Father Sez

From and to parents - parental advice to our children on personal financial management and life.
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Our children’s weddings – is it going to be a major cash drainer?

Monday, March 30th, 2009

Asian parents normally bear the full cost of their children’s weddings. This cultural norm + keeping up with the Joneses + inflation + number of children can inflict serious damage on a parent’s finances. 

We have five children. The two eldest should have marriage in their plans over the next couple of years. The younger three are still young and have quite a number of years to go. So, as you can imagine, all aspects of weddings are an important part of our long term planning.  

Malaysia is still a young nation. Until recently we were still an agricultural nation, basically a rural economy, with a large number of people living in the villages. Development has resulted in the migration of many to the cities with the villages being left with the old or the very young. As this phenomenon is relatively new, many of us in the cities still have a strong rural background, at least in our minds.  

As they say, “You can take a Malaysian out of the village, but you cannot take the village out of him.” 

These days many weddings are held in hotels or halls. The grander the hotel or the hall the higher would be the price tag. This is usually the case for city folk.  Some just have it in their homes, often barricading off the roads to function as the dinner / lunch venue. Though this inconveniences the neighbours, it is taken in good spirit and everyone just goes with the flow. 

Village weddings are another thing. They are far cheaper, as there is no hall to rent, no caterers and almost everyone pitches in to help.  

I had an opportunity to be present at a wedding in Zai’s village last week. Whilst having lunch, I thought about the cost of the weddings for my children and wondered if going rural should be the way to go. After all, on my wife’s side, the grand matriarch of the family has a huge house which is lying empty now. It would be prefect for a wedding.    

On the negative side, attending the wedding would be a major pain in the neck for my friends who mostly live in the city.  Well, just thinking.  

Here are some pictures taken at the wedding. Enjoy.

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The King and Queen for the day. The groom is from Zai’s village, whilst the bride is from another State. Her delegation was there is full force to lend support and to get to know the boy’s side better.

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The official car park. The unofficial ones were any house which had space in their lawn, and there were plenty!

  the-kitchen.jpg The kitchen. All the cooking was done by men. It started at 5 a.m. and finished at 11.00 am, just in time for the guests.  Notice the firewood, it’s rubber wood from the nearby rubber smallholdings. Almost everyone in the kampung has a small lot planted with rubber.

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We cannot have the function without the DJ, can we? This DJ was perfect for this crowd, speaking in Nogri slang for the groom’s people and Kelantan slang for the bride’s people. 

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The ladies wearing yellow are from the village association. They help out at all the village functions and weddings with the serving of food etc.

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The main lunch hall. With tall rambutan trees providing the shade and the cool kampung  wind providing the ventilation.

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Guests having their lunch. Though the seating could take only abouy 50 people, the function spread out over 4 hours. People came, ate their fill, mixed with the other guests and left. Then others arrived to take their place. This is a great way to accomodate the late comers and the early birds.

My view of what is Halal and Haram income for an employee

Friday, February 13th, 2009

I am now “jobless”, having worked for more than 3 decades. My career encompassed jobs that might be classified by many Malaysians as a ticket to the easy life. Somehow I missed the many ticketing offices that lined the roads of my career. 

I have my parents to thank for this. Somewhere along the line, my parents have drummed in the message (I am sure I did not learn this in school) that the only income that is allowed (halal) for me as an employee was that paid to me by my employer as salary, bonuses or share options and the like. (Yes, the pay that I got should have put me on easy street had I practiced sound personal finance management, but this is not the point of this story.) 

As a Muslim, I devoutly and absolutely believe that my rezeki (livelihood) is in the hands of the All Mighty. This doesn’t mean that I should sit at home and just pray for my livelihood. I have to work and strive my best for my living. I have tried to explain this philosophy in one of my earlier posts about the Arab and the camel. 

Much is being written in the Malaysian papers and other media that we could be forgiven for accepting “presents” given to us by our customers, suppliers and others we deal with in our line of work. I don’t agree and disagree strongly at that.  These presents are a form of income due directly to our position or office that we hold. And these are income not from our employer. I deem these to be tainted income. In the clear cases where these “presents” are given by a beneficiary because we did our work or because we did not do it, then it is clearly haram.  Examples may be buying something like, office supplies at a price which is below our office’s budget, but still at a higher price that what we could have obtained from another supplier. In return we get some sort of a gift from the supplier we bought the supplies from. This is clearly haram. Our job is to ensure that our office gets the best price we can get and all the savings should go to our employer. 

Benefits that accrue because of the network built up from the workplace are a different story. So long as we can in all honesty say that the transaction in question has nothing to do with the post or position that we hold, then it is halal. An example may be buying a piece of land together with friends met through work and then selling it for a profit.  

I am sure my daughters, who have just started working, would be facing many temptations along the way. Some easy to turn down and others not so easy. Still the test as mentioned above should be applied and a decision can be made relatively easily. 

