Retirement Savings Is Top Financial Priority Amongst Malaysians

What Is Forex Trading ? – A Definition & Introduction What is Forex? – The basics… Basically, the Forex market is where banks, businesses, governments, investors and traders come to exchange and speculate on currencies. The Forex market is also referred to as the ‘Fx market’, ‘Currency market’, ‘Foreign exchange currency market’ or ‘Foreign currency market’, and it is the largest and most liquid market in the world with an average daily turnover of $3.98 trillion. The Fx market is open 24 hours a day, 5 days a week with the most important world trading centers being located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney. It should be noted that there is no central marketplace for the Forex market; trading is instead said to be conducted ‘over the counter’; it’s not like stocks where there is a central marketplace with all orders processed like the NYSE. Forex is a product quoted by all the major banks, and not all banks will have the exact same price. Now, the broker platforms take all theses feeds from the different banks and the quotes we see from our broker are an approximate average of them. It’s the broker who is effectively transacting the trade and taking the other side of it…they ‘make the market’ for you. When you buy a currency pair…your broker is selling it to you, not ‘another trader’. • A brief history of the Forex market Ok, I admit, this part is going to be a little bit boring, but it’s important to have some basic background knowledge of the history of the Forex market so that you know a little bit about why it exists and how it got here. So here is the history of the Forex market in a nutshell: In 1876, something called the gold exchange standard was implemented. Basically it said that all paper currency had to be backed by solid gold; the idea here was to stabilize world currencies by pegging them to the price of gold. It was a good idea in theory, but in reality it created boom-bust patterns which ultimately led to the demise of the gold standard. The gold standard was dropped around the beginning of World War 2 as major European countries did not have enough gold to support all the currency they were printing to pay for large military projects. Although the gold standard was ultimately dropped, the precious metal never lost its spot as the ultimate form of monetary value. The world then decided to have fixed exchange rates that resulted in the U.S. dollar being the primary reserve currency and that it would be the only currency backed by gold, this is known as the ‘Bretton Woods System’ and it happened in 1944 (I know you super excited to know that). In 1971 the U.S. declared that it would no longer exchange gold for U.S. dollars that were held in foreign reserves, this marked the end of the Bretton Woods System. It was this break down of the Bretton Woods System that ultimately led to the mostly global acceptance of floating foreign exchange rates in 1976. This was effectively the “birth” of the current foreign currency exchange market, although it did not become widely electronically traded until about the mid 1990s. (OK! Now let’s move on to some more entertaining topics!)… What is Forex Trading? Forex trading as it relates to retail traders (like you and I) is the speculation on the price of one currency against another. For example, if you think the euro is going to rise against the U.S. dollar, you can buy the EURUSD currency pair low and then (hopefully) sell it at a higher price to make a profit. Of course, if you buy the euro against the dollar (EURUSD), and the U.S. dollar strengthens, you will then be in a losing position. So, it’s important to be aware of the risk involved in trading Forex, and not only the reward. • Why is the Forex market so popular? Being a Forex trader offers the most amazing potential lifestyle of any profession in the world. It’s not easy to get there, but if you are determined and disciplined, you can make it happen. Here’s a quick list of skills you will need to reach your goals in the Forex market: Ability – to take a loss without becoming emotional Confidence – to believe in yourself and your trading strategy, and to have no fear Dedication – to becoming the best Forex trader you can be Discipline – to remain calm and unemotional in a realm of constant temptation (the market) Flexibility – to trade changing market conditions successfully Focus – to stay concentrated on your trading plan and to not stray off course Logic – to look at the market from an objective and straight forward perspective Organization – to forge and reinforce positive trading habits Patience – to wait for only the highest-probability trading strategies according to your plan Realism – to not think you are going to get rich quick and understand the reality of the market and trading Savvy – to take advantage of your trading edge when it arises and be aware of what is happening in the market at all times Self-control – to not over-trade and over-leverage your trading account As traders, we can take advantage of the high leverage and volatility of the Forex market by learning and mastering and effective Forex trading strategy, building an effective trading plan around that strategy, and following it with ice-cold discipline. Money management is key here; leverage is a double-edged sword and can make you a lot of money fast or