Father Sez

From and to parents - parental advice to our children on personal financial management and life.
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Archive for January, 2009

Links – The Shorter Work Week for Malaysians Edition

Saturday, January 31st, 2009

It seems the Malaysian Government has agreed with a suggestion to institute shorter work weeks to counter the possibility of job losses. This move, whilst reducing the take home pay of the affected workers at least keeps them in their jobs.  

So far the Government has come up with announcements on 2 stimulus packages. Though I have yet to find the full details. I hope the leaders have the right planners to steer us through these rough times.  

Listed below are some of the blog posts I found worthy of sharing with you. 

The CFO asks is buying a house jointly before marriage a good idea? As she says, it depends. Still I wonder if people who seem not ready to make a marriage commitment could be ready to make this “usually the biggest purchase of our lives” commitment jointly. 

MDJ gives 6 reasons why a recession can be a good thing. Yes, every cloud does have a silver lining. These 6 reasons may not apply for everyone, though.  

NCN wrote a good piece on 5 methods of reducing debt. I follow the debt snowball method (though I did not know this was the term applied till I started reading pf blogs.)We did a massive reduction of loans in 2008 when we sold one of our properties. It’s back to steady whittling down of loans this year. 

PaidTwice suffered a recent tragedy. Her father passed away and he was the principal finance manager in the household. Despite the deep emotional grief she must be going through, PT is also wondering about the steps she has to take to get back the family back to an even keel on financial management. I am also the principal finance manager in my family. This post has made me wonder (yet again) about what I should do now to ensure that my family is not thrown into confusion if something untoward were to happen to me.  

One of FMF’s readers asks a question. Should he take advantage (a little deviously, perhaps) of the relief, banks were giving their customers who could not pay their instalments?  I think it is a question of integrity and the reader would have to make his choice and live with it. I have very high regards for this reader, as a person without integrity would never have asked this question in the first place. 

This is all for the week, folks. Have a great weekend.

Taking out loans to invest in ASB – is it worth it?

Friday, January 30th, 2009

ASB, which stands for Amanah Saham Bumiputra, is part of the Malaysian Government’s efforts to alleviate the financial standing of Bumiputra’s. ASB is in the form of a unit trust, except that the principal is guaranteed by the Government. The scheme also pays relatively generous dividends, 8.55%, 9.00% and 8.75% for the years 2006, 2007 and 2008 respectively. This dividend is made up of a dividend portion and what is called a bonus portion.  

Recently a friend asked me if it was worthwhile to take out a loan (which some banks readily give) to invest in unit trusts? This is an interesting question. I have always been a great fan of this opportunity. In fact, I have always told the younger Bumiputra staff in the organisations that I have worked for that this ASB scheme should, in fact, be one of the best schemes in the world.  

Some banks give 100% ASB loans with a MRTA thrown in. The spreads between the interest paid on the loans and the dividend income can vary. If one does not take out the dividends and bonus earned and there is a negative spread of, say, 1.5% between the income and the repayment (principal + interest) outflow, the ball park computations would be as below for the two most likely possibilities: 

ASB Investment: RM100,000 

Tenure: 20 years 

Interest Rate:     7% p.a. 

Option 1 

Paying 10% downpayment and borrowing RM90,000. 

Monthly payment for loan:    RM 698 per month 

1st year :            Pay RM698 per month for 12 months.

2nd year onwards:        Pay the differential between the ASB income and the loan instalments. Assume to be about RM1,400 per annum. 

To get RM100,000 at the end of 20 years (which is what you would get), your 1st year payments and the yearly differentials would have been compounding at a rate of almost 8% per annum. 

Option 2 

Borrowing 100%, i.e. RM100,000

Monthly payment for loan is : RM 775 per month 

1st year:             Pay RM 775 per month for 12 months

2nd year onwards:        Pay the differential between the ASB income and the loan instalments. Assume to be about RM1,500 per annum. 

To get RM100,000 at the end of 20 years (which is what you would get), your 1st year payments and the yearly differentials would have been compounding at a rate of almost 7.5% per annum.  

