http://biz.tSaturday April 17, 2010

Improving our financial well-being


A BETTER understanding of savings, credit and investments can help investors enhance asset accumulation and preservation.

Thus, Malaysians should seek information and assistance to better understand financial products and investment opportunities that could enhance their financial well-being.

" People must make the effort to engage their banks or financial advisors to obtain financial and investment information if they want their money to earn them better returns "- CITIBANK BHD INVESTMENT BUSINESS HEAD JEREMY HO
Citibank Bhd investment business head Jeremy Ho says the global economic crisis has created a new level of financial awareness.

Citing Citi’s Financial Quotient (Fin-Q) 2009 survey, he says 82% of respondents became more involved in their finances while 37% were spending less monthly compared with a year ago.

“When asked what they would do if they had extra cash, 53% of the respondents say they would invest in stocks, shares or unit trusts that had a higher level of risk but 48% say they would still choose savings and fixed deposits.

“This is reflected in the typical Malaysian investment portfolio of cash (42%), real estate (30%) and equities (28%), which indicates an aversion to risks. This is likely due to a lack of understanding and knowledge of investment options, financial markets and economic trends,” he says.

The Citi Fin-Q survey, which was carried out from January to October last year, showed that 64% of Malaysians wanted better returns on their investments.

Some 70% of respondents indicated they would like to “invest more” as their short, medium and long-term goal.

When asked what they would do with six months salary to invest, 42% of respondents answered they “know exactly” while 51% had a “good idea” what to do.

The survey also revealed that 74% of respondents knew how much they would need for retirement and were on track, but only 27% had a formal retirement plan in place. About 14% had an up-to-date will.

Based on the overall results in 11 key financial subject areas, Malaysia showed an improvement from an average of 51 points in 2008 to 53.5 points in 2009.

While the survey findings were generally encouraging, Ho says Malaysians should develop a deeper understanding of the basics of investing.
“The global financial crisis has been a wake up call for many. The Fin-Q scores were generally higher and there is an increasing awareness on the importance of financial planning. More than two thirds of the people surveyed want better returns on their investment as they want to better manage their finances and be more financially independent.
“The key to making successful financial decisions lies in having a strong foundation in the basics – budgeting, saving and investing wisely. People must make the effort to engage their banks or financial advisors to obtain financial and investment information if they want their money to earn them better returns,” he says.

The annual Citi Fin-Q survey comprised 500 online interviews of 40 questions each with the purpose of determining the level of understanding among Malaysians about their personal finance and financial practices.
This is the third year the survey has been carried out in Malaysia and in key markets in the Asia Pacific region.

For more information in planning your retirement or information regarding financial planning go to
3 Major Money Mistakes that Can Cost You

February 10, 2010
By: Ann-Marie Murphy

Everyone makes mistakes, or so my mother tells me. But when it comes to making mistakes with your money, it can cost you.

Avoid expensive mishaps by being in the know, particularly when it comes to your credit score, home loan and rainy day fund:

Ignoring Your Credit Score

Your credit score has never been as important as it is now. It’s not just about qualifying for the best interest rates and terms on credit cards, auto loans, private student loans and home loans anymore. It’s about qualifying at all.

For example, just a couple months ago, you needed a 580 credit score to qualify for home financing. Now, your score needs to be north of 620. And that’s just to get your foot in the door. To qualify for the best mortgage interest rates and terms, you’ll need a 720, according to Bob Walters, chief economist for Quicken Loans.

Another common money misstep is credit score procrastination. If you wait until you need to borrow money to get up to speed on your credit, it may be too late. Making big improvements to your credit score can take many months depending on your situation.

Luckily, it’s never been easier to access your credit. With new sites like, you can get your hands on your credit report and score for free, no strings attached. Plus, credit improvement tools are now available online to help you make improvements so you’re in a good spot should you need to apply for financing.

Neglecting Your Home Loan

If you had $100,000 to invest, would you monitor your investment? Would you check in regularly to make sure your money is in the right place? Would you consult with a financial adviser to update you about market moves and new investment opportunities?

If you’re like most Americans, your home is your largest investment. So treat it that way! If you’re not into monitoring daily mortgage rates, find a trusted home loan expert who will do it for you. Or sign up for free Rate Alerts that automatically notify you when interest rates dip. Or use home loan comparison tools that will show you how your mortgage stacks up against other available loan programs.

By being in tune with your home loan, you’ll know when it’s the right time to refinance. And refinancing can potentially help you to achieve greater financial flexibility and freedom with lower monthly payments, different loan terms, high-interest debt-relief and cash-out options.