lose you a lot of money fast. The key to money management in Forex trading is to always know the exact dollar amount you have at risk before entering a trade and be TOTALLY OK with losing that amount of money, because any one trade could be a loser. More on money management later in the course. • Who trades Forex and why? Banks – The interbank market allows for both the majority of commercial Forex transactions and large amounts of speculative trading each day. Some large banks will trade billions of dollars, daily. Sometimes this trading is done on behalf of customers, however much is done by proprietary traders who are trading for the bank’s own account. Companies – Companies need to use the foreign exchange market to pay for goods and services from foreign countries and also to sell goods or services in foreign countries. An important part of the daily Forex market activity comes from companies looking to exchange currency in order to transact in other countries. Governments / Central banks – A country’s central bank can play an important role in the foreign exchange markets. They can cause an increase or decrease in the value of their nation’s currency by trying to control money supply, inflation, and (or) interest rates. They can use their substantial foreign exchange reserves to try and stabilize the market. Hedge funds – Somewhere around 70 to 90% of all foreign exchange transactions are speculative in nature. This means, the person or institutions that bought or sold the currency has no plan of actually taking delivery of the currency; instead, the transaction was executed with sole intention of speculating on the price movement of that particular currency. Retail speculators (you and I) are small cheese compared to the big hedge funds that control and speculate with billions of dollars of equity each day in the currency markets. Individuals – If you have ever traveled to a different country and exchanged your money into a different currency at the airport or bank, you have already participated in the foreign currency exchange market. Investors – Investment firms who manage large portfolios for their clients use the Fx market to facilitate transactions in foreign securities. For example, an investment manager controlling an international equity portfolio needs to use the Forex market to purchase and sell several currency pairs in order to pay for foreign securities they want to purchase. Retail Forex traders – Finally, we come to retail Forex traders (you and I). The retail Forex trading industry is growing everyday with the advent of Forex trading platforms and their ease of accessibility on the internet. Retail Forex traders access the market indirectly either through a broker or a bank. There are two main types of retail Forex brokers that provide us with the ability to speculate on the currency market: brokers and dealers. Brokers work as an agent for the trader by trying to find the best price in the market and executing on behalf of the customer. For this, they charge a commission on top of the price obtained in the market. Dealers are also called market makers because they ‘make the market’ for the trader and act as the counter-party to their transactions, they quote a price they are willing to deal at and are compensated through the spread, which is the difference between the buy and sell price (more on this later). Advantages of Trading the Forex Market: • Forex is the largest market in the world, with daily volumes exceeding $3 trillion per day. This means dense liquidity which makes it easy to get in and out of positions. • Trade whenever you want: There is no opening bell in the Forex market. You can enter or exit a trade whenever you want from Sunday around 5pm EST to Friday around 4pm EST. • Ease of access: You can fund your trading account with as little as $250 at many retail brokers and begin trading the same day in some cases. Straight through order execution allows you to trade at the click of a mouse. • Fewer currency pairs to focus on, instead of getting lost trying to analyze thousands of stocks • Freedom to trade anywhere in the world with the only requirements being a laptop and internet connection. • Commission-free trading with many retail market-makers and overall lower transaction costs than stocks and commodities. • Volatility allows traders to profit in any market condition and provides for high-probability weekly trading opportunities. Also, there is no structural market bias like the long bias of the stock market, so traders have equal opportunity to profit in rising or falling markets. While the forex market is clearly a great market to trade, I would note to all beginners that trading carries both the potential for reward and risk. Many people come into the markets thinking only about the reward and ignoring the risks involved, this is the fastest way to lose all of your trading account money. If you want to get started trading the Fx market on the right track, it’s critical that you are aware of and accept the fact that you could lose on any given trade you take. Forex Trading Terminology The Forex market comes with its very own set of terms and jargon. So, before you go any deeper into learning how to trade the Fx market, it’s important you understand some of the basic Forex terminology that you will encounter on your trading journey… • Basic Forex terms: Cross rate – The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in. For example, if an exchange rate between the British pound and the Japanese yen was quoted in an American newspaper, this would be considered a cross rate in this context, because neither the pound or the yen is the standard currency of the U.S. However, if the exchange rate between the pound and the U.S. dollar were quoted in that same newspaper, it would not be considered a cross rate because the quote involves the U.S. official currency. Exchange Rate – The value of one currency expressed in terms of another. For example, if EUR/USD is 1.3200, 1 Euro is worth US$1.3200. Pip – The smallest increment of price movement a currency can make. Also called point or points. For example, 1 pip for the EUR/USD = 0.0001 and 1 pip for the USD/JPY = 0.01. Leverage – Leverage is the ability to gear your account into a position greater than your total account margin. For instance, if a trader has $1,000 of margin in his account and he opens a $100,000 position, he leverages his account by 100 times, or 100:1. If he opens a $200,000 position with $1,000 of margin in his account, his leverage is 200 times, or 200:1. Increasing your leverage magnifies both gains and losses. To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. For example, if you have $10,000 of margin in your account and you open one standard lot of USD/JPY (100,000 units of the base currency) for $100,000, your leverage ratio is 10:1 ($100,000 / $10,000). If you open one standard lot of EUR/USD for $150,000 (100,000 x EURUSD 1.5000) your leverage ratio is 15:1 ($150,000 / $10,000). Margin – The deposit required to open or maintain a position. Margin can be either “free” or “used”. Used margin is that amount which is being used to maintain an open position, whereas free margin is the amount available to open new positions. With a $1,000 margin balance in your account and a 1% margin requirement to open a position, you can buy or sell a position worth up to a notional $100,000. This allows a trader to leverage his account by up to 100 times or a leverage ratio of 100:1. If a trader’s account falls below the minimum amount required to maintain an open position, he will receive a “margin call” requiring him to either add more money into his or her account or to close the open position. Most brokers will automatically close a trade when the margin balance falls below the amount required to keep it open. The amount required to maintain an open position is dependent on the broker and could be 50% of the original margin required to open the trade. Spread – The difference between the sell quote and the buy quote or the bid and offer price. For example, if EUR/USD quotes read 1.3200/03, the spread is the difference between 1.3200 and 1.3203, or 3 pips. In order to break even on a trade, a position must move in the direction of the trade by an amount equal to the spread. • The major Forex pairs and their nicknames: • Understanding Forex currency pair quotes: You will need to understand how to properly read a currency pair quote before you start trading them. So, let’s get started with this: The exchange rate of two currencies is quoted in a pair, such as the EURUSD or the USDJPY. The reason for this is because in any foreign exchange transaction you are simultaneously buying one currency and selling another. If you were to buy the EURUSD and the euro strengthened against the dollar, you would then be in a profitable trade. Here’s an example of a Forex quote for the euro vs. the U.S. dollar: The first currency in the pair that is located to the left of the slash mark is called the base currency, and the second currency of the pair that’s located to the right of the slash market is called the counter or quote currency. If you buy the EUR/USD (or any other currency pair), the exchange rate tells you how much you need to pay in terms of the quote currency to buy one unit of the base currency. In other words, in the example above, you have to pay 1.32105 U.S. dollars to buy 1 euro. If you sell the EUR/USD (or any other currency pair), the exchange rate tells you how much of the quote currency you receive for selling one unit of the base currency. In other words, in the example above, you will receive 1.32105 U.S. dollars if you sell 1 euro. An easy way to think about it is like this: the BASE currency is the BASIS for the trade. So, if you buy the EURUSD you are buying euro’s (base currency) and selling dollars (quote currency), if you sell the EURUSD you are selling euro’s (base currency) and buying dollars (quote currency). So, whether you buy or sell a currency pair, it is always based upon the first currency in the pair; the base currency. The basic point of Forex trading is to buy a currency pair if you think its base currency will appreciate (increase in value) relative to the quote currency. If you think the base currency will depreciate (lose value) relative to the quote currency you would sell the pair. • Bid and Ask price Bid Price – The bid is the price at which the market (or your broker) will buy a specific currency pair from you. Thus, at the bid price, a trader can sell the base currency to their broker. Ask Price – The ask price is the price at which the market (or your broker) will sell a specific currency pair to you. Thus, at the ask price you can buy the base currency from your broker. Forex trading is everything.

