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Financial planning Savings Investing your money Getting financial products Loans and credit cards Protecting your money Getting help on financial matters Contact details of relevant organisations
The booklet is divided into two parts: Part 1 gives you guidance on areas directly concerning money management such as financial planning, savings and investment. Part 2 concerns other areas on money handling such as getting financial products, financial protection as well as getting help on financial problems.
PART 1 Financial planning
Financial planning is the first step to taking charge of your finances. Four steps are involved: 1. Set your financial goals. 2. Know where your money goes. 3. Examine your spending habits. 4. Create a spending plan.
Step 1: Set your financial goals Financial goals reflect things you want to do with your money for a given period of time. Setting goals will make sure you spend and save in a way that enables you to reach your goals.Your financial goals can be for short term, medium term or long term depending on factors such as your age, income, marital status and family commitments.
X X X
Clear credit card debt Buy a car Buy a house Save for retirement
Warning signs of bad spending habits
• You use your savings to pay current bills. • You pay the minimum amount which is due on your credit card. • You always borrow to make it from one pay day to the next. • You pay only the minimum amount of your repayments which are due and do not reduce your total debt. • You find yourself arguing with your spouse or family members about money.
Step 2: Know where your money goes Next, you need to know how you have spent your income. Do this by noting down your spending over a period of time, say eight weeks.Your aim is not to cut your spending but to note where you have spent your money. Step 3: Examine your spending habits If you find that you have no spare funds or you would like to grow your savings, you need to examine your spending habits. Look through your list of spending and ask yourself if they are needs or wants.Trim off the wants and look for signs of bad spending habits that you need to change. Step 4: Create a spending plan Once you have studied your spending habits, you can now create a spending plan that will allow you to achieve your financial goals.You can use Bank Negara Malaysia’s “Buku Pengurusan Belanjawan Keluarga” (Managing Household Budget Book) which has been designed to assist users in creating and monitoring their spending on a daily, monthly and yearly basis.
Start to save early. Don’t wait for an ideal time.The sooner you start, the more your savings will be. Aim to save at least 10% of your income every month before you spend. Raise your savings as and when you receive extra income, e.g. when you receive a bonus. Keep your money in a fixed deposit account. With higher interest compared to a savings account, your savings will grow faster. Save before you spend and not vice versa. Most people do this: INCOME – SPENDING = SAVINGS/ INVESTMENT The way to go: INCOME – SAVINGS/ INVESTMENT = SPENDING In this way, you can be sure that you have some savings from the income earned each month.
Consider an emergency fund of three to six months of your monthly spending to meet sudden events and payments. In this way, you can stay away from getting into debt when there is a sudden need for money. However, do not use the money from the funds to meet your normal spending or to meet your financial goals. Steps in building an emergency fund 1. Work out your total monthly spending, e.g. housing, groceries, transportation, utilities and other debt repayments. 2. Decide the number of months of monthly spending you would like to have in your emergency fund. 3. Work out your total emergency fund, i.e. total amount of monthly spending in step 1 multiply by the number of months in step 2. 4. Put funds into your emergency fund.
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Investing your money
You can grow your wealth through investment if you invest carefully.The types of investment you choose will depend on your purpose for investing, so start by drawing up your investment goals. Ask yourself: • • • • What are my goals? What do I hope to get from the investments? What level of risk can I take? Do I need my money back within a short period of time? Do I know how the investment works to allow me to watch it effectively?
Before you invest in any product, find out the risks and returns of the investment. High returns mean high risks. If you are not prepared to take the risks, don’t invest. Be careful of investment products that promise very high returns, e.g. those that promise returns that are much higher than the market rate.This is to avoid being cheated in a bogus investment scheme.
How to protect yourself from scams?
• Remember the golden rule - if it sounds too good to be true, it's probably a lie. • Deal only with licensed financial institutions. • Check with the relevant authority before investing. • Don't be pressured or rushed into an investment. • Be extra careful of any investment opportunity that is not in writing. • Guard your bank account and credit card information carefully. Never reveal it to any party.
