Father Sez

From and to parents - parental advice to our children on personal financial management and life.
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When facing hardship, smile, breathe, go slow and reflect on this advice

Sunday, December 28th, 2008

My daughters who have just entered the working world, seem a little too stressed up over matters I would consider relatively trivial. But then I have many more years under my belt and I am speaking with the benefit of 20/20 hindsight. 

I have had times in my life when I thought the world as I knew it was coming to an end. Yet we have survived and by the Grace of the All Mighty, thrived.  

2008 has been tough, and 2009 looks even tougher. Hard times are ahead. At times like these, it is good to have a pillar of support to cling on to. I have had mine for many years. And I want to impart this practice that I follow to my daughters on this 29th of December 2008 which also coincides with the first day of the Muslim calendar, Awal Muharram.  

Also today I read an excellent article by Zen Habits on his secret weapon that helped him in running and completing the Hawaii marathon and achieve all the goals he had set for himself. I think Leo has some splendid advice and thus I want to add his to what I have been practicing all these while.  

When I have to deal with hard times, difficulties or tough decisions my source of guidance, support and inspiration is the Quran. And this is what our Holy Book has to say about difficulties. Not once but thrice in 3 different verses. 

“On no soul doth Allah place a burden greater than it can bear.”                                

Surah Al Baqarah, Verse 286 

“No burden do We place on any soul, but that which it can bear.”                    

Surah Al Araf, Verse 42 

“On no soul do we place a burden greater than it can bear.”                                

Surah Al Muminum, Verse 62 

It simply says that hardships are shelled out in such a manner that the recipient can certainly bear and overcome them.  And Leo’s secret is in the words of a wise Vietnamese Buddhist monk, “Smile, breathe and go slowly”. 

I ask my children to reflect on these words of God. The All Mighty has Himself said that we can bear and overcome any difficulty that is thrust upon us, so what is the problem? And the Buddhist monk also sets an excellent perspective.  

So, my girls, remember …Smile, breathe, go slowly and go forth and face the world with the conviction that whatever the world throws at you, it can only be something that you can handle. Be assured that whatever the outcome, it would be one better than the one that you presently have. 

Reducing EPF contributions – Is our Government doing the right thing?

Wednesday, December 17th, 2008

Malaysian employees have a compulsory savings scheme, the Employees Provident Fund. Legislated under the Employees Provident Fund Act 1991, all Malaysian employers must contribute 12% of the monthly gross salary whilst the employee contributes 11%. The contribution is done monthly and the Employees Provident Fund invests these contributions and pays a dividend yearly to the employees’ accounts.

The percentage contributions have varied over time and so too have the dividend rates 

The EPF is the bedrock of retirement savings for most Malaysian employees. The more financially literate ones plan and prepare better, using other investment vehicles in addition to their EPF. The EPF also allows for withdrawals by contributors to invest in approved unit trusts. (If the units are sold before retirement age, the money goes back to the EPF account of the contributor). 

In November 08, the EPF announced that it was reducing the requirement for employees’ contributions to 8%. This is to be effective from January 09 – December 10 wages / salaries. The intention was to assist the contributors by increasing their disposable income and to help stimulate the economy.  

Much has been written in the Malaysian Press about the general inadequacy of retirement savings by the Malaysian public. The EPF itself has acknowledged that the average Malaysian uses up his EPF retirement savings within 3 years of withdrawal.  This move to reduce the contribution has been welcomed by many in the lower income groups. The very same group who would most probably best benefit from higher EPF savings. The objections have also been many. 

So why is the Government allowing this reduction? Is the Government showing its concern and trying to alleviate the economic suffering of the Malaysian public?  

I don’t know. Presently I don’t contribute to EPF, now that I am no longer a working stiff. Had I been so, I would have maintained the 11%, especially since the savings would have a great compounding effect. 

