Are you familiar with financial terms like cash flow, assets, liabilities, good debts, bad debts and compound interests? No? Then, it’s time for you to start getting familiar with them if you would like to manage your debt, control your spending, pay down debt and accumulate wealth.

Bahagian 1 – Tip Kewangan Bijak (Tip #1 – #7)

Tip #1 – Jadilah Seorang Pakar Kewangan
Tip #2 – Ketahui Nilai Masa Anda
Tip #3 – Focus Kepada Meningkatkan Pendapatan
Tip #4 – Jadi Kaya Melalui Hutang Berlebihan
Tip #5 – Miliki Rancangan Peruntukan Belanja Jutawan
Tip #6 – Eksploitasi Faedah Kompaun Untuk Bekerja Untuk Anda
Tip #7 – Nilaikan Sesebuah Pelaburan Dengan Pantas Menggunakan Peraturan 72

There are 50 tips of cutting down your expenses at Tip #3. Try them and see whether they help you reduce your spending.

If increasing your income is currently not possible for you, then cutting down your spending/expenses is a good option. However, if there is a way for you to increase your income, by all means, do so. K.C. Lau has listed 25 ways of increasing your income.

Tip #5 is about budgeting. I have failed many times when it comes to doing a budget. But I don’t give up. Recently, I challenged myself by setting up a 30-Day Challenge of Tracking Every Dollar and Cent Project to record where my money goes to.

By knowing what I spend my money on and how much I pay, it’s easier for me to control my future spending/expenses. Eh, sound familiar? I have told myself my times leh. Wuahaha!

You know, K.C. has listed more than 20 websites where you can download free budget spreadsheets and budgeting tools. You can try out a variety of spreadsheets, from the most simple one to the most complicated one, before you decide which suits your style.

Wow, I am very, very long winded! There are 5 parts for this book review – Tip-Tip Kewangan Untuk Rakyat Malaysia by K.C.Lau!

What to do? People have shorter and shorter attention span now. They read the first paragraph, scan through the rest and read a bit of the conclusion of an article. Me too.

In brief, this book is suitable for those of you who would like to learn how to save money, cut down on expenses, increase income, protect your money and build wealth.

Just like the description on the book cover says, Panduan Mudah and Praktikal Untuk Menguruskan Kewangan Peribadi Anda, the tips are easy to understand and follow.

This book is available at all major bookstores at RM29.90. You can also order online here.

Thanks, Adino, I copied the online store link from your post about ‘Tip-Tip Kewangan Untuk Rakyat Malaysia.

Question: My wife and I know we should have an emergency savings fund, but with one income we have nothing left to save after paying expenses.

But I’ve been thinking of a way to deal with this problem. We charge about $2,000 in monthly expenses to our credit cards, which we then pay in full each month.

My idea is this: Instead of paying off the cards every month, I’ll make only the minimum required payment and save the rest. Once I’ve accumulated a decent emergency fund, I would then begin paying down the cards. Do you think this is a good strategy? — N.G., California

Doesn’t this sound familiar to many people? It definitely sounds familiar to me.

There was once upon a time in 2007 that hubby and I were living on one income. Life was tough then because there’s so little income in hand, yet there were so many bills like car and home loan installments, term loans, and as many as 15 credit card payments waiting to be paid every month!

It’s very difficult to save for emergency fund after paying all the expenses because there was literally no money left at all!

But since hubby and I enrolled in AKPK debt management program and hubby started his full time teaching job, we have been able to save money as emergency fund.

If you are thinking of paying the minimum credit card payments and saving the rest as emergency fund until you have accumulated a decent amount of emergency fund to paying down the credit cards, well, it may/might never come true.

Financial experts say so. And I say so; I did what the reader above thought of doing and it didn’t work for me. It’s either you find extra money/income or cut down on expenses or do both if you want to save money as emergency fund.

I agree with Walter Updegrave, the author of the article of Big No-No for Building Emergency Savings that, “If you can’t save today because you have no money left after paying your expenses, how are you going to pay those expenses, plus come up with an extra $xxx a month to pay down the credit card balance you racked up to accumulate your emergency fund?”

