The Side Hustle Series 1 - Validate That Idea

 There are many ways to increase our income. Some prefer to invest in the stock market for passive income, and others would work on a side hustle. There is no right and wrong way. Each has its pros and cons. This article will be a series of articles that will discuss mainly on starting a side hustle.

Let's admit it, we all have that one big idea that we believe will change the world. Some of us may have more than one. I personally have quite a few and at least one of it has become a small side hustle for myself. I was lucky because I took action on the idea. And the results are showing that I am on the right track.

Have you taken the action for your big idea?

Many of us would not dare to take action because we have been told that to start something, we need to have Ringgit first. (And for those that did, chances are, it didn't work out.)

This thought came from the saying that "It takes money to make money" but it is not real. Do you know the origin of the saying? It was to by a comedian for a play as a joke! And yet, many of us actually choose to believe that it is true.

And because of this saying, there are a lot of "starting a business" guide on the internet would tell you that you would need a business plan prepared by a professional first because that's the way it should be. In the business plan, you will put in a lot of information. You would find out that you need a lot of Ringgit to start because you will need to rent/buy an office (not forgetting the furniture and all related office items), registered the company, print name card, etc. according to your business plan.

I am sorry to tell you that this is all BS. It is on the internet to makes you believe that it is real so that you would engage the professional to write a business plan for you. What happened in the end? You will pay a certain amount of Ringgit to the professional even before you start.

You don't need a business plan to start. You need an idea to take action on. With the power call internet, it has become so easy to take action without breaking the bank. I started mine with 0 (zero) Ringgit.

But I have so many ideas. Which one should I focus on?

It is easy to feel overwhelmed because we are not sure which idea we should focus on. It was the same as mine and in my opinion, the best way is to focus on an idea that came about from our own needs.

In early 2020, I was looking for ways to find the right companies to invest. I was particularly intrigued by the idea of dividend growth investing where we invest in companies that pay out increasing dividends on yearly basis. This concept leads to the creation of the US Dividend Champions List and many similar lists have been created for a few other countries. Unfortunately (or should I says, fortunately), there is no such list in Malaysia yet (at least I don't know). So, I took the time to start researching the market and after a few months, I have established basic criteria and more than 30+ companies are able to meet these criteria.

With some help from my partner, we work out the concept into "The Malaysia Dividend Champions List" and we start promoting it to the world. It takes a while for it to start moving (people signing up) but things have been steady now. All these are done without using a single Ringgit to start but it does take a lot of our time.

Our own story for "The Malaysia Dividend Champions List" is just one of the side hustle that was started without putting in a lot of money. Some started without any Ringgit and yes, it can be done.

So, if you have an idea that you wish to test if it is workable, you can try to pitch the idea to your relatives and friends. Most of the time, you will not get real feedback because they don't want to hurt your feelings. To counter this, tell them how much you are charging for it and ask if they will sign up right there and then and become your first customer. When real Ringgit is involved, you will get their true feedback. If they rejected your idea, don't be dismayed. Use the feedback to improve your product/services or the reason to stop and focus on the next idea.

If there is at least one who signs up, you already have a winner. You have validated your idea.

Side note - even when you didn't confirm your idea, it is okay to move on to the second stage to build up your idea. This post was first published in Radical Ringgit.

Should Malaysians strive for Financial Independence?

 

There have been reported that 76% of Malaysians do not have enough savings to last them for 3 months if some unexpected events (loss of job, accident) happened in their lives. Most of us believe that because we have a job that is paying us every month, we are safe. Thus, many people do not save much.

But it may not be true. The current Covid-19 pandemic is a very good example. Covid-19 pandemic basically put most of the economy in the world into a standstill and many companies are unable to sustain in paying the salary of its employee. Thus, there are many people that have lost their job or would experience some pay cuts.

Without enough savings, many of these people are in a very bad situation.

It is only with the correct financial know-how that we are able to overcome this and the concept of financial independence is the know-how to overcome this situation.

