Family Finance

I want to get rich fast. What should I do?

Getting rich fast is many people’s dream. How can you do that? The followings show the list of things one can do to get rich fast.

If you want to do thing extremely well, you need to focus. “You get what you focus on!” Perhaps you need to start focusing only on wealth and your business. Be prepared that you won’t have time for your spouse, your kids and your parents. All these are the distractions.

The fastest way to get rich is based on either luck or extreme effort.

Take the money and gamble and you can get 100% or 200% within seconds. You often hear this, if you keep doing the same thing again and again, you will succeed one day. As long as you are consistent in this, one day, you might get the jackpot and become a millionaire.
Bet on a few stocks based on the “hot tips”. This can give you multiple return within few days to few weeks. You always hear that “hot tips” can earn big money. You can earn 100% in a month, why try value investing or mutual funds which are too slow.
Quit your job and start to sell something. When you are stuck in the job, you have endless excuses on why you cannot get the wealth you deserve. So, you can burn your bridge so that you can go all out to get what you want. If you are desperate, you will find things eventually work out for you.
Build your business. You always hear that entrepreneurship is a fantastic journey. Many businessmen become billionaires via business like Jack Ma and Mark Zuckerberg. Take all your saving and venture into a business. Ignore the fact that most businesses fail within the first 5 years. If you never try, you never know. Do you want to regret not trying? If the business can earn you millions of dollars within a short period of time, it can save you long time working hard to get the money you deserve. Why stuck in a 9-5 jobs and get paid little?

Don’t be angry after reading the above. I’m writing the above because most people want to get rich fast without realizing that there is no magic pill for fast success. If none of these strategies seems logical for you, perhaps you don’t really want to get rich fast by risking a lot or ignoring your families.

Certain people might get rich very fast through “luck” or they need to work very hard to get them to the path they want. It takes certain efforts and sacrifices. Getting the balance of the gain and effort is crucial in reaching financial success and satisfaction.

The fast way to get rich is never think about short-cuts. Ignore the extreme success story from others because they never tell you how much effort they have made to get there. If you are not ready to work, you might not get the same results. Start to plan your finance and execute better and properly based on your timeline.

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Financial management in your 30s

When you are in your thirties, you probably have just got married or have a very young kid. How you want to do well in personal finance, you must manage your finance better when you are 30s if you have not started during your 20s. How are you going to manage your finance better?

During this stage, you have new family members, expenses will increase too. If new house has been purchased, you have even bigger commitment.

First: take care of your family and wealth protection. Family protection becomes very important because there will be more commitments. If you are a bread winner, you need to have adequate insurance protection to cover the liabilities – the car or house loans. When death happens, the family do not need to bear your loans. Critical illness coverage is also important at this stage because when the bread winner suffers critical illness, the family needs more monies for supplements and treatment, the bread winner might not have the ability to work anymore. Hence, the family income will reduce tremendously. One needs to protect the income via critical illness insurance payout. How much is adequate? In general, the death coverage shall be 10x of the annual income and the critical illness coverage shall be 5x of the annual income.

However, at this stage, you will find that you have much more family expenses than when you are in your 20s. To save money, you may consider buying just term life insurance. Keep the insurance cost within 10-12% of your annual income.

Second: start preparing for retirement fund. In 30s, it is critical to start investment if you have not started investment before. Channel 20% of the income to investment for retirement fund. Watch the previous video I recorded for calculating retirement sum here. The later you start, it will be more difficult to accumulate enough funds for retirement.

Third: if you have children, you need to put aside extra 5% of your income for their children education fund. Education is the best gift parents can provide for the children. Hence, always prepare some monies for children’s higher education when the children are still young. The more time you have, the easier it is to accumulate the fund. You don’t want to regret not having enough money for your beloved kids when they are ready for tertiary education.

Fourth: scrutinize your tax and maximise the tax benefits given by the government. In 2020 tax year in Malaysia, you can get tax relief up to RM3,000 for life insurance premium, RM3000 for private retirement scheme, RM 3,000 for medical and education insurance, RM 8,000 for SSPN which is the children education contribution. As a smart person, you shall maximise these benefits because you need to protect your family, save more for your retirement and children education fee. While doing the necessary things, you save more taxes concurrently.

