The Small to Medium-sized Enterprises (SMEs) are the backbone of a country’s economy. As a whole, they provide more job opportunities, pay more in taxes and contribute much more to the local community than the big corporations.

No doubt SMEs takes more risks in their business, but if you want to see real growth and opportunities, you can count on these gung-ho SMEs enterpreneurs. During an economy crisis, they are the ones that would work hard to make sure the orders continue to come in and also to keep their employees on the payroll, while big corporations won’t even think twice about laying off their crews.

Here’s a list of microfinance institutions available for SMEs in Malaysia and the various products they offer:

Source: www.smeinfo.com.my

The wallet or purse is basically just another form of ‘luggage’ that we carry around everyday. If you have the liberty to peep into your friends’ wallets, it can tell you a bit on how she manages her money. The wallet is such a personal accessory that the fashion industry has exploited very successfully- everyone has at least got one. Yet, the primary function of a wallet remains the same for the majority of the population- to store items that is crucial for day-to-day survival in our society. So, it’s almost ‘fatal’ to be carrying a wallet that is empty without cash or a working credit card. Most of us almost never leave the house without our wallets in the pocket. It is this very emotional attachment we have with our wallets that I had the chance to observe the relationship between these leather-made fashion accessories and our spending habits.

A few months back, I gave a personal finance workshop to a group of students who will be joining the work force in a few months time. I brought up the issue on controlling their expenditures and how they can limit it by a very simple trick. In my example, I told them how most of us would go to the ATM and withdraw a certain amount of cash that will be spent for the next couple of weeks. Some of us even withdraw as much as we can so that we don’t have to visit the ATM again until the next paycheck. Next, we will naturally insert all the cash which we’ve just withdrawn into the wallet. And it stays there until all of it is depleted. You might think there’s nothing wrong with that, but my observation tells me otherwise.

Let’s rewind to the scene where you were at the ATM machine, right before you press the figures on how much to withdraw. Now, just for a second, you force yourself only to withdraw only RM150 (this figure could vary according to your income size). RM150 would be a typical example for a fresh graduate, who has just got a new job with a monthly salary of RM2,000. Before this, you could have been withdrawing RM600 every time at the ATM, telling yourself it’s more convenient to withdraw RM600 once than to withdraw RM150 in four different sessions.

I have to agree that it does become an administrative burden if you had to visit the ATM machines more than 5 times a month. The trick here is to balance out the withdrawal figure (I would suggest not more than 8% of your monthly income, how many days it will last you (preferably 10 days), and how many ATM trips you have to make in a given month (preferable less than 3 times). From here onwards, I will refer to this specific figure you withdraw each time at the ATM as the ‘ATM-Limit‘.

By restricting the withdrawal amount to RM150, you will now have a maximum of RM150 in your wallet at any point of time. Now, here’s the interesting part: each time you decide to make a purchase with your cash, you will notice that you only have that much of cash in your wallet, which is going to make you think twice before splurging. By making a mental note of your ATM-limit, you will not be tempted to overspent. Since making trips to the ATM is going to be time-consuming, you can reduce the percentage of impulsive purchases too. Just look at how many ATM machines there are in the shopping malls catering to impulsive shoppers. In essence, you are giving more time for the logical part of your brain to process the buying decision, rather than allowing the emotional part of you to subconsciously open up your wallet and part with the cash inside.

Effectively, you will only be having RM450 cash in your wallet for the entire month. And if you manage to survive with that, you will would have a remaining RM1,550 left in the account to pay for the ‘fixed expenses’, such as your car loans, home loans and bills. There are times and emergency situations when you really need the extra cash to help out, but you must keep these extra cashing-out to the minimum. If you do this too often, it only means that you are not withdrawing a realistic figure each time at the ATM. So, practice a little logical budgeting when you set the ATM-Limit’s amount.

However, there can be a serious drawback to this strict cash management technique: the sudden increase in your credit card usage. This will happen if you don’t already have a strict rules for credit card usage. If you find yourself starting to use your credit card more often, then you should reevaluate if this technique is of any help to you at all. Hence, it is best to experiment with this technique only when you are not behind your credit card payments. Also, setting a realistic ATM-Limit will also help.

If you’ve been wondering why you just cannot see any money in the bank account at the end of the month, I really suggest that you try this method out and see if it works for you. If it doesn’t help at all, then there must be other loopholes that you must identify. Always refer to your cash flow spreadsheet. If you don’t already have one, I suggest you start one right now! You can’t be serious about managing your own finance without knowing your personal cash flow condition. You have to constantly monitor your expenditure and figure out ways to increase the income. Things can really get out of hand very quickly on the expenditure section, while growth in income might take a little longer.

Spending within your means takes a lot of will-power and discipline. It’s one of the toughest training for the mind. Imagine not being able to splurge like your friends and not being able to enjoy the lifestyles that you are constantly bombarded with by media. Online shopping is definitely not helping things either. If you are not careful, your money will slip away to places you don’t even know existed. Amassing money might not be your purpose in life, but mismanaging it will definitely leaves you without one.