There must be Malaysians who welcome the additional 3% in their take home pay. I am not belittling them at all. I am just urging them to think a little deeper to see if there are expenses that they can eliminate rather than to reduce this savings.  I hope that the younger generation reflect upon the compounding effect of this 3% and just how much it would grow into should it remain in the fund for 10, 15 or 20 years. It might be better for them to trawl their expenses to see what could be eliminated.  

The EPF is supposed to be a champion for savings and not spending. The move to reduce the contribution certainly seems anti saving. The EPF has even made it easier for the reduction by asking those who want to remain at 11% to fill in forms to confirm their stand. At the very least, the EPF should have made it easier to retain the 11% and asked those who wanted the 8% to fill up the forms.  

I hope my daughters read this post and do the right thing! 

The results are in ……I am not a Net junkie.

Friday, November 21st, 2008

About a month ago, I wrote about my little Internet experiment. I wanted to stay away from the Internet for a week and check out the effects. 

It has been said that habits form slowly and seamlessly. A cigarette once in a while becomes a cigarette more often and before we know it, we become a cigarette junkie. The simile used by Dr. Covey, I think, was the building of thick mighty ropes strong enough to hold ships still, by the use of small fine threads over and over again. 

Many of us use the Internet at work, home and play. Maybe even without us realising it, we might be Net addicted. It might show by we becoming uneasy when we do not have access.  I should know, I used to feel that I was one of them.  

So the week without any access to the Net was an important test case.  And I am happy to report that the week went well, and life went on just fine and dandy without accessing the Net at all. 

As expected, my reader box is overflowing. I am still reading the blog posts of late October, and the debates on the US Presidential elections are still going on. (It does feel a little strange to read about predictions etc., where the outcome is now known). 

I feel that this experiment was a very useful thing to do. I am clear of all withdrawal symptoms and am sure that I’ll get by another week or two if I chose to.  

Bloggers and readers of blogs must be prolific users of the Net. The same can be said for the younger generation who are so attuned to computers and the Net that they might not be able to imagine life without or before the Net. It may do us some good to once in a while take a step back and say that we are going to live our lives without the Net for a week or so.    

Next week, I am attending a 4 day course and am travelling for a couple of days after that. As at now, my plan is not to take the laptop along and just stay away from the online world.  

After all I do have an offline world that I should be focussing on.   

Yet another reason why it pays to be financially literate

Wednesday, November 19th, 2008

dy/dx Ben was the nick name given to a good friend Ben from my campus days. Ben was an Arts or Economics student, I think. (He is now a proud holder of a Masters Degree in Law). I still remember vividly Ben telling us about some exam he had sat for, where his brains just fried, emitted smoke and froze when he saw questions like x + 3x – 4 x = ?  

I think that was when I first realised that not all of us are wired the same way. Having attended Science stream in school, questions like these would have been no problem for me or any of my classmates.  

Apparently it was not the same for those of us from non numerate backgrounds.  

This fact struck home again a few weeks ago. 

I saw an advertisement in the local papers about a 3 hour seminar designed to teach us the secrets of tremendously reducing the interest we pay on our mortgages and at the same time shortening the time.  

The first thing that came to my mind was that these guys will probably tell us to pay over and above the minimum payment which would reduce the interest and the period of the loan.  Still my curiosity got the better of me and I signed up. The amount to be paid was very small and I thought the coffee break and the cookies that went with it would cover the cost anyway. 

There were almost 50 of us that day, all eager to find out about this secret. As expected the presenter showed some fancy charts, and finally came to the point that additional payments would reduce the interest and the period. He then struck some uncertainty in us by saying that since most of us would not have read the loan agreements in detail, just making the payment was not enough. And his company offered the service (for a small fee) of analysing the loan agreement and to ensure that the additional payments were properly allocated by the Bank. 

Then came the invitation for people to sign up, and many of the attendees did. 

I wondered as to why we could not read the loan agreements ourselves and settle this. Why should we need to pay for these services?  

The answer is that not all of us are wired the same way. 