Ill-Preparing for a Rainy Day

With a national unemployment rate just under 10 percent, many Americans are learning about the importance of a rainy day fund – the hard way. A rainy day fund, also known as an emergency savings fund, is meant to protect you from financial hardship should a little rain fall in your life, like losing your job.

In 2009, the average duration of unemployment was six months, according to the Bureau of Labor Statistics. As such, it’s smart to save up money to cover at least six months worth of expenses in case you lose your job, encounter a major home or car repair, or have unexpected medical bills.

In addition, don’t assume that creditors and lenders will be empathetic in your time of need. If you don’t have an income, you’re likely not going to find anyone to extend you credit or a loan.

Smart money management requires a regular effort. There are countless tools and tips online to help you navigate the personal financial waters, but ultimately, the responsibility is yours. Dodge costly money mistakes by giving yourself a regular money check-up. And if you do make a mistake, I’m sure mom would say, “Pick yourself up, dust yourself off and try, try again.”
7 Things about Money I Wish I Knew in My 20s

February 19, 2010

If only there was a mandatory class in high school or college to prepare students for the often-confusing world of personal finance – or at the very least, a crib sheet handed out at graduation listing all the common money traps that befall 20-somethings.

Unfortunately, most young adults find themselves on their own when entering the “real world” without guidance about money and how to manage it. It’s time to play Monday morning quarterback and review some of the basic money pitfalls that I – and a bunch of helpful folks on Facebook – wish we had known in our twenties:

Start saving for retirement as early as possible.

For most 20-somethings, the budget is tight and there isn’t a whole lot of room for extras. But when it comes to saving for retirement, allowing time for your money to grow is just as important as the money itself.

Consider this: Your money is worth more now invested than it will ever be. If you invest just $1 when you’re 20, it will be worth 1.75 times more than $1 invested when you’re 30, 3.5 times more than $1 invested when you’re forty and seven times more than $1 invested when you’re fifty because of the power of compound interest (assuming 8 percent rate of return and retirement age of 65).

What’s more is many companies will match your retirement contribution – That’s essentially free money! So start saving for the future now… Even if it’s just a little bit.

Don’t skip out on health insurance.

I get it – health insurance isn’t sexy. It’s not even tangible. But if you find yourself in the hospital without health insurance, you may be headed for financial ruin very early in life. If you’re not covered at school or by your employer, consider purchasing a health plan on your own. Some insurance providers offer plans designed for cash-strapped 20-somethings.

Live below your means.

If you went to college, you should be used to this lifestyle by now anyway. Why not extend the frugality for a few more years? Living modestly will allow you to save more money for your future. Consider living with mom and dad for a little longer, driving that jalopy for another year and avoiding new monthly bills for services you don’t really need.

Save early, save often.

When you’re barely scraping by, it’s tough to think about saving money. But having an emergency savings fund can help you avoid financial hardship in the event that you lose your job, encounter a major car repair or are slapped with a large unexpected expense. Keep in mind this is a totally different fund than your retirement savings. This one is for emergency purposes, the other is for your future and should be considered off-limits until then.

No one expects you to sock away thousands of dollars when you’re living on Ramen noodles, but even a small contribution can add up with time. Looking for ways to trim your budget so you can save more? Check out these 55 Money Saving Tips.

Just because you qualify for credit, doesn’t mean you need to take advantage of every offer.

You don’t need five credit cards and 10 retail store credit cards. I know it’s tempting to take advantage of those “10 percent off your purchase today” offers that retail stores throw at you, but those cards often carry high interest rates and fees. Now is the time to build your credit. Start with one card and pay your bill on time and in full every month.

Credit card balance transfers often cost more than they’re worth.

On more than one occasion, I’ve been swayed by tempting zero percent balance transfer offers only to get stung with outrageous fees. If you carry a balance on your credit card and are interested in taking advantage of a lower interest rate on another card, make sure you read the fine print. Often, balance transfers come with fees that cost more than the savings you’d get in return.

Avoid the slippery slope of debt.

In your twenties, you should be thinking about building your credit, not sinking it. Only charge items on your credit card that you can pay back immediately. And avoid only paying the minimum – If you get into this habit, you will be in debt for a long, long time.

It’s also important to only borrow what you need. Just because you may qualify for a large loan – whether it be a student loan, auto loan or home loan – doesn’t mean you should take on the full amount. Consider what you really need to get by and only borrow that amount.

