Father Sez

From and to parents - parental advice to our children on personal financial management and life.
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Archive for October, 2008

Helping to set up my daughter’s monthly budget

Monday, October 27th, 2008

I have regretted not discussing personal financial management with my elder two girls during their younger days. By the grace of God they have both grown up to be quite financially responsible. They have not shown any signs of the “must have” mentality for designer jeans, fancy cell phones and the like. 

I realised my shortcoming ever since I started blogging and have started on the younger 3 children. They now operate on a monthly allowance + maintaining books of accounts of their spending. In addition they practice the “pay yourself first” principle by allocating 10% of their allowance for savings as soon as they receive get their allowance. (Our youngest, Ain, has a weekly allowance). 

Coming back to the elder girls. Along and Azah have completed their degrees and have started work. (Along has resigned from her teaching job. More on this later.  Azah works with one of the Big 4 firms).

This budget exercise was done with Azah. Over the last 3 months, she has kept track of her spending and now has an accurate estimate of her monthly outgoings. She has a single income, a once a month paycheck. Her net salary is banked into her account and she withdraws what she needs using an ATM card.  We worked out her outflows, the fixed once a month ones and the other daily outflows. The worksheet looked like this. 

1. Income  This is net of deductions made for the Employee Provident Fund, a statutory requirement under Malaysian Law, and a little also for statutory insurance.  

2. Savings. I have explained the concept of paying yourself first to Azah and she transfers 15% into her savings account. 

3. Rental (she rents a room near her workplace) 

4. Loan Repayment (she has a study loan as well as an investment loan. The investment loan was taken by me under name when she turned 18. The returns are almost sufficient for the monthly payments and there is a small top up). 

5. Food 

6. Entertainment (including her cell phone costs) 

7. Travel 

8. Miscellaneous 

Items 2, 3 and 4 are fixed monthly. At present she does the transfers monthly. I have talked to her to make these automatic bank transfers. I’ll have to check to see if this has been done.  

For items 5, 6 and 7, I have asked her to do withdrawals weekly and keep the money in separate envelopes in her room. Each day she’ll take the estimated amount for that day and keep the money in her purse for daily spending. The purse is “topped” up each day.  

Picture Credit: http://www.money3rd.com/financial-success-2.php 

I have talked to her about joining friends to eat at expensive restaurants. It is likely that some of these restaurants may be too pricey for her budget. In such a case, she just has to turn down the invitation. Perhaps it may seem to be shameful amongst her peers, but I have assured my daughter that there is absolutely no shame in this. It is far more shameful to live beyond one’s means.  

The balance in the envelopes and in her “salary bank account” each month should be  transferred into her savings account.  

I have not talked to her on her yearly expenses like insurance, her new clothes for Hari Raya etc. This year these costs have been in the Ma and Pa’s budget. In January 09, Azah has to start including these. 

I suppose my children are far luckier than my wife and I were when we were at her stage in life. My daughter already has an emergency fund (again, thanks to Ma and Pa) and she does not have to contribute to our household.  

I have not talked to her on investing etc, though she did attend a workshop on property investment earlier. I plan to do this sometime next year, by introducing her to my friends who are far more successful in various investment activities than her parents.   

Note: 

The envelope system seems to be a great way for a start into budgeting. A fair bit has been written on this subject. Have a look at

- Budget Building 101 - Creating a Budget Using the Envelope Method,

- Frugal Dad’s fine tuning when you have to take your envelope system on the road and

- the well written piece on this subject by guest poster Luke from NeoBudget on Gather Little by Little.   (NeoBudget is an online budget manager that uses the envelope method to help you track your spending habits and stick to a budget).

My two elder girls…….an update

Friday, October 24th, 2008

I last wrote about my two elder girls way back in July. My eldest girl Along had started work with an educational institute for children whilst the second, Azah had started with a Big 4 audit firm. The two offices are located at opposite ends of our Federal Capital, Kuala Lumpur which is about 60 kilometres from where we live. As it was not practical for the both of them to stay together we found rooms for them and thought that we would work out the staying together bit later. 

Along did not find the job to her liking and came back home. Her principal interest is in counselling, especially children, and teaching them did not work out the way she thought it would be. She has now found an assignment as an assistant to a counsellor. She found the lady through a blog and met up with her a couple of weeks before Eid. They both got along well and my wife and I have also met and have gotten to know this lady. Along is really looking forward to being involved in the counselling profession. 

The plus points are that the lady’s office is not too far from Azah’s office and also the University where Along plans to do her Masters in Educational Counselling.  So we have rented a house where the two girls will stay together and rent out the other rooms.

