Kong Hei Fatt Choy

Wishing Everyone A Blessed, Prosperous, Healthy and Wealthy Chinese New Year 2015.

Let's Usher in the Year of the Goat.

Kong Hei Fatt Choy

Check out what GST has in store for you!

I believe many have seen this of late. Yeah I know I have been slow in updating my blog of late.

Anyways, this applies to Malaysians effective April 1st 2015.

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Utilising EPF savings do nothing to help those in debt

How about living within your means instead of borrowing money so you can lead a lavish life you can ill afford and which will plunge you into further debt?

Source here

I refer to Hafidz Baharom’s piece, “Time to really help individuals in debt”. I must say there are many points on which I disagree with him. I do agree that many people, especially the young, are in debt. However I disagree that using their EPF savings or giving them more loans is the way out of it.

For goodness sake, EPF is not a magic wand to solve all our financial woes. Over the years we have allowed EPF withdrawals to buy houses, computers, invest in unit trusts and for medical treatment. Now we even want to use EPF savings for credit card debt settlements?
If we continue with this trend, there will be nothing left for retirement. Please, are you fellows expecting the government to come to your rescue when you are old and tattered and with nothing in your savings account?

Frankly, I am quite tired of hearing ways and means to try to get people out of debt. We should first ask why they are in debt. Should we not be addressing this and asking what can be done to avoid falling into debt?

Debt is an “income-expenditure” issue. If our income is too low, we either find ways to increase our income or reduce our expenditure by changing our lifestyle.

We simply should not borrow money to sustain our lifestyle. If we do that, we can never get out of our debt. In fact, our situation can only get worse. Even if EPF withdrawals are allowed, in no time the savings will be all gone because our income and expenditure “equation” would have remained unsustainable and untenable.

Despite slow income growth among many Malaysians, I believe many incidents of debt are due to poor financial discipline, lack of education in financial management and unsustainable lifestyles.

Many cannot differentiate “needs” from “wants”, the essential from the non-essential and the important from the unimportant. Herein lies the genesis of their problems.

You be the judge if I say it is not necessary to borrow excessively just to get married (i.e. to spend on the elaborate ceremony). It is also not necessary to change your handphone every year; eat in fanciful restaurants every week; or go for holidays every year. Worst yet, is to borrow to go for holidays or to buy branded goods.

Being frugal is not a sin, more so if your income is small. Wake up a little early. Packing a homemade lunch before you go to work is one good way to save on food costs. Bring along boiled water from home. These measures not only help you save, they are healthier options too. Quit smoking and drinking alcohol. These are expensive addictions which eat up a big chunk of your income and they have brought you nothing good in return. Please don’t argue that smoking and drinking help ease tension. No, it doesn’t; it only adds to your financial woes and wrecks your health in the process.

I know what some of you are thinking – life would be so boring and meaningless. But then it is far better to be debt free than being chased after by creditors day and night.

Lifestyles must be based on affordability. Delaying gratification is a virtue. Everything has its time. There is a time to sow, there is a time to reap.

Hafidz Baharom, please don’t preach adventurism here.

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Unit Trust Funds - The type of Investment for you

Source here

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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10 Things To Consider Before You Hit Retirement

Point 6,7 and 9 are reasons why you need to start investing in mutual funds for long term investment.

Source here

You have been working your whole life, saving for your retirement. Most of us have millions of ideas about what it’ll be like when it finally comes to the moment where we break away from the 9-to-5 rut. However, with a few more years to go before the day finally arrives, it’s time to take serious action, and get things in order for your golden years ahead.

Most of us would want to achieve financial freedom by then and having not to worry about money any further. To ensure everything is in order when your last conventional pay cheque comes your way, here are 10 things you need to do:

1. Decide on your goal

Many a times when we plan for our retirement, we don’t have a clear picture of how we really want to retire. Do we want to retire at a small and quiet village, outside of town, or perhaps stay in a small(ish) condominium in town, where everything is within walking distance?

By this time, with just a few years to your retirement, you should really have a clear idea whether you want to upsize or downsize your lifestyle post-employment.

The first question you ought to ask yourself is what you want after you retire. Travel around the world and eventually, retire at one of the Caribbean islands? Whatever your goal is, you need to align your retirement plan towards achieving it.

2. List down your obligations

Before embarking on your adventure after retirement, you should consider any financial obligations you may have that can adversely affect your finances after employment.