Taking on too much debt, too early, is one of the most common money mistakes 20-somethings make. The freedom to charge whatever you want whenever you want is a tempting proposition. But when you finally come to and realize the error you’ve made, you may spend the rest of your twenties – and in some cases, the better part of your thirties – paying off what you owe. Don’t let this happen to you.

By avoiding many of the traps that 20-somethings commonly encounter, you’ll set yourself up for greater financial success. And at 30 or 40, you won’t have to wonder, “If only I knew then what I know now.”

For more tips about your home, money and credit, plus free tools to help you make the most of them – including a totally free credit report and free credit score – check out

By: Ann-Marie Murphy

Mind Over Money

In tough times, psyching yourself up to save is even more important. Here’s how:
By Jim Plouffe;

“But I can’t save any money.” It’s an excuse I hear a lot. Sometimes it’s a whine. Other times I detect a note of defiance. In the past few years, it has become increasingly frequent, as more and more of us make less than we spend, eating up the equity in our homes, while increasing our borrowing. Savings rates are declining. And the situation seems to be getting worse.

The question is: Why? Why don’t we make saving a priority? We certainly know that saving money – like eating broccoli and strengthening our core muscles – is good for us. In the latter cases, we listen. Yoga and Pilates have never been hotter. And broccoli now comes as a baby vegetable, precut and bagged, and even in purple. Yet saving for tomorrow is still a largely ignored and unappreciated skill. There are three reasons for this.

One: Saving today is harder. “If you’re having to spend a disproportionate amount of income on food and gas, it’s hard to save,” says Anthony Pratkanis, a psychology professor at the University of California, Santa Cruz, who specialises in financial issues.

Over in our part of the world, food and fuel prices have increased substantially, eroding much of the income growth we’ve enjoyed in the past few years. According to the UN Food and Agriculture Organization, food prices soared nearly 40 percent since last year. Meanwhile, crude oil prices have surged more than five-fold since 2002.

What’s worse, the prospect of still spiralling inflation amidst a current slowing global economy will make it more difficult for already strapped households to save.

Two: Credit became too accessible. For years it was simply too easy to get your hands on money to spend. Banks are eager to extend credit to you if you meet their requirements.

A financial cards study by Euromonitor International reported there were 580 million credit cards in circulation in Asia Pacific last year, a 54 percent increase since 2002. Correspondingly, credit cards transactions has increased 62 percent in the same five-year period.

Another study by the Bank for International Settlements, the bank for central banks, noted that many Asian countries such as Singapore and Malaysia, racked up a 200 to 500 percent increase in credit card usage volume, including the use of cards both to make purchases and to withdraw cash, between 1998 and 2005.

With such easy credit available, why save when you could get that big flat-screen TV today and pay for it with a simple swipe of plastic?

Three – and most intriguing: Saving is, was, and always will be no fun. “Saving money,” explains Jason Zweig, author of Your Money and Your Brain, “doesn't feel good.” Think about it this way: Choosing to save almost always means opting for delayed instead of immediate gratification. “You can buy a pair of shoes today,” says Zweig, “or have a nice retirement 20 years from now.” You’re going to buy the shoes because the pleasure of getting something good today is much greater than the pleasure of getting something good years in the future – even if the reward in the future is bigger.

IF IT’S NOT SHOES THAT make you go mushy inside, it may be technology, or rare books. But that’s not only an intensity you feel, it’s an intensity neuroeconomists can see. In recent years, this relatively new breed of experts in economics and neuroscience have started using MRIs to view the brain as it is making money choices.

When something we want to buy comes into view, they see the pleasure centre firing up as we get a feel-good dopamine rush. Similarly, getting a few dollars today is thrilling – more thrilling, in fact, than getting a slightly larger profit tomorrow. And if you have to wait a few weeks or months for that gain, it will have to be much bigger in order to arouse the same interest in your brain. Things way off in the future – like retirement – don’t jostle the pleasure centre much at all.

“HUMANS, LIKE MOST ANIMALS, have a strong preference for immediate reward over delayed reward. If you offer me $10 today or $11 tomorrow, I’ll probably say I’d rather have the $10 today,” says Zweig. Even bigger numbers don’t seem to make a difference. Financial experts routinely use what-if scenarios to try to encourage people to save more and at a younger age. You’ve probably heard that if at age 20, you put $100 a month into an account earning 8 percent interest, you’d have $527,454 at retirement. If you waited until you were 30 to begin, you’d have only $229,388. Yes, the examples are striking, but by Zweig’s logic, they probably aren’t very effective.