Who doesn’t want to be their own boss? According to the Employees Provident Fund (EPF), about 50% of the Malaysian workforce ply their trade in informal sector, which encompasses a wide range of jobs, from pasar malam hawkers to freelance writers.

A survey conducted by INTI International University and College found that 68% of freelancers in Malaysia chose the freelance route despite the availability of the full-time jobs.

Some, such as the EPF, believe there is a level of distrust among Malaysians towards the formal institutions – in government and corporates – which could be partly fuelling that growth.

Regardless of the reasons, what’s certain is the Malaysian freelancing economy has grown by 31% and is the third largest freelancing market in the region, on the backdrop of digital platforms such as Freelancer.com and Upwork.

But the life of a hustler means fending for yourself and to do that, you need a financial safety net. The good news is, setting that up is easy and we’ll show you how to build it. Step by step.

Step 1: Build out your emergency fund
Also known as a “rainy day” fund, this amount of money stashed away in a liquid savings account is set aside for unexpected events that carry some financial impact. In the case of a freelancer that’s basically your reserves to carry you through during the lean times.

Some of the products you can consider to park your emergency money in are fixed deposit accounts, unit trust funds and Amanah Saham Bumiputera/Nasional, as these products offer higher interest rates than a regular savings account to protect your fund from being eroded by inflation, and yet still offer liquidity.

The objective is to have this money easily accessible during emergencies and help you and your family avoid high-interest credit card debt.

Some financial advisors suggest having enough to cover living expenses across three to six months. If you were a staffed employee, that would be an easy exercise to navigate and achieve.

But where do you start as a freelancer? One way to do this is set aside 45% of every pay cheque into savings. This allows you to do three things: earmark 30% for taxes, 5% for re-investing in your business, and 10% to build your proper emergency savings fund.

That 10% might be a small start but being realistic is the goal here. The key is to have some form of loose money to tide you over.

Step 2: Contribute to EPF monthly
Freelancers are not required under the EPF Act 1991 to mandatorily set aside a certain amount of their earnings for forced savings.

But voluntary participation is encouraged and for good reason: you need a retirement fund. Roughly three out four Malaysians can’t raise RM1,000 for a rainy day.

More than two-thirds of EPF members aged 54 have less than RM50,000 in EPF savings. It’s believed that with the household poverty line at RM930 monthly, that amount will only last you 4.5 years.

So it’s not that easy to rest on your laurels when you reach those golden years, and while things are much more challenging for a freelancer, you could certainly do yourself a favour by ensuring that you contribute monthly to EPF by being a member.

For freelancers, the minimum monthly payment is RM50 for every transaction, and a maximum of RM60,000 yearly.

If you put away RM10,000 every year in your EPF account, you would have accumulated RM150,200 in your EPF savings in 10 years. This is assuming a 6% annual dividend rate, with the contribution split equally over 12 months.

Also aside from retiring, your EPF funds, especially those in your Account 2, can come in handy in the event of an emergency, or if you want to further your studies but can’t afford a dent in your cash flow.

Step 3: Consider life insurance
This is a necessity if you have financial dependents, such as a spouse and children and it’s an altruistic effort on your part, the policyholder: in the event of your death or permanent disability, your family gets to move on without absorbing financial shocks.

The rule of thumb is to secure coverage that equals 10 times your annual income. But remember before signing up for one, educate yourself about the pros and cons of the policy and also do some research before committing to one.

And always avoid falling to the underinsured trap where you do pay for life insurance coverage, only to find that it is not sufficient to tide you over in the event something untoward happens to you.

