Getting to know lifestyle inflation

November 29, 2013

Lifestyle inflation is an ever present problem plaguing our society today. What is it and how do you avoid it? SaveMoney.my explains.

 

By Eugene Chua

I’ve heard of Inflation… but what is lifestyle inflation!?

When a person advances into a more profitable position at work, his or her monthly expenses typically rise correspondingly. This is a phenomenon known as lifestyle inflation.

Just like economic inflation, while healthy in controlled amounts, lifestyle inflation can present a problem when left unchecked, because even though you might still be able to pay your bills, living pay cheque to pay cheque limits your ability to accumulate wealth.

Most of you can probably recall that as a high school student or even in college or university, we managed to live on almost no money at all.

Our only real ‘source of income’ was probably through allowance given by our parents and that probably wasn’t a whole lot!. Still, life was pretty good and while sacrifices had to be made because of limited funds, life went on.

With greater income, comes greater spending ability
Most people will spend more money if they have more money to spend.

Perhaps the first sniff you will ever get of lifestyle inflation is when you find your first part time job.

That extra couple of hundred bucks a month from working at TGI Fridays during summer break opens a whole new world of options in terms of monetary freedom. Suddenly things seem so much more affordable now that you have more cash at your disposal.

Consider a graduate who, just embarking on his career, shares an apartment with some friends for RM500 a month. A couple years later, his salary has increased, so he finds a “better” apartment for RM2,200 a month.

The old apartment was adequate – good condition, great location and well equipped but he reasons that he rather have some privacy and also, the new one is located in a more exclusive area.

Despite the fact that the original living arrangement was fine, he traded up to a more expensive apartment – not necessarily because he needed to, but because he could.

Why it happens
Entitlement
“I bust my butt off to earn my money! I deserve to spend it on the things I want!”

You’ve worked hard for your money so you feel justified in splurging and treating yourself to better things. While this is not always a bad thing, rewarding yourself too much for your hard work can be detrimental to your financial health now and in the future.

Peer Pressure
It’s not uncommon for people to feel like they have to keep up with their friends’ and business associates’ buying habits. If everyone drives a BMW to the office, for example, you might feel compelled or pressured to buy one as well, even if your trusty old Saga gets the job done just fine just so you don’t feel “left behind”.

The problem with lifestyle inflation is that you get used to the things you have.  So, as you get more things, you get used to those things too, and having more things becomes your new “normal”.

Numerous studies have shown that people settle into the same level of happiness after the initial excitement of buying new things wears off, so no matter how many things you have (provided you have what you need), you always settle into the same level of happiness eventually.

Am I suffering from lifestyle inflation?
Some possible signs that you may be suffering from lifestyle inflation:
1. You always have a balance on your credit card.
2. You live pay cheque to pay cheque
3. You feel the need to get the latest device or consumer product when the item it replaces is still working perfectly
4. You take on debt to buy consumer products
5. You associate spending with happiness, but normally don’t feel any lasting happiness after a purchase

Managing lifestyle inflation
While some level of lifestyle inflation may be unavoidable, remember that every spending decision you make today affects your financial situation tomorrow.

Here are some tips on how to manage it:

Be conscious of of it’s presence

Keep a budget, watch for examples of where your regular spending has gone up and review it before deciding whether it should be changed.

Splurge with enjoyable activities, not things

Reward yourself by doing activities such as playing a video game, taking a walk in the park or reading a book rather than choosing to buy something new.

Buy an affordable house. For most people their largest monthly expense is housing. Affordable does not mean what the bank will let you borrow! By simply buying the biggest house possible, you’re also inflating many other things.

Be realistic about cars Probably the second largest monthly expense for many. Know that a new luxury car means more than just higher monthly payments. It means more expensive insurance, maintenance costs, repairs and may even required premium-grade fuel. The cost of RON97 (RM2.85/L) is substantially more than RON95 (RM2.10/L).

Eugene Chua is the Finance Editor of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time, painless) savings in their daily banking, technology and lifestyle spending habits.

Migrating to Australia: good meh???

Narinder Singh

 | November 29, 2013

           

The book does provide some valuable arguments and thoughts, and could be a light read for those Malaysian dwelling with the idea of migrating to Australia.

BOOK REVIEW

‘Migrating to Australia: good meh???’  by Ken Soong and Michael Soong attempt to dissect the intricacies associated with general perceptions among hopeful migrants to Australia. The authors cover wide ranging subject matter in this rather short book that would suit to be more of an idiot’s guide or coffee table companion. From simplified economics to the darker side of Australia is laid for the readers to make some or little good in taking the first step towards making Australia a home.

Ken and Michael are brothers who obtained their tertiary education in Australia in the 1990s and are currently in the teaching profession there. Having migrated in the heat of the era, they share their inner thoughts, bitter sweet experience, and observations made.

