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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

You would have read it already – more than 40% of the 8.8 million credit card holders only manage to pay the minimum 5% of their outstanding balance.

Now it is easy to blame all this on our very own financial carelessness, inability to delay gratifications or the easy credit approval by the financial institutions

But maybe not! May be it is our mathematic skill, or to put it precisely, we are terribly bad at calculating the true cost of borrowing. We have the tendency to believe what the lender told us and we seldom look beyond the simple interest rate calculation, or simply not aware that simple interest rate is not a good indicator to assess the true benefit of saving or cost of loan.

If we can’t get ‘interest rate’ right, as research have shown, we will likely  underestimate the cost of borrowing (borrow more) and benefits of saving (delay in saving).

So if you interested, here are some questions to test your “Interest” level

1. Let say EPF has declared 5% dividend rate for the next 10 years, so what is your dividend rate for 10 years?
2. How long it takes to double your RM1,000 FD with an interest rate of 3%?
3. 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 (any number, be reasonable, pls)?
4. 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.”

The ‘answer’ will be revealed in next posting. Meanwhile, please feel free to post your answer here for sharing.

What is your 2008 finance resolution? Achieving ‘financial freedom’? Or may be something more mundane like paying-off credit card debt, or hire purchase loan?

Whatever your goals are, it is important to get the basic right.
The very basic question is about good financial planning is understands your liabilities. NO, liabilities are not your housing loan, car loan, personal loan or study loan.

Your biggest liability is about paying for your own retirement. That means to have a comfortable and dignify retirement, you need to invest now and save diligently. When investing in stock market, avoid aiming to earn the highest possible returns or beat the market. The reason is if you set yourself to do you, you are taking unnecessary risks and that will hurt your investment returns. Instead, hunt for lowest investment cost and diversifying broadly and invest for a long term.

Your second biggest liability is your family. Family includes your elderly parents, siblings, spouse and children. The liability comes in the form of medical needs, education needs, or financial troubles. For financial prudent or simply out of love, it pays become a ‘busy body’ to know their finances and gives appropriate financial advice to avoid their financial troubles become yours. This is of course, can go both ways, your family may be your last hope if you get into money problems. Most often than not, when all hopes are out, you could always count on your family.

Start your 2008 financial planning by first look at you two biggest liabilities: retirement funding and your family.