Step 4: And maybe a critical illness plan
This is not the same as having a medical card which deals with hospitalisation and surgical coverage. A critical illness policy gives you a lump-sum benefit upon diagnosis of any of the 36 critical illnesses.



And how much do you need? Well since money is your ceiling, the rule of thumb for minimum coverage is at least three years’ worth your annual income, and your contribution should not exceed 10% of your annual income.

So for example, if you are earning RM60,000 a year, you should be contributing roughly RM6,000 per annum. And you should buy RM180,000 worth of critical illness coverage.

To put this in perspective, if you buy three years of your income coverage, you can afford to take some time off work for medical treatment. The lump sum from your critical illness policy should be able to cover some of your out-of-pocket expenses while you concentrate on recovery.

Given that 73% of deaths among Malaysians are caused by non-communicable diseases, a critical illness plan needs to be on your list, if not now, at least in the near future.

Step 5: File your taxes properly
Being in the informal sector doesn’t mean you could dodge taxes. Even Uber and Grab drivers are required to file in their taxes.

That said, there are a few ways to cushion yourself from paying the full amount: you have to know your tax exemptions and deductions.

The former reduces or entirely eliminates your obligation to pay tax; the latter is similar but a deduction reduces your chargeable income and is a result of gifts and donations.

For example, if your chargeable income is RM55,000, and you’ve donated RM2,500 to an approved charitable organisation, you are allowed to deduct 7% of your aggregate income to reduce your chargeable income.

The former reduces or entirely eliminates your obligation to pay tax; the latter is similar but a deduction reduces your chargeable income and is a result of gifts and donations.

For example, if your chargeable income is RM55,000, and you’ve donated RM2,500 to an approved charitable organisation, you are allowed to deduct 7% of your aggregate income to reduce your chargeable income.

So all these deductions will help you save and therefore increase your monthly cash flow.

Step 6: Aim for retainers
As its name suggests, freelance work is usually associated with being project-based, but it is not unheard of for independent these days to treat it more like a solo-run agency. If you are a freelance writer, for instance, you could ask your clients if they need to produce a whitepaper on a monthly basis.

But remember it’s all about empathising and communicating the benefits of this structure in the context of your clients’ own challenges.

Retainers can be much easier for clients to manage since they remove the need to have consultancy costs approved internally with each task and help build an ongoing support resource that can be budgeted over time.

Clients also need not worry about added costs involved in hiring a full-time employee, such as EPF contributions or insurance, granting them more savings.

For you, the freelancer, the benefit is obvious: a steady source of guaranteed income that can be contracted on a monthly basis.

Step 7: Plan and think ahead
The life of a freelancer is akin to managing your own business: the learning curve is steep with a 50-50 chance of failure and success. But that shouldn’t put a damper on your dreams.

Maybe the first thing to do is prove yourself: take up a few gigs while holding down your full-time job. That might be exhausting but it’s the safest way to hedge your bets in the event going independent does not bear fruit.

And while you are negotiating that, you might want to think about best practices for budgeting. You might also want to tweak your lifestyle and learn to be frugal as quickly as possible. Debt? That has to go, too.

And if you have those big-ticket items such as a mortgage, you might want to really take your time in transitioning to the freelance world. Defaulting on your home loan payments can bring serious consequences.

But the rewards of being your own boss is indescribable. No one said it was easy, but impossible? Not quite.

Despite retirement savings being the top financial priority amongst the majority of Malaysians, 49% of them are still not confident of having enough savings to live till the age of 80.

According to the 2017 Prudential Relationship Index (PRI) survey, more than half (59%) of the respondents said they are worried about not having enough funds saved for retirement.

The survey found that 83% of Malaysians contribute financially to their parents’ daily expenses, but only 31% expect their children to do the same in their old age.

Most of the respondents expect to be financially independent in their retirement, with 87% plan to live off their personal finances and assets, while 43% expect to continue working in their senior years.

Prudential Assurance chief brand officer Fiona Liao said, Malaysians should frequently review their finances.

