Laymen Financial Facts and Lies...

This is one of the all-time worst financial books ever written! I was so disturbed by it that I wrote an extensive
review of it.

Go ahead and read the extensive review.

I recommend you guys read stuff on his website. But don't forget to put your thinking hats and filter the advises that you will get from other people. Dangerous advises can lead damage to your life.

Other interesting read by John Reed:

John T. Reed views on various gurus

and all his other articles at http://www.johntreed.com/rateseminars.html

This is fairly an interesting subject for people who are looking for a car. Be it brand new or second hand, I hope this article can be useful to you.

This I relate to my past experience of my foolishness in getting a car. As usual, I’ve just started working and was without a car. At first, being a budget guy I was attracted to Perodua’s Kenari due to its spacious feeling and their cheap price. But after consulting my wonderful wife, then lot of questions popped up in my mind. She highlighed things like on how long I am going to use the car?, do you really want to use the car for 7 years?, Do you want to sell the car after 2-3 years?. I knew that if I buy a brand new car, the moment it is out from the showroom it will depreciate at least by 10%. That is not good for me because I know I am going to use the car 3 years max. I settled for a 2nd hand car instead. I bought a 2nd hand Proton Wira year 1999 1.5 GL injection with automatic transmission grey in colour but…..green interiors!

Whoa I am so stupid on colour coordination. I sold the car after 1 ½ years using it. My wife has another car and I still have my bike. The moment I wanted to sell the car, I had problems because the inside of the car is green. I have to admit someone will like it. But the rest doesn’t like it. So, if you want to buy a car , be objective on your goals for the car. Don’t just judge on what you like. Sometimes, what other people like must be taken into considerations as well. That’s why when people want to sell their car, they have to change all their accessories to standard. I made the right decision on my choice on not buying a brand new car, but I slacked on my actual choice of 2nd hand car.

Before I start with car loans, get your reasons right for getting a car . The main questions asked is the usage of the car. Like myself, I wasn’t really sure. I just knew I needed to get a car. But in actual, I still use my motorbike to work… So the car is only for night and weekend use. What a waste of paying every month.

When I wanted to sell the car, people always ask the current interest rate for the particular car with the particular year. So I called up the banks for the rates on my car. By the way, I was dumb because I used B*B finance which at that time was the highest interest rate at 5.85%. The reason is because B*B finance can offer a higher loan margin which is why a lot of agents like to use B*B. But now, I heard that their rates are more competitive.

This is the list I got 8 months ago. I believe it only applies for proton. But you can compare the rates between banks because it does not differ on the margin their getting. At that time, I’m selling the car at RM32k.

For B*B you can take a full loan on my car, for the rest, you must add up on the down payment. Yes, the rule is of course 10% out of the selling price. But for many years salesman have practiced the art of manipulating the sale price to get the best loan amount.

To illustrate, let’s say a person would like to buy my car at 32k with no down payment, I will tell the bank that I sold my car at 10% higher which is Rm35.2k. Because of the maximum loan amount for B*B is RM39k so they would permit this to happen. I will just say to the bank that they buyer has paid the 10% deposit (which is RM3200) and the balance of RM32k he will finance the car with the bank. As you can see, if you’re a person who likes to invest in the bank, you can buy my car at 32k, but you can ask for a loan at B*B finance for 39k. The balance of money you can get cash. Huh, don’t do this friend. Car loans are killer loans.

The rest of the banks will follow the nearest market value. Like H*ng L**ng, they know that at RM28k they won’t have any problem selling the car at that value. That’s why they offer a lower maximum loan amount and lower interest for the sake of their own security. For B*B finance, they are betting on people like me to pay and continue their legacy on higher loan margin. To compare 4% between 5.4%, if you take a loan at 28k for 7 years, your difference will be RM2743.72 throughout your payments. Or, RM32.67 a month, or RM392.04 a year. That is a lot of money guys.

