How to Create Wealth You Can Pass Down to Your Kids

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Your money is the culmination of hard work, discipline and smart management skills. If you are finding financial success, there are some ways to better sustain that wealth not only for yourself, but for your children and their children after that. However, leaving a legacy of multi generational wealth is no easy feat. While wealth affords opportunities, it can also present unique and complex challenges. If you want to leave behind some money for generations of your relatives to use and pass on, follow these tips for transferring wealth through your family tree.

Educate Your Family on Financial Matters

Even if you pass on millions, your children may squander all you have worked for before it can become a legacy. It's important to have open and honest conversations with your children about how to make, spend and save money.

Make Sacrifices

No matter if you follow a familiar career path, build your own business or focus your energy on investments, everyone needs an income. To create generational wealth may mean forgoing luxuries and even opting to avoid early retirement in favor of filling the family vault.

Protect Assets

Life insurance can be a powerful tool for passing on wealth, especially because the beneficiaries of your policy will not have to pay taxes on this stimulus. If something happens to you or your spouse, this can provide your family the financial resources they need to cover the expenses of your death, but also income for education, investing and wealth building of their own.

Tax & Transfer Wisely

Taxes can have a significant impact on you wealth and generational legacy, so you may choose to work with advisers to reduce your tax liabilities. This may require special transfers like trusts, endowments and estate freezes. If you have a traditional IRA, you can convert it to a Roth so your heirs inherit an asset with continued growth potential.

Maximizing your wealth for a legacy is more than finding fiscal success. There are many aspects of a comprehensive wealth plan that will last for generations, but if this is a priority for you, it's important to plan wisely.

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HfW : 5 Numbers You Really Need To Know

Do you really know your money? You would be surprised how many people don't know anything about their all-important relationship with their finances. You may think you're pretty financially savvy, but if you can't answer these five questions you may need to get better acquainted with your money.

1. Monthly income

This may seem very basic, but more often than not people can't answer how much money comes into their home. That means knowing the gross and net income. Almost everyone knows what their salary is, roughly, but when it comes to pre- and post-tax income per month, many people have no clue.

Look at your next paystub and take note of both your gross (pretax) and net (post-tax and other deductions) pay. This knowledge really comes in handy when putting together your budget.

2. Monthly expenses

This one goes hand-in-hand with knowing your monthly income. While knowing how much you have coming in each month is important, it's equally important to know how much you have going out. Get a grip on your expenses. Take the time to write down everything you spend your money on in a given month. You'd be surprised what expenses you have over and above your rent/mortgage, car, utility and insurance payments. An understanding of your expenses can help you identify areas where you're overspending and can reveal new ways for you to save. If you want to have a well thought out and effective budget, knowing both your income and expenses is pivotal. Without this knowledge, you won't know what you can (and can't) afford and you could easily spend beyond your means.

3. Net worth

You may think that a 'net worth' is only for wealthy people. Not so fast: Net worth, simply put, is the difference between what you own and what you owe. This begins with your bank account, income and expenses. Assets such as investments, cars and real estate all factor in to your net worth as well. Knowing your net worth provides you with a straightforward financial snapshot. If your number is positive, you can give yourself a pat on the back. If it's negative, you might want to take a closer look at your finances so you can diagnose the problem, and create a plan to get you into the positive.

4. Debt-to-income ratio

While your net worth compares all of your assets to what you owe, a debt-to-income ratio shows you specifically how much debt you have compared to how much money you're making. The first step to figuring this out is to pull up your credit report (to get the most accurate estimate pull it from all three bureaus, in case there is a debt that is reported to one and not the others; also make sure there are no errors in how your debts are reported). Once you've checked your free annual credit reports, you can monitor for changes to your credit reports every month by getting a free credit report summary on Credit.com. Tally up your monthly debt payments, and divide them by your gross monthly income (money before taxes and other deductions). As you could have guessed, the lower this number is the better off you'll be. Ideally you want to keep that number below 35%.