These are rates of returns that should not be sneezed at. Discipline would be needed for not withdrawing the ASB dividends and for making the yearly differential payments. But then is there any investment that doesn’t call for discipline?   

I think it is a great opportunity just for the taking for so many of the Bumiputras in our country. Lots seem to have been written about the pros and cons of taking a loan to invest in ASB. My view is based on what we pay as opposed to what we get.

The only negative may be inflation. At the end of 20 years, the RM100,000 may not have the same purchasing power as RM100,000 today. But then this problem is applicable for EPF savings and almost every other kind of savings.  

Unlike in the US, where they have inflation adjusted Treasury Bonds.

My two elder girls’ net worth computations as at the end of 2008. Now it’s all up to them.

Wednesday, January 28th, 2009

Recently I read a fascinating article on a 25 year old lady’s thoughts on where her net worth would be without her parents’ help.  With this present entitlement generation made up largely of “the gimme, gimme, gimme types”, the article was a refreshing read. I was pleased that the lady deeply appreciated the efforts made by her parents to give her a head start. 

I am a father of five children, 4 girls and a boy. Like so many parents out there, my wife and I, too, want to give our children a far better life than the one we started off with and are going through. Still there was always a lingering fear that the children might just fritter away whatever little we gave and keep on stretching their hands out for more.  

Well, by the grace of the All Mighty, it looks like my two elder girls have their heads screwed on right. My wife and I have never had any problems with the girls coming back with requests for the “expensive, everybody has it!!! kind of thingamajig”. We have recently completed the net worth calculations for my two elder girls. Their first. (I have also done mine, which is essentially the family’s. But that is another story.) Their net worth is not going to put them up in any Forbes list. Still, the fact that their net worth is positive should put them ahead of many of their peers. 

I know that my girls read this blog fairly frequently, or at least I think so. Perhaps these  statistics will let them know where they stand. 

As per EPF 2007 Report, page 101 

As at the end of 2007, the average savings of a Malaysian male employee at age 54, was RM138,895, whilst the average for the ladies was RM84,596. My girls should be able to compare their net worth and see how they stack up against Mat Average and Minah Average. 

And these are the savings statistics for Americans when they reach retirement age.  

My wife and I have no intention of gloating or to tell our two elder girls that we have made supreme sacrifices so that they could start off their lives in a favourable position. We do not want our girls to feel guilty in any way. Where there are now financially is also a function of their relatively reasonable childhood. And after all, no one will ever love them like their Mama and Papa.  

Now it’s all up to them.  

They can live responsibly and frugally and follow the rules that FMF has listed on how to become a millionaire. And grow their net worths steadily. And grow up to be respectful and respected members of the community we live in.  

That’s all my wife and I want of our kids.   

Kong Hee Fat Choy!!!! Happy Chinese New Year!!!

Monday, January 26th, 2009

It’s the year of the Ox again, one of the 12 animals in the Chinese Zodiac. It last made its presence from February 1997 till January 1998. It was a tough year for us Asians, with the Asian Currency crisis blowing through Asia like a tsunami.   

There are already tons of predictions for 2009. From the Feng Shui angle, from the vastu angle, alignment of stars angle, from your birth date angles etc. Quite a number of them are bad and foreboding.  Still the world has gone though and survived the 30’s Depression, the two World Wars, countless other periods of devastating plagues, disasters natural and man-made. We should see through the present period of gloom and doom, too. 

To all our fellow Chinese celebrating their New Year, the Fathersez family wishes you all a blessed, happy, healthy and prosperous Year. May all your dreams come true, if they are good for you. And may you be protected and sheltered from all that is not good for you.  

Kong Hee Fatt Choy!!!

Photo Credit: BBC News

Links – The Child Blogger Edition – 24 January 09

Saturday, January 24th, 2009

Last week one of our local papers carried a story about a 11 year old Malaysian blogger who writes and maintains a blog, www.glosonblog.com, with the tagline, “Learn online with Gloson – Anything that Gloson learns”. 

Gloson seems to be quite a child prodigy, being able to design websites when he was 8 and having helped create a product called ‘Linking Memory”. He could read and sing in English and Mandarin when he was just one and a half.The blog looks neat and well designed, and includes some ads. He has some interesting articles including this one on actions to consider before we publish a post. Advise that I can do with.  

