Bank Negara Malaysia decided to lower the Overnight Policy Rate (OPR) by 25bps to 3.00 percent today. This was somewhat expected, which also prompted Mrs Money to try to renew some deposits prior to the BNM meeting.
The OPR was reduced to accommodate growth and in view of the current slowing global demand and heightened downside risks to the Malaysian economy.
I thought of listing down some areas in which the OPR change affects our personal economy.
Equity – lower interest rates tend to boost the stock market since it eases the funding cost for companies. The financial sector is an exception, especially banks with high net interest margin earnings which will face some pressure.
Mortgages – lower interest rates usually means lower mortgages for home owners. I doubt that we can expect a 25bps decrease in our mortgages but there should be a significant reduction in rates which in turn would spur activity in the real estate sector.
Bonds – Existing bond holdings with fixed interest rates will increase in value since the differential with the OPR will be higher.
Fixed deposits – banks will lower the rates for fixed deposits to reflect the lower OPR.
Currency – A reduction in interest rate decreases the value of the currency since its yield is lower. The MYR should depreciate in value due to the change in OPR.
For myself, the impact on equity, mortgage and bonds will have the largest effect to my assets. Therefore, I welcome this OPR reduction that will hopefully further spur my asset growth as well.
How will the OPR reduction affect you, Money Makers?
In the final part of this 3-part series, I will share the steps I took to begin shifting my mindset from one of lack, scarcity, and guilt, to one where FI was a real possibility.
In Part 1 of this series, I shared how this paradigm shift happened for me, in the windy beaches of Cherating. In Part 2, I talked about identifying and beginning to overcome limiting beliefs that were holding me back from achieving FI.
So Step 1 of the FI journey is really that – identifying and overcoming limiting beliefs.
As I was beginning to overcome these beliefs, I was able to feel more confident and hungry and managed to negotiate higher salaries. I thought the solution must be earning more money, right? Well, that’s part of it. But as I advanced in my career and started earning more, I continued to have this same mindset, and still very little to show at the end of the month – which was frustrating! What was I not getting? I felt that no matter how much I earned, I was still caught in the same cycle.
It slowly dawned upon me that earning more money was only one part of the equation. I needed to have a plan.
Step 2: Set a clear goal
This is simple. Set an ambitious but achievable goal so you can start taking actions that are within your control to reach that goal.
At the early stages, I would set a goal to, say, hit RM5,000, or save enough for a trip, but I would never go beyond a certain ceiling before it went down again (read: excessive travel habits – although I’ve since learned to travel smart).
I realized very quickly that I needed a tangible goal to get me to not dip into my savings account the first chance I had. So I decided buying my first property was a worthy goal to set my sights towards.
Based on my income at the time, I decided I should be able to afford a monthly mortgage for a RM700,000 property – which meant that I had to save around 15% of that (10% deposit + 5% stamp duty, legal fees and other ancillary costs). That was a whopping RM105,000 in cash that I needed to have! Although it was a monumental task, I now had a target..
The only caveat I would issue here is to make sure your goal is related to an investment, instead of a consumption item. At the risk of stating the obvious, setting a goal to buy a car or to go on a nice holiday is not getting you any closer to FI.
Step 3: Start! The power of habits
Ok so you have a guiding star — now you just have to make your way towards it.
The aim at this stage is to develop a sense of control over your finances – which tends not to be the case when you are living paycheck-to-paycheck. At the time I set the goal of buying a property, I had not chanced upon the FI community yet. All I remember thinking was – I need to start investing so my money can grow. But with just a few thousand ringgit, what were my options?
Savings: Well, first off, start developing a habit of saving more. I tracked my expense using a money app, figured out some expenses I could cut, and the decided to try to cap my monthly expenses. So every month when my salary came in, I would transfer that capped amount into my expense account, and keep the rest in a separate savings account that I opened. Although I inevitably dipped into my savings account for travel and other larger expenses or emergencies, it reversed my thinking so that savings was the default, rather than spending.