5. Your invested income

You may know the number in your savings account, (this is invested income, too, despite the small return) — but do you know if you're making the most of your money? Ask yourself what your money is doing for you. Is it sitting in the bank to use for a rainy day, or is it working to make you more money? Work with a trusted adviser to come up with a plan. Even if you're just starting out with your first job, wrangle your money and make it start working for you. If you already have some investments, ask yourself if you know what the money is invested in, not just the old, "oh, it's in an IRA." Know who manages it, what you earn, what the money is invested in and what kind of returns you get. The younger you are, the more freedom you have to make that young money work hard to earn you the most possible future money.

Finally, your money should be in line with your future goals. Know what those goals are and the compatibility with your money. Saving money alone is not enough when it comes to having good financial health. You have to make sure you're paying attention to what amount of your savings is for what, and whether you're not on track for the big things.

When it comes to managing your money, it's easy to get overwhelmed if you don't really know your money. Between knowing all the terms and numbers, you can quickly lose track and get discouraged. However, if you take the time get to know your money and how it impacts your life, it'll be easy to see that financial health comes down to being in the know. So the next time you want to have a close relationship with your money situation, take a deep breath, and jump in as if you were interviewing your money for a job . . . to work for you.

Read it all here 

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Unit Trust Funds - The type of Investment for you

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MANY have looked far and wide for Ms Right (Investment), the one with the sexy, super model looks and outgoing personality (attractive, high double-digit growth and guaranteed returns).

The good news is that Ms Right might actually have been with us all this time, amongst close friends (unit trust funds). Ms Right, however, might not necessarily have the glitzy characteristics; instead we have the humble, charming and loving personality (well diversified, proven track record and consistent returns).

Interested to know how to find Ms Right? Or are we avoiding a relationship with Ms Right because we won’t risk broken hearts (suffering losses)? For the relationship to work, there are some basic ground rules:

1) Know the purpose of your investment. Are you investing because everyone is making good returns and you feel left out? In this case, you might be investing on the wrong basis.

2) Then, establish a timeframe for your investments. Do you need the money in the short to medium term? If yes, then investing might not be for you.

Investment returns can be volatile over shorter periods. However, for the longer term, say four to six years, the returns from investments might very pleasantly surprise you.

3) Next, a proven strategy is essential. For example, dollar cost averaging, putting in regular investments, setting profit and loss target levels. At which point perhaps do we need to realign our portfolio? What about creating a suitable portfolio that caters for the amount of risk you can handle and looking out for opportunities during crisis periods?

4) Lastly, are your investments reviewed periodically? That does not mean daily, weekly or even monthly reviews. A six-monthly review can ensure our investments stay the course and are aligned to our goals.

A successful relationship with Ms Right needs nurturing, commitment, and constant input and feedback.

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China Steps In as World's New Bank

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Thanks to China, Christine Lagarde of the International Monetary Fund, Jim Yong Kim of the World Bank and Takehiko Nakao of the Asian Development Bank may no longer have much meaningful work to do.

Beijing's move to bail out Russia, on top of its recent aid for Venezuela and Argentina, signals the death of the post-war Bretton Woods world. It’s also marks the beginning of the end for America's linchpin role in the global economy and Japan's influence in Asia.

What is China's new Asian Infrastructure Investment Bank if not an ADB killer? If Japan, ADB's main benefactor, won't share the presidency with Asian peers, Beijing will just use its deep pockets to overpower it. Lagarde's and Kim’s shops also are looking at a future in which crisis-wracked governments call Beijing before Washington. 

China stepping up its role as lender of last resort upends an economic development game that's been decades in the making. The IMF, World Bank and ADB are bloated, change-adverse institutions.  When Ukraine received a $17 billion IMF-led bailout this year it was about shoring up a geopolitically important economy, not geopolitical blackmail.

Chinese President Xi Jinping's government doesn't care about upgrading economies, the health of tax regimes or central bank reserves. It cares about loyalty. The quid pro quo: For our generous assistance we expect your full support on everything from Taiwan to territorial disputes to deadening the West’s pesky focus on human rights.

This may sound hyperbolic; Russia, Argentina and Venezuela are already at odds with the U.S. and its allies. But what about Europe? In 2011 and 2012, it looked to Beijing to save euro bond markets through massive purchases. Expect more of this dynamic in 2015 should fresh turmoil hit the euro zone, at which time Beijing will expect European leaders to pull their diplomatic punches. What happens if the Federal Reserve’s tapering slams economies from India to Indonesia and governments look to China for help? Why would Cambodia, Laos or Vietnam bother with the IMF’s conditions when China writes big checks with few strings attached?

