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Content
Smart Money Tips1. Be a financial genius
2. Know what’s your time worth
3. Focus on increasing income
4. Get rich using excessive debt
5. Have a budget plan
6. Employ “Compound Interest” to work for you
7. Quickly evaluate an investment using the Rule of 72
Money-Making Tips8. Earn passive income while surfing the Internet
9. Liquidate those junks in your house
10. Turn your passion into money making machine
11. Turn your credit cards from foes to friends
12. Learn the Essential Rules of Investing
Money-Saving Tips
13. Get your first car FREE
14. Enjoy tax relief for education purposes
15. Minimize Upfront Service Charges in Unit Trust investment
16. Manoeuvre your Mortgage
17. Upgrade your lifestyle while cutting down expenses
Money-Protection Tips18. Five Basic Insurance Benefit You shouldn’t lack
19. Traditional plan vs. Investment-linked plan
20. Understand “Insurance Switching”
21. Investment Replacement Feature
22. Beware of the Worst Advice from Insurance Agents
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23. Premium: Monthly, Quarterly, Half-yearly, or Yearly?
24. Minimum Effort to keep you Investment-linked policy in
force.
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TOP MONEY TIPS FOR MALAYSIANS
Tricks that make you richer without hard work
K.C.Lau has been involved in the financial industry since year 2003. He graduated from
University of Technology Malaysia with a degree in Aeronautical Engineering, but
ironically never ever worked as an engineer. Starting at age 21, He has been performing
as a pianist, keyboardist, and vocalist professionally for many years and still doing whathe loves now. While serving hundreds of his existing clients, he writes regularly at
http://kclau.com to give valuable information to the public in regards of personal finance
topics. If you are wondering how well he performs musically, check out his solo albumswritten, produced, recorded, mixed and mastered by himself at http://music.kclau.com
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Introduction
After I graduated, I didn’t get a job. During the final year studying in university, I haddetermined that I am not the kind of person to be an employee. While my school mates
were busy sending out resumes applying for jobs, I was busy thinking of alternative ways
of not to have a day job.
There is really nothing wrong to have a job, and work on it from seven to eleven, even
though during weekends. It is just my own choice not to work as an engineer. However, it
is an undeniable fact that time had to be traded in exchange of money. There are people
who work their whole life, just for the money. Money can’t be everything. But withoutmoney, we are most probably left with nothing.
This leads to my quest to gain more knowledge in personal finance. You can spend yourwhole working hard just to earn more money. But without knowledge in personal finance,
you are just sailing blindly in the middle of the ocean.
So I buy a lot of books, study them, digest the content, practice the tips, and finally I
ended up involving in the financial service industry. Unlike most personal finance books
that preach on a certain concept, this book will show you many simple, and practicaltricks and tips. Most of the tricks can be used right away. Some of the tips here just
require slight changes in your daily habits in order to be effective. Hopefully, this book
will be an eye-opener for you to achieve more with your limited financial resources.
This book is arranged into four parts:
Part 1: Smart Money Tips - You will learn important money concepts that will tuneyour mindset to the right frequency.
Part 2: Money Making Tips – I will share some easy tips for making more income that
doesn’t require a lot of work.
Part 3: Money Saving Tips – Collection of tips that will save you money, without
significant downgrading of lifestyle.
Part 4: Money Protection Tips – This part includes information and advices oninsurance planning. Accumulating wealth require strong foundation of risk management.
I share tricks that even insurance agents never realize.
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Tip #1: Be a Financial Genius
You don’t have to be a genius to be wealthy. Although high IQ definitely helps, it is moreimportant to have emotional intelligence in order to get rich.
I like to tell the story of the twin brothers, James and Jeremy. They graduated with thesame degree in engineering. They work for the same company. They earn the same
amount of money throughout their working life. But they have different mentality about
money.
James started saving RM1000 at age 18. The brothers’ income is measly RM10,000 a
year at that time. James decided to save 10% of his income. But Jeremy didn’t. Jeremy
thought that RM1000 saving a year is really hard for him.
10 years had passed by. James had never failed to set aside RM1000 every year for thepast 10 years. He invested the money and got an average return of 10% per annum. Both
the twin brothers were earning RM50,000 a year at age 28.
James thought he had saved enough. He stopped saving since age 28. But he still investswhat he had put aside before that. Ironically, at the moment he stopped saving, his
brother Jeremy started the commitment to save RM1000 a year. Jeremy was so
determined that he never stopped saving a thousand ringgit every year until he reaches
age 65.
The brothers invest in the same portfolio and reap a return of average 10% per annum.