Investments: Around the same time, a friend recommended unit trust as a good mid-long-term investment that could help grow my money for a downpayment for a property, so I decided to just dive right in. In hindsight, the returns have not been great after taking into account the fees I have been paying, it instilled a valuable habit of setting aside money monthly and automatizing my investments. Since it was directly debited from my account into my investment account, It was money I never saw and thus, money I never missed. I also signed up for a Private Retirement Scheme, which was also auto-debited from my account.
Unfortunately, after a while, I lost sight of my goal, and lost track of my plan. I decided that it was time for me to move out of my parents home into my own place. I found myself a lovely 1 bedroom rental in Bangsar. While the year I had there was really pure joy, it put a massive dent in my savings. I also took a really amazing (but expensive) trip to Latin America. By the end of the year, I felt almost like I was back at square one.
Enter Mr. Money.
Step 4: Study, experiment, repeat: Begin understanding the power of money
The one thing Mr. Money loves, is money. He loves reading and learning about finances, interest rates, the economy, investments. Although I initially found this terribly dull, after a while, some ideas begin to seep in. He started asking me about my investments, and I realized I knew very little about them. He was shocked that I was just “giving money to the bank” by keeping money in savings account instead of a fixed deposit. I never bothered to read about how much fees I was paying, what interests I was getting out of my investments.
He, on the other hand, has structured his savings and investments almost from Day 1, and is very clear about his path. He is also a minimalist. I always tell people in amusement about how, apart from work clothes, he only owns 4 polo T-shirts and 2 pairs of shorts, 2 jeans and 2 “party-shirts”. His home, which looks like an IKEA showroom, is pristine and tidy, with almost every item serving a purpose. He keeps his life simple, and I really love that about him. Watching him be intentional about his expenses and savings and reading the numerous articles he would send over, made me rethink my choices about what I own and what I purchase, and actually got me slowly (and very reluctantly) interested in money.
On a lazy Sunday, we were chilling at home when he told me about this movement picking up in United States called FIRE (Financial Independence, Retire Early), led by Mr. Money Mustache. We started reading up about him and watching some videos and were totally captivated! Here were a bunch of young Americans, living a simple lifestyle, saving and investing between 50% – 80% of their income over a few years, and managing to actually retire early! Many of them still work, but they don’t have to anymore. It was totally mind-blowing.
So that began the real process of learning for me. I obsessively read articles and listened to podcasts (my favourite is Choose FI, I highly recommend it!). I started hearing about how so many people from all walks of life have chosen this path, and have actually managed to achieve it by just being intentional about how they spend, earn and save.
The big “A-ha!” moment for me came when I realized why all those years ago, I never felt like I could set aside savings despite being able to earn more money. It was all about my expenses! As I earned more, I correspondingly increased my lifestyle and expenses. Although I would always look for a bargain (read how I got this habit from my dad here) and was never into big brands, I was also not really conscious about what I was buying, and whether I needed something in the first place.
I started by looking at all my expenses again, but this time, with the proverbial microscope. I started with my recurring expenses such as my mobile phone, car payments, insurance, internet. I reconsidered clothes, toiletries, gadgets or anything else that I didn’t need. I would always try to ask myself “Do I really need this?” before paying for something. I found that just stopping to ask yourself that question, helps in making smarter purchases. I also did a Marie Kondo, and cleaned out my wardrobe and all my possessions, and really just simplified my life.
I definitely don’t lead a frugal life, but just being more intentional about my expenses and understanding money and my investments better meant that I started making smarter choices, and were important building blocks to creating an FI mindset.
Step 5: Having good role models
Heard of the phrase “You are the average of the 5 people you spend time with”?
For me, that included Mr. Money and the good guys Brad and Jonathan from the Choose FI podcast that I listened to almost daily on the road when I was driving, cooking, or just doing laundry. That’s the beauty of podcasts and Youtube! You can surround yourself with all kinds of people these days – all from the comforts of your living room or your car. Listening to tips, stories and ideas for earning, investing and saving more just ingrained it in my daily thinking and choices.
I also started talking money to friends and family, which can often be seen as a bit of a taboo topic. I would ask them about investments they were making, how they felt about it, and tips of how to make smarter financial choices. I realized when I would start sharing, people are more open to it and actually welcome the opportunity to share advice and learn.