Some would have figured this MR trick all by themselves. Others would need some prodding, and then they would be able to figure it out. And yet others would remain baffled despite the prodding and would need someone to sort it for them. 

I think this is yet another reason for us to be financially literate. And those of us from non financial educational backgrounds should for our own good, make a strong effort to get ourselves a little educated financially.    

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.

Mind Mapping my way to retirement – Part 2

Sunday, May 25th, 2008

Last week, I wrote about my present position vis-a vis my aims for retirement.  

Today, I shall show my idea of where I want to be when I retire and my intended action plan to get to where I want to go.

mind-map-2-as-picture-mger.jpg 

And the map above is the position I want to find myself in when I retire.    

With this, I sat down to think about where should I focus? The important areas are:- 

a)    The elder children’s personal finance education. My wife and I want to try and make sure that the elder two girls are financially literate and that they would not be a financial pain in anybody’s necks. They should be able to take care of themselves and be a sterling example to their younger siblings. As the formal education sector does little to prepare children for life, my wife and I have to do our part.

Thankfully, I have tons and tons of resources from the pf blogs on this.  

b)    The younger children’s education should be the biggest costs that we expect to face in the future. Their studies should be nurtured so that their grades are good enough to qualify for good scholarships.  

Not withstanding the support given by many commentators to Mighty Bargain Hunter’s “Worried about paying for college, then don’t”, my wife and I rate our kid’s education as our duty. 

We shall do what we can, in fact all we can, to ensure that the children get a better chance in life than we got.  

I also hear Flexo’s comments whilst debunking yet other retirement myth. That children cannot be 100% depended upon to support the parents in retirement. 

My wife and I just want to pay it forward. We are not expecting anything from the kids, anyway.  

c)     Health. This is an item that is “so, so important, but not urgent”. So it is usually left somewhere at the bottom of the pile. Exercise is one item that is left out when other so called more urgent things crop up. We shall focus on exercising and learning Chi Qong. This is an ancient Chinese art, geared towards guiding its users to gain tranquility, better health, fitness and also some self defense. 

d)    Take the businesses from the incubator level, nurture them and organize them such that my time involvement will be minimal. This has to be something like a 2 – 5 year plan, but should be started now.  The goat farm is in progress. The planned launch is in July 08, the critical outstanding issue being the bringing in of our farm workers.  

Another business is in the field of the leasing of telecommunication towers in Indonesia. This plan suffered a setback when the Indonesian Government issued a decree deeming this business to be closed to foreigners. However, we have come up with a workable alternative and are actively pursuing this now. 

e)    Clear my liabilities, leaving only the mortgage. Tackle the mortgage last. My family can achieve this by selling off one of our assets. This plan is currently in progress. 

f)     Nurture and grow this blog. I am not making any money from this blog. However blogging has made me really focus on the important areas of my life.

g)    Generating some passive income. I may have missed the boat in socking away some good dividend paying stocks in earlier years. It’s my loss that I did not run into people like Dividends 4 Life when I was much younger. 

I have to use all the skills I have acquired in my corporate life and put them into effect to systemize the operations of the businesses I am incubating. Much like what Michael Gerber has written in his book, E-Myth. The operations should be “engineered” in such a way that my time involvement would be minimal.  

Then I came back to the other rule of thumb that I read from Plonkee’s comment to Flexo’s post that started off all this thinking. The need for us to have about 25 years of spending money during retirement. 

The options are quite clear. Either  

-    Increase my income and get the 25 years nest egg, or 

-    Decrease my expenses. 

I shall keep working on these two very sensible things to do.  Nevertheless, the focus would be on the second option.  

Now I have a nest egg of $X. This should grow to say, $Y, by the time I retire. This should have to last me say, 25 years. So per year I can spend $Y/25. 

Where can I have a life that I want with this amount? Aha! More options fall on the table.  

I can move to the country side in my own country. We already live well away from the Federal Capital. I can still go further rural. Or I can check out other countries.