I also concur with him that it’s more practical to spend less than you make or cut down your expenses to save money.

Well, the reality is that there is only one way to save — and that’s to spend less than you make. There are a number of ways to do that. You can go the “cut the latte” route and avoid relatively small daily expenditures that add up. You can create a budget and then go over it line by line, looking for specific areas to squeeze. You can try two techniques that I’ve advocated in the past, focusing on big-ticket items or employing strategies that can effectively fool you into being a better saver. Whatever works for you. But one way or another, you’re going to have to find a way to pare your spending.

… But I also know that borrowing to save is an oxymoronic concept that’s more likely to create problems than solve them.

Here is Raymond Roy Tiruchelvam’s article on How to Manage Personal Debt.

THE “easier said than done” phrase latches on to this topic like ants to sugar. While getting into debt is made easier today with the many innovative marketing plans undertaken by financial institutions, getting out of if, leaves much to be pondered.

For those who do not see the light at the end of the tunnel, Bank Negara has introduced AKPK or Credit Counselling and Debt Management Agency. I am assuming a single source of funds being financial institutions, and not “ah-longs” and other unconventional sources.

There is actually one step to be undertaken prior to managing your debt, which is managing your cash flow. It does not mean that if one is a millionaire, there is no need for debt management … well perhaps there is no need, since the ability to source for debt is high, but everyone will need to manage their cash flow, let it be millionaires or paupers.

Let’s look at some steps that we can take to ensure that we are able to manage our personal debts so that we do not go into the “PN4” or “PN17” status (which for companies implies a financially distressed state).

Let’s start with liquid debts, credit card and car loans. For the former, never follow the minimum payment requirement of the bank, which is 5% of outstanding sum. The reality is that it does not diminish in 20 months (5% X 20 months = 100%) – which is the general misconception.

Instead, spread the payment over a reasonable payable period. For example, if you purchase a personal computer for RM1,500 perhaps, you want to make a RM300 monthly payment over 5 months, rather than pay RM75 in the first month, then RM71 for the second month and so on (assuming one follows the minimum 5% payment, excluding interest charge).

As a matter of fact, if one were to purely pay the 5% minimum payment, do you know that it will take 50 years for the sum to trickle down to RM100. And mind you, even with that, the debt won’t be fully settled.

As for car loan, do not take a hire purchase (HP) contract for more than 5 years. What would a car costing RM80,000 be valued at after 2½ years? Depending on the type of car, continental or eastern, a 5-year HP term will value it at RM40,000 (assuming a simplicity straight line depreciation, 100% hire purchase financing, excluding interest with zero value at the end of the payment term).

Assuming one needed cash, don’t you think it’s easier to find a buyer at RM40,000 compared to if you were to take a 9-year car loan whereby you will need to find a buyer at RM62,222 (remaining loan balance after 2 years for a 9-year HP plan).

Naturally, one would say if not for the 9-year term, he or she will not be able to afford the vehicle … but that’s exactly the point. If you can’t afford it, then don’t buy it!

Next comes personal loan. Firstly, it baffles me that banks are giving out “clean” loans today, meaning non-collateralised, non-guaranteed loans as personal loans to almost everybody with a monthly pay slip. If you are unable to pay, there is little recourse, as compared to hire-purchase loan, where you may have the option of selling the car. Hence, unless you are sure of the purpose and that the usage of the funds will return a cash flow, do not indulge in one.

Using electronic means via Internet banking and online payment systems is a good way to manage your cash flow. Today many banks have this facility that allows you to also format standing instructions to promptly pay a fixed sum on a particular date towards debt settlement. This will help you ensure that priorities take precedence. Therefore, it’s only the balance cash after settling debts that will be available for disposal.

What will be the comfortable debt to income ratio? Zero is preferable, otherwise a 25% maximum limit of disposable income is recommended. For example, if you had bought the RM80,000 car mentioned earlier, on a 5-year term; assuming a simplified zero interest scheme, you would be paying RM1,333 monthly installment.