Step 6: The “Why”
Amidst all of this, I was acutely aware that I could fall off the FI bandwagon, so to speak, at any time. I still had many days of eating out unnecessarily and spending on other things without much thought. While home ownership was a worthy goal and helped in developing good financial habits, I was beginning to realize that it was not enough of a long-term motivation. Once I purchased a home, what then?
I realized that I didn’t really have a “why”. Why did I want to earn more money? What would I do with it? What was my motivation? For Mr. Money, financial independence was the security of knowing that he could at any time just leave his job and live a life he wanted, without thinking about whether he had enough. That was a solid long-term vision.
But sometimes this answer doesn’t come to easily either, and it didn’t for me. Sure, it would be nice to be able to take off anytime I wanted and travel the world, but I actually like working. I get so much fulfilment from it, and would be happy to continue to do so for years to come. At the same time, I realized that that’s not really a smart way of thinking, because my situation could change anytime. I may not be able to work, or may be made redundant, or may have a family and my priorities could totally change. Still, I felt like I needed a stronger “why”.
I was listening to a financial independence podcast one day, and the speaker, Grant Sabatier framed this in a different way that I think could help some people think about the “why”. Ask yourself, “What kind of life do I want to lead, and how will money help me get there?” I found that the answer come so much easier to me then because I had something to visualize.
I saw myself living in a beautiful cottage, surrounded by mountains and lakes and trees. Having my own vegetable garden, living sustainably and in connection with nature and people around me. Mr. Money and I having coffee in the garden, eating off our land, going for runs in the forest. Surrounded by family and close friends. Close enough to nature, but also to a city (Mr. Money is more of a city person). I still see myself working on interesting projects related to my field of social impact. Travelling to exotic parts of the world and perhaps even living in different locations for prolonged periods of time. Hahhhhh. Just writing this out makes me so happy.
But let’s be honest, this lifestyle is going to need some serious financial planning. It will require not just owning a property, but also having a very steady and substantial stream of passive income to be able to up and leave at any time, travel the world and take care of my health and that of my loved ones.
What’s beautiful about it is that this visualization exercise is that it is something everyone can do, and it can help you start developing those habits that will eventually help you start to lead the kind of life you want to lead. Like eating well, exercising, prioritizing relationships with friends and family, and understanding where your career fits in with everything. These are things I can start doing NOW, as I build up a plan for financial freedom that will hopefully allow me to be able to lead this life.
Ultimately, for me, the life has to come before money in the path to achieving financial independence. I don’t want to scrimp and save and struggle in the years leading up to FI, forgoing my health, important relationships and experiences for the sake of this dream, but when I get there, I realize that everyone hates me, I’m unhealthy and I have the spiritual depth of a stone.
So ask yourself – what is the life I want to lead, so your motivation to earn money has that positive energy behind it. More importantly, so you can start living your life today, in a way that helps you get there down the road.
BONUS Step 7: Increasing your income – the golden side-hustle
So this has been a recent revelation for me, and one that I would really encourage everyone to start thinking about. There’s a limit to how much you can cut your expenses, but there is no limit to how much you can earn.
You can save all you want (and it’s still important that you do), and keep your expenses low, but if you have a low income, it just will take you that much longer to get there.
Although my income had been steadily increasing over the past 5 years or so, I had not learnt to be conscious of my spending at the time. So the additional income didn’t really make a difference to me because I would spend it just as fast as I would make it. However since I started capping my expenses, actively saving and being conscious about spending, earning additional income was really a game-changer for me.
Last year, I decided to leave my full-time job, to take on a part-time job. Apart from the fact that the new position was a really exciting one, I did this for two other reasons: (i) the part-time gig paid me almost as much as my previous full-time job; and (ii) it also gave me an additional 2 days a week to take on other types of work. I also had the opportunity to work full-time for 4 months as a maternity cover. My income almost doubled over a 4 month period. My expenses however, didn’t change. Seeing that money just exponentially grow in my account had a surprising effect on me – I saw it was possible. Following that, I was determined to increase my income with the side hustle as much as I could. I’ve since started doing consultancy work with that additional two days, and that has really boosted my income, and consequently, my savings.