You should only save or invest with parties licensed by the authorities so that your savings or investments are protected: • The institutions accepting deposits that are licensed by Bank Negara Malaysia.You can check their licensing status from Bank Negara Malaysia’s website www.bnm.gov.my. • Your deposits placed with the financial institutions licensed under Bank Negara Malaysia will be fully guaranteed by the Government through Perbadanan Insurans Deposit Malaysia (PIDM) until December 2010.This coverage is provided automatically at no cost to depositors.To find out more about deposit insurance, visit PIDM’s website www.pidm.gov.my or call PIDM’s toll free line 1-800-88-1266. • Individuals and companies involved in investment activities are licensed by the Securities Commission. You can check their licensing status at the Securities Commission’s website www.sc.com.my.
PART 2 Getting financial products
When getting a financial product, choose the financial product carefully to avoid any financial loss when you decide to withdraw or cancel the product before its maturity. Before you agree to any product, you should: • Gather information and shop around. Compare prices and product features. • Seek explanation if you do not understand. Buy the financial product only after you know how it works and its main terms and conditions. • Find out the fees and charges you may have to pay now and after you have bought the product.This is to avoid any surprise charges which you have not budgeted for. • Pay attention to exclusions and exception clauses under the contract.
• Take your time to consider any offer. Say “No” if you do not need the financial product that is being sold to you. • Be aware that some financial products like unit trust or insurance/takaful allow a “cooling-off period” for you to decide whether you wish to continue with the products after you have signed the agreement.
Loans and credit cards
Loans are facilities provided by financial institutions to help you in carrying out certain transactions or purchases. For example, when you buy a car or a house, you may need to borrow from a banking institution to finance your purchase. Credit cards are payment instrument that allow you to pay for goods and services instead of using cash. Below are some of the issues you need to consider when taking a loan or credit card: • Different loans have different features, interest rates, fees and charges, and terms and conditions. Know what you have agreed with your banking institution. • Make sure you can afford the monthly payments. As a general rule, your monthly payment on your debts should not be more than one third of your gross monthly household income. • Pay on time to minimise interest charges.Try to use any lump sum money received, such as bonus, to reduce your loan.
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• Exercise more control when using credit cards since you are effectively having cash in hand. If you overspend, you may end up with a huge credit card debt. Remember, finance charges for credit card debt is high, it can be as high as 18% per annum. • Talk to your banking institution as soon as you can if you have a debt problem.Your banking institution may be able to vary your repayment amount for a short period until your financial position becomes better.
Getting help on financial matters
• Making a complaint Below is how you can make a complaint against institutions regulated by Bank Negara Malaysia such as a banking institution, insurance company, takaful operator or a non-bank institution that issues credit cards or charge cards.
Write to the Complaints Unit of your institution. If you are not satisfied with the decision given by your institution, refer your complaint to the Financial Mediation Bureau (FMB).The FMB is an independent body set up to deal with disputes between the public and its members (e.g. commercial banks, insurance companies, takaful operators, non-bank institutions that offer credit cards and charge cards).The services of FMB are free of charge.You can get details on the type of complaints handled by FMB from its website www.fmb.org.my.The decision of FMB is binding on your institution but not on you. If you are not satisfied with the decision of FMB, you may take your case to the court. If the complaint does not fall within the scope of FMB, you can refer the complaint to Bank Negara Malaysia.
• Assistance on debt management If you need advice on money management and assistance to deal with your debt, you can contact Agensi Kaunseling Dan Pengurusan Kredit (AKPK). AKPK is an agency set up by Bank Negara Malaysia to provide money management, credit counselling, financial education and debt restructuring services for individuals.The services of AKPK are free of charge. More information on AKPK is available on its website www.akpk.org.my.
Contact details of relevant organisations
Bank Negara Malaysia BNMTELELINK Jabatan Komunikasi Korporat, Bank Negara Malaysia, P.O. Box 10922, 50929 Kuala Lumpur. Toll: 1-300-88-5465 Email: firstname.lastname@example.org Website: www.bnm.gov.my Financial Mediation Bureau Level 25, Dataran Kewangan Darul Takaful, 4, Jalan Sultan Sulaiman, 50000 Kuala Lumpur. Telephone: 03-2272 2811 Email: email@example.com Website: www.fmb.org.my Agensi Kaunseling Dan Pengurusan Kredit Level 8, Maju Junction Mall, 1011, Jalan Sultan Ismail, 50200 Kuala Lumpur. Toll free: 1-800-88-2575 Email: firstname.lastname@example.org Website: www.akpk.org.my
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