“A reward you get in the distant future has no emotional kick to it. It’s just an abstraction,” he says. “Even if you tell people you’ll have a million dollars 30 years from now, the brain doesn’t get it.”

Which, of course, is perfectly rational. “If tomorrow’s reward is based on promises – which retirement is – the people making the promises might be lying, they might not be around 20 years from now, your goals might change, many things could happen,” says Zweig. “So you have this automatic preference for an immediate reward. And that probably comes from our [hunter-gatherer] ancestors.” Back in those days, food was scarce. Given the choice of eating now or maybe eating more later, the cave folk who chose the latter very likely starved to death.

So the question becomes: Knowing what we know about our money and our brains, what mind games can you play to psych yourself into saving?

Visualise your goals. Let’s say you're 31 and you want to retire in 25 years. The key is to make the goal as concrete as you can, says Zweig. Pick your birthday circa 2033 as the day for your retirement goal. Then ask yourself, What do I want to do when I retire? Do I want a villa in Bali, a yacht to sail the seas in, or a paid-off mortgage? It’s different for everyone. But you’ve made retirement tangible: You have the date. You have the goal. Then you give it a name. It becomes “The Villa in Bali Fund.” You put a little Balinese music on your desktop, or cartoons of the beach – whatever reminds you of your goal. Put your account statements in a manila folder and decorate it with coconut trees.

Sound corny? Sure, but what you’re doing, Zweig says, is building an emotional environment that you can save in. All these things work together to motivate you, and then when you see the pair of shoes, it will be easier for you to say to yourself, This is a choice between shoes and Bali. Suddenly, you can leave the shoes in the store.

Rally your team. Use your friends and family as a way to discipline yourself. Tell them what your goal is, and ask them to remind you if you’re about to spend money on something you won’t need. (Tell them you won’t get cranky and will appreciate the help.) You can even do this on the internet. Dean Karlan and Ian Ayres of Yale just launched a website called, which lets you post your goal, notify your friends, and set up penalties if you fail. It worked for both founders, who lost a significant amount of weight by pledging a significant amount of money if they didn’t drop pounds. But you could also use it to build an emergency stash, increase your contribution to your retirement savings, or amass an education fund for your kids.

Break it down. Stephen Brobeck, executive director of the Consumer Federation of America, says that one reason many middle-income families don’t save is that they don’t believe they can come up with big enough sums of money to do it effectively. The fact is, he says, small amounts can be quite effective. Start with your change. “It sounds trivial, but we have story after story of people who accumulated hundreds of dollars that way, realised they could do it, and worked harder to get more,” he says. Then add an automatic transfer from checking to savings account every month.

Finally, recognise that the saving process is actually healing. It makes you feel better – a better person, a better spouse, a better parent – to know that you have something put away for your future. Says Brobeck, “You may have to make sacrifices in the short term, but you’ll feel so much better in the medium to long.

10 smart money-saving tips for 2010

By Greg McBride, CFA •

As consumers face an uncertain future in 2010, they will be looking to lower their costs, to save more for the future and to stabilize their financial lives.

Here are 10 money-saving tips to reach those not-so-lofty goals.

1  Start, or boost, your emergency savings account.
The biggest barrier to saving is not being in the habit of saving. The best way to get in the habit is to pay yourself first by directly depositing money from your paycheck into a dedicated savings account. This can be done concurrently with your goals of paying down debt or saving for retirement. You won't miss what you don't see, and putting your savings on autopilot is a great way to reinforce your money saving habit when unplanned expenses inevitably come along.

2  Get a high-yield savings account.

Once you've started to save, you'll need a place to put that money. There are three requirements in determining where to put your rainy-day fund: It must be liquid (meaning you can get to the money whenever you need it), it must be free of investment risk and you must earn a return that preserves your buying power against the erosive effect of inflation.

An FDIC-insured, high-yield savings account meets all three of these requirements. Check's search engine for the highest-yielding, FDIC-insured savings accounts available nationwide.

3   Find a free checking account.

Having the wrong checking account can take hundreds of hard-earned dollars out of your pocket every year. The average interest-bearing checking account charges a monthly service fee of $12.55 and requires a balance of more than $3,300 at a near zero rate of interest to avoid fees. Instead, look for one of the many accounts that charge no monthly service or per-transaction fees, and don't require a minimum balance. These free checking accounts have long been the hallmark of smaller community banks, credit unions and online banks. Check out's tips on avoiding fees and use the search engine to find a free checking account that meets your money-saving needs.
4   Track your monthly spending.