Therefore following the 25% debt to income ratio, you should be earning a minimum of RM5,333 per annum. This is after tax and EPF, therefore gross monthly salary should be about RM6,200. So after reading this, do you think you have overspent on your car? There is no under-spending by the way, since the ratio is only an indicator, and I am sure you would probably want to also invest in a housing loan.

You can also increase your capacity to loan, by simply borrowing money to invest where the returns are higher than the cost of funds.

If you can find one an avenue that guarantees this position, then do inform me, I too am curious!

Raymond Roy Tiruchelvam is a former senior manager – economics and investment analysis at an oil and gas outfit.

If you think that you do not see the light at the end of the tunnel, then attend AKPK‘s briefing to see if you need a debt management plan to help you get out of debt.

The success stories of getting rid of debts motivate me to keep on paying down my credit card debts through the debt management plan and most important of all, they give me hope that I can be debt free one day.

I want to be like Russell and Kathy Hildebrandt who successfully pay off $100,000 debt with DMP or Lisa Brough who was forced into a debt-free life:

Lisa Brough was forced into a debt-free life by medical disaster.

Her husband has Huntington’s disease, a degenerative brain disorder, and has been unable to work since 1999. The couple, who have three children, saw their finances suffer as a result. They ended up with $50,000 worth of credit card debt as Brough worked two jobs and still struggled to pay the bills and the high property taxes on their home in Westchester County, N.Y.

“I said to myself, ‘I can’t do this anymore,’ ” she recalled. “He was going downhill, and I had to figure out a way to get out of this. I couldn’t count on tomorrow because I didn’t know what tomorrow would bring.”

In 2005, she took drastic measures. She decided to sell her $350,000 home, pay off all the family’s debt, and move to lower-cost Cary, N.C., where she was able to buy a house for $164,000 house in cash.

Since then it’s been cash and debit cards only for Brough, 50, who has no debt of any kind.

My reasons of getting into knee deep debts were more or less the same as theirs. However, their ways, means or methods of getting out of debts may or may not the same as mine.

By reading and utilizing their tips on how to eliminate the debts and save money, I hope I can be free of credit card debts through the debt management programme in a few years’ time.

The success stories of others also make me realize that it is possible to survive and thrive without depending on credit cards!

Note: If you would like to know the process of applying for the AKPK DMP, please take your time to read A Credit Card Debt Woman is Under AKPK Debt Management Program Malaysia.

Of course, you don’t need a debt management program, also known as debt management plan, if you are able to lower the payments and pay down your debt steadily.

There are many ways to lower your monthly credit card payments, but I am sharing with you a few which I have tried before.

1. Pay More Than the Minimum Payments. If you pay more than the monthly required payments, then your minimum payment requirements will begin to drop in subsequent months.

To make this work, you must pay well above your minimum payment requirements AND stop using the credit cards for purchases.

2. Negotiate Lower Credit Card Payments with Your Creditors. Many banks and companies are willing to work out an alternate payment plan with you if you are sincere in paying off the balance.

3. Balance Transfer Your Multiple High APR Card Debt Balance to A New Credit Card with a Much Lower Interest Rate. Take advantage of low interest or 0% interest balance transfers. Interest charges are calculated on the basis of the interest rate or the APR applicable to your credit cards, so a lower APR rate means that your credit card debt will grow at a slower pace and thus switching over to a card with lower APR makes sense.

By transferring your multiple high APR card balance debt to a new low APR credit card, you are able to save money and reduce debt at the same time.

4. Refinance or Second Mortgage on Your House. By doing a refinance or second mortgage on your home, you can use the equity in your home to pay off your high interest credit cards.

The interest rate you get with a mortgage refinance is typically higher than the average, but it is often always lower than your credit card interest rates.

As a credit-card-debt woman who is now in the AKPK free debt management program (DMP), I have tried all the above mentioned ways to lower my credit card payments; I was able to reduce my credit card debt from RM63,809 to RM40,344 in one and a half years.