Another 25 basis points increment to our OPR. This is the 3rd increment in the year 2010. The first increment was back in 4th March, whereby the rate was increased from 2.00 percent to 2.25 percent. The second increment was in 13th May 2010, where the rate was increased from 2.25 percent to 2.50 percent. On July 7th, the rate is now officially 2.75 percent.

In just half a year, the OPR has been raised 0.75 percent. You might need to negotiate harder to get a better deal for your loans now.

At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to raise the Overnight Policy Rate (OPR) by 25 basis points to 2.75 percent. The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 2.50 percent and 3.00 percent respectively.

The global recovery has continued in the second quarter, supported by robust and broad-based growth in most emerging economies, in particular Asia , and a moderate recovery in the advanced economies. Nevertheless, volatility in the international financial markets has increased following concerns over the ongoing sovereign debt crisis in several advanced economies. These developments have raised uncertainties on the potential impact on the international financial system and the global economic activity. Going forward, while the assessment is for the global recovery to continue, there is increased risk that the global growth momentum could moderate.

Read the full “Monetary Policy Statement” here.

I’ve recently gone through quite a bit of ‘spreadsheet-work’ with clients who engaged me to give them a report on how well they are doing financially. After crunching the numbers, I summarized these findings into a report which allows them to easily understand what is really going on with their money. In most cases, they are quite surprised, if not shocked.

This is when I realized another thing about doing these sort of soul-searching exercises with clients- they don’t seem to like crunching these numbers themselves. To most of them, it felt like getting a blood test where they are not sure about the outcome. Some of us even hesitate to go under the needle, for fear of finding out the truth.

In short, denial is bliss. It’s better to get busy and let the finances take care of itself. “Hey, I am still able to put food on the table, so why worry?”

Unfortunately, by putting your finances on ‘auto-pilot’ mode, you might be living in an illusion of wealth, while your debts pile up mysteriously off the radar.

If you cannot perform your own Personal Financial (PF) Blood Test, then it’s probably a good idea to get someone whom you can trust to do it for you. Just think of it as outsourcing your accounting chores, only difference is this is much more personal.

If you are running the family’s finance department, it’s a good idea to also get your spouse to sit through the planning process together. This is also a good way to nourish a good and trusting relationship.

However, in most cases, one of the spouse would usually claim to be ‘financial-illiterate’, resulting in only one person fully responsible for the family’s financial well-being. I would discourage such arrangement because the family’s economy plays a very crucial role in the stability of a family.

Let’s look at this scenario:

Mr Wong who was the sole breadwinner was killed in a road accident. He left behind a young wife and 3 school-going kids. While he was still alive, he was the ‘finance minister’ of his little household. Unfortunately, he did not share with his wife about how he manages the household’s finance because his wife was not interested with anything related to numbers and money.

And to top it off, Mr Wong also left behind RM1 million worth of insurance payouts and distributed all his assets to his wife in his will. Close relatives and friends who heard about the ‘fortune’ Mdm Wong inherited started appearing and gave her ideas on how to make use of the money.

Before Mdm Wong realize what has happened, all the money that was left by Mr Wong to keep the family going was depleted due to the ‘investments’ recommended by these opportunistic family members and friends.

In fact, your PF blood test should be done as regularly as once a month which is why you should have an easy to update procedure when consolidating your incomes and expenditures. A simple spreadsheet that extracts the data from your banking accounts is usually sufficient. Next, you need to categorize your transactions to help you reveal your spending trends and uncover any ‘suspicious’ transactions that you might have made.

A regular PF blood test would allow you to plan ahead. You will know in advance if you are in for a tough time or if you will have enough surplus to invest in the stock market.

Don’t wait until you are struck with a paralyzing stroke. As I’ve mentioned earlier, if you don’t have the courage to crunch the numbers and face the truth yourself, seek assistance from someone whom you can trust. Pay them a little administrative fee if you have to ;-)

For those with lots of debts in their ‘blood flow’, sorting out your finances can be a very mentally discouraging exercise. This could be one reason why you are so deep in debt in the first place. Yes, striking the lottery might ease the pain for a while, but to really prevent yourself from suffering financial scars and bruises, your better bet is to go straight to the root of the problem.

Use the information you get from these blood test results to make adjustments. See where you can trim, reduce or totally eliminate from your spending column. Next, look at how you can increase your income with the resources available to you. Then, see what you can do with the extra money that you manage to salvage after paying off all the bills and loans.

Be in control of your own financial health!

For those of us who keep constant look-out on the OPR, the good news is that the guys at BNM has decided to keep the interest rate unchanged at 2.0%.

24 November 2009: At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to leave the Overnight Policy Rate (OPR) unchanged at 2.00 percent.

The latest indicators have continued to signal further improvements in the international economic and financial conditions. Economic activity in the advanced economies has shown broader signs of recovery, supported by the impact of the policy measures, while several regional economies have recorded positive growth in the third quarter. While these positive developments are expected to continue going into 2010, the recovery is likely to be gradual and uneven, with the outlook remaining uncertain once the effects of the policy support begin to diminish.

Read the full monetary policy statement here…