Countries, where culture, food, transportation, housing, health facilities, education for the younger children and other normal barometers of living are acceptable to my family and me. This I can do now, the checking out I mean. India (where I have worked for 3 years and still have family there), Vietnam, Cambodia and the Philippines are countries that come to mind. 

Suddenly the prospect of retiring as a semi derelict is no more seen as a possibility. 

Life seems to be so much rosier, the sun so much brighter, the birds singing so much sweeter and I do feel a bouncier step as I walk. 

Why not try a mind map yourself?

Invest or pay down loans?

Monday, May 19th, 2008

This issue has been argued and debated to death in the pf blogs.

Nevertheless it’s an important topic and I am sure sooner or later every one of us will have to make a similar choice. 

Well, my second daughter was recently at this cross road. 

My elder two girls both have, what we call in Malaysia as investments in Amanah Saham Bumiputra (ASB). This is a type of unit trust managed by a Government owned body and the principal and annual returns are guaranteed by the Government.  

It’s hence not surprising that banks freely give out loans to people to buy these investments. After all, these unit trusts are sovereign rated. So since they turned 18, my two elder girls have loans and investments in ASB.  (The yearly returns are sufficient for the yearly repayment and I do a small top up yearly. My wife and I hope that this will help them to continue and maintain the savings habit only they start their working lives.)  

Recently my second girl received some money and the issue of using the money for investment or paying down loans came up. 

For me, it was simple.  

I showed her the great article written by Mighty Bargain Hunter under the heading of “How strong is your piggy bank?” 

Azah went through the story and decided she wanted to keep 50% of the money in a titanium-reinforced Kevlar® piggy bank inside a force field. That is to pay down the ASB loan. 

The balance will be kept in a steel piggy bank by buying additional ASB units. 

I am happy with the choices she has made. What do you think?

How should I choose my web designer?

Wednesday, May 7th, 2008

So far I have not done anything on monetizing or commercializing my blog. The main reasons being that my traffic figures would not exactly make any advertiser drool, and secondly I am still not comfortable with the technical skills that go along with placing ads etc.  

But getting involved with this blog has however, opened my mind wide open, on online businesses in general.  

Now my wife and I have decided to set up an online shop. Selling a product that we think has a market. Some of the market research work is going on at the moment. But this is not the reason for this post. 

We want a web site done. We know how the end product should look like. We know what features we want on the site.  What we are not that sure about is whether this knowledge is sufficient to commission a web designer?   

                                                     

To be able to commission a web designer, I have to be able to give clear and mutually agreeable specifications. How on earth do I do this, when I can’t recognize CSS even if it fell on my head? What if I miss a key requirement and realize only, say, 6 months later? And how do I test the web site to make sure it meets my requirements, when the content is going to be built up over time.  

What about modifications that may have to be made later? Do I have to go back to the same person or can I do it with someone closer to home. 

It may be a little easier when it comes to things that we can see, like say, a garden retaining wall. Even then, we are warned to define clearly what the contractor is expected to be doing for us, making sure it covers all the things we want completed. We should spell out any preparation work, protection of surrounding areas, clean up, etc.  

I have listed the requirements as I understand them on Elance, and so far some bids have come. I have time to “evaluate” them before I make a decision.  

Some great guidance has been obtained from the Web, here and here. 

I am thinking of just listing all my concerns, plus the suggestions that I got from the Web and asking the short listed bidders to address them. Then just go with my instinct.  

Is this how it is supposed to be? Is there a better way? I would appreciate some pointers.

Hah! Phase 1 of another major financial commitment has now been done with

Thursday, April 10th, 2008

I wrote recently about one financial burden that I had. Something that was not in black in white, rather it was just something that I had to do. 

It’s a little difficult to explain why I should take this financial burden upon myself. Perhaps this can be better understood by families who have members who have immigrated to other countries, to seek better lives for themselves. Nevertheless, by the Grace of God and sheer chance this commitment has now been taken care off. 