But why did I still opt for the debt management program to lower my credit card payments? There are a few reasons stated in Why Opting for AKPK Debt Management Program (DMP).

Due to AKPK’s lower debt repayments to my credit cards, I am able to Start Saving Money for Emergency Fund.

What about you? Are you worried about your credit card debt?

You should be if your credit card debt has spiraled out of control; you pay more than 15% of your monthly income to your credit card bills or/and borrow cash from one credit card to pay another.

You are not the only one who is dealing with credit card debt nowadays. In fact, almost 40% of credit card holders are in the same predicament!

So what should you do to avoid the need of getting help from debt relief options such as debt consolidation, debt management program, or debt settlement and worst of all filing for bankruptcy?

Start doing credit card debt management to help yourself get out of debt as fast as possible!

Most financial experts will advise you to stop using your credit cards. Quit using credit cards is to prevent you from adding new debt to your existing outstanding balance.

If you have more than one credit card, pay the minimum payment on them all. Then, pay the most to the credit card with the highest APR. Once the card with the highest APR is paid off, keep paying the minimum payment to the rest of your cards and pay the most to the next highest APR. Do so until all the credit cards are paid off.

Another way to help you is try balance transfer deals that offer 0% interest free period for 6, 9 or 12 months to save some money.

Credit cards are convenient, but you don’t have to use them all the time and put everything from groceries to petrol to night’s-out on them. Instead of using credit cards, cultivate the habit of using cash to help yourself curb your spending habits and get into more credit card debt.

If you are really concerned about your credit card debt, start doing debt reduction before you end up resorting to debt consolidation, debt management plan, debt settlement or bankruptcy.

At first, it was very difficult for me to control every cent and dollar and stick to a budget. I was so used to spending money like water all these years, so logically speaking, I really needed time to change my spending habits.

Fortunately as time went by, the habit of limiting my spending seemed to develop and work automatically.

If you are in debt and hoping not to end up in a debt management program, then you have to start cutting back on your spending and sticking to a budget by trying a few practical changes that you can make everyday.

You’ll be amazed that you can actually cut your spending more than you expect by simply making some minor changes.

1. Pack Your Lunch Every Day. Having lunch at restaurants or food courts is definitely more expensive than bringing your own lunch.

By bringing your own lunch, you can save several dollars every day, which will add up over time.

2. Use Your Cell Phone During Off Peak Hours. Are you one of those people who spend a couple hundred dollars a month on phone charges? If so, lower your phone charges by making most of your calls during off peak times.

Check with your service and plan to find out when you have cheaper or unlimited calls.

3. Start Clipping the Sunday Newspaper Coupons. Stop throwing away your Sunday newspapers, what a waste! Instead, skim through the advertisements for coupons and sales.

Although the process of clipping coupons is tedious, the savings are often worth it due to the fact that more and more stores double or triple the amount of their coupons.

This technique can save you up to 20 or 30 dollars each time you head to the food store.

To be honest, I used to sneer at the idea of cutting back on spending that saved a dollar here and there. How could saving a dollar here and a dollar there help me pay off credit card debt?

Well, the truth is a dollar here and there really adds up in long run. Changing your spending habits does save you much money.

As a credit card debt woman who is now in a free debt management program, let me share with you what a debt management program is.

A debt management program, also known as debt management plan, is a program designed to combine all your existing multiple unsecured debt payments from credit cards, students loans, personal loans, and medical bills into one payment.

So instead of paying multiple payments to various creditors on different due dates, you make a single payment to the credit counseling company you sign up the debt management plan with. The credit counseling and debt management company is then in charge of distributing the debt repayment to all your creditors.

The consolidation of multiple monthly payments into one monthly payment usually results in lowering the total monthly payment previously paid and thus allowing you to continue to pay your debt with lower payments and reduced interest rates and most important of all, restore your credit score.