“As a society, we don’t spend enough time thinking or doing financial planning. There are plenty of solutions out there, insurance is just one option. As circumstances change so do our needs. Malaysians tend to worry about these things but not enough action is taken on their part,” Liao added.

Malaysians should consider various financial planning services offered by banks and insurers, she suggested.

“Sometimes it really helps when there’s a third party sitting in the middle of you and your spouse to guide you on your finances. It helps take a burden off your back and your relationship even,” she said.

Most respondents in the survey agree with that sentiment, with 57% of couples agreeing that planning their finances with the help of a financial agent improves their relationships.

Family relationships are likely to improve for couples who make financial plans together (76%), compared to those who don’t plan together (42%). They are also more positive about their personal finances improving by 2020 (74%) compared with those who make plans separately (55%).

Financial planning has also become easier with the growth of technology in the country. About eight out of 10 Malaysians agree that technology has made planning finances easier and better.

On top of being concerned about their retirement planning, Malaysians are also worried about their children. Almost all parents in Malaysia (96%) are stressed about their children’s future. About 67% admit to worrying at least once a week, while half of them make supporting their children’s education as a top financial priority.

The financial state of the family if also one of the key financial concerns for more than a third of Malaysians. More than a quarter of the respondents believe their family would suffer financially and emotionally if anything were to happen to them. One in ten predicts the effects would range from serious to catastrophic.

The PRI is an exploratory study to understand the state of personal relationships in Asia. In Malaysia, 516 interviews were conducted through online sampling with adults aged between 25 and 55 years. Respondents were residents of Kuala Lumpur and Petaling Jaya with household incomes of at least RM4,000 per month, representing the top two-thirds of household incomes in the two cities.

How many times have you been guilty of setting the bar too high, and then failing miserably? Maybe that’s why most of us never stick to our New Year’s resolution.

But given that the start of every year ushers in hope, how about we be practical about this and look at what we can achieve by the end of the year?

Look, you don’t need to drive down debt to zero to make financial progress or land a five-figure job to have some semblance of social mobility.

Some simple twists and turns can help you make 2018 a much better year than the last. Here, we provide five easily attainable financial goals anyone can do:

Pay your bills right after receiving your salary
One common budgeting strategy you will hear all the time is to take care of monthly obligations before indulging in any personal – or dare we say, luxury – expenses.

The logic is simple: doing so gives you a better sense of what you can truly afford and what you can’t. It also helps you avoid having a late payment reported to the major credit bureaus, which is one of the easiest ways to damage your  .

So how do you get on the prompt-payment bandwagon? By using that auto-debit function, of course. And we recommend setting up two automatic monthly payments: one right after payday and another a few days before your monthly due date.

This is best for regular bills of the same amount, such as your broadband and mobile bills.

This second round of payment helps you avoid interest due to late payments. But here’s where you have to do some work: If you don’t know when your billing cycle begins and ends, just check your monthly statement.

As for fees, banks provide this service free for customers.

Tip: You could also request to change it to whatever day of the month is best for you.

And the major difference between direct debit and standing orders is: With the former, a variable amount of money is taken from your account while the latter allows you to set up the amount of money to send every month.

Focus on getting physically healthy
There is a huge correlation between physical and financial health. It’s a fact that Malaysia ranks top for non-communicable diseases (NCD) such as obesity and diabetes.

The latter especially is an epidemic that costs national coffers a whopping RM1.6 billion last year to treat some 40,000 Malaysians.

These NCDs also have a way of forcing you to adjust your lifestyle. Say for example if you are diagnosed with diabetes, outpatient treatment will cost you around RM2,750 a year and expect to fork out an additional RM1,523.84 a year due to unpaid leaves taken whenever you make that trip to the doctor.

So in a year, as a diabetic, you will spend RM4,273.84.But a simple gym membership, say, at Chi Fitness only sets you back RM1,548. So just by exercising, you could potentially save RM2,725.84 a year!

Tip: Another incentive that can help put this in order is the lifestyle tax where you can claim, among others, gym membership and sports equipment amounting up to RM2,500.