Who do you think has more money at age 65? James only saved RM10,000 from age 18-27. Jeremy saved RM38,000 from age 28-65. Without doing the compounded calculation
using Microsoft Excel, most people would have guessed that Jeremy would be richer.
But the fact is that at age 65, James has RM645,617 but Jeremy only has RM403,536.James is richer than Jeremy by RM242,081! Both the brothers were doing quite well. The
moral of the story is about deferring your spending. The earlier you can do it, the better it
is. The earlier you can save, the less you need to sacrifice at later age.
When you receive your paycheck, there are only two major choices of what you can dowith the money. You either spend it now, or save it for future consumption. The question
is how long can you delay gratification? James only defers his spending for 10 years. But
Jeremy defers for 38 years and still failed to catch up with his brother.
Sometimes rational can’t lead you to save. It always involves emotional struggles. Do
you want that LCD TV now? Can you wait another three years to change your old car?
Would you buy that hi-tech hand phone now, or wait another year for an even more
advanced model, and perhaps cheaper? Only high EQ (emotional quotient) can ensure
your wealthy future.
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It is your decision to be made. Defer? You will get richer. Or spend it now?
We all learn the simple arithmetic in primary schools. For example, you certainly know“8 = 10-2”. There is really no challenging mathematics involved in personal finance.
Simple plus and minus equation is all you need.
The two most essential equations in personal finance are:
S = I – E
Where S = savings, I = income, E = expenses
&
NW = A – L
Where NW = net worth, A = assets, L = liabilities
In the quest of acquiring wealth, one must have a positive S all the time. Only throughsmart utilization of your savings can ensure that your net worth will increase over time.
Hacking Your Cash Flow and Balance Sheet
In accounting world, a balance sheet (also known as a "statement of financial position"),reveals a company's assets, liabilities and owners' equity (net worth). The balance sheet,
together with the income statement and cash flow statement, make up the cornerstone of
any company's financial statements.
Similarly, every individual is also an entity that has his/her own financial statements.
Living in this modern society, you are earning an income and spend money to maintainyour lifestyle. You also have your cash flow statement and balance sheet to look after.
Publicly traded companies have to disclose their financial statements in a regular basis.
Do you do the same for your own “company”? I mean your own “company” as anindividual.
Based on the two formulas discussed previously – (S = I – E), (NW = A – L) – you shallhave two very important financial statements at any point of time – the cash flow and
balance sheet statements.
Learn to hack the charts and you will be on your way to the road to riches. These charts
are discussed and elaborated insightfully in the book Rich Dad, Poor Dad: What the Rich
Teach Their Kids About Money–That the Poor and Middle Class Do Not!
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There are three general “shape”
First, let’s look at the chart of the mediocre.
Hacking the Charts of the Mediocre
Financial situation:
• always spend less than they earn
• save a portion from their pay check every month
• conservative passive investors who mostly keep their money in the bank
• buy a house, buy a car, go to work and wait for retirement
• net worth grow slowly (probably too slow).
• they are very afraid of debt and try hard to pay it off as soon as possible
Being mediocre is definitely better than being poor.
Cash Flow Net Worth
IncomesExpenses
Savings
Assets
Net
Worth
Liabilities
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Hacking the Charts of the Poor
Financial Situation:
• at first, there is some tiny saving left at the end of the month
• but they use the little surplus to acquire more debt - buying stuff they can’t afford
• liability is greater than the amount of asset, resulted in negative net worth
• excessive amount of liabilities put more load to the overall expenses because theyneed to pay interest charges - Negative cash flow
• when they finally got a career promotion with higher income, they use the tinysurplus to acquire more liability — switch to a bigger house, a bigger car etc
• frugal is a word that doesn’t exist in their dictionary
Cash Flow Net Worth
Incomes
Expenses
Deficits
Assets
Liabilities
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Hacking the Charts of the Rich
Financial Situation:
Cash Flow Net Worth
Incomes
Expenses
Savings
Assets
NetWorth
Liabilities
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• they are definitely the Millionaire Next Door
• normally they work hard to increase their income
• they earn better than the mediocre but still spend like the mediocre.
• they save a lot from every paycheck which is normally invested, in the area theyare familiar of, probably in their own businesses.
• some ultra rich know how to use the leverage of good debt. They might get intodeeper debt, but at the same time the debt is being used to acquire justifiably
greater assets. Assets contributes more earning and improve their cash flow chart.
• financially, they are independent.
• They are the prodigious Accumulator of Wealth
How do your cash flow and net worth charts look like? What’s the shape?