This book has a continuous relevance in perspective of time as the lure towards Australia is always present in the minds of many potential migrants from Malaysia and other parts regardless of their profession, age or background. Nevertheless readers must keep in mind that the goal post for migrating into the kangaroo land some how changes position along political tides; and requirements are rather getting more sticky and critical in demand for all categories of migrants.

On this aspect this book does provide the relevant websites as an escape clause in the event the rules change and are not in sync with its content. Many of these website can be easily Googled up with not much effort though.

The authors tried being as updated as possible but then again socio-economic and political landscape of Australia is in a phase of rapid development. Though their style and expressions have been rather non-committal but there is a tendency to be tinged with pre-judgments on certain issues especially those related to finances and job possibilities. No doubt they are quite witty and cynical in revealing some hard facts about taking advantage of the Australian migrating policies but fall short of being detailed.

From a birds view, this book strives to make a neutral stand as much as possible on all matters and radiates a feeling they do not want to step on the wrong toes.

‘Migrating to Australia: good meh???’ tries to make the first impression impact-full as much possible in the first chapter by evaluating if indeed a western culture is better than ours.  Some direct comparisons are made for example in language and the different myths associated with western culture but then again in a super charged globalised world it may not mean much for a migrant.

In the proceeding chapters the book generally debates the various aspects that a person needs to self evaluate all the pros and cons before marching into a migration consultancy firm. Choosing the right schools, neighbourhood, area to live in, taxation system, business environment, education system and many other idiosyncrasies are net into their discussions, some in depth but some merely touched on surface.



The larger part of this book was rather academic and monotonous in dishing out quotes and references. Well, coming from academics, it is no surprise but then again there were many ambiguities and self countering arguments made by the writers.

There were occasions they had to justify as not steering out of sync with the objectives of the book and yet more often than not they did so in jest.

It is difficult not to like the authors per se with their modest and unpretentious style of writing but there are weaknesses in the book. It its endeavour to cast too wide of a net, the authors remain undecided to drill any firm points despite the title with a triple question mark; indicating and implying a strongly opinionated piece at the first impression to a reader.

In questioning the migrating ‘minds’, the writers have in essence possibly projected an image of sour grapes  for themselves. There is definitely this remote possibility after reading the entire book.

Nevertheless, the book does provide some valuable arguments and thoughts, and could be a light read for those Malaysian dwelling with the idea of migrating to Australia.

Ken Soong and Michael Soong, published by Gerakbudaya Enterprise, No 11, Lorong 11/4E, 46200 Petaling Jaya, Selangor, Malaysia, www.gerakbudaya.com, 2013. ISBN 978-983-2344-18-6. RM 25.

Are you financially ready to freelance?

November 28, 2013

Here’s our checklist on getting financially ready to freelance.

 

By Diana Chai
Many of us have at some point thought of leaving our fulltime job and working freelance instead.

Who doesn’t want to have such freedom at work? Freelancers definitely have more say on workload and working conditions, however they also tend to have a very unstable income. Unless a person is already established and well-known in their industry; it is not uncommon for freelancers to go weeks, sometimes months, without paid work.

Because of the instability of it, you will have to prepare yourself financially before going ahead. Here’s our checklist on getting financially ready to freelance.

1. You have enough requisite experience
Though this may look unlike a ‘financial’ preparation measure; it will decide how successful your freelancing endevour is and if you will make any money from it. Many young people come out into the world thinking they can build a career at the beginning by freelancing but employers would rather bank on someone with experience. After all, they are paying you for output and will not want to waste resources ‘training’ you to do a job only to have you use those skills to aid other companies. It doesn’t make financial sense to an employer and hence will not get you jobs.

Collect work experience which will make you not only look reliable and accomplished to hirers but also to bolster your freelance fee.

2. You can balance accounts
As master of your own business and livelihood: financial management skills are a must. You don’t want to end up spending more on your freelance business than you are making from it or leaving little money leaks unplugged. Managing money is a little trickier when you are planning to eke a possible living from selling a service, talent or product but you don’t need to have financial and accounting background. Just know the basics and your way about a balance sheet.

3. You have enough savings
Because a freelancer does not have a fixed income, it is important to have good savings to ensure you are able to pay the bills in the leaner months. Even if you do complete a project; freelancer payments from companies aren’t always paid on time. Some can take weeks. In the meantime, you will still need to eat!

Calculate how much your bills and necessary expenses will cost you in a month. Once you have this number, ensure you have a minimum of six times this amount so you will be covered for at least six months should the projects not come in.

4. You have a back-up plan
Experienced freelancers will agree that aside from networking, a lot of freelancing opportunities are also seasonal. There will be specific periods in a year when assignments decrease, so having a second income will come in handy. It doesn’t even have to be related to your field. You could try your hand at blogging for instance and make some extra cash from advertising or try part-time tutoring.

