Meshio.com

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…

Photo Courtesy of Aaron Tan

Another indicator that the Government is running low on cash.

Or it’s a sign that even the Malaysian Government is not spared from the Madame Bovary Syndrome…

MALAYSIA will sell RM3 billion (US$886.5 million) of government bonds on Nov 30, said Bank Negara, late last Friday.

The bonds will mature on May 31, 2013 and tendering for the paper closes on Nov 30, the central bank said on its website. – Reuters

I hope this won’t be applicable in Malaysia anytime soon. This just reinforces the fact that banks are always finding ways to ‘tax’ (in the name of interest) everything that goes through their doors. This makes them more scary than the government…

The banks have spoken.

For the past few years, the banks has been spending millions of ringgit to acquire plastic subscribers. There is no doubt that the credit card department is the most profitable channel for most of these banks. Regulations on approving new cardholders has been surprisingly lacking, which resulted in the need for the government to set up debt management agencies such as the AKPK. A fire-fighting approach I’d say, but it’s better than not doing anything to the rising problem of high-interest credit card debts faced by many Malaysians today.

Now, in the tabling of the 2010 Budget, our beloved PM announced the infamous RM50 service tax on all primary credit card holders, and RM25 on supplementary card holders. It’s easy to see that such a move will indeed be very ‘taxing’ on the plastic population as a whole but the plastic issuing banks are very unlikely going to let their subscribers cut up their cards and leave just like that, just when they are starting to milk the insanely profitable interest and floats after spending a fortune acquiring them. Another way these credit cards are profiting the banks is through the swiping terminals they offer to the business community. It’s quite a common practice these days for the merchant banks (the bank that provided the credit card terminals) to hold the payments for up to 45 days. Imagine the amount of transaction (float) they hold in their coffer, and then imagine the interest accruing for the 45 day period which goes straight into the banks pocket. No, they don’t laugh their way to the banks, they are already having a party right inside ;-)

I still don’t think anyone would need more than 2 credit cards, unless you are a collector. But if you are holding many cards, rest assure that the banks are going to come up with something to offset your ‘losses’. They are used to paying RM100 or more to these credit card agents to sign you up!

As ironic as it might seem, the banks are being robbed (estimated about RM520 million) under broad daylight. Ouch!

(THE EDGE MALAYSIA) 7th November 2009, KUALA LUMPUR: The Association of Banks in Malaysia (ABM) is advising credit and charge card holders not to make any “hasty decisions” in terminating their cards as the mechanics of the imposition of service tax are still being formulated.

“Whilst details of how the service tax will be imposed are being finalised, cardholders should continue to use their credit and charge cards wisely to enjoy the many benefits that the cards have to offer as a payment instrument.

“Cardholders are thus advised to avoid making any hasty decisions in the meantime. Banks will inform their customers as soon as details are available,” ABM said in a statement yesterday.

It said banks were prepared to assist the relevant tax authorities as best they could in the smooth implementation of the imposition of service tax on cards on Jan 1 next year.

“It is understandable that the imposition of the RM50 service tax a year on each principal credit card and charge card as well as the RM25 service tax a year on each supplementary card has raised many concerns of affordability on the part of cardholders.

“In the short time following from the announcement of the same, commercial banks, together with the other card issuers, have acted swiftly to assess the thrust of the measure with the aim of better pre-empting any issue which may arise in connection with its rollout and apprising the tax authorities,” ABM said.

The association also said it would enhance and promote its consumer education programmes designed to inculcate stronger personal financial management skills among cardholders.