Akaun, then click on the “Investment” tab at the top.

Alexiares' comment on i-Invest:
Do not rush in to invest in this platform. Do your due diligence to make sure that you know what you are getting yourself into. Do note that while it is possible for you to get higher returns from investing at those private funds, it is possible to for you to lose money.

The sales charges range from 0% to 0.5% of the transaction amount. So, if you are investing RM10,000, you will be paying RM50 for the sales charges. And remember that when you sell the investment, you will be charged again. So, if you made RM 1,000 after a certain period of time, you would be paying RM 55 for the sales charges.

Personally, I would not touch my EPF accounts and let it reap the benefit of an average of 6% given by EPF. So, if you are not willing to take the risk, don't try this.

KWTBB - Kumpulan Wang Tenaga Boleh Baharu

I was looking into my house's electricity bill and I noticed that I was paying for 1.6% surcharge for KWTBB. The amount was small but it just captured my attention. Thus, I began to look into what this KWTBB is.

Not my bill. Just one that I found on the internet.

It turns out that this KWTBB is "Kumpulan Wang Tenaga Boleh Baharu". The name in English is "Renewable Energy Fund". The 1.6% levy for ‘Kumpulan Wang Tenaga Boleh Baharu’ is used to develop Malaysia’s renewable energy program. It is meant for maintaining a mechanism called the Feed-in-Tariff (FiT). The FiT allows homeowners and businesses to earn money by producing energy through renewable resources that will be fed into the utility grid for distribution throughout the country. In other words, those who participate in the FiT program will be generating energy that Tenaga Nasional Berhad (TNB) will use to produce the electricity that we consume on a daily basis. The idea is to reduce our reliance on fossil fuels as a source of energy (a non-sustainable option in the long run).

From what I have learned, only households that consume electricity above 300 kW (electricity bills that exceed RM77) are required to pay this surcharge. So, if you do not want to pay for this 1.6% surcharge for KWTBB, save more on your electricity usage.

Electricity Bill - How are we charged by TNB

I was curious about how our electricity bill is being calculated. Thus, I decided to do a bit of research on this topic. My first stop is Tenaga Nasional Berhad website, www.tnb.com.my. I have learned that there are many different types of tariffs, depending on which category you are in. But for the sake of our common people, we would be interested in only two tariffs: Tariff A for domestic tariff and Tariff B - Low voltage commercial tariff.

How does both this tariff is related to us?

Tariff A is meant for residential areas, such as your house, no matter it is a bungalow, linked house, apartment or condominium. The way the electricity bill is being calculated is the same.

Tariff B is for low voltage commercial buildings, which include service apartment that some of us may be staying in.

Below is the Tariff A and B:

So, for most of us that stay in houses, apartments or condominiums, we only look into Tariff A. From the way it is structured, the more that you use, the more that you would have to pay. Let us look into a simple home that used about 374 kWh.

For the first 200 kWh, we would have to pay RM 43.60 (200 kWh x 21.8 sen/kWh)
For the next 100 kWh, we would have to pay RM 33.40 (100 kWh x 33.4 sen/kWh)
For the balance 74 kWh, we would have to pay RM 38.18 (74 kWh x 51.6 sen/kWh)

Thus, the total payable is RM43.60 + RM 33.40 + RM 38.18 = RM 115.18

But if your house used about 748 kWh, you would have to pay a lot more

For the first 200 kWh, we would have to pay RM 43.60 (200 kWh x 21.8 sen/kWh)
For the next 100 kWh, we would have to pay RM 33.40 (100 kWh x 33.4 sen/kWh)
For the next 300 kWh, we would have to pay RM 154.80 (300 kWh x 51.6 sen/kWh)
For the balance 148 kWh, we would have to pay RM 80.81 (148 kWh x 54.6 sen/kWh)

Thus, the total payable is RM43.60 + RM 33.40 + RM 154.80 + RM 80.81 = RM 312.61

If you look carefully, I deliberately double up the quantity from 374 kWh to 748 kWh to make a point here. While the total electricity is double, we are paying more than double for it. Thus, the best thing that we could do to minimize our electricity bill is to minimize our usage.

There are many tips that can help but the few that I find most helpful are the following:

1. Air-conditioning temperature to be kept at 25 or 26 Deg C.
2. Use mild temperature on water heater when taking a bath.
3. Iron your clothes in batch.

Do you have any other tips to help bring down the electricity bills?