Even if you are in a full-time job now, but you feel like you have more to offer and would like to see how you can capitalize on your talents and hard work to earn more, I would strongly encourage you to start by just setting that intention first. Start thinking about what unique skills sets you have to offer and starting learning about the market. I will write a separate post about the details of how I developed the side hustle, the challenges of figuring out a charge out rate, and all that other fun stuff soon!
Where to now?
The famed philosopher Alan Watts had the best definition of success that I’ve ever heard. He says “Success, is the progressive realization of a worthy ideal”. I believe I have a worthy ideal; and that I am progressively realizing it. I think this means I am successful! YES!
So that’s the journey so far. It has been one full of mistakes and hard choices and wonderful lessons. I’m still very much on it, but I’m just excited to be able to feel a little bit more in control of my choices and my finances than I was 5 years ago.
Ultimately, it is a process, and importantly, like all else in life, you have to enjoy the path that leads you to the goal in order for the goal to mean anything at all.
Do any of you want to share your tips towards developing a FI mindset? What struggles are you trying to overcome? I want to hear from you!
We often talk about returns or yields in the investment community without addressing the risk involved. No risk usually means no returns, unless you have an arbitrage situation. A recent conversation with a friend, compounded with my own observations from acquittances led to this post on my thoughts on risk and risk-adjusted returns. I have omitted some risks such as currency risk since I believe most Malaysians invest in Malaysia without any exposure to foreign currencies. Instead, my interest lies in highlighting an area I hope more retail investors understand and factor in when sharing about returns.
Risk asset classes
Different assets classes carry different risk. For instance, a fixed deposit account is a low risk product. Essentially your only risk is a credit risk on the bank that the deposit is placed with, and if the amount is below the PIDM threshold (RM250,000 – corresponding to around 97% of all Malaysian retail depositors), then it is covered by sovereign Malaysia (which is a credit risk rated A3 by Moody’s). Mutual funds have a higher risk than fixed deposits but a lower risk than stocks. The reasoning is that mutual funds have diversified holdings whereas a stock has a concentration risk on one company. The more stock you hold eliminates the concentration risk and if your portfolio holds exactly the same proportion of each stock represented in the index – voila! you have created an index fund. An index fund does not carry concentration riskson companies but has market risk. KLCI Index for example has a Malaysian market risk or the Dow Jones indices has a US market risk (albeit several international companies have a second listing there).
The graph describes the relationship between risk and return. Mutual funds is missing but it would be placed between Large Company Shares and Higher Yield Fixed Income.
One rule of thumb I try to follow has been to allocate to different asset classes based on your age. The idea behind this is that the older you are, the more sensitive you are to shocks in the market and access to liquidity is more important. The formula is simple, you differentiate between high (growth) and low risk (defensive) assets. Your age corresponds to the % of asset allocation to low risk asset classes, and 100 – your age to high risk asset class.
Using this and the graph above, a 25 year old would invest 25% of their assets in cash and government bonds. The remaining 75% would be in growth assets such as mutual funds, shares etc. The formula means that a 100 year old would have all their asset allocation towards low risk assets which always made sense to me as the ability to withhold market shocks over cycles is harder then.
Mr Money’s assets
If you look at my asset allocation, you will see that I have not been very strict on the allocation rules but they have served more as guidelines and also an reminder to recalibrate periodically (often needed when the times are good and you find it tough to sell down on stock holdings). An observation I made earlier this year on my own holdings is that I am heavily weighted towards property as an asset class. The concentration risk is high but the market risk is somewhat mitigated from the fact that they are in very different markets. I therefore decided to rebalance and channel new liquid funds into riskier assets classes such as index funds and PNB (mutual funds) but not stocks as I unfortunately do not have the time to follow companies. The stocks I hold today are in 7 Large Cap listed entities with global operations and in my opinion strong moats (Warren Buffett reference) in their fields.