Beijing’s $24 billion currency swap program to help Russia is a sign of things to come. Russia, it's often said, is too nuclear to fail. As Moscow weathers the worst crisis since the 1998 default, it’s tempting to view China as a good global citizen. But Beijing is just enabling President Vladimir Putin, who’s now under zero pressure to diversify his economy away from oil. The same goes for China’s $2.3 billion currency swap with Argentina and its $4 billion loan to Venezuela. In the Chinese century, bad behavior has its rewards.

If ever there were a time for President Barack Obama to accelerate his "pivot" to Asia it's now. There's plenty to worry about as China tosses money at rogue governments like Sudan and Zimbabwe. But there’s also lots at stake for Asia's budding democracies. The so-called Washington consensus on economic policies isn't perfect, but is Beijing's model of autocratic state capitalism with scant press freedom really a better option? With China becoming Asia's sugar daddy, the temptation in, say, Myanmar might be to avoid the difficult process of creating credible institutions to oversee the economy.

There could be a silver lining to China lavishing its nearly $4 trillion of currency reserves on crisis-plagued nations: It might force the IMF, World Bank and ADB to raise their games. Competition, as Lagarde, Kim and Nakao would agree, is a good thing. But more likely, China's largess will encourage bad policy habits and impede development in ways that leave the global economy worse off.

Iskandar’s plunging fortunes

Iskandar’s booming property market has come crashing down this past year. Cooling measures implemented by the government, coupled with chronic oversupply, declining demand as well as controversial land deals have cast storm clouds over the economic hub. (Source : Kinibiz)

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This has been a year to forget for the Iskandar economic region in Johor.

After much lauded growth in the last five years, led by a robust property market, cracks began to show in Iskandar this year. Bullishness about Iskandar’s property market has been replaced with a more cautious, sometimes even bleaker outlook.

What is causing this dwindling optimism about Iskandar? For a start, the numbers don’t lie.

Alarming drop

country garden danga bay iskandar johor 2“In comparison to the first half of 2013, there was a drop of about 48% in terms of total transactions in the same period this year,” said V Sivadas, executive director of PA International Property Consultants based in Johor Bahru (JB).

That is an alarming drop in sales by any standards. The fact that it is happening just when Iskandar seems to have picked up momentum in the last few years has rattled the market.

According to Sivadas, this decline is across all sectors of the property market in Iskandar.

“Our records indicate 5,419 total transactions in the first half of this year at a value of about RM3.7 billion. In comparison with the first half of 2013, there was a drop of about 48% in terms of total transactions and about 37% drop in terms of total value of transactions in the first half of 2014,” said Sivadas who based his analysis on available records of properties sales within Iskandar Malaysia.

According to Sivadas, 2013 was the peak of the Iskandar market in terms of number of transactions (25,034 transactions) and total value of transactions (estimated RM20.3 billion — excluding the controversial RM4.5 billion land sale by the Johor Sultan to Guangzhou R&F). In comparison, there were 21,503 transactions in 2012, at a total value of about RM13.5 billion.

The 20-year project is spread across a sprawling 550,000 acres and divided into five flagship zones in Johor and has experienced exponential growth. It is designed to rejuvenate JB and position it as a major regional economic hub. It is targeting between RM20 billion to RM22 billion in investments targeted yearly until 2025.

Although Iskandar consists of several designated zones, property development has arguably fuelled its remarkable growth in recent years. Major property developers, both local and foreign, have flocked to Iskandar in the last five years to ride the wave of Iskandar’s property boom.

It’s not that the well has run dry for Iskandar. Recently, Prime Minister Najib Abdul Razak announced that Iskandar has attracted close to RM25 billion worth of investments this year, adding up to a total of RM156 billion investments secured for the region since its inception in 2006.

Supply outrunning demand

Country Garden Holdings Co Ltd at Danga BayFor many observers, the root cause of the slump this year has simply been supply outrunning demand in Iskandar.

Even as early as January this year, it was reported that purchase bookings of new property launches in Iskandar were already down 20% to 30%. Several other factors have contributed to the cooling down of the Iskandar property market.

