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Last week, I was RM545 poorer because the car air conditioner starts to giving me problem, and the week before that, I have to fork out RM610 for a new pair of glasses to replace a broken one. But there is more, this week, I have to spend RM600 for air ticket to attend some family matters.

All together, I am having RM1,700 unexpected expense.

Though these expenses didn’t create any panic in my monthly finances, they, however, caught me unprepared - they “destroyed’ my monthly saving plan!

Yes, the idea of having a saving plan to handle unexpected expenses is the very basic of good personal finance but it is also very difficult to pull it off. Ever since I started to work, I thought I will be just doing fine by living within my budget and saving a little for investment.And just when it seems I was start to getting somewhere, some unexpected expenses will always come along the way. After dealing with such ‘emergency’, I ended up where I was first started.

According to a marketing poll done by Citibank recently, 85% of Malaysians tried to follow a monthly budget but less than a third succeeded in following it.So now with the overall increases of cost of living from petrol to the latest rice shortage, having an emergency saving is simply just getting more challenging.

But life without emergency saving is painful, and is stressful too.

The good news is you do not need to have a big pay check to build the emergency cushion. What you need is discipline and great deal of patience. Along the way, you may need to make a choice between delaying your gratification such as taking that holiday or save for a better tomorrow. And I must admit that these are difficult trade-offs.

The reward you gained is when emergency situation struck; you do not need to skip your monthly house or car installment, borrow from the credit card, or begging friends and family to ‘cover’ the emergency. If you are forced to do that, there is a high chances that you will start fall behind the payment and ruined your finance plan. Get some emergency fund ready, so that will able to overcome the unexpected without a scratch, less alone pay a dear cost to it.

In Part I of this article, 4 “interest-related” questions was posted and thank to KH, Vai, KC Lau and Freeman of taking time to answer these questions. So now let’s reveal the “answers”:

Let say EPF has declared 5% dividend rate for the next 10 years, so what is your dividend rate for 10 years?

No you don’t get 50% returns; instead, you are getting a whopping 63% returns! The secret is compounded interest (as versus simple interest). We earn returns not only on the original investment, but also on the investment gains earned in earlier years. So if you have a habit of carrying forward credit card debt, you pay interest on both of the new purchases and on any previous month’s outstanding balance. Do not mislead by the “5% minimum payment” to stretch your payment period or postpones paying off credit-card debt. When compounded, that little 5% will ballooned and get of control pretty fast. The formula for calculating compounded interest is = Principal × ( 1 + Rate )^years

Now let say you want to borrow RM10,000 to renovate your house, assuming 12 months repayment, how much would you expect to pay back in total?

The responses from the readers vary from RM500 – RM900, or equivalent to interest rate of 5-9%. At one glance, these numbers are quite in-line with the current personal loan rate and thus seem like a ‘fair deal’. But if you were to calculate based on effective interest rate, for the RM500 interest, the effective interest rate is 8.09% and for the RM900, it is 13.57%! You are paying MORE than what you think.

The true is, we underestimated the cost of borrowing. But this is not our fault. The reason is simple -when we do our mental calculation; we overlook the fact that, with each monthly payment made, we’re effectively reducing the loan principle. With a short-term loan, as you gradually pay down your loan, the monthly repayments will take up a bigger portion of the outstanding principle. For example, at 5% quoted roulette rulesroulette gewinnenonline kasino spielen,online kasino,online kasino spielen auf deutschslots softwareonline baccaratpoker spielen ohne geldcard credit searsbad card credit credit unsecuredbank one credit card offerdebt management consolidation credit cardlow fixed interest credit cardassociate bank credit cardsears credit card account,account card credit sears,access account card credit searsuk lowest interest credit carddiscover credit card application,application card credit discover statuscredit card counseling,card consumer counseling credit report,card counseling credit debt madiscover credit card phone numberbad card credit credit studentcard credit point reward visa,visa reward credit cardassociate citibank credit cardchase credit card paymentcard credit history no visa,card credit credit history no,no credit history credit cardcard credit free machineapproval card credit instant onlineguaranteed credit card ukamerican card credit expressbest card credit rate transferuk credit card applicationlow interest credit card consolidation loan,card consolidation credit loanassociate national bank credit card,associate bank card credithousehold bank credit card servicesapplication card citi credit statuscredit card debt management services0 card credit interest ratetip on credit card consolidationcrazy download free frog ringtoneshotlink maxis caller ringtonespcs ringtones sprint vision,sprint pcs vision ringtonescomposer free nokia ringtonescell free lg phone ringtones,cell free lg phone ringtones verizon,free ringtones lg cell phonefree 50 cent ringtones,50 cent ringtones,50 cent mp3 ringtonesmessenger ringtones yahoo,ringtones yahoo yodel,yahoo ringtonesfree cingular cell phone ringtones,cell cingular free phone ringtones wireless,cell cingular free phone ringtonesdownload free nokia ringtonesmotorola ringtones makerfree lg ringtones verizon vx6000nokia 1100 ringtones,monophonic ringtones for nokia 1100,ringtones para nokia 1100cheap music ringtonesmetro pcs compatible ringtones,metro pcs ringtones,metro motorola pcs ringtonescingular media mall ringtones rate for a RM10,000 loan, the first RM875 payment is 8.3% of the principle borrowed. But when you are in your 4^th month payment, the same amount now is accounted for 11.1% of the balance. Therefore, you are no longer paying the 5% rate, but a higher one.