The house is within walking distance from Azah’s office so the transport issue for her has been resolved. It’s a little further from Along’s expected place of work and we have agreed that we will buy a car for her (used, of course).  

Last week the whole family checked out the house (which is unfurnished) and prepared a list of the basic furnishings and household items to buy. The dent in my wallet aside(this has to be discussed with the girls later), there is the fatherly fear of whether my girls would be safe and be “all right”. My wife is taking it a lot better (she is a great believer in independence). 

As I would be in Jakarta all this week, Along and my wife will be taking care of getting the house cleaned and furnished. And Insya’Allah the two girls will move in by the 1st November.  

(Should I or my wife set any house rules or should we just let the girls go with the flow? This will be a thought that will linger a lot in my mind over the next few days).   

Looks like our square foot garden project is still not worthy of a success post

Wednesday, October 22nd, 2008

It was in August that I posted an update on our square foot garden project. The prognosis was not that good. I did mention that though the house project did not work out well, we were about to launch something a little more ambitious.  

Well, we did and it turned out to be too ambitious and too successful! We parcelled out part of our goat farm for planting vegetables. My intention then was that the “fruits of our labour” would be for the consumption of Zai’s household, our Indonesian farm workers and our household. And we had vegetables in abundance……much too abundant.  

The farm is about an hour’s drive from our house, so it was not practical to drive down daily for vegetables. There were just too much for Zai’s household which consists of 5 adults and 3 young children.  Even Zai’s attempts at giving them away to his neighbours, was not that successful as being a rural community, almost everyone had their own square foot garden.  

garden-in-bm.jpg 

Picture shows the former spinach patch now being planted with the Napier cuttings. In the background is the patch for long beans, okra and maize. This will also soon be planted with Napier.

So we have cancelled this project and are converting the plots to grow Napier grass as feed for the goats.  

Meanwhile at our home front, the chilly plant on which I had placed hopes of meeting all our chilly requirements just died. (The late plant is the one shown in the picture.) This happened after we transplanted the plant from its pot to the ground. Apparently the soil along the edges of our house, where the plant was replanted was not that good. Now we are regularly throwing the poop from the rabbits on this part and hopefully the soil will be much improved. 

In the meantime, we are growing two more chilly plants in flower pots and hopefully they will fare better. The plants are still young. I hope that we get to eat something that we have actually grown ourselves.  

I must take my hat off to people like Frugal Dad and Lynnae who have done so much better.  The GRS household is in a class of their own. They have a GRS Garden Project and track the time and money they are spending to grow their own food. See their September report here. And Squawkfox deserves a special mention. She (with some help from her “better half” and her tried and trusted Tivo) had to contend with and overcome deer and gophers in her journey in growing her vegetables.

But rest assured that the Fathersez family has not thrown in the towel yet. 

A taste of cold turkey treatment …… a little at least

Monday, October 20th, 2008

Quite a bit has been written about internet addiction (a Google search turned up 4.9 million pages). Internet addiction seems to be ranked up there with other more punitive forms of addiction like gambling etc. 

To quote Louise Nadeau, a professor at Montreal University’s Department of Psychology:

“The problem isn’t widespread but we know of serious cases in which teenagers don’t leave the house, don’t have interpersonal relationships, and have been isolated in front of their computer screen for the past two or three years, and only speak in the language of the characters they play with in network video games,”   

 

And whilst I am not a teenager nor play any video games, it looks like I may be one of the characters the good professor is talking about.  Checking my mail, looking up the political blogs, reading the online news portals, and checking my blog stats 3 – 4 times a day sure seem sufficient criteria to put me in this classification of an internet junkie.  

To make us want to check the Net is a pull that is difficult to define. Certainly it is not important, much less urgent, yet there is this craving. I am a late starter. I think it was only in the late 90’s that I started using email etc. We were then in Ghana and not having phone lines in our house we had to use cyber cafes. So the use was not that prevalent.

When I returned to Malaysia in 2001, by then all office computers were hooked up and we were online all the time we were in the office.  Now we also have Internet at home. 

The following study by Kimberly S. Young of the University of Pittsburgh at Bradford on the same issue was published in 1996. So perhaps now the malaise is even more widespread and deeper rooted.

There have been times when I have gone without looking at the Net for a day or two. This is usually when I am traveling and the transit airports did not have facilities that were cheap. Perhaps the longest was the one week I spent in India when my mother passed away. Somehow I feel that week should not count. 