Risk-adjusted returns define an investment’s return by measuring how much risk is involved in producing that return. There are different metrics used which includes alpha, beta, R-squared, standard deviation and Sharpe ratio. I would not dwell in that but instead say that it is important that we compare apples with apples. To compare the return from a fixed deposit with a stock is not fair since the underlying risk is very different. It is important to be mindful when investing, but also when talking in general that returns are always connected to the risk taken to receive it. A risk-adjusted return could be negative but the absolute return positive.
Early on in our blog, Mrs Money and myself posted about our investment in a PNB fund and mentioned a comparison with other similar options in the market. In my opinion, there are two options in the market with similar risk and public access. These are fixed deposits and mutuals funds – of which I would limit it to KLCI i.e. an index fund for better comparison and similar risk. The risks are similar with fixed deposits being the lowest due to their PIDM insurance followed by PNB funds (their ownership) and highest risk being the KLCI index fund which also carries a credit risk on the bank issuing the mutual fund. The PNB funds and KLCI are expected to deliver higher returns than a fixed deposit. Unfortunately, KLCIs recent poor performance paints an even clearer picture and it remains to be seen how this will affect the future of PNB funds dividends. Moreover, the cost involved with transacting and managing mutual funds (ETFs would probably be cheaper) makes PNBs a superior choice. I do note that the recent aggressive drive from banks to grow deposits has definitely raised my opinion of the returns from fixed deposits (5% on short term fresh funds).
Money-Makers, how do you view risk when investing?
Mrs Money here. Over the next few posts, I wanted to share the beginnings of my journey to developing an FI mindset. If you haven’t read Part 1, you can check it out here.
Just a few years ago, I did not believe I would ever be financially independent. Worse still, I associated wealth with negative traits – greed, materialism, inequality – which meant that I never allowed myself to think it was OK to make money. Naturally, that had consequences to how much I was making, and keeping.
In the past few years however, I’ve taken positive steps towards shifting this mindset – and it hasn’t been easy. I had to deal with some ugly truths, ask hard questions, set goals, get frustrated, then try again. It’s very much a journey for me, but I’ve made real progress in shifting how I think about money, and now I believe that it is just a matter of time before I can achieve financial independence. Hoorah!
Before I dive deeper into my process, I have to come clean about some qualities that definitely helped me along in this journey:
I’ve always been cheap. (Mr. Money lovingly refers to me as cost-conscious, a term which I much prefer). Ever since I can remember, I’ve always felt a deep sense of injustice realizing that I’ve overpaid for something that I could have got for 30% less just across the road, or having to pay for “premium” bottled water (I truly believe water is a common resource and all I should be paying for is the cost of the waiter’s time to get me the tap water).
I wear this label of being cost-conscious proudly. As a society, we have bought into the idea that excessive consumption or purchasing expensive brands is a sign of wealth and status, and frugality is something to be ashamed of. Countless luxury cars and a closetful of Prada bags later, with little retirement savings and praying that we don’t encounter a medical emergency, the joke is really on you.
It’s really easy to inculcate this virtue, too (yes, it is a virtue!). Just start by being aware of what you are buying and how much you are paying for them. Have you compared the prices of vegetables in different grocery stores in your area? Do you know when you should buy organic, and when it just doesn’t really matter? If you are buying luxury goods, ask yourself why is this important to you and if its worth it. This habit of questioning and assessing your options and values is like a muscle you can keep building, and will serve you well as you begin making bigger financial decisions. To me, its not about scrimping and being miserable, but rather just being smart with your expenses. #Costconscious ftw!
I’m a bargain hunter
Secondly, I’m always looking (and asking) for a bargain – which seems to be fairly common amongst Malaysians. But I remember once shopping in Chinatown in New York with an Australian friend, who was mortified by my attempt to negotiate down a $10 pair of gloves. My explanation that this was normal in my country did nothing to alleviate his horror. I got them for $7.
I think I got this from my dad. Since I was a kid, I have vivid memories of my dad asking vendors asking for their “best price”. He would do it with street vendors, in supermarkets or restaurants – it didn’t matter. I watched him use all the tricks of the trade – charm, negotiating down for bulk purchases or minimally faulty items, and planting a disinterested accomplice (usually my sisters or I, as my mom will always give us away). His inclination towards this is unsurprising given that he has a career in negotiation and sales, but as I grew up, my usually shy self found it very easy to just imitate him. His number one tip though — just ask. You never know when you can get it. I have found this to be true time and time again, sometimes in very surprising settings.