5. You know how to live lean
Tapering your spending in the ‘leaner’ months will definitely come in handy. If you are the kind of person who doesn’t seem to be able to save money and are living paycheque to paycheque; freelancing may not be for you just yet! Not being on a fixed income will mean having to adopt a frugal lifestyle at times, at least until you have established yourself with long-term clients or have already made oodles of money.

Freelancing certainly has its perks. You get to be your own boss and steer your career according to your needs. However, it can also be a very uncertain path as you can’t be sure of when the next pay cheque will come in. Being financially ready is as important as having the talent and expertise.

This was brought you by Diana Chai from RinggitPlus.com. RinggitPlus compares credit cards, personal loans and home loans to help Malaysians get more for their money.

Starting your emergency fund

November 19, 2013

Emergency funds are usually separate from general savings for holidays and other life events. You wouldn’t want to pay for that car tire whilst foregoing your Bali vacation.

 

By Diana ChaiThere will definitely come a time when life will just happen. Living paycheque to paycheque will surely lead to difficulty when a sudden car repair, hospital bill or purchase comes up. For such instances, having a savings beyond that for retirement and vacations will be helpful.

Why you need one
As the name states, the fund is for an emergency! And having one will definitely save you money and a lot of stress. Many people are ill prepared for life’s little hiccups and when something does happen – they turn to credit cards and personal loans. The added debt at best will cost them exorbitant interest but at worst – may spiral into a debt cycle they are unable to escape.

Emergency funds are usually separate from general savings for holidays and other life events. You wouldn’t want to pay for that car tire whilst foregoing your Bali vacation.

The Basics
To get you started on building your emergency fund; these are some basic rules.

Start by saving 10% of your income. Granted, 10% is harder for someone on a salary of RM1500 than for someone on RM3000 but endeavour to hit the 10% mark anyway. But honestly, the key is to save something. If you can’t meet 10%, go for RM100 a month.

If 10% from the get-go on salary day is too scary a number; spread the amount over the month. For instance; if you earn RM3000; 10% is RM300. Divided over a month, it’s RM10 a day. So, start by saving RM10 a day, every day. The staggered payments make it easier to swallow and you will still end up with the same amount at the end of the month.

Put it in a savings account and not in a safe at home or under the bed. Most savings accounts will give a minimum 2% interest on your savings. This is better than having your fund grow nothing else but mould.

Don’t apply for an ATM card. ATM cards will only help you give in to the urge to withdraw the money. Save the RM8 fee and don’t get an ATM card.

Optimise Savings
Once you have at least RM1000 in your emergency fund; it’s time to get more serious about saving.
Start shopping around for savings accounts with better interest rates. The fund is still for emergencies and at the time you’ll want easier withdrawal so avoid fixed deposit accounts. Savings accounts have limited interest rates but with some digging you may find one giving perhaps an extra 0.5%. It may not seem like much but when your pot grows; it can make a nice difference.

Revise saving levels with every increment. As your salary increases: look to increasing the percentage you save. Saving at an income of RM5000 is easier than on RM3500 so look to increasing to perhaps 15% or even 20% if you can manage it. If you don’t like percentages, increase it by RM50 or RM100 when you can.

Automate savings. Though you can start this at the get-go; it’s sometimes helpful for some to start slowly. The daily method will not work on automation. But once you are comfortable with saving – start an auto-deduct plan with your bank to funnel your savings straight into your savings account. Of course, you can always start with automated savings to help ensure you don’t slack off from the beginning.

Unlike general savings; your emergency pot doesn’t need to always grow. Keep it at RM3000 or RM5000. You’ll only need to restart saving if you’ve used the money. It’s important to remember that an emergency fund is just for emergencies and should not take the place of regular savings.
This article brought to you by Diana Chai of RinggitPlus.com. We believe all Malaysians should have access to free, accurate and independent personal finance information.

A beginner’s guide to medical insurance

November 18, 2013

There are several types of insurance available on the market, but what do they all cover?

 

By Eugene Chua
There are several types of insurance available on
 the market, but what do they all cover? SaveMoney.my explains medical insurance, which should be noted is separate from life insurance or personal insurance.

What is medical insurance?
Medical Insurance functions as a form of protection to cover unforeseen expenses arising from illness, injury or accidents – which can be very expensive, especially if hospitalisation and/or surgery is required. Getting the right Medical Insurance also ensures that you won’t have to fret about the cost of seeking treatment during an emergency. In addition, it also provides you with a stream of income while you undergo treatment.

There are 4 major types of medical policies:
Medical Card/Health Card – covers hospitalization and surgical benefits
36 Critical Illness or Dread Diseases Insurance – a lump sum benefit
Disability Income Insurance – stream of income when you are unable to work
Hospital Income Insurance – provides a specified sum of money on a daily, weekly or monthly basis if you are being treated in a hospital

Where can I get medical insurance?
Medical Insurance products can be found at insurance companies and banks. Pos Malaysia also provides Hospital Cash Income Plan too.