Do you still have dependents (parents or children) you have to support even after you retire? Will your child(ren) still be in college, with hefty tuition fees coming your way every few months?

How about your lifestyle? If you have planned for your retirement optimally, you should not have to downsize your lifestyle too much. The key word here is sustainability. You should have a clear idea of how much you need every month during your retirement, and how long your retirement fund will last.

3. Clear your debt

Ideally, you should have cleared all your debts before you hit retirement. By clearing your debts, you improve your net worth and credit rating which might be helpful should you need to take another loan in the future.

Credit card debts are usually the first priority to be cleared off due to its high interest rates, followed by personal loans and car loans. There has been an ongoing debate on whether home loans should be cleared off sooner than needed for the peace of mind of being debt-free. If you think paying off home loan last is a better idea, perhaps you should look into the option of refinancing your mortgage.

Currently, Malaysia’s base lending rate is at 6.85%. Comparing with the historical rates, it might seem to be a little high too high to refinance your mortgage. But consider this: after retirement, you’ll lose your primary source of income (for some, only source of income) and your ability to take up a new loan diminishes.

If you have to refinance your mortgage by then, banks might quote you a higher rate, require a guarantor, or simply reject your application. Perhaps it might be a good idea to lock in a fixed mortgage rate to avoid being exposed to interest rate volatility in times of economic uncertainty.

4. Preserve your assets

When we are still earning an income, we mostly focus on accumulating assets. However, when retirement hits you, more focus should be put on preserving your existing assets.

A person may own multiple properties and be worth millions of Ringgit, but he or she may not be able to even afford lunch! In finance, two terms arise: solvency is the ability to meet its long-term ( more than two  years) financial obligations, and liquidity is the ability to meet short-term (less than two years) obligations by converting assets quickly into cash.

In other words, how we preserve our assets depends on our ability to sustain our short-term needs (daily expenses and outflow) without needing to liquidate (force sale) our assets. Consolidating your assets by consulting wealth management and financial planning advisories may be a good idea to have clearer view of your current financial health and have more control in monitoring and preserving your assets.

5. Create or update your will

To prevent your family from exploding into those family feuds infamously depicted in Hong Kong soap operas, updating your will (or create one if you don’t have one yet) is essential. Jokes aside, it is important to have estate planning so that you can be assured that your family is being taken care off  in the manner of your preference.

Having a will doesn’t just ensure your hard-earned assets are distributed properly and rightfully, according to your wishes, it also helps your family go through the process quicker and with greater ease. Remember, avoid hassles by having different wills for assets in different countries and jurisdictions.

6. Review your investment portfolio

As you retire, you would require a substantial steady stream of income to replace your previous conventional income that takes care of your daily expenses and other obligations.

As result, your capacity or holding power of your investment is limited. Perhaps toning down your investment appetite from aggressive high capital growth equities to a more conservative and passive, dividend paying funds such as bonds or government securities might be a good idea. Reviewing your risk tolerance is essential to sustain good cash flow and preserve your assets.

Here are some financial mistakes you should avoid before you hit retirement.

 7. Establish passive income

If the retirement you envisioned for yourself is one where you stop working completely, it becomes even more crucial for you to establish at least one source of passive income, which will be your new primary source of income.

As an alternative to your investments, you can also create another stream of income by working part-time or taking up freelance jobs. For those who have years of professional work experience, they can opt for consulting or an advisory role to other firms or institutions – this may not exactly be ‘passive’ but if it’s something you enjoy doing, it wont feel like a job for sure!

Setting up a mamak or a sundry shop as a small business might also be a good idea (seriously, mamaks rarely fail and typically have healthy profit margins).

8. Healthcare

The unfortunate thing with healthcare is that it becomes more expensive the older we get. Most people give up one their medical card due to the exorbitant price they have to pay — especially in view of the diminishing income after retirement.

Therefore, it is important for one to have a clear idea of their health and fitness level before they hit their golden years. Prevention is certainly better than cure.

Find out if you have any medical conditions that may require substantial amount of money to finance, especially when healthcare cost is escalating to the tune of 12% per annum. Maintain your medical card, review the policy to ensure it is adequate, then set up a budget for rainy days, that could include medical emergencies.

9. Withdraw your EPF

Should you withdraw everything or should you withdraw a set amount regularly? Prematurely withdrawing and depleting your EPF, even if you can, may bring adverse effect to your retirement savings. Unless you have a strong reason or solid financial plan to invest elsewhere that could potentially provide better returns, EPF should be remained untouched and used as a last resort as this will be retirement fund  for the next 10 to 20 years.