Remember, the fewer the number of monthly payments, the more we’re likely to underestimate the interest rate charged. So next time when you see “low monthly payment” in any personal loan advertisement be careful! Now, do you still think you are only paying 18% p.a on your outstanding credit card debt? (Effective rate calculation)

long it takes to double your RM1,000 FD with an interest rate of 3%?

The answer is 24 years (round up). The quick way to do this is using the “72 rule.” Simply divide 72 by the rate of return you expect to earn, that will tell you how long it takes to double your money. The implication: If you saved $1,000, rather than spending it, you would have roughly $2,000 after 24 years. But if the rate of return is 7%, it will only take 10 years, and an impressive $8,000 after 30 years. So next time if you are no sure whether to spend of to save, use the 72 rule to ‘imagine’ the money.

Answer “right” or “wrong” : “A short term loan i.e. loans that lasted only a few months is better than the longer one as I can save on the interest payment.”

This is a trick question – a trick question that always confused our brain. The answer is a short-term loan that promises a low monthly payment can be more costly than a long-term loan. The reason is same at the answer in Q2 above

No place like home.

If you celebrating Chinese New Year, it is a huge family jamboree, replete with parents, grandparents, nephews, nieces, kids, and lots of foods.  And of course, if you no more a “Koko” or “Cheh Cheh” but now being addressed as uncle and untie, prepared yourself – get the Ang Pow ready.

But with the raising cost of living, and the looming threats of recession in US & how it may affect our economic, how much should you give in an Ang Pow and not to burn a hole in your next month expenses?

Here, I have a suggestion or two, albeit conservative.

Generous to your parents.  This is on top of the Astro bill that you have been paying every month.  And if your parents have special needs such as accommodation, healthcare and that you have the ability, you have the moral obligation to give more.  But sometime there is a souring part – that what you gave to your parents they give it to someone else or use it in areas that not in your liking.  For example, your parents gave your money to your other siblings, or use your money to indulge on their grandsons, etc.  While you may not necessarily agree with how the money is ultimately spent, the bottom line is, giving money doesn’t give you the right on how should it spent.  Giving money to your parents is just simply an act out of love.

Modest on Children.  Nowadays children are materially well taking care of and are sometimes barraged with bad personal finances influences.  It is increasingly common now that children went all out to out do each others in the Ang Pow F1 race  and to see their bank account number grows.  But then there is a dilemma, while it is a good thing to see them start saving at the early age, but at one hand they seems to not having a good grasp on how the money is earned – they simply think they ‘deserved’ it.  The bigger the Ang Pow it, the less likely they will come to appreciate the true value of the money.  Therefore to teach kid a good money concept, shrink your Ang Pow.

Charitable to those needed.  My wife always remember one particular uncle who has been very generous in given Ang Pow to her & her sister because he knew very well that they need the money.  Indirectly, the uncle puts the Ang Pow tradition in a good charitable use.  Look around, it you have the means, you may want to consider to emulate what the uncle has done.   Trust me, you gesture be remembered for life.

Finally, you should only give out of love, not guilt or to buy affection.

Have a wonderful new year