I shall be following Gloson’s blog and wish him all the best in his blogging and other activities.   

The Digertati Life has an interesting post comparing the present nasty economic cycle to its brethren from the past. I am fascinated by the graph on Equity Markets Performance. It seems to me that the present dips are way overdone and a mighty swing upwards to the mean might be in the works.   

Business Opportunities blog wrote about the Asian Enron, Satyam Computer Services of India. The company’s Chairman has admitted to presenting fraudulent accounts for the past 5 odd years. This disclosure has sent the stock reeling and is expected to have repercussions in a number of the many countries where Satyam   operates, including Malaysia. In absolute terms the amount involved may seem small, USD 1 b or so. The loss of shareholder wealth when the shares took a steep dive is something else.  I suppose, PwC, its auditors must be looking at some serious class action suits to be hurled at them soon. 

Pakdi wrote about a Korean blogger who got arrested by the Authorities in Korea. Apparently this blogger, known as Minerva, had allegedly claimed the Authorities had advised the banks to stop buying dollars. Well, freedom of speech is one thing. Announcing something that has serious implications but is not true is another. And if the announcer is a person with influence it’s yet another. Just where do we draw the line? 

JD asks a very pertinent question. What monetary value should we give to our principles? Principles are not quite the same as integrity. There may be no fraud or cheating or bribing involved, for example having a principle of being vegetarian. Look at how JD examines the situation he was put in and how he came to a logical conclusion based on his principles.    

One of GLBL’s readers, Sarah, has turned to him for some advice. Apparently there is increasing debt and lies involved and Sarah’s conscience is now at a critical point. To resolve any problem, first we must recognize and admit that there is a problem. Sarah has taken this first and most important step.  I think the GLBL guy has given some great advice. Click through and hear what he says.  

This week I participated in the Carnival of Family Life that was hosted by Colloquium. The Writer’s Coin who hosted the Carnival of Personal Finance, rejected my article as it did not meet his qualifying criteria…which was for the post to be interesting. Well, I’ll just have to try again next week.  

This is it for the week, folks. Have a very happy and memorable weekend!

My hopes for Mr. Barack Obama

Friday, January 23rd, 2009

Hope usually surrounds the election to office of any new President or Prime Minister. Hopes for something better, a better life, a better economy and a better country. However these hopes and hopefuls are usually localized. Perhaps the only exception would be when it is the election to office of the President of the United States of America. 

The inauguration of the 44th President of the United States of America has touched the hearts and minds of billions of people the world over. The reason is clear. The United States with its undisputed economic and military might can make the whole world come tumbling down or the reverse should it so decide. So everyone notices and hopes.  

I grew up on the diet of American movies and TV programmes. Those days the Americans were inevitably the heroes. In almost every war movie, the Germans, Russians and Japanese were bad. In almost every cowboy movie, the Indians were the bad guys etc. One can just imagine the admiration for all things American I had whilst growing up. 

As I grew older and learnt to understand that there were good and bad people from every country, my prevailing feelings for Americans were that they were good people. People who stood for principles of civil rights, freedom, justice for all etc.   

And I am sure I am not alone in this view. (Hollywood has made sure of this.) And I am also sure that I am not alone in declaring that this view has been sorely tested over the last 8 years.  

Now with the inauguration of the new President, I have deep personal hopes. 

Mr. Obama is taking office at a time when outstanding leadership is needed in almost every country around the world. A time when the traditional “1st 100 days of honeymoon” has been replaced by crisis control at every turn.  

I long for the time when citizens of countries whose leaders did not practice good governance, could look to the US as an example to tout as how things should be done.  

I long for a time when war was the absolute very last thing a US President would put his seal of approval on.  

I long for a time when there is not only a choice between “with us” or “against us”. 

I long for a time when our local children all knew that the best library in our town was that of the USIS. 

I long for a time when there were more news about the great stuff done by the US Peace Corps than stories some armed skirmish somewhere involving US troops.