If you don’t think your EPF savings enough is adequate to outlive your retirement years, you can consider withdrawing some of the money for selected investments.

10. Continue working

Retirement is really just a phase that everyone goes through. According to the Life After Work survey conducted by HSBC, 22% of Malaysians plan to semi-retire because they need to bridge an income shortfall.

Review your retirement savings before your retirement to have an understanding of whether you stand financially post-employment. Will you be able to live comfortably on that savings, or do you need to continue working to generate income for your golden years?

For some, the idea of not doing anything for next one to two decades may not be conceivable at all! However, the point is to plan for your retirement so semi-retirement is an option and not a means to survive.

We need to start retirement planning as early as possible in order to have a comfortable retirement in years to come. However, planning your retirement is not just about saving money religiously, but also about making the right decisions at the right time to boost your savings.

These 10 steps should be done just a few years before you retire. This will still give you some room to make up for any shortfalls.

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Why You Should Never Accept A Counter Offer When You Resign

Thought of sharing this piece below. Source here

It was a moment in my career that I will never forget. I had accepted a new job at a different company and when I went into my boss’s office to quit, with resignation letter in hand, he offered me a higher salary if I would remain in my current job.

Even if you think this would never happen to you, it is best to prepare in advance so you’ll feel comfortable with your response, which should always be: “No, thank you.” Surprised that I’m telling you to decline your manager’s counter offer? Here’s why…

If you followed the process I explained in a previous blog (Job Seekers: Consider This – Before You Change Jobs) – to analyze the reasons WHY you want to change jobs – then you’d already have identified the issues that were within your manager’s or your ability to control. And you’d already have worked through ways of fixing those issues.

If you felt you were underpaid, you’d have asked your boss for a raise.

If you were bored in your job and wanted more challenging work, you would have discussed this with your manager and asked him or her to assign you to projects or tasks that will broaden and deepen your work experience.

If a lengthy commute was lowering the quality of your life, you’d have negotiated to work from home a few days a week.

Whatever the reasons were for wanting to change jobs, you would have analyzed them and made every attempt to fix the issues that were possible to fix. So what does that leave you? Issues that weren’t fixable – the deal-breakers. They were the reasons you went out and found a new job that better fits your career requirements or goals. So why would you suddenly want to stay in your job just because your boss offered you more money?

If you previously couldn’t get a raise from your boss when you provided proof that you are underpaid, ask yourself: “Why is my manager offering me a raise now that I’m resigning?” If you weren’t valuable enough to be given a raise before, why would your boss be willing to give you more money now? Most likely, it is not because you’ve suddenly become a more valuable employee. It’s because your manager doesn’t want to deal with the work disruption your departure could create.

Let me state that one more time to be sure you understand… it is not because you’ve suddenly become a more valuable employee. It is because your manager doesn’t want to deal with the work disruption your departure could create.

Don’t waiver on your decision to change jobs. You took the time to identify your reasons for leaving. You worked to fix all the issues that were within your control. There were issues that weren’t fixable and these were your deal-breakers. Because you couldn’t change the deal-breakers, you found a new job that was a better match to your career goals and aspirations. Don’t let your ego or feeling flattered that you’re being offered more money cloud your judgment or cause you to make a bad decision. You already did your homework, so feel secure about the process you went through to seek a different job.

If you begin to second-guess your acceptance of the new job and consider accepting your manager’s counter offer, think about what else would change if you stayed (besides receiving more money). Review each of your reasons for wanting to switch jobs and take an honest look at your deal-breaker issues. Will they somehow magically disappear if you accepted the counter offer? Nope. So look your boss in the eyes, smile nicely, and say “No, thank you” to that counter offer.

~ Lisa Quast, author of award-winning book, YOUR CAREER, YOUR WAY!.  

IPO setback for 1MDB? Chief exec replaced

Source : The Star Online

PETALING JAYA: 1Malaysia Development Bhd (1MDB) will be welcoming its third chief executive in a space of just over five years since it was established, as the government-sponsored investment fund struggles to complete the submission of the listing of its energy unit.

Malaysian-born, Dubai-based banker, Arul Kanda Kandasamy (pic), will replace 1MDB chief executive Mohd Hazem Abdul Rahman, who was appointed to the post in August 2012.

1MDB chairman Tan Sri Lodin Wok Kamaruddin announced the appointment of Arul Kanda as president and group executive director of 1MDB with immediate effect and described the change as “part of a transition plan”.