If you want to be cheapskate about it, then jog at the park. How much does that cost? Nothing.

Also, cut down on eating out. Malaysians are notorious for that, spending 13.4% of their income on restaurants and hotels. While eating healthy may cost some time and money, always indulging in that mee goreng or roti canai will seriously burn a hole in your pocket, if you live to tell the tale.

Get a side gig
Malaysia may be heading to better economic conditions but we are not in the promise land yet. What we learned from last year is that the country is and has been susceptible to external shocks whether it’s the election of Donald Trump as US president or the global oil price movements.

There’s no better way to hedge yourself against these uncertainties but by generating some part-time income. There are many ways to do it. You could either go the usual route of working in an F&B outlet or you could also monetise your car and drive for a ride-hailing service.

Now, we are not advocating crazy hours but a side gig that’s worth your time and Uber and Grab offer those flexi hours, where you can make that trip back home count by cashing in on a trip.

Have a sizeable following on Facebook or Instagram? Then get your hands dirty with being an influencer.

The point is, a side hustle helps mitigate the risk of unemployment or unpaid bills should something untoward happen. It also increases your spending power and savings because of that extra income. Just remember to not take up something too taxing that your full-time job is affected: this is a part-time stint after all.

Repay 20% of your credit card debt
Malaysians owe way too much credit card debt. By the end of 2017, we are on the cusp of breaking past RM3 billion and that debt is extremely expensive, too.

Something eventually has to give and you’d much rather that be your outstanding balance paid down on your own terms, than your ability to afford monthly minimum payments and, in turn, your credit score. So get serious about getting out of credit card debt.

Now, we know owing zero is a tall order, let’s start with shaving 20% of your credit card debt. Steps to take include budgeting and automation. To optimise the entire process you could use a credit card payoff calculator to crunch the numbers and if you can afford higher payments, by all means make them.

The biggest, and also the most difficult part of paying down your credit card debt is to refrain from putting on more debts while you are paying it down. Keep your card at home for emergency, so you won’t be tempted to use it for unnecessary things.

Because the sooner you can reach debt freedom, the better off your wallet will be.

Tip: Consider credit card balance transfer facility to help you manage your credit card debt without incurring interest.

Add one month’s pay to your emergency fund
About 75% of Malaysians do not have a rainy day fund, according to  Bank Negara Malaysia. Like someone without insurance, people who lack an emergency fund are tempting fate, putting themselves at risk of financial catastrophe in the event of unexpected unemployment or major medical expenses.

So building up some reserves should be one of the first orders of business for any financial makeover. While there’s no rule of thumb as to how much you need to build, some recommend a reserve of six months.

But it’s important to understand that won’t happen overnight. In other words, you don’t need to put the rest of your financial life on hold until your emergency fund is complete. Rather, chip away at it over time.

Tip: This is the best time to use auto-debit to transfer a set amount of your income every month to a high interest account for emergency fund.

Just remember to scale
The problem with all these New Year’s resolutions is that we set the bar unreasonably high. Now, it’s fine if you don’t meet your financial goals, but you have to at least attempt to work on them.

One way to do it is to set achievable goals such as trimming off 20% of your credit card debt. That is reasonable and doable and by the end of the year, achieving that will free up some money.

To make it more manageable, you can also split your target into quarterly, so you can have a review every quarter to see if you are on track.

If midway you get stuck or lapse into bad habits, quickly get back to it, rather than let your resolutions slide into oblivion. And should you face dire circumstances, always ask for help.

If that credit card debt becomes unsustainable, get in touch with your bank to negotiate repayment or freeze your card. If overall debt becomes unmanageable, get in touch with agencies such as Agensi Kaunseling & Pengurusan Kredit (AKPK) for professional help and guidance.

Regardless of where you are on the personal finance spectrum, remember to make 2018 count by working towards – and hopefully achieving – some positive financial goals.


sumber:https://www.imoney.my/articles/freelancer-safety-net
             https://www.imoney.my/articles/retirement-savings-priority
             https://www.imoney.my/articles/financial-resolutions-2018

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