I hope and pray that Mr. Obama will steer back the US back to the path which resulted in the open admiration of the people of the world. A path that as FDR stated in 1933 would result in a “restoration” of American ethics. 

God bless you, Mr. Obama. May you be rightly guided as you set out to carry out your onerous duties. 

Unemployment numbers looking grimmer and grimmer for Malaysians

Wednesday, January 21st, 2009

On Monday the 19th, one of Malaysia’s more influential blogs posted an article titled “1 million Malaysians could lose jobs this year”.  

This forecast had been made on the basis of estimates by the Malaysian Employers Federation (MEF) and news reports on expected job losses for Malaysians working in Singapore.  

Current official Malaysian unemployment statistics are at 3.1% or an estimate of 343,700 people. Increasing this by even another 300,000 people is going to cause a terrible strain on the Malaysian people.  

The highest unemployment rate that I could find for Malaysia was for the year 1986 when it was 8.3%.  Though I had already been working for a few years when this 1986 recession hit us, I was quite blissfully ignorant. There were no retrenchments done at my workplace and I did not know anyone who had been affected. I wonder how my mindset would have been affected had I been retrenched or suffered some set back this early in my working life.  

My two elder girls have just started working. The eldest is doing some part time work teaching an autistic child, and my second girl is in a fairly recession proof industry. At this stage in their lives the parental umbrella is still available to them. In addition, their expenses are still low and they have yet to be burdened with car loans, housing loans and such. 

I have my doubts if my girls will truly understand the difficulties faced by many others in the work force. They might if some of their peers have been affected by the storms in the job market.  I hope that my girls will hear, learn and try to understand the flimsiness of the job markets and the resultant devastating impact this can have on incomes and lifestyles.

This would be one of the best lessons one can have for maintaining a frugal lifestyle and always earning more than spending.

Can bloggers do more for world peace than politicians have ever done?

Monday, January 19th, 2009

quran-logo.jpg

I ask this question because most politicians get elected on the premise that they represent certain groups. By definition this might result in having to oppose the requirements of other groups, even if it is the right thing to do.  

And there is no country in this world which is made up of one group. Hence politics is not going to resolve the so important issue of world peace and understanding.  

So what can be the best mechanism to promote peace and tolerance in this world? I suppose though there cannot be any single answer, a better understanding of each other might do a lot of help.  A major factor creating these schisms is religion. So why not every world citizen who wants peace and better understanding try to understand his fellow human being better by trying to understand their religious beliefs.  

Malaysia is a multi cultural and multi religious country. Despite growing up with friends from other religions, many of us do not have a real clue about the religious beliefs of their neighbours, fellow colleagues and friends. What if followers of every religion took it upon themselves to, at least, try to gather an understanding of other religions? Would this act help in promoting better understanding? I don’t really know, but my feeling is that it would. 

I believe that the blogging community is set to take its rightful place (if not already) as the strongest influencer of people’s opinions. Thus can bloggers take it upon themselves to promote a movement on this?  After all bloggers have done this before. People like Leo have promoted the “Pay it forward” movement. Tim Ferriss is promoting his “4 hour Workweek” to his considerable following. Lynnae is forging ahead with her mission to impart the habit of frugality to the rest of the world.  

I am all for this movement started by some Malaysian bloggers, here and also here on “Reading the Quran”. Yes, it may seem biased that I am a Muslim. 

Still I am an avid follower and admirer of Gather Little by Little, Free Money Finance, and lots of other blogs that are run by fine Christians. While their principal messages are on personal financial management, they make no bones about their spiritual leanings and how this helps them in strengthening their resolve in meeting their life goals. 

So what say you? I have joined the “Read the Quran” movement. Can one of the other blogs out there start a “Read the Bible”, “Read the Guru Granth Sahib” or “Read the Tao te Ching” movement? 

I, for one, shall certainly join these movements And I dare say that if these movements gather traction, we would have done more towards promoting world peace and understanding than any politician has ever done.  