There may be some borderline cases. What if someone gives a gift during a festival? This happens a lot in Malaysia where you can see lorries of hampers being delivered to many of the offices around town during festivals. The best would be to open the hamper there and then and distribute the stuff to the office staff.  

It will be tough when we try to take such a stand when so many of our colleagues do otherwise. We just have to remember and keep reminding ourselves that we should earn only halal income and only such an income should be used to feed our families. We don’t have to judge others. That is for them and for their conscience to decide. 

After a while word should and will get around. Word that so and so does not like such gifts. And can still be depended upon to do the right thing.  

This is what is meant by a reputation and this is the reputation I want my children to earn.  

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.   

Malaysians just got hit with a knock out blow….a 41% increase in fuel costs!

Sunday, June 8th, 2008

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Picture Credit: Google Images 

I have often commented on the pf blogs that the fuel prices in our country are one of the cheapest in the world. After all, we are a net exporter of oil. 

We were assured by our political masters earlier this year that there would be no fuel price increase, despite the regular news on the spiralling costs in the international market.

Our Government has often talked about the humungous amounts the Government was bearing in the form of this subsidy. A sort of “we are looking after you at great costs” kind of PR mumbo jumbo.  

On the stroke of midnight, the 4th of June 08, the prices were raised by 41%. 

Some people may say that this is still cheap by international standards. In fact our Government takes great pains to compare fuel prices against those of neighbouring Thailand and Singapore.  However a large number of Malaysians have different views.  

For one, we pay huge amounts in car duties. Our mouths water when we compare our car prices with car prices in other countries except Singapore (which has an excellent public transportation system.)  

The opportunity cost per annum due to these duties should be enough to pay for fuel costs, without touching the principal.   

Secondly, when the prices were increased the last round, we were all promised that the “subsidy saved” would be used to improve public transport. If I am not mistaken, the savings were in the region of RM6 billion. That’s a lot of money! I have not felt or seen this improvement yet. 

Maybe the fact that, at the last elections held on March 8, the ruling Government lost its customary two thirds majority in Parliament (which gave it a clear run to amend the Constitution and pass any law they wanted with impunity) had something to do with this. 

The Malaysian political blogs are full of comments by readers giving the Government a public cyber flogging. The 3 main blogs that I read have part of their views here, here and here. 

This act has also unleashed a horrendous tsunami of price increases all around. Transportation costs, food costs, any costs for that matter will be raised in the coming days. Needless to say, it started immediately and will continue for some time to come. 

I think that many Malaysians have grave misgivings over this drastic increase and the likelihood that the savings from these subsidies would be frittered away on wasteful projects. I share this view. 

This Government is just 3 months into its term. Nevertheless, I suspect that memories of this increase will remain in the minds of most of us for the next 4 odd years, when the Government will next face the electorate.  

Luckily my family and I have some shelter as we have the main family car running on NGV, the price of which has been left unaffected. I have written about fitting our second car with a NGV kit but have yet to do so. For now, the fit out shops will be overflowing with business and there should be long waiting lists. I have to revisit this a little later.   

Our selling of our house – one step closer to completion

Sunday, June 1st, 2008

I have written about the sale of one of our investment properties, i.e. our former home.  

We signed the S & P Agreement for the house in late April 08. The sale has to be approved by the State Authorities, before it becomes effective. We had provided for a 6 month period in the S & P Agreement for the securing of this approval. (Yes, this doesn’t speak too highly of our State Government’s efficiency.)  

Lo and behold, the approval came out late last week. Whether this is due to the change in our State Government in the last elections, or just a general improvement in the delivery system of the State Government, I don’t really know. But the speed of the approval surprised everyone when I told them. 

This morning, I met with our tenant and the buyer at the house. The house was handed over to the buyer, with whom I’ll now have a landlord-tenant relationship till the full payment is made. (Our previous tenant has moved into another house not too far from this house.) The deadline for the balance payment is late August 08.

The buyer came with his wife, his 4 children, his parents in law, and his brother in law and one of his nieces.  

I felt an intense feeling of nostalgia, when I walked them through the rooms. Our three younger children were born in this house and their antics will always remain etched in our memory.  

It seemed like an era has ended in our lives. And a new era begins for the buyer.          

Credit Cards Are Not Designed for Daily Living Expenses

Tuesday, May 27th, 2008

This is a guest post by Tisha Kulak who is a writer for Creditorweb.com, where she writes about credit card offers, personal finances and credit card matters.

Economically times are getting harder than ever. Nearly every aspect of a person’s basic needs have gone up in price and those living paycheck to paycheck may be considered lucky to make it from one paycheck to the next. Due to the increasing costs of so many things, consumers are being faced with tougher financial decisions.

Many families no longer have the cash needed to buy basic grocery items and necessities and ultimately turn to their credit cards to survive. Utilizing credit cards to maintain daily life is not a financially healthy situation.

However, many consumers have no other choice. They are using credit cards to keep the lights on and food in the refrigerator. The trend is becoming increasingly popular and equally dangerous. Credit card balances are going up but family income is staying the same. Many consumers are not able to even make the monthly minimum payments. By not paying more than the minimum each month, people are digging themselves in even more debt. Balances will take many years to pay off in full and average consumers typically have more than one credit card with an existing balance. Add into the mix a missed or late payment and the balance grows even more outrageous.  