The basic of financial independence is to be able to have a nest egg that would be enough to sustain the required expenses in case of losing the ability to earn, whether because of losing a job, accident, or even loss of life.

The simple steps to financial independence are as follows but it does require certain discipline to make it a success:

1. Understand where your money comes from or where it goes. A full record of the most recent income and expenses will give a good idea of your financial situation.

2. Minimize/eliminate debts, especially lifestyle debts such as credit cards and personal loans.

3. minimize spendings by spending only on needs instead of wants, though some want is acceptable but not excessive.

4. increase income by buying assets or starting a side hustle that will generate long-term incomes.

By knowing your financial situation, you will be able to eliminate debts and lower down the spendings. This will help to lower the required amount of passive income, and thus making financial independence easier to achieve. By increasing the income, especially passive income from income-generating assets, there will be a time when it is okay no matter what type of economic downturn that you may face.

So, in my point of view, financial independence is something that everyone should strive for. Even if you are not there yet, the benefit of eliminating your debts and increasing your incomes will benefit you greatly.

This post was originally posted at Radical Ringgit

Save 20% or More on Your Electricity Bill

Electricity bills are getting more and more expensive as we are staying at home more often due to the lockdown for Covid-19 pandemic. However, it is possible for us to save up to 20% or more on our electricity bill. Our electricity bill are usually not more than RM 80 every month even though we have 4 air-conditioners, 2 water heaters, a fridge and an inductor cooker. From my understanding, the bill for our neighbours are usually at the range of RM 100 to RM 150.

Below is some steps that we took to save on our electricity bills:

Use LED light

With the advancement of technology, the current LED light is as good as, if not better than the conventional light bulb. In fact, the LED bulbs and lights are able to save up to 85% of the energy compare to the incandescent lights. It is also more eco-friendly, durable, energy efficient and affordable.

So, my best suggestion is for you to change your lightings to LED lightings when your current lights "give up".

Also, using natural light would help to keep the bill low.

Manage the cooling system.

We are living in a tropical country and most of the time, the temperature in our home would be hot or warm. We would need the air-conditioner to avoid being roasted by the heat. As mentioned earlier, our home have 4 units but it does not contribute a lot to our bills.

We do that by making sure that we set the temperature toward room temperature (aka 25 Deg C) instead of the lowest temperature possible on the air-conditioner unit (16 Deg C). If you turn it to 16 Deg C, your air-con unit will need additional energy to bring down the temperature. But if you keep it at 25 or 26 Deg C, it is still cooling but would not burn your pocket.

An inverter air conditioning unit will be helpful too because it will "stop" when the right temperature is achieved and start again when it is out of a range. This is better than the conventional air conditioner that continue to blow out cool wind no matter what is the temperature.

Also, never forget to service your air conditioner unit from time to time. It helps by making sure that your unit is running at the best conditions.

Electrical appliances

1. Change the old fridge to a new one. Look for the one with 5 Stars rating as these fridges would be more energy saving. Yes, you may pay a bit extra initially, but you will be using it for 10 or even 20 days. The amount of electricity that you would save would be worth more.
2. Just like the air-conditioner, don't turn the water heater to the extreme when you can adjust it with the intensity of the water flow. Running it at optimum temperature with suitable water flow would give you the same shower experience and save money.
3. Use your washing machine when you have a full load. Believe it or not, the amount of energy use would be the same whether you have a full load or half a load. Also, use cold water for washing as heating up the water will cost more.
4. Turn off the electrical appliance when it is not in use. Items such as TV, computer, rice cooker, etc.

This post is originally posted at Radical Ringgit.

3 Reasons Why I Would Not Invest in Gold

While many people would tell me to buy gold to invest, I felt that there is no reason why I should have gold as part of my investment portfolio. Thus, after many arguments (with myself in my mind), I have decided to write a post on why I would not buy gold as an investment.

I know that many gold lovers would hate me for this but still, you can read what I got to say and decide later to hate me or not.