Last year, the federal and state governments moved to check an overheating property market nationwide. An increase in Real Property Gains Tax (RPGT), hiking minimum property purchases of foreigners from RM500,000 to RM1 million and a property levy of 2% for foreign purchases in Johor were all implemented to clamp down on speculative buying.

All of these measures slowed down the market considerably this year, Iskandar included.

Market observers have also cautioned that the influx of big Chinese developers, such as Country Garden and Guangzhou R&F, into Iskandar could backfire. Although they have brought in much needed investments, the massive scale of their launches have analysts worried about a potential oversupply or overhang in the market.

Country Garden launched 9,000 units of the Danga Bay development in 2013, a scale that was unprecedented in the Johor market. Guangzhou R&F’s development on the 116 acres it bought from the Johor Sultan is set to dwarf Country Garden’s project.

It has also been reported that Guangzhou R&F is planning to launch a staggering 30,000 units in the next few years.

Chinese invasion

These mammoth developments and launches by the Chinese developers in Iskandar have sparked genuine fears that a severe oversupply of high-end units will drag down the Iskandar region for years to come.

“Most of Country Garden’s and Guangzhou R&F’s properties are premium priced. Very few ordinary JB residents can afford them. If the Singaporeans stop buying, they will be in deep trouble. I feel their sales are already suffering, although no official figures have been released,” said Andy Mohan, a property agent in JB.

Even major local developers have not been spared the impact of the Chinese invasion in Iskandar.

Last August, UEM Sunrise slashed its annual sales target by 40% due to poor second quarter (2Q14) results, partly due to poor take up of new its launches in Iskandar.

UEM Sunrise’s new chief executive officer Anwar Syahrin Abdul Ajib has also said that the company will “re-strategise” its position and reduce its dependency on Iskandar, where it has approximately 60% of its total land bank.

The fact that UEM Sunrise, one of the biggest developers in Malaysia and master developer of Nusajaya, one of the designated zones in Iskandar, is feeling the pinch and re-evaluating its business its Iskandar is a telling sign that all is not well in Iskandar.

HfW - When the Market Gets Scary

You really can't time the market — this time isn't any different!

This past Friday, the Dow Jones Industrial Average closed at 16,544. That's about 100 points higher than its close on January 2, the first trading day of the year.

Yes, the stock market is higher today than it was nine months ago.

That statistic might surprise you. After all, over the past couple of weeks, the stock market has been gyrating. The Dow fell 273 points last Tuesday - and then rose 275 points the next day. How can anyone make any sense out of that?

You can't - so don't even bother trying. That's why we instead focus on the long-term. Markets always react in the short-term, so it helps to remind ourselves that the stock market is higher today than it was two years ago, and it's ten thousand points higher than it was six years ago!

The market is now 10,000 points higher then it was in 2008!

But many people aren't focusing on that. They are worried about the economy in Europe, unrest in Ukraine and Hong Kong, threats from ISIS and, of course, Ebola. The media tend to overstate the bad news and underplay the good news - like the fact that unemployment is at the lowest level since 2007, mortgage delinquencies are at their lowest level in six years, the manufacturing index is at higher levels than it was prior to 2008 and U.S. auto sales are poised to set an all-time record this year.

And that's why we're writing to you today. We want to reassure you, and remind you that we've all seen this movie before, as our letter to you in August noted. Yes, stock prices since then have indeed been going down - but that's part of what stock prices do; the other part is that they also go up. And history tells us two things: After every down period, there's an up period, and every up period is larger and longer than each preceding down period, as the accompanying chart shows. Every down period, therefore, has proved to be a great time for you to add to your long-term portfolio.

Perhaps you're not convinced - maybe because Ebola is dominating the news lately. If that seems like scary stuff, it might help to put it into context. Before you ever heard of Ebola, the news was filled with stories about Mad Cow Disease. Before that it was SARS. Before that, Avian flu, and before that the "swine" flu. In 2011, stories warned that the Mayan calendar predicted that the world would end in 2012. Before that, of course, was Y2K.

There's always something out there that the media say is imminently going to cause our destruction. As comedian Alonzo Bodden said, "Weren't we all supposed to be dead by now? I don't know about you, but I stopped paying my bills."