So while these helped ensure I was not spending as much as others, I realized early on that I had some damaging believes that were my real barriers to making and growing money.
Limiting Belief #1: “I can never be rich”
This was a deep believe that money is hard to come by, that I will never earn enough, and that being wealthy is only for the few who are able to run successful businesses or work hard in high-income jobs all their lives.
This is a damaging belief for many reasons:
It puts us at a psychological disadvantage at the mercy of money, rather than feeling in control and knowing that money can work for us
It confines us to mediocre-paying jobs instead of driving us to get creative or hustle to find ways to increase our income
This feeling of resignation prevents us from taking the baby-steps needed to save and invest, that are crucial in the path to FI.
My early experiences as a lawyer earning RM3,000 a month and spending RM3,000 a month is an example of how this belief played out. Because I didn’t realize that I had this belief, I continued my lifestyle and hardly had any savings left at the end of the month. I was frustrated and seeing very little money at the end of the month reinforced this belief. The idea of investing and growing my wealth was laughable because, well, I had no money.
Limiting Belief #2: “I should never be rich”
Later on, and to compound the effects of damaging belief #1, I started believing that I should not be wealthy. This may sound odd, but hear me out.
After a few years working as a lawyer, I had a calling towards social justice and human rights work. I left legal practice, and started a career in the non-profit sector, hoping to use my legal skills to improve the rights of marginalized communities.
The non-profit sector globally is notoriously underpaid, and Malaysia is no exception. The story goes like this:
fundraising in the nonprofit world is incredibly challenging, which means that the priority has to be to channel money to the communities you are trying to help, rather than to you, the person working to help them. The belief here is that money is finite.
It is us (the self-sacrificial, bleeding heart nonprofit workers, who were trying to better society) vs. them (the evil, wealthy corporates who were ruining it). Money is therefore evil.
But I was deeply fulfilled in my new career and always told myself that fulfilment is more important than money. However after a while, I began to realize that this was not sustainable career. I needed money. More importantly, I wanted it.
Moving past my limiting beliefs
This growing frustration made me looking inward for answers. I was a fan of Tony Robbins, and he encourages us to start with your story. What is the STORY you are telling yourself about money?
I reflected on this non-profit-bleeding-heart myth. I realized that it effectively instilled a sense of guilt in those working in the sector. You are either Mother Theresa helping people selflessly, or you are a blood-sucking vampire of a human stealing from the poor to feed your lavish lifestyle.
I just couldn’t reconcile the two seemingly conflicting beliefs (wanting to earn money, while at the same time feeling guilty about it) and it was very frustrating. If you believe in the law of attraction, I was also sending out mixed signals to the Universe, effectively stunting any possibility of getting what I want.
A defining experience for me came after watching a Ted Talk. If you are in the non-profit sector, or any sector working on social impact, I recommend that you watch Dan Pallota’s “The Way We Think About Charity is Dead Wrong”. If you have just a minute, watch from Minute 3.00 – 3.50. Game changer.
In short, Dan Pallota argues that there is a bias between the for-profit and non-profit sectors, including the ridiculous reality that corporates are often paid more for encouraging consumerism in our society, while those who are trying hard to fix some of the societies most complex challenges have to struggle financially (he puts this far more eloquently than I just did). And that the solution is that we have to start demanding more of our society at large to understand that it’s our collective responsibility to incentivise bright talents who can do a world of good to raise people in marginalized communities, instead of forcing them (i.e. me) to make career choices based on economic needs that they shouldn’t have to.
Watching this video totally validated my experience as a professional in the non-profit sector.
Around the same time, I decided to look deep and explore the root causes of some limiting beliefs that I had. It hit me one day while meditating. Self-worth! What is the value I attach to myself? If I don’t feel that I can bring value to whatever I do, or more importantly, that I don’t have inherent value, I will always struggle financially. Without it, how can I negotiate a higher salary? How can I be ready to seek and seize opportunities when they come my way?