1. Gold is not an investment

For me, an investment is something that would provide a certain return of investment for as long as I am holding that investment. For example, if I am holding some shares of Public Bank Berhad (PBBANK), I would be receiving a certain amount of dividends every year. I don't see how that happens when I am holding Gold. The only way I can realize the return of investment is when I sell it.

2. Gold is gambling

That brings me to my second point. When you buy gold, what do you hope for? Obviously, you are hoping for the price of gold to go up and when you sell it, you would get your profit as your return. What if the price goes down? That will be a loss. And when you look at the price, there are only two possibilities, UP or DOWN. Hmm, that sounds familiar. Something like a game of chance (Sic Bo). SO, for me, buying gold as "investment" is actually a form of gambling.

3. What is the worth of gold?

What is the worth of gold? It is only worth what people are willing to pay for it. Still, it has little real value as in 'the things you can actually do with it'.

If you can do this, it will be great but no, you are not Scrooge McDuck.

As Warren Buffett once famously said about gold:

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

You can argue that gold is used in your smartphone and some other electrical items, but the quantity used is not really significant. The primary use of gold is actually for jewelry. Jewelry use up 78% of all gold production. And what do you do with jewelry? You either wear it and let others see it or you keep it in a box in your house or bank. Truth be told, even my wedding ring is not made of gold.

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.

Insurance 101 - What is Insurance anyway?

Insurance is an arrangement whereby a company or government agency would provide a guarantee of compensation for specified loss, damage, illness, or death. In return, those that bought the insurance will make a payment to the company call premium periodically. 

For Malaysia, we also have Takaful, the shariah compliant version of insurance. The concept of Takaful insurance is based on the Shariah laws whereby a group of participants mutually agree among themselves to guarantee each other against a defined loss or damage that may inflict upon any of them. These participants will be contributing a tabarru’ or donation into the takaful funds. Takaful emphasizes unity and co-operation among the participants.

What insurance basically means is that you as the policy owner would pay the insurance company a sum of money (called the premium) periodically. In return, the insurance company would undertake to protect you, by compensating you for the damage or loss of what you have insured. The insured items can be your house, car or yourself, in case of illnesses or death. 

Insurance would help you manage your risk. That is the reason it is also called a risk management system, where the risk is transferred to another party.

The 3 most common types of Malaysian insurance are:

• Medical and Health
• General
• Life

1. Medical and Health Insurance

This is the most basic insurance that covers you in case of illness or injury due to an accident or illness. It covers all medical expenses and, if necessary, hospitalization cost which can be quite overwhelming if you don't have enough savings to pay for the bills. This insurance is the most critical insurance that everyone needs.

2. General Insurance

General insurance protects things that are valuable to us. Valuable things such as our homes, our cars, and other possessions are insured under this insurance. Most of us get general insurance for our car or motorcycle when we purchase them for it is mandatory in Malaysia to buy insurance for the vehicle that you own. Also, when we bought a house with a loan from the bank, the bank will require you to purchase a house owner or fire insurance.

3. Life Insurance

Life insurance is a policy that pays out a sum of money (sum insured) to the beneficiaries upon the death (or other circumstances such as critical illness or permanent disability) of the person insured. It would be a good idea for you to consider purchasing life insurance once you have covered the basics of health and motor insurance. Life insurance is highly recommended when you start earning more than what you spend and when you have responsibilities such as spouse or kids.

By knowing the basics of insurance, you will be able to understand your needs better. This will help you in your search for the right policy. If you need more help in buying insurance, contact an insurance agent.

This article is first published in Radical Ringgit.

Who is Dave Ramsey?

In the world of personal finance and money, chances are, you already know who is Dave Ramsey. He is a radio personality turn author and public speaker who uses his own story of financial turmoil that followed by tremendous wealth as a way to teach others about personal finance.