His point is well taken. We mustn't let ourselves get upset by the latest headlines of doom. Experts in behavioral finance call this catastrophizing. We humans tend to take a piece of information and automatically assume the worst, filling ourselves with such fear that all rationality leaves us.

Your long term goals are what matter!

It's important that we stay focused on our long-term goals. If you have an effective strategy to achieve your long-term financial goals - and as our client, you do - all you need to do is stick with that strategy. It's as simple as that. Rest assured that we are monitoring your account daily, maintaining extensive diversification for you to help control risk and, as opportunities arise, we're exploiting the market's volatility to rebalance your account.

Of course, if something has changed in your life that might require alteration in that strategy (including a change in marital status, employment, income need, health or risk tolerance), please tell us. Otherwise, you can ignore the headlines with confidence.

And when you come upon others who express worry or fear, you can invite them to contact us, so we can help them obtain the same quiet confidence that you enjoy. We're happy to help your friends, family and colleagues, too, if they need our help. And if they're worrying, they really should call us.

As should you — anytime you have any questions or concerns.

As always, we'll continue to monitor your accounts and keep you informed.

Regards!

Ric Edelman
Chairman and CEO

David Bach
Vice Chairman

HfW - Where are you?

At some point in life you will need to financially plan for your well being. So where are you now?

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HfW - Food for Thought

Some food for thought for all walks of life.

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HfW - I save up so I can....

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HfW – Mindset on Savings

‘I don’t need to save because I don’t see a need to yet’

‘What is savings?’

‘Why should I save up now? I am still single’

‘I have enough right now’

‘How can I save up when I don’t have enough to begin with?’

‘Savings? I have not thought about it’

These are some of the statements you often hear when one talks about savings.

In my last post, I asked if you started saving as much as $100 a month, how much would that be in 10 years?

With savings of $100/month, that translates to $1,200/year. That amount if rightly invested would yield you the following :

$21,037 (Year 10)

$41,940 (Year15)

$75,603 (Year20)

Many are not aware of this as they think saving up $100 a month is totally insignificant.

Well, that is absolutely not true. I will write more about it in my later post.

Coming back to the topic at hand, I have spoken to many people from different age category. They can be split into 4 major categories :

Age 22 – 28 : Don’t need to save up. Shall save later when I see a need to.

Age 29 – 35 : Need to begin saving. Some know how to save, some don’t know how to begin with.

Age 36 – 45 : Definitely must save. Some already have proper savings plan

> Age 46 : Yeah there is a savings plan for my future – retirement, children, etc.

I have been thru 2 out of the 4 age categories, and now I am in strolling in the 3^rd (Age 36-45) and I used to be like them.

When I was in my mid 20s I didn’t see a need to save. Everything was enough and self-sufficient. I understood what savings was and I understood a need for it but later. As like all those in their 20’s I saw a greater need to spend. Lol

Do you know why? The thrill in spending, that’s why.

If saving was like spending just like how you would spend a $100 on CDs, gadgets and other useless stuff, then savings would also equally give you the same thrill. Unfortunately it doesn’t.

You just needed to spend to satisfy that lust of yours.

Fast forward 10 years later, you would still need to spend but on greater materials. The question then begs, where would you get the money then?

Well, had you saved up a $100/month 10 years ago, todate you will have on hand $21,037.

In my next post, I will share more about this topic and also a concerning one - the bankruptcy rate amongst our youth todate.

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Why am I here?

So what am I doing here with a new blog site?

In fact I started blogging in 2005 and my last blog post was July 2009.

Ever since moving back from Singapore to Penang in 2009, I have had a tough time trying to squeeze time to actually write a quality blog. So as time went by, I just gave up.

Many things both good and bad have come and gone by in the last 5 years. And now we are looking at the end of the Year 2014.

I do actually miss blogging – it brings out the inner me expressed so eloquently in words. Ah-hem!

Coming back to the purpose of the blog – it is called Health For Wealth.

The main intent is to create rigorous awareness about the importance of financial planning, saving up for the rainy days and how you set your money to work for you.

This site is dedicated to all walks of life, regardless of where you are, who you are or how old you are because one day it will just sink in and that I have actually told you so.

Given the trying times in your country and with the inevitable fact that economies these days are so uncertain, there is no harm giving in to ponder why savings or financial planning is so vital.

In my next post, I will share what  changed me to save up.