I recall so vividly an incident where someone offered me a research consultancy which would pay a pretty decent consultancy fee, and I just thought “Nah, I’m a salaried employee in my company. I can’t do anything on the side”. I didn’t even entertain the thought because I was so closed to the idea that I could add any value to a project beyond what I was already doing.
Dan Pallota’s talk, together with my recent revelations made me start to realize my worth, as someone who has the skills, experience and passion to trying to improve the lives of people who are disadvantaged. Maybe, just maybe, I could and should make this into a sustainable career.
Ok, so now I am beginning to deal with issues around guilt and barriers that were holding me back. Now what?
In the final part of this series, I will share the steps I took to slowly develop a FI mindset. I’m going to go deep, sharing processes and ideas, but also insights and reflections on why all of this even matters in the first place.
So where do you stand? What is YOUR story? Chances are, you probably didn’t know you had one! But if you have ever had financial issues, you most definitely do, and you need to start getting acquainted with it in all its ugliness. Here are some that you might resonate with:
I am not good with money
I don’t need money to be happy
Money is hard to come by
I will have to sacrifice too much time to make money
Money is the root of all evil
I don’t have skills or talents people would pay money for
Rich people are never happy
It is not ok for me to be rich if others are struggling
Investments are complicated and I’ll never understand it
Once you identify your story, start working backwards. Where did it come from? Was it something you observed from your parents? Something someone told you about yourself that you believed? The people you surround yourself with? This first step is key towards changing your belief-system and eventually, your relationship with money.
What beliefs do you have? How have you tried you overcome them? Any successful tips to share?
Mr Money here. I have been travelling for work across northern Europe the past two weeks and missed out on the festive CNY celebrations, and of course updating our blog.
EPF announced earlier today that the dividend for FY2018 landed on 6.15%. In my opinion, a very respectable return considering the challenging end of the year for the domestic and foreign equity markets. I was expecting a return in the range of 5-5.5%. EPF has consistently performed well above their goal of returning >2.5%.
So I aim to evaluate this year if part of the funds in EPF should be reallocated to other investments to mitigate the concentration risk in my current portfolio. I have previously withdrawn funds from Account 2 to repay a mortgage. The avenue I am investigating now is towards equity investments in an effort to increase my portfolio returns while at the same time diversifying from the credit risk of the fund.
Stay tuned for a comparison between ASNB and other relevant funds.
Mrs. Money here. There are many people in the Financial Independence (“FI”) community who really maximize savings by almost never eating out and living an extremely frugal lifestyle. That’s not us.
Mr Money and I eat out. A lot. I would say at upwards of 4 times a week. Sometimes, it’s simple hawker or cafe food, other times, we dine at nicer restaurants. It is probably the largest expense of mine (I’m keeping track over the next few months so I’ll know this for sure soon), and definitely the largest for Mr. Money, who eats out even more than I do.
Why? The fact is, it’s really hard not to. Food is so cheap and accessible in Malaysia. And of course, so oh-my-God-yummy.
But it’s still a bit of a sticking point for us. Mr. Money thinks it sometimes costs more to buy groceries and cook for two rather than eating out. That’s in addition to time and convenience factors, and not to mention the additional element of wasted produce dying a slow death in the fridge, which really bothers him. I can’t disagree with some of those points, especially on time and convenience, but I try to avoid eating out as much just because I tend to eat more unhealthy and meat dishes (I’m an aspiring flexitarian), and I do think the cost adds up.
While one of our big couple goals this year is to cook more and reduce dining expenses, the fact that we do eat out quite a bit, combined with our generally cheap genes means we are always looking at ways to cut costs when eating out!
Here are our top tips so far:
If you are someone who eats out a lot and entertains, you really should download the Entertainer app. You pay around RM120 a year, and it gives you tons of savings. Most restaurants allow you to buy one main, and get one main free of charge – and you have 3 of these vouchers per year at the same restaurant. Others give 1-for-1 promotions of alcoholic beverages, including bottles of wine. You can check out places in your vicinity, and there are usually quite a lot of restaurants and bars in the Klang Valley listed there. You can make back your RM120 in just 3-4 meals! A friend of mine also recently mentioned that you can get the “family” package, where you pay slightly more, but you can get up to 4 members access your account.
