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7/29/2004

My Example

My examples are pretty straightforward. I don’t have big mortgages and loans. But I do have some study loan, unpaid telephone bill thanks to an old housemate, and some others.

My T-account looks like this. This is a summarized version of me.

Debit

Credit

Asb savings

RM20,500

Car

RM10,000

Phone Bill

RM4,100

Study Loan

RM12,000

0% interest credit card loans

RM3650

TOTAL

30,500

19750

Table 2: My example

Theorotically, I have a +ve account. But, I want to take out the savings and car from my account because I don’t want to make myself look good and I only want to make myself realistic. Since the ASB account was setup for investment and emergency purposes only. Since all the credits that I have are on 0% interest, the best is to settle the bills/loans on a monthly basis without touching the savings because the savings can actually generate about 7% average revenue. Of course people can tell you that you have to clear off your debts first. But the point is the debts I’m having are 0% interest. Might as well save the bulk money in a revenue generating account than taking all out to pay all the debts.

The amount that I owe will shrink due to inflation because the value of the money become smaller. That’s why I have to increase my savings to counter the inflation as well.

Taken out my debit column I have a –ve of RM19750 which I have to settle over the years.

For your information, I have a separate monthly account to keep track and control of my monthly expenses. I will explain on how I do this later.

For these interest free account, simple calculation was used. I pay rm50 for my phone bill, RM50 for my study loan and a fixed amount of RM299.34 for my 0% interest credit card payments. For the first 2, I have a choice of paying how much I want for a particular month. The key is to at least pay something. For the 0% interest payments, I really don’t have much choice but to follow the fixed amount to avoid any interest.

Rm4100 /rm50 will totalled to 82 months ~ 7 years repayment.

RM12,000/rm50 will totalled to 240 months ~ 20 years repayment.

RM50 will be a small amount 20 years from now.

I found a free budget calculator at http://www.free-financial-advice.net/. It currently can serve as a basic financial planning. I have personally use it initially to get a picture how I am currently doing. Practically, you won’t follow the rules all the time. You’ll get a shopping urge, death in the family and others which can be knock the budget out of the picture. But with proper realistic budget planning can make your finances better. Having
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