Links – the S. Jayasankaran Edition

Saturday, January 17th, 2009

Jaya is one of the rare breed of writers who can make the well chosen words jump out of the paper upon which they are written and narrate the story to you. And he speaks much the same way. Full of wit, well placed jokes and with a colourful choice of words that are worthy of a AAA Grade wordsmith and storyteller. 

Though trained as a biochemist, he spent very little of his working life in this field. He has been in the journalistic world, including a long stint with Dow Jones, for as long as I can remember. Presently he is the bureau chief of Singapore’s Business Times in Malaysia.

He also writes a weekly column in a Malaysian daily. Here I am listing just two of his recent articles that made me laugh out loud. 

i. This one is about the growing tendency for Malaysians to get a name worldwide as counterfeiters.  

ii. And this one is a light hearted poke at the one thing one of our elected representatives figured should be aired in our Parliament. This article was picked up by one of Malaysia’s heaviest hitting socio-political blogs.    

Onto the other interesting articles I found in my reader.  

Adam Khoo, a Singaporean author and a peak performance trainer, asks “How much would we sell 10 years of our life for?” Read why he asks this telling question.  

The CrackerJack Greenback writes about the benefits of premarital counselling. Couples in love often forget to discuss many important things in life. Having a structured discussion with a trained counsellor mediating helps the couple in understanding each other better so as to have common goals in life. This is something that is quite commonly done in Malaysia though I have sometimes thought that it seemed a little too commercial. I hope my children will go through this kind of counselling when they decide to tie the knot.  

The Malaysian Life has an interesting post on password selection. He provides links to Stanford University’s guide to selecting a good password and another to a site which outlines how your passwords can be hacked. A must read, I must say. 

Shaun warns us that inflation is inevitable. He gives his reasons and promises to write about what we should do to protect ourselves.  

This is all for now. Have a great and happiness filled weekend, folks. 

There was a time when wealth was measured by the number of children one had……

Friday, January 16th, 2009

Times have changed. Now it seems people are concerned about the wealth draining effect of having children.  

The Simple Dollar recently asked his readers “Do children really cause financial burdens?” Trent’s question had been triggered by a comment he read on LifeHacker that said “Having kids is one of the most expensive poverty-inducing things you can do right now” Trent’s gave his reasoning and numbers and concluded that we should not be scared into not having children - or delaying having children for years – just by the huge costs bandied about. 

Steve also had a recent post telling us that we would be richer if we did not have kids. He did make it very clear though, just in case he was misunderstood, that all he wanted was for people to think ahead about the costs involved. So that people could make informed choices. As for him, he loved his son and daughter most dearly and did not mind the costs.  

Both the articles were very actively commented upon. Mainly pro and some others against. 

I have serious reservations about looking at the question about having children by looking at a list of expenses that would arise immediately and in the future once we had children.

Having children, like Mike, commented to Trent’s post) (#36) enriches our lives. Mike says that he was motivated as a new parent to further his career in ways he’d previously overlooked. Parenthood gave him the nudge to live up to his potential in his career. It’s been an enriching experience that made him a much better person.

I, too, started being more responsible, financially and in a number of other ways, after having children. I only started saving after the kids arrived. In fact, I say that I am “richer” in every sense of the word, after having our children.

Having children cements and makes for stronger family bonds. In our case at least, the petty quarrels and disagreements that almost all husbands and wives have, have not degenerated into break up situations because of our children. We have been forced to take a step back and reassess our disagreements because we want a happy household. 

And can any value be placed on the “no strings attached smiles, laughter and love” given us by our little ones? I don’t think any words can ever do justice to the feeling you get when the little ones smile and look adoringly at you. I must admit that I do feel sorry for those of us who have never experienced this feeling.  

Some people have likened having children as an investment and that we should work towards getting “a decent return”. I believe, as I have written before, that having children is not an investment, rather it’s an act of paying it forward. Even if our children do not pay us back, they’ll in turn pay it forward to their children.

Whether we should have a child or not is a lifestyle choice. Yes, costs may be one consideration, but it is only one. Don’t let ourselves be consumed by this one factor.

After all, wives, husband, girlfriends and boyfriends also cost money. In fact living costs money!!! And where would we be if our parents had done some financial modelling before deciding to have us?

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