Now I want to purposely try a week without any connection with the online world.  I’ll be in Jakarta for the rest of this week. I’ll be coming back late on Friday night and on the Saturday we have a full day planned for visits to family and friends. I am going to Jakarta without my laptop (just swinging my arms like a tourist (as my old geology professor told a bunch of us after returning from a 3 day field trip)). So it will be about 6 days without accessing the Net.  I want to see how strong the pull would be.

I am confident that no important messages such as those requiring my services to resolve the world’s financial crisis or to settle the repatriation of the Nigerian princes untold millions in an African Bank will be missed as I’ll still have my cell phone with me.  

The only negative may be that my Reader Inbox will be overflowing and I may not respond to comments as soon as I should. 

Let’s see how this “semi medical” exercise goes.   

Note: 

No, my son and I are not at the above depicted stages yet. And we are sure we’ll never be. The pictures are from Google Images.

The Financial Meltdown – What should we do?

Friday, October 17th, 2008

No one (unless he /she is living under a coconut shell) can say that they are unaware of the major brouhaha that is currently going on all over the financial world. Banks closing, banks being taken over, stocks plunging, commodities plunging, fortunes lost etc. are daily headline news in almost all newspapers and news portals. 

What should we do about our holdings in the stock market?  

The conventional wisdom seems to be to just sit this through. And history seems to be in favour of this. I think for this wisdom to work, two important assumptions should be in place. One is that we made our stock picks very wisely in the first place and the second is that we have a long term time horizon on our stock investments. 

See PTMoney’s posting of a video of Mr. John Bogle seeking to calm our nerves and to stay the course. 

Another equally compelling school of thought says that we should never go against the major trend. So if the major trend seems to be down down (like what it seems now), we should just get out and stay out till the coast is clear. After all, no matter how much we are losing now, we’ll lose more if the decline continues.

I am one of the luckier ones who does not face this predicament today. Not because of adroit investing skills but because I cut my losses (horrendous ones, if I may add) earlier in the year.

So I am presently free of any stockholdings, except for the investments in unit trusts that I continue to dollar cost average monthly (These are meant for the younger kids’ education, so there is a pretty long time horizon attached). 

I am continuing because as the chart in the link below shows, far worse has happened before and we rebounded. I also remember the dark days of October 1987 when we thought the end of the world had come….and it didn’t.  

 The Kuala Lumpur Composite Index So what should we do?

Only you can answer this.  

Can just seeing poverty give us a frugal outlook to life?

Wednesday, October 15th, 2008

Well that is what I thought. 

I was born into a relatively poor family in India. Though we were not really impoverished. (I don’t remember ever starving). My father brought me to Malaysia in search of a better life. Whilst growing up, I made do without many of the trappings my classmates had.  I am grateful for this as I strongly believe that this was what gave me my present frugal outlook to life. It was not something read from personal finance books, rather the whole aspect of just having grown up in an environment that just did not have the trappings. 

Our children are a different story. Like parents the world over, we wanted to give a better life to our kids. As they started growing up with seemingly no feelings for or inclination to frugality, my wife and I got a little worried.

And I thought I had the perfect solution. 

We were due to go to India to visit my mother and other relatives and I thought that this would afford me an opportunity to show my children the need for frugality. A shock treatment, so to speak. whilst in Chennai (our village is about 400 kms away), we went for a tour, and I asked the driver to drive us around the banks of the river Koovum, where whole communities of the impoverished live. I thought that if my children saw these sights and the many, many children as street beggars(I don’t think we have anything like this in Malaysia, not on this scale anyway), there might be some impact. 

hovels-1.jpg

Hovels

My children, bless them, felt tremendous pity for these people. I don’t think (at least for now) that any of them might take on a Mother Theresa role in their future, but, I think, they’ll never ever forget the sights they saw. 

beggar.jpg 

A street beggar

Whilst this has not had a dramatic effect in their outlook to life, I think the thoughts will linger and when the time comes (as I am sure it will), the effects will kick in. I am hoping (actually expecting) that the effects will be for them to help others, be charitable and to do their part in alleviating poverty, Insya’Allah. 

But an immediate jump to a frugal lifestyle has not happened……yet.  

Pictures: Google

Bliss Moments - Delicate Handmade Accessories

Monday, October 13th, 2008

Jewellery, crystals and semi precious stones occupy a special place in the minds of many people.  They associate different stones with certain powers - powers for healing, for happiness, for inspiration, wealth and love. And even for warding off “black magic”.  

The crystals and stones are also often linked to birth dates, where the correctly chosen birthstone would give great benefits to the person with the appropriate birth date. However it’s not easy to get dependable advice on what stones would be most suited for us. This is important as a wrongly selected stone might enhance the negative powers rather than the positive.  