Fifth: Work smart and not hard. You cannot work harder and harder when the expenses keep increasing. You need to balance your family time and work time. Start to increase your sources of incomes, ideally some passive income streams. Expenses will start increasing until your retirement age. To maintain your saving rate, your need to have more income sources. You can also consider upgrading your professional skill so that you get higher pay hourly. Alternatively, you can start to have more investment properties, creating a business or intellectual properties which can bring you more passive income at the later stage.

Sixth: watch the saving and loan interest rates. You shall invest more than saving because saving rate is low. You need to schedule paying a little more loan payment every month so that you can finish paying off the loan faster. Pay the one with the highest interest rate first.

What if you cannot allocate the above-mentioned amounts for retirement and children education? Then, perhaps you are spending more than what you can afford. You shall try different ways to increase your income, understanding the 7 types of income streams here. You can also understand how you can spend wisely through this video here.

Watch the Youtube video here on this topic.

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Tapping into technology sector to increase your investment yield?

Do you know technology sector is the best performing sector for the recent few years? Due to the current pandemic, the demand for technologies has increased even more which contributed to higher revenue for the technology companies.

Source: Google: XLK sector fund performance

Based on the above, you can see the technology sector has been growing steadily since 5 years ago. The sector has grown nearly 150% for the past 5 years. If you are a potential investor thinking which fund you can tap into to increase your investment yield, here is the suggestion – TA Global Technology Fund managed by TA Securities (this is for education purpose and talk to your investment advisor before investing). Why this fund?

This is one of the oldest active managed funds available in Malaysia which can show consistent return over the past 10 years. In the recent few years, there are few more funds being introduced in Malaysia such as Principal Global Technology Fund launched in 2018 and United Global Technology Fund launched in 2017.

Part of fund fact sheet for TA Global Technology Fund: Up to July 2021

As shown above, the TA fund has grown more than 400% since the inception about 10 years ago, this translates to 18% annualized return. This is a fantastic return. For the past 5 years, the return is 173.53%, it is above the XLK sector fund.

Principal Global Technology Fund has delivered return of 117% over the past 3 years (as of June 2021) and United Global Technology Fund has over 105% return over the past 3 years (as of August 2021). Both these 2 funds have slightly better return than TA fund. However, these 2 funds have been launched only recent few years, the consistency of fund performance over longer term cannot be assessed.

Part of fund fact sheet for TA Global Technology Fund: Up to 30 July 2021

Part of fund fact sheet: Principal Global Technology Fund (up to June 2021)

Part of fund fact sheet: United Global Technology Fund: Up to August 2021

By looking at the above, TA Global Technology Fund and Principal Global Technology Fund focus more on big and established companies while United Global Technology Fund focuses more on emerging companies. Hence, United Global Technology Fund has higher volatility compared to TA fund.

Principal Global Technology Fund is quite a country focus fund with more than 88% of investment in US while TA Global Technology Fund has near to 80% of exposure in US with slightly more diversified regional portfolio.

By investing in the TA fund, investors can invest in the big and expensive companies like Google (Alphabet), Microsoft, Apple, Facebook, Amazon, Visa, Adobe, etc. easily without needing a big capital.

Amazon share price now is USD 3500

Google share price now is USD 2800

Microsoft share price now is USD 300

Apple share price now is USD 150

Facebook share price now is USD 370

Adobe share price now is USD 660

If we are to invest 1 share of the companies above, the total capital required will be USD 7780. It shows it will be more affordable for retail investors who want to start with lesser capital. The minimum investment for this fund is RM 1,000 or RM 100 monthly investment.

Charge of this fund is up to 5.5% for front end sale charge. The management fee is 1.8% per annum. Even with considering the management fee, the fund is performing better than the Technology SPDR fund for the past 5 years.

If you are interested to know more about this, you can contact me.

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China Investment? Which fund to choose?

Since the suspension of Ant Group’s IPO, China government has introduced unprecedented regulations to govern several sectors including the technology, food delivery and education sector. This does not seem to stop but continue for the past few months. Due to the regulatory crackdown, many retail investors have dumped the shares massively. The institutional investors have also reduced their exposure to the related shares to avoid the volatility.

As you can see the chart above, the MSCI China Index dropped 32.65% since the highest point. Does this freak you out?

If you have invested in Chinese equities, stay invested as the fundamental of Chinese equities remains intact. Subject to your investment portfolio, you can choose to top up to average down the price for the Chinese equities.

If you have not invested in Chinese equities, it could be a good chance to have some in your long-term investment portfolio. Be greedy when others are fearful!