The reason why he is so popular is that he understands the motivation people need to get out of debt. He breakdown the steps into 7 steps that he calls the Baby Steps:

• Step 1: RM 1,000 in an emergency fund.
• Step 2: Pay off all debts except the house by utilizing the "The Debt Snowball" method.
• Step 3: Three to six months of savings in a fully-funded emergency fund.
• Step 4: Invest 15% of your household income for retirement.
• Step 5: College Funding (e.g. SSPN-i)
• Step 6: Pay off your home early.
• Step 7: Build wealth and give.

Step 1: Save RM 1,000 in an Emergency Fund

Dave recommends starting off by focusing all your attention and energy on saving up $1,000 in an account and label it for emergencies only. By doing this he is able to get people to have a “small” win first, which will encourage them to continue the next baby step.

Step 2: Pay Off All Debt Except Your Mortgage

Baby Step 2 is all about psychology. This step is one of the most important ones that show his power of motivation by using something he calls “The Debt Snowball“ method. This method gives people quick wins from the start and keeps people motivated because the majority of people will be staying in this step for several years before they can get rid of their consumer debt altogether. The quick wins will help to keep the people motivated so they can continue to stay the course.

"The Debt Snowball" method is where you would list down all of your debts (except for your mortgage) from smallest to largest. Next, you would make minimum payments on all the debts and put every extra Ringgit towards the smallest debt until it is gone.

After the smallest debt is paid off, you would move on to the next smaller debt on your list. With this second debt, you would add what you were paying on the smallest debt plus the minimum payment you were already paying until it is paid off. Repeat this process with all the debts on the list until you are consumer debt-free.

When you start paying off the debts one by one, you will see that the snowball would start growing. It will cause the brain to release dopamine and serotonin (neurotransmitters) whenever you win something. These neurotransmitters will cause you to want to continue the process more and more.

Baby Step 3: Finish The Emergency Fund With 3 To 6 Months Of Savings

Once you are debt-free, you would have a good stash of ringgit(the money you used to pay off your debts) for other use. On Baby Step 3, this stash of Ringgit is best used to build up your emergency fund of 3 to 6 months of savings. Dave claims that by doing it this way, we're reducing the risk of having to go back into debt if we experience an emergency. If you do not do building up this emergency fund, how would you handle an emergency? Would you pull money from your children's college fund or get into debt again?

Once you have completed this step, you are now able to protect your family from major financial emergencies.

Baby Step 4: Invest 15% Of Income Into Retirement

It's natural for us to want to put our kids ahead of ourselves. But what if you end up without sufficient retirement income because you made the college funding a higher priority? You would have to depend on your kids to take care of you. Won't it be better for you to take care of yourself?

So before you begin doing anything with the excess money left over from paying off the consumer debt and building the emergency fund, Dave suggests that you invest 15% into your retirement accounts. For us Malaysia, this is in addition to our KWSP/EPF. If you are not sure where to invest in, you can look into the articles I have written on Wahed Invest here and here.

Baby Step 5: College Funding For Kids

By the time you reach this step, you should:

• have an emergency fund with 3-6 months of expenses
• be debt-free (except a mortgage)
• be investing at least 15% or more of your gross income

Now that you have your finances in order, it is time for us to put some money into our children's college education. It is a good thing that we actually have SSPN-i and SSPN-i Plus which are tax-advantaged accounts for educational expenses. How much should the amount be is up to you to decide? Tertiary education in public universities would be much cheaper compared to private colleges or universities. It is best to save more.

Baby Step 6: Pay Off Your Home Early

Dave recommends that you take any extra money coming in after you've progressed through the other Baby Steps in order, and throw it towards the mortgage. The faster you pay off that mortgage, the more interest that you would be saving once you have clear it.

Baby Step 7: Build Wealth And Give Generously

Yes, you have finally made it to Baby Step 7. You don't owe anyone anything and now it is time to really start building wealth and help others.  Dave actually wants us to reach this step and become financial independence.

Dave mentions that to build wealth, one should invest in both mutual funds and real estate but before you move in and start buying shares in every single company in Malaysia, read up on investing books or search the internet for what those who are financially independent do with their money.

Never forget about giving. The meaning here is to give to help others.

This post if first published in Radical Ringgit.