HAPPY NEW YEAR!

What better topic to start the new year than “My New Year Resolutions”? Last year was a good year for me. I hope this year will be even better. Here are my goals for 2009.

Financial
1. Save RM65k in CD by Feb 2009. This amount is allocated the down payment for buying property.
2. Buy insurance by Mar 2009 in anticipation of buying a property in May 2009.
3. Earn a side income of RM6,000/mth by Apr 2009.
4. Buy a property in May 2009. (