So, what fund you can select for the China equities? You can look into Principal Greater China Equity Fund (this is for education purpose and speak to your investment advisor before investing). Why this fund?

Performance

Source: Morningstar

In terms of performance, comparing with other few peer funds, Principal Greater China Equity Fund has higher return short term and long term. As you can see from the Morningstar, the fund has been performing consistently above the benchmark since 5 years ago. It is also performing greatly compared to the similar category funds.

Return vs reward

Source: Morningstar

In terms of risk vs reward, you can see it has average risk compared to the category but with high return. It has high alpha compared to the similar funds, which is the excess return in relative to the return of benchmark index due to the active investment approach.

Others

This fund has been awarded 5-star by Morningstar and the fee level is below the average. Total assets are now approximately RM 2.6 billions so it is a good size for investors to consider.

If you are interested to know more about this, you can contact me.

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3 big concepts of debt

Before you start to borrow money from others and start leveraging using debt to build your wealth, you better know these concepts first.

What is good debt and bad debt? Good debt means a loan which can help you to build your wealth or increase your income over time. On the other hand, bad debt is a loan which does not contribute to your wealth. It will make you poorer over time.

How to differentiate good debt and bad debt easily? Good debt is used to buy asset, and bad debt is used to buy liability. Assets give you income, liabilities give you expenses.

Why people have more bad debts than good debts? These are the concepts of debt:-

Concept 1: Bad debt is easier to get into than good debt

Loan is an easy way for us to afford all major purchases. We as humans like to enjoy life while we are working hard. When we see beautiful and luxurious things, especially if those are being offered to buy them conveniently with credit, we easily fall into the debt trap. With credit purchase, it encourages one to spend more than what he / she can afford. All debts come with costs, i.e. the interest; if it is bad debt, he / she will end up paying more interest.

The good debt normally couples with investments where analysis is involved. Hence, works are involved. Bad debt is hence easier to get into than good debt as it merely involves pleasure emotion than analysis.

Concept 2: Bad debt makes it harder to get good debt

Banks lend money to one based on the Debt Service Ratio (DSR). Most banks in Malaysia can accept DSR up to 65% – 70%. When one has debt, he can borrow less in the future.

If the bad debts take up 65% of the DSR, one needs to finish paying off the existing loans to get a new one. As bad debt takes money away from the pocket as one needs to pay interest, it won’t be that easy to pay off without additional income.

Concept 3: Debtors can get rich faster than savers

If good debt is used to build wealth, one can invest without needing to have high capital. Good debts are debts used to fund investment assets. Through the assets, one gets more income, more income can be used to decrease DSR which allows one to borrow more good debts.

Based on the above, you can understand if you are using the debts correctly, your wealth can increase. Else, you will be stuck in bad debts. Differentiate the type of debts before you start borrowing!

Watch the Youtube video here on this topic.

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How to have enough wealth to have happy life?

How to have enough or more money to be happy seems to be a popular question asked by many. If you think carefully, the answer will be “You will never have enough!”. When you first graduate, you might think that when you have a million, you will be happy and comfortable. When you finally have a million, you will realise you need 10 million. The more you have, the more you want. That’s the truth.

Happiness cannot be pursued and it is impossible to be pursued. If we think that once we attain certain wealth, we can be happy, we are wrong. Totally wrong! This means that we put a condition to our happiness. We cannot be happy before we achieve certain level of wealth.

When I have no money to buy a house, I always think that once I have a house, I will be happy and comfortable. Once I bought a house, I realized I only feel happy for a while and it doesn’t last long. Then, I realised that the house is too small. Are you one of them? After achieving something, you found that the happiness last only for little while. Perhaps, you are not alone!

We often have unlimited desires and it is not easy to control our desire when we work extra hard to get to our goal. We usually will have the feeling that we ought to be spending some money to reward ourselves for working hard. Else, there is no point to working hard if we cannot enjoy our fruit of hard work. Without realising, it becomes a vicious circle.

No one tells you that when you have more money, different problems will also arise, it will lead to greater sense of the fear of losing it. Will you be happy? Never!

The economist in mid-70s, Richard Easterlin, showed that economic growth does very little to improve human happiness. The Easterlin Paradox states that at a point in time, happiness will increase when there is an increase in income. However, after some time, happiness does not increase when the income continues to grow. This finding concludes that we do need money during the initial phase of wealth generation. This is purely for survival and security purpose. Beyond that point, more money does not necessarily bring us more happiness.