The best thing for any consumer with credit card debt is to really understand how much they owe. When family budgets are stretched to the maximum and there is no good outlook for paying down the debt, turning to a professional financial counselor may be beneficial to avoid falling behind and ruining your credit score. Once you have fallen behind, it becomes all the harder to catch back up. It is also bad for the economy as a whole because consumer spending ultimately decreases as there just isn’t enough money to go around.  

For those who feel they can not survive without using credit cards to maintain daily life, there may be a need to seek financial support from the community or local welfare office. Check out programs to help with utilities, buying groceries, and other necessities in order to stay on track  Debt management companies may be able to help you pay down your credit card balances in a shorter period of time. They may also be able to work with you on a realistic budget to get your through the worse of your financial situation. Not seeking help when you need it will eventually make your debt even worse and it will stick with you for a long time.  

Credit cards were not designed to keep your family going each week. Responsible credit card use dictates that anything you can not pay off at the end of the billing period should not be charged on your credit card. Before you turn to credit to help you make ends meet, consider all other available resources first and only charge what you can afford.

 

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.

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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?

Mind Mapping my way to retirement – Part 1

Thursday, May 22nd, 2008

A while ago, Flexo wrote in his blog a story titled, “Retirement Income Rule of Thumb Debunked.” In it, he quoted a mysterious Mole of Money Magazine, who came up with the assertion that we should estimate our full current expenses now and add 10% to that. Then we have to come up with that amount for each of our retirement years. 

This effectively debunked the previously held wisdom of needing 80% of our pre-retirement income per year of retirement.

This post was actively debated in the comments. And in her comment, Plonkee added in another rule of thumb that she was aware of. We should have about 25 times our estimated yearly expenses. (This rule was not debunked by anyone, not in the thread anyway).  

Man, is this depressing or what? 

We have rules of thumb that say, the maximum house we should go for is 1.5 - 5 times our yearly income, and another rule of thumb that says the biggest purchase of our lives would usually be the house. 

How on earth do we get 25 times of our yearly income, sorry, 25 times of 110% of our yearly income as our retirement nest egg? This is 5 – 17 times our biggest purchase.

I can hear people telling me…..Yeah! That’s why we asked you to start saving early and let the power of compunding work for you. 

Well, unfortunately, I did not hear clearly enough these wise words earlier.  

I sat back and asked myself exactly where would I stand, given all these rules of thumb. I have the fear that I may not achieve this retirement rule of thumb.

So what would be my downside, and if I were to plan to do my best and start now, where should I direct most of my energies.  

A post I read in Problogger gave me an idea of how to do this evaluation. Giving ideas on how to excite the minds of new bloggers to come up with ideas on posts, he suggested the using of mind maps.

So I drew a simple mind map of my current position.   

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So, this is where I stand now.  For the next post, I shall look at where I want to be and how and what are my thoughts on what should I do to best bridge the gaps.

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?

What should I do with my Timeshare?

Wednesday, April 30th, 2008

During my younger and much more financially and life ignorant days, my wife and I purchased a Timeshare 

Then, the logic sounded good. For this one time payment + another yearly payment, my family had a choice of 7 or 8 properties in Malaysia where we could go for family holidays. As a large family we usually had to take 3 or even 4 hotel rooms. The Timeshare offered facilities like kitchen, a hall and 2 – 3 rooms. Perfect…it seemed.  

Alas! That was then! 

Now I think about the opportunity cost of the capital invested. This plus the yearly maintenance fee could pay for much more than what I was getting. 

Now I think about the resorts being booked solid during the times when my family would want to use it the most, i.e. school holidays, festive seasons and during other National holiday seasons.  

Now I think about how silly I was to have bought the Timeshare in the first place. 

Now I think about it being no wonder why there are so many ads for selling Timeshares at discounted and often deeply discounted prices. 

My wife has started renting out the Timeshare to her friends and other family members who may want to use it. The money received is used to defray the yearly maintenance charges.  Though the whole process is also quite cumbersome, at least part of the yearly outflow is being taken care off. 

We have often thought of selling off the Timeshare. Our local classifieds often have advertisements of these for sale. There are also some international web sites that claim to sell or rent Timeshares.

This situation of having to pay the yearly outflow whether we use the facilities or not is clearly an unnecessary financial pain. Something that is not in line with my present thinking of eliminating outflows that do not add any value. Something that should be taken care off immediately. 

I am going to advertise our Timeshare for sale. After all my investment is already sunk, if I can stop the continual bleeding, it should be enough. 

I have no back up plan.  However there seems to be an option to be able to donate the Timeshare.

My wife and I may donate this and hope that the recipients make more productive use of this Timeshare. 

PS:  

If any of my readers out there have any interest in a discounted and deeply at that,   Timeshare, please get in touch with me.   

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