To sum up, do your survey on the financing company first. Of course, there are other factors to put in such as easiness, number of branches, a branch next to your house, people skills, the insurance company the are using and the list can go on and on. It can a another subject altogether.

I noticed that for other races, they will never take a loan longer than 3 years. For Malays like me, we will always take the longest years to repay our car. This is sad folks. That’s why we can never compete with them. They understood the effects on taking a longer loan. Now, new cars like the Proton Gen-2 can get loans up to 9 years with low interest rates. 9 years? Do you really want to use the car for 9 years?

By the 3rd year, you’ll get bored and you’ll want a another car. In fact, 3 years is just nice before everything in the car rattles and something starts to break…

1. Always pay on time
2. Never pays
   
3. Always pay the minimum amount or some amount
   

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.

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.

Motivational books and seminars will always start with the dream. Sorry folks. But we are not living in a dream world, at least not yet. From experience, dreaming will get the wrong idea, they will be highly motivated but the excitement will never last. Only a few lucky ones which already get into their senses will make out of these books and seminars. For the rest of us, we must anticipate balance. So lets talk about reality first. Dream later.

First, sit down; put some pen, papers and a calculator in front of you. The dining table would be a great place to start. Put all your WIFI enabled laptops, Instant Messenger capable GPRS PDA phone, handphones, kids and maids AWAY for a while. If you have kids, get them to sleep. If you have a partner, please, let the partner sit next beside you unless you want to settle some ‘along’ debt which you don’t want to involve your wife and family. If your partner is busy getting the kids to sleep, then it’s good to start first and get your wife/husband later when they are not so busy. The rule is to at least start. Don’t wait and give excuses that you have a lot of other things to do. That’s why, you are left behind financially.

Accountants will appreciate what I am trying to do. I’m not from an accounting background. So If I do any mistakes, please do correct me. And yes, your house is your asset, your mortgage is, your liability.

Next, draw out a T-account style here in your paper. Mark the left column: debit and the right column: credit.

In the left column, enter your balances of each savings account that you have to the very penny. This will include your assets as well. An example of the list are:

• House (current value)
• Savings account
• Unit trusts
• Cash
• Car(depreciating asset current value)

And you will put your liabilities in the Credit column:

• Your house mortgage balance(Link: calculate your mortgage balance)
• Your car’s loan balance(Link: Autoworld's loan settlement calculator)
• Credit card outstanding balances
• Personal loans
• Study loans
• Anything that you owe other people money with

You get the idea?

Once you’re finished, total up both the debit and credit column. Substract your debit with your credit. If you have a +ve value, congratulations, you’re at least not debt ridden. If you have a –ve, I’m so sorry my friend. You’re in deep trouble. If you have +ve the chances are you shouldn’t read my articles anymore because you are on the right track. Maybe you can contribute to my column as well.

The good news is, this is what I’m here for. To help you get from –ve to +ve. To be honest, Im not totally debt free. At least I’m doing something about it. How about you?

So you want to learn more about money?

It seems that you have done some research and stumbled across my humble site. What I intend to do is to let my readers understand the current financial situation in the modern world; and how to live by them.

You have probably read all the motivational books talking about financial freedom. But what is really financial freedom you ask? They will start to put horror stories on you, the “what if a bad thing happens in your family” they say. After that, they put all the glorious stories in front of you. Thousands of people made millions. If you’re a MLM business owner, you will know too well on what I am talking about. You’re confused. After reading a book or attending a seminar, you felt that you can take over the world, or at least do something about yourself. 1 week down the lane you’re back with your usual life (or can I say, miserable?)

Okay, so my life is not perfect either. I was trying too hard at one point, and at the same time not trying at all. The point is, I have not done it the right way. Doing the right thing in this world is not a sane thing either.

What I am here for is to shout some balance in our life. Balance for your finance, spiritually and mentally.

So how do we achieve this balance?