People hate to use the "B" word -- budgeting. Call it what you want, but you do need to get a handle on your spending. Doing so does two things: It helps you determine where you can cut back and helps maximize your money-saving efforts. Begin by tracking your spending for two months. Then use that information to build a realistic monthly spending plan. Finally, track all of your monthly expenses. At month's end, tally your spending against the plan and see where you did well and where you didn't
  Pay down high interest credit cards.

For many households, the best return on your money is to pay down credit card debt. Whether carrying balances at 12 percent or 22 percent, credit card debt is typically the costliest debt households have. Plowing excess cash into repayment of credit card debt is a double-digit, risk-free return because it reduces the outstanding balance and the resulting interest charges. This is a sound move now as credit card rates will only move higher over the next two years.

Use's debt pay-down calculator to develop a custom, month-by-month plan for repaying your debt.

6   Begin or increase contributions to a workplace retirement program.

While many employers have scaled back or suspended their matching contributions to workplace retirement plans, such as 401(k)s, this is not an excuse to suspend your own. Even if your employer is contributing at a reduced rate, it still represents free money. If they're not, the burden is on your shoulders.

Contributions not only reduce your taxable income now, but your investment goes to work immediately and grows without the headwind of taxes. The regular contributions made with each paycheck represent the best example of dollar-cost averaging, buying fewer shares when values are high but more shares when prices fall.

Another avenue is a Roth 401(k), in which your contributions are made with after-tax dollars but withdrawals in retirement will not be taxed, allowing you to keep your entire nest egg.

7   Make an IRA contribution.

If you or your spouse has earned income, you are eligible to contribute to an individual retirement account. Those under age 50 can contribute a maximum of $5,000 and those 50 and older can contribute up to $6,000. You can open an IRA with a bank, credit union, brokerage firm or mutual fund, and invest the contributions as you choose. With an IRA, you can choose investments that aren't available in your workplace retirement plan, such as commodities, individual stocks or certificates of deposit, giving you access to investment options that result in a more diversified portfolio.

A traditional IRA offers tax-deferred growth, while a Roth IRA offers tax free growth of retirement savings.

8   Convert traditional IRA to a Roth IRA.

The new year brings an attractive new opportunity. While the income limits restricting contributions to a Roth IRA remain, the income limit restricting eligibility to convert a traditional to a Roth IRA disappears. This means anyone wanting to convert some or all of their traditional IRA into a Roth can do so, regardless of income. It also means doing it in 2010 is especially appealing because the resulting taxes can be spread over 2011 and 2012. Even though the income limit on Roth contributions remains, you can contribute to a traditional IRA then immediately convert that traditional to a Roth IRA. This is a roundabout way of financing a Roth IRA, even if your income is too high to do so in a direct wayAs for the tax bill that results when converting a traditional IRA to a Roth IRA, it is vitally important to pay the taxes out of other assets, not your retirement assets. Save that money for your retirement.

9   Refinance into a fixed-rate mortgage.

Interest rates are at record lows, and eventually they will move higher, much higher. When that happens, the home financing place not to be is in an adjustable-rate mortgage that is subject to a rate reset.

Fortunately, this is entirely avoidable. Refinance out of an adjustable-rate mortgage and lock in a fixed rate while they are near record lows. Do this even if your adjustable rate mortgage won't reset for another year. Yes, you may trade away another year at 3.5 percent to 4 percent, but you permanently insulate yourself from the inevitable scenario of higher interest rates.

Homeowners who are upside down and can refinance through the Home Affordable Refinancing Program, or HARP, should move quickly to refinance as that program is scheduled to expire in June 2010.

Check out's free search engine to find the lowest fixed mortgage rates in your area.

10   Rebalance your investments.

Many investments have rebounded from their depths in March 2009, with the stock market up by more than 60 percent. Commodities, too, particularly gold and energy, have turned in strong performances. In other words, your portfolio may look much different than it did during the March lows. Such outsized performance by some asset classes can distort your asset allocation widely from its intended target. So rebalancing your investments back in line with your goals and risk tolerance is prudent. This also helps reduce the susceptibility of your portfolio to sharp market corrections.

Rebalancing is a good habit to undertake, but it is particularly important following a year of huge swings as we've seen in 2009.

This article is from the web below.
Walaupun tip-tip berikut merupakan pandangan penganalisa kewangan dari Amerika untuk orang Amerika, kita boleh adaptasikan pada kondisi kita.