Picture Source: Google 

Thus I am very happy to announce that a dear friend together with her friend has launched an online store, Bliss Moments, selling personal jewellery and accessories using these stones and crystals. All designs are unique and delicately handmade. The key characteristics of the semi precious stones used are also explained so that the buyer can make informed choices by matching the design with the stones. 

Do drop by and have a look at the Store.       

 

Tip to maintain our sanity in traffic jams

Wednesday, October 8th, 2008

n_01trafficjam.jpg

Picture Credit: The Star, Malaysia 

You know the feeling. You are in your car, merrily driving along to wherever you want to go. Then you get caught in a traffic jam, right smack in the middle of something like that shown in the picture above.

You sit patiently, as the cars move slowly, almost inch by inch. Then you see some drivers using the emergency lanes, overtaking a stretch of cars and then cutting back well ahead of you. Doesn’t this make your blood boil? These characters contribute to the jam, as cars have to slow down when this people cut back into the main lines. 

This is a very frequent sight on Malaysian roads and especially marked during the mass exodus from the main cities that happen at every major Malaysian festival. 

I used to get really upset with these guys. Do these emergency lane users really think that the rest of us are blind and do not see the emergency lanes? Do they think that the rest of us are stupid and do not know how to use the empty emergency lanes and then cut back in like they do? 

Last week as my family and I were doing our Hari Raya rounds this happened. We were trapped in a long stretch of snail like traffic and then these “heroes” started using the emergency lanes and then cut in well ahead of us. As I watched these fellows, I could feel my blood pressure rise. I wished I had a magic wand that I could just wave and puncture all four of their tires and get them stuck for hours.  

Then a thought suddenly struck me. Perhaps these guys had a very sick child on board whom they were rushing to a clinic or hospital. Or maybe some other sick relative. Maybe it was because of this that they were forced to drive the way they were doing. I know I would if I were to be driving my very sick child to a clinic and I faced something like that kind of traffic. 

Immediately my feelings of disgust and anger at these people dropped. And I felt a lot calmer. And a far lot better. This is what I do now. If I cannot avoid it, I just sit through a traffic jam, and calmly watch these guys merrily cut in and tell myself that they are doing this because of some emergency.

Non financial lessons from my mother

Monday, October 6th, 2008

 Picture Credit: Google

Lately I have been thinking about some of the “lessons” learnt from my parents. Learnt not by receiving formal instructions or such. Just learnt by example and reinforced by reprimands received when we broke them. 

Lessons such as: 

How to awake a sleeping person 

This had to be done gently. By slow and gentle taps on the shoulder of the sleeping person and softly calling out to him or her. The taps can be progressively increased in intensity, but the start must be soft and gentle.  Islam mentions that our souls are taken away whilst we sleep and to some people the souls are returned (meaning that they awake) whilst for others they are not.  Perhaps this was the basis of my late mother’s insistence that we use a slow and soft approach.  

(Sure looks like the Army’s method of waking people up would have merited severe disagreement from my mother.) 

Never cross over a person’s body 

Whether the person is sleeping or just lying down, we should never walk over him or her. We should always walk around the person. I have never ever found out why, but it does seem to make a lot of sense.  

Never cut our nails at night 

This was a severe no-no. Perhaps my mother, having grown up in an era of no electricity,  wanted to make sure that we did not cut ourselves in the dark or in the dim lights we used to have.  

Never walk over or step on a book 

This was a sure way to make sure that we would grow up as “stupid” people. My mother would insist that we had to pick up any book that was lying on the floor so that there would be no chance of any of the younger children walking over them. We never had any tables or chairs, (we used to do everything on the floor) so this was a common issue. 

Never step on or walk over money, whether a coin or note 

This was another no-no, as stepping on money was a clear mark of disrespect and would this encourage wealth to stay away from us. 

Walk softly 

My mother believed that the ground was Mother Earth and should be treated with great respect. Walking roughly, loudly or shuffling would earn us a nasty clip and a sharp reprimand.  All of us brothers and sister, till today, walk such that you would not hear us coming.

All these rules I still follow strictly, though it has been decades since I got the lessons from my mother. It still grates me when I hear people walking roughly and loudly or shuffling.  

I have tried to pass on these lessons to my children. However my wife (who comes from a different cultural background) is not so sold on some of these lessons. I don’t know if these lessons will be ingrained as deeply into my children as it has been for me.  

I suppose when my children are much, much older, they might think back about these times and wonder about these non financial lessons they got from their dad.

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