How much does it cost?
Insurance companies and banks provide a few plans for you to choose from, based on your budget and needs. Of course, the longer the list of medical coverage provided, the higher the premium (insurance fee) will be. Aside from this, the premium will also vary based on other factors such as your age, occupation, health record, gender, and whether you are a smoker or non-smoker, subject to underwriting. As expected, those with a higher risk potential will be charged with higher premiums. From our research, the premium for a medical card is basically charged based on the age of your next birthday and it will be increased with age upon renewal.

Medical card / Health card
Government hospitals offer emergency and essential medical care but there is usually a long waiting list. Possession of a medical card will be able to give you more choices to both government and private hospitals. A medical card can also help you prepare for costly expenses and ensures comprehensive coverage in medical, surgical and hospital costs, ambulance fees, and other related medical charges.Things to be aware of:
Panel hospital A panel hospital is the hospital collaborating with the insurance company. All the expenses incurred by the insured are directly payable to the hospital from the insurance company; you do not need to worry about preparing and submitting claims. Depending on the insurance company, the number of participating hospitals varies. Choosing a medical card with more participating hospitals benefits you better, as you will have more choices in the time of emergency.
 
Co-insurance
Some medical cards practice co-insurance, meaning that you’ll have to pay a certain amount of the medical fees, normally at 10% – 20% of the total medical fees incurred, while the balance will be paid by the insurance company. Another similar option is Deductible per disability, which is also the amount you have to bear before the insurance providers pay the claim for you. The difference is that deductible per disability is a stated amount (not a percentage), and only the amount exceeding this deductible amount will be payable by insurance providers. guide on medical insurance in our next piece!
Eugene Chua is the Finance Editor at SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.

Financial leaks to plug

November 5, 2013

Here are some ways your money may be leaking out from your wallet and how to plug it.

 

By Michelle Brohier
With the rising cost of items and other financial burdens to worry about, it’s easy to believe that there is little you can do about the dwindling amount of money you have at the end of each month. But there are actually a number of expenditures that can be avoided. So if you’re determined to make each and every ringgit you spend count, here are some ways your money may be leaking out from your wallet and how to plug it

Anxiety spending
You’re stressed out, tired and in desperate need of some cheering up. So you think of the easiest way out: buying happiness through splurging on expensive meals, a couple of drinks at the bar with friends, or even on a new item you like. While they may work in cheering you up for a short while, spending based on your mood is a surefire way to end up with massive debt for things and experiences you don’t even remember why you wanted.

Look into inexpensive ways to handle your stressful days, like staying home to watch a movie or have friends meet up at cheaper places. While entertainment and keeping yourself happy is important; if you aren’t careful, the added bills and debt can be a lot more stressful than the guy who accidentally shredded your work documents.

Hidden costsYou’ve been buying many items that you believe is saving you money as they were on sale, there was a bargain or even a special promotion. But then you realise you didn’t need half of it and probably won’t use the rest. Sometimes, you may find you were duped by a ‘good deal’ that wasn’t so good after all.

Take your time to find out how much the item you want really costs by looking out for possible taxes or fees that may come along with it. Don’t buy anything out of impulse, and do as much research as possible for there may be ways to cut down on those hidden costs. Items on sale that requires you to make more purchases to obtain a discount may not be worth the extra spent, especially if you end up buying items that you never use.

Indiscriminate parking
Parking can be a real pain here in Malaysia, and in order to save time and even money, double parking or even illegally parking seems the only option. But parking this way brings a lot of risk, with the possibility of your car getting scratched or dented, getting summoned or worse, being towed away.

If you receive a summons, it would cost you many times more than parking legally. If your car gets damaged, you will also have to pay to fix it and the inconvenience of retrieving your towed car would also cost quite a bit. So take that extra effort and look for a proper parking spot even if it means having to walk a little further away.

Rarely used services
You spend hundreds of ringgit on your postpaid phone service, on cable TV, gym memberships or even on some subscription magazines. But you don’t use your phone much, barely watch TV, have lost interest in the magazine and let’s face it – you’re never going to the gym again. There’s probably hundreds of ringgit being wasted right there. While they may be useful occasionally, it’s burning a hole in your pocket when it isn’t in use. Cancel it all and before signing-up for something again, make sure you are committed to making full use of it!

Plugging these financial leaks can save you a lot of money, but it can only be done if you make a conscious effort to know where your money is going.

This article brought to you by Michelle Brohier from RinggitPlus.com. We help you get more for your money; be it from banking products to lifestyle tips. Check out our banking product comparator or just drop by for informative reads on everything money.