Another major commitment my wife and I have is the expenses of tertiary education for our five children. I am aware that many responsible and respectable personal finance bloggers have written that this should not just be a burden of the parents.  

Lily of the Honest Dollar wrote a very balanced article on this issue of the Parent Trap, some time ago. Whilst this article did not focus on tertiary education per se, the general idea is clear.

 And there are really compelling arguments for making the kids pay their way  

My wife and I had never ever considered the possibility of setting the children loose and to let them sort out their tertiary education costs themselves (with or without our help). This was something we were going to take care of. So it was the “Pa and Ma scholarship way.” 

My eldest girl wanted to do psychology. All the local universities needed the students to have done Biology, which my girl did not do (for reasons that were completely my fault.) So the option was overseas universities. We have a number of local institutions that do “twinning programs”, where the kids study in Malaysia based on an overseas university’s syllabus and marking standards.  

To cut a long story short, my eldest girl finally ended up choosing University of Wales, Bangor, where she is just about to finish her basic degree in Psychology. The cost of this degree is far more than the cost locally. 

For the past 3 years, my wife and I have somehow managed to make the payments for the fees.  Today I am sending by registered post the bank draft for the final installment of her University Fees.  

My eldest girl is having her final exams in mid May and then, God Willing, she graduates.  

For our three younger children, my wife and I will revisit and follow Madison’s sound advice.  The cost of tertiary education for the younger children is going to be probably the biggest financial commitment my family will have in the years ahead. We’ll plan for this far better than we did for the two elder girls. And the kids themselves will be playing much more involved roles.  

The “counting down the no’s theory” of perserverance

Thursday, February 21st, 2008

Much has been written about the power or usefulness  of just asking for something. After all, the worst that can happen is we get a “no” for an answer.

Sound financial reasons  for asking can be for a raise, better terms, reduction in interest rates, reduction in prices and even asking for the love of our live’s hand in marriage. 

Mrs. Micah has written about this here and Navin’s take is hereSavings.com has also something to say about this.

What about “just asking” from the point of perseverance?

We all know that “perseverance” is a solid asset, as Abundance and Happiness has so eloquently explained. However it is not an easy trait to develop, much less follow.

The best way I have had the manner of developing perserverance explained was by my friend Bala when we were in the Thai island of Koh Samui many years ago.

We were much younger and still single then.  The island was a favourite of backpackers  and we met a number of young people from all over the world, ladies as well as guys. During one of our “philosophizing” about saving the world and all that, the talk somehow turned to asking girls for a date.

Bala laid forth his theory. He said, all we had to do was to count down the “no’s”. Ask this girl, she says no, move on to another lady, she says no, move on and on, until someone says yes. Though the law of probability says that our chances should be 50%, in reality it is a lot less. But it will eventually happen, if only we keep asking enough times.

I have remembered Bala’s theory ever since.

Frank Bettger wrote about this in his “How I raised myself from failure to success in selling”. He noted each and every sales call he made, even though no sales were done. When, say, his 21st call resulted in some sales, he would divide the 21st call’s sales by 21 and get a figure, say $10. His self motivation to continue making sales calls was that for every call, he was making $10, irrespective of whether the call resulted in a sale or not. 

He then found that as he continued and time passed, his $ per call became higher and higher.

(Though the book may be written some time ago, I have serious respect for this book.) 

The need for us to have perserverance and determination is important. It is so easy to feel demotivated once we hit our first wall. The difference between success and failure often lies in our getting up and continuing.

I hope my children understand Bala’s theory of counting down the “no’s”, remind themselves of this theory whenever they feel demotivated and then continue their struggle.

In  seeking betterment in our careers, in generating more sales and in getting better deals for ourselves.

“Consider the postage stamp, my son. It secures success through its ability to stick to one thing till it gets there.” Billings, Josh American humorist (1818–1885)

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