The key is to always have basic financial security. As long as we do not spend more than what we earn, the security is being established. You won’t feel fear. We got to trust that we have enough wealth at all times. We need to acknowledge that our desire will be bigger and bigger. Take one step at a time to improve our earning and automate our earning to create some passive income streams.

Never put a condition to our happy life. Enjoy your life regardless of our wealth condition. Happiness is short-lived after achieving a goal. Why not choose to be happy during the journey to achieve a goal? Watch the Youtube video here on this topic.

3 things relating to finance that you can do with your family to enhance relationship

The above news raised concern for Malaysian families. Kids become the victim if families are broken. It is hence important for families to find ways resolving financial issues so that families are being protected.

The followings show 3 things you can do with your families to increase family relationship and enhance the family finance.

Have your spouse to discuss the family financial goals with you. Make sure his / her financial goals are aligned with what you want for the family. Financial goals include retirement goal, children education fund goal and lifestyle goal. How much money you both anticipate for each of the goal and by when you need to achieve the goals? Having these to be discussed will reduce misunderstanding and arguments at the later stage.

Following the goals setting, both of you should start discussing about the budgeting plan and the saving plan. Who should save for what? How much to save per month to achieve the goal? How much to spend to enable the saving required.

Family financial planning doesn’t just end with goal setting and budget setting. It is suggested that the spouse can sit together to discuss the actual implementation and the plan. Monitor and discuss about the progress. Better communication about finances can help to deepen the couple’s relationship which in turn strengthen the family tie.

Involve the kids on simple finance matters. The parents should start having money talks with the kids since young. Many Malaysian families tend to avoid the kids from financial issues thinking that it is good for the kids. However, kids should know the family financial situation so that they don’t bother the family with more financial commitments, or if possible can contribute financially. They should be educated on the basic things such as the costs of the toys, activities, classes they were enrolled into. Let them understand the impact of the cost and have the choice to make decision to select what is best for them. This will also help raise the financial literacy of the kids and they can better manage their money in the future.

Have the whole family to plan for family activities with a budget in mind. It can be a family vacation with a bigger budget or just an evening activity with a small budget say RM 150. Let the kids or spouse to discuss what to do with the small budget. It can be a meal or a movie.

Having the whole family to plan for the vacation including discussing and determining the hotel, places to visit will enhance the relationship and it gives more chances to the family to have conversation. Less arguments will occur pertaining to the selection of hotel and trip packages. Sometimes, when there is a budget set, some elements within the vacation package need to be compromised. Having the family to discuss together can help the family to identify the priorities and spend more effectively. If we want to be happy, having a loving family is important. We do not hope that the financial issues will affect a loving family relationship. Let’s implement the above 3 suggestions for better family relationship.

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Work harder and longer for leaving a legacy?

There is an interesting article which shares that Japanese who wants to leave a legacy will work harder and longer. Those who do not leave legacy will work hard but not longer (read the article talking about this here).

I have a slightly different view to the above. Leaving a legacy for children does not need to work too much longer. Legacy can be built through insurance fund. If we want to leave a legacy using our own assets, it will definitely take longer time to accumulate. However, if we pay some fraction of money to purchase a large payout insurance policy, then, leaving a legacy to our children will be very simple.

See this example. John (aged 30) wants to leave RM 2 millions to his 2 children when he passes away. He will need to save and accumulate RM5,500 a month continuously for 30 years to accumulate RM 2 millions assets. Can John enjoy life after 30 years if he wants to leave all monies he saves and accumulates for his children? The answer is an obvious NO. What if he spends RM 1,500 a month to buy a RM 2 million insurance policy, his children will get the RM 2 million insurance payout when he passes away. If he can save RM 5,500 a month, he can use his remaining saving, i.e. RM 4,000 (RM 5,500 – RM 1,500) to enjoy his life and for retirement.

Do you need to work harder and longer for leaving a legacy? Not really – You just need to be smarter and choose the correct financial tools to help you achieve your financial goals. Don’t ever sacrifice your life especially your retirement life because of your children. You deserve to enjoy your life better because you work hard too!

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You can receive constant broadcast message relating to wealth creation to financial freedom through Telegram. Click here to subscribe to the telegram for the weekly newsletter.

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