Our only rule we use when using the Entertainer is to make sure that we are anyway going to be eating out, so that we are not spending money on meals that we wouldn’t anyway be doing.
Download discount apps
This includes Boost, Fave Pay etc. where you can get discounts on your next trip to the restaurant, and sometimes cash back too. Similarly, we wouldn’t select a restaurant just because we could get back some money, but if we’re anyway going in there, why not save a few bucks?
Check if your credit card gets you a discount
So many restaurants have discounts for certain credit cards. Use them. You’ll have to ask though, and be ok with sounding like a penny-pincher. Which also applies to the next tip…
Always ask about promotions
So I figured out this sinister trick restaurants use recently! I was at a popular Japanese food chain that shall not be named, and only after I paid and left, did I realize that there was a happy hour promo (I was eating lunch at 3pm) that provided a significant discount at that time. It was displayed for anyone walking outside the restaurant (to lure customers in), but once you’re in, it’s not something the wait staff will always mention, well because, you’re already baited fish to them. I was so annoyed by this, but realized that many restaurants DO use this trick of displaying promotions outside, but not on the table or anywhere visible to existing customers. Do not fall prey! Always just make it a point to ask.
Lunch specials and happy hour
One thing we’ve tried to do when we want to try out a new restaurant, especially if it’s fancy, is to go there for lunch instead. There are usually lunch promotions, and we are less likely to order alcohol which then hikes up the bill.
For heaven’s sake, skip the drink
Some of you know by know that I’m a strong advocate for not ordering sugary and unnecessary drinks while eating out. I stick to warm water (which is my favourite drink), and if they charge for bottled water, I say thanks no thanks because I usually have my own little flask of water that I carry with me everywhere. Ordering a drink at a restaurant can easily come up to half the price of your meal, which is just totally not worth it.
As Mama says (not mine, though), don’t over-order
My parents have always shown love through food. We would go for meals at Chinese restaurants and order 7 dishes for 5 of us. And my dad, never allowing us to waste anything, would always say: “you can order anything you want, as long as you finish it”. I recall an incident once where my two sisters and I went to a restaurant and ordered so many dishes that the restaurant manager who was taking our order actually suggested that we drop a few. Offended that he was doubting our eating abilities, we insisted and forced ourselves to finish the food. We were almost blue in the face in the end, but we felt ridiculously proud.
Fast forward many years, I really have tried to drop this one. Trying to generally not do anything in excess and striving to lead a minimalist lifestyle means that I also just eat in moderation. When we order, we just try to make sure that we are keeping it light enough, but not too light that we get hungry later. And of course, if we have any left-overs, we just take them home and have it the following day.
I still struggle with family dinners though; I’m always the annoying one telling everyone not to over-order and inevitably gets ignored. And then I’m usually the garbage truck at the end finishing up all the food.
We’d love to hear from you! Do you have any other money-saving tips that you use when eating out?
We are approaching February, the month in which the EPF dividend is announced and distributed to its members. EPF makes up the bulk of the savings for most Malaysians and is a considerable part of Mrs Money and my assets. There have been numerous articles speculating on the dividends for FY 2018 with reference to the political landscape. Some more fact-based like this, compared to others.
After the recent expose on Tabung Haji, I welcome a more reasonable, healthy dividend that is sustainable in my eyes. FY 2017s dividend payout months before the last general elections will be hard to achieve again.
Moreover, Mrs Money and myself are contemplating using the investment scheme within EPF in 2019. The scheme allows members to transfer a portion of their savings from Account 1 for investments in order to enhance their retirement savings. Members can invest no more than 30% from the savings in excess of the recently-revised Basic Savings Amount in Account 1 through appointed Fund Management Institutions (FMIs) at a minimum investment of RM1,000.
That being said, the lack of availability of low cost investment products in Malaysia is deterring us from pursuing this.
Do you have any advice, experience or tips to share around EPF investment schemes? Any thoughts on the upcoming EPF dividends?