There are two rules to follow:1. Have a positive saving (the “S”) – you must have surplus or saving in your cash
flow chart
2. Use the saving (the “S”) to acquire more assets (A), not liability (L)
Plot Net Worth Chart versus Age
Definition of net worth is assets minus liabilities. More accurately, it should be defined
as total assets less total liabilities.
Net Worth = Total Assets - Total Liabilities
In this case, assets include all your economic resources, such as fixed assets (land,vehicles, houses) and current assets (cash, money owed, stock, unit trust, etc)
Liability is anything that is owed to someone else, including your mortgage, car loan,
credit card debt etc.
The net worth of a person is the value of his possession in monetary terms. You can saythat the wealthier a person is, the greater is the net worth. When we plot the net worth of
a person over his age, we will know how the person actually manages his money.
There are two extreme groups of people: The financial idiots who belong to the worst
group and the financial geniuses who belong at the other end of the spectrum. Most of usare somewhere in between.
Financial Idiot
Eddy is a fresh graduate who earns RM1800 per month. Right before graduation, hebought a new Toyota Vios with minimum down payment. After paying the hire purchase
installment, he is left with RM1000 for all other expenses. He rented a room in KualaLumpur that costs RM300 per month. Without proper budgeting, he pays for all other
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expenses with his credit card whenever possible, such as petrol, fine dining, and some
other consumer spending.
Just within a few months, he had reached the maximum credit limit of his first credit card.
Not enough still, he applied more credit cards from other financial institutions. Another
six months down the road, he can no longer afford to pay the credit card minimum
payment. Finally, he lost everything. This is a typical story of a financial idiot.
Let’s look at the net worth chart of a financial idiot.
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Net worth chart of a financial idiot
This chart shows an idiot digging a never ending debt hole. Until the day he is too broke
to even declare bankruptcy, he will be buried in the deep pile of debt shit. There is no
other way to help this guy unless he is willing to delay gratification, cut a lot of expenses,
and work hard to save!
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Financially Disciplined
If you are educated enough and have the discipline to save, you will get the chart shown
below:
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Net worth chart of a financially disciplined
This is a typical chart of a graduate, who takes up a study loan to obtain his tertiaryeducation certificate. That’s why you will see the line chart drops to the negative part.
After he graduates, he knows that he is in debt. He gets a job and moves up the corporate
ladder. Meanwhile, by spending less than he earns, he’s able to settle the study loan, and
build up some assets. You will see that his net worth goes up and finally stops at the
retirement age. After he retires, there is no more active income generated and he starts to
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spend his hard earned retirement fund. This fund might be just enough for him to spend
until the day he rests in peace.
This is not too bad right? In fact, there is a study that shows that only 5 out 100 fresh
graduates can successfully achieve the net worth trend shown above. These people are
said to have achieved financial independence. They don’t need monetary sponsorship
from family members nor the public. These are the financially educated group.
Financial Genius
Let’s look at another story about John. He is a frugal person. Every month when he gets
his salary, he saves at least 20% of the net income. The savings are used for investment.
His income grows every year, so as his savings because he still keeps saving 20% of what
he earns. While earning active income from his job, he also tries various ways of making
more money through investment and other business. Finally he acquires a large amountof wealth that he will never have to worry about working hard for money anymore.
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Net worth chart of a financial genius
A financial genius is someone who is really good with handling money. It doesn’t require
a Ph.D in Maths or Economics to pull off something shown above. What ones need to
know is some simple arithmetical operations. He definitely knows that to have a positive
net worth, assets have to be greater than liabilities at all times. He would also know that
savings is equal to income minus expenses.
Please plot your own net worth chart using the past historic data of your financial status.
What’s your net worth when you are still studying at secondary school? What’s your net
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worth now? And extrapolate the line graph. Is it moving up? Or is it going down? Is it
forming the shape that you want, like the financial geniuses?
I think financial idiots know these simple principles too. The only difference is that the
financial geniuses know that wealth and money is unlimited, but time is limited and
scarce. Time ends at our last breath.
That’s why financial idiots don’t save money from the start. They never want tocompromise to delay gratification. They think that time is abundant and retirement is still
very far away. They don’t know what their time worth is!
__________________________ END OF PREVIEW _______________________
You can purchase and read the rest of the book here:
http://kclau.com/about-2/moneytipsbook
Hopefully these money tips have helped you to make more money, save more money and
make you wealthy.
If you wish to find out more money tips, do check out
My blog: Personal Finance Money Tips (http://kclau.com)
And please share your personal money tips at the forum: http://forum.kclau.com
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