“The board also announces that 1MDB will be undertaking a strategic review to explore and determine a course of action that will allow the company to maximize returns for all of its stakeholders,” it said.

1MDB, which was supposed to complete the submission of its energy unit in December last year, did not eloborate on what it meant by the investment fund undertaking a “strategic review”.

“1MDB will update the market on the outcome of its strategic review in due course,” according to the 1MDB statement.

Bankers said 1MDB’s initial public offering (IPO) of its energy unit had been submitted to the Securities Commission (SC) last month, but was incomplete.

“The submission is incomplete, and hence, the authorities cannot proceed to process the application,” said a source.

1MDB’s listing of its power-generation unit, which has been touted to raise US$3bil (RM10.5bil), is crucial for the fund to pare down debts it accumulated to acquire power plants since 2012.

“Topping the list is a debt of RM2bil that the fund still owes Usaha Tegas Sdn Bhd for its purchase of the Tanjong power assets for RM8.5bil. The debt is supposed to be extinguished during the IPO, but the IPO has been delayed,” said a banker.

During the IPO, Usaha Tegas has the option of converting its debt to an equity stake in the listed company a few years down the road.

Investment bankers do not rule out “issues” with regard to the amount owed to Usaha Tegas as holding back the completion of the IPO.

“It should be Arul Kanda’s top priority,” said an investment banker.

Arul Kanda said he was pleased to be joining 1MDB at this important juncture.

“As the company’s new president, my first priority will be to undertake a comprehensive strategic review of its operations, while ensuring we derive value from the high-quality energy and property assets in the company’s portfolio. I look forward to working with the rest of the 1MDB team as we begin this journey, and am confident that we will achieve the right outcome for the company and its stakeholders.”

Rumours of Hazem’s resignation have persisted over the last two months, where 1MDB had previously refuted queries posed by StarBiz. The reason for Hazem’s departure was not provided by 1MDB.

Critics have often taken potshots at 1MDB for putting its money, including US-dollar debt papers, and parking it with little-known funds outside Malaysia when nearly all its projects and operations are in the country.

Lodin had in the past responded to the criticism, stating that it was normal for funds to undertake such practices.

Arul Kanda, 38, hit the Malaysian corporate scene in 2009 when he was appointed non-independent, non-executive director of RHB Capital Bhd representating Abu Dhabi Commercial Bank (ADCB) that had a stake in the bank. He held the position until the bank sold its stake to a sister company also owned by the Abu Dhabi Government – Aabar Investments PJSC – in 2011.

A graduate from the London School of Economics with a distinction in corporate and commercial law, Arul Kanda has held several positions in the investment banking division of ADCB since July 2008. Before that, he was head of Islamic Financing Solutions at Barclays in London and director of capital markets at Calyon in London and Bahrain.

Aabar still holds a 21.2% stake in RHB Cap.

Arul Kanda’s appointment comes as the market awaits development in the listing of 1MDB Energy that was slated for the first quarter of this year.

1MDB had struck up deals with the Usaha Tegas group and International Petroleum Investment Company PJSC (IPIC) for the RM4.29bil purchase of the Tanjong and Genting power plants, which eventually led to it getting three other power plant projects from the Government.

In 1MDB’s latest annual report, it was stated that 1MDB had incurred a goodwill of RM2.6bil for the acquisition of the power plants.

IPIC is the parent company of Aabar and also a major shareholder of ADCB.

During the purchase, 1MDB also issued US$3.5bil debt papers in two tranches of US$1.75bil each. The papers were issued by 1MDB Energy Ltd and 1MDB Energy (Langat) Ltd. The US-dollar debt papers were secured by guarantees from IPIC.

IPIC came into the picture as it is believed that Usaha Tegas and the Genting group were not comfortable with guarantees from 1MDB, as it would have been perceived to be receiving favours from the Government. This is because 1MDB is wholly owned by the Government.

In return for the corporate guarantee from IPIC, 1MDB had given a 10-year option to Aabar to acquire up to a 49% equity interest in the Tanjong and Genting power plants when the energy division goes for listing.

1MDB’s annual report for the period ended March 31, 2014, said the fund had taken a bridging loan facility worth US$250mil (RM836mil) in May last year and that the proceeds were used to extinguish the options granted to IPIC. Some of the US$1.22bil (RM4.03bil) repatriated back to Malaysia from Cayman Islands has also been used for the settlement of the put option with Aabar.