However before you enroll in a DMP, it’s important that you attend a credit counseling briefing first. To effectively use your time with a credit counselor, make sure you have certain pieces of information in hand before your first meeting.

If it is determined that a recommended budget is enough to help you get out of debt, your credit counselor will NOT enroll you in a debt management plan.

Beware of credit counselor that automatically signs you up with a debt management program! This means your debt management counselor does not have your interest at heart; he tries to make money from you through collecting fees.

A certified credit counselor will help put your debts and finances in order by helping you develop workable budgets and money management skills and pay off debts.

Here are a few simple debt management tips that you can use without having to go to an expensive financial counselor.

1. Cut Up All Your Credit Cards. This is the best way to stop adding new debt to your existing credit card debt. If you have no credit cards, there will be no more excuses such as keeping one card as ‘emergency card’.

Have you ever set aside a card with the lowest interest rate for emergency use? Is it really used for true emergencies or has it been maxed out already because of the best buy TV or deep discounted iPhone? If so, stop giving yourself any lame excuse to keep a card for ‘emergency purposes’.

2. Move Your Multiple Debts to a Lower APR Card. If you have multiple credit card payments, you may consider moving the higher APR multiple debts to one with a lower APR. This will lower the interest charges and help you get you out of debt faster.

3. Use Dave Ramsey’s Snowball Method. This Dave Ramsey Snowball Method has worked for many people and you should give it a try if you haven’t.

This is how it works: List each of your credit card debt, and the amount you are paying each month. Start tackling the card with the lowest amount first. Then use that money to start paying off the second lowest amount. And then the next and the next.

Confusing? Well, here is an example.

Let’s say you have a $7,000, $5,000, and $2,000 credit card with payments of $150, $125, and $100, you will finish paying off the $2,000 card first.

Once it is settled, you take that $100 and put it towards the $5,000 credit card. That means you are now paying $225 per month. You have increased your monthly payments which will pay off that credit card sooner and will have you paying a lot less in interest.

Once that is paid off, you apply the $225 to the $7,000 card, making your monthly payment $375. This will greatly speed up the payment of this card, reducing your interest payments even further.

When every card is paid off, you now have $375 per month extra to put towards savings, emergency funds or investments!

4. Consider Debt Consolidation. If you own a home, you may want to consider consolidating all your multiple debts using a home equity loan.

A home equity loan has a much lower interest rate than your credit card interest rates. The best part is that it’s tax deductible.

But a word of caution, though. A home loan is a secured loan; the bank can take away your house if you fail to make payments.

By following these 4 debt management tips, you can completely pay off your credit card debt without the need of enrolling a debt management program like I did or resorting to debt settlement plan or declaring bankruptcy.

A credit counseling agency, either non-profit or for-profit, offers you credit counseling advice including how to use credit lines wisely; establish a workable budget; keep track of your bills; and best manage your money.

During a credit counseling session, a certified credit counselor will first gather as much information about your income, expenses and debts as possible. Once he has sufficient information from you, he will evaluate the information, discuss your situation with you and offer the most appropriate debt management advice for your situation to help you rectify your financial problems.

If it is determined that participating in an educational class is not sufficient to help you get back on the track to financial security, you will then be recommended to enroll in a debt repayment plan.

Debt management plan is also known as debt repayment plan.

When choosing a credit counseling agency, it’s important that you spend enough time researching and picking the most reputable agency.

Most important of all, look for a credit counseling and debt management agency that has satisfied clients, offers personalized service from certified counselors, educates you how to make appropriate financial choices and provides you with the tools you need to achieve financial security.

Remember, the best credit counseling service agency needs not have a big advertising campaign. Don’t be tempted to think that just because it has a big advertising campaign, it is the best.

A reputable and reliable credit counseling and debt management company normally relies on past clients for referrals rather than soliciting business through constant television ads, infomercials and telemarketing or spam e-mails.

It’s too late for me to be debt free fast with credit counseling or DIY debt management, but it’s not too late for you, right? Don’t wait until you need to enroll in a debt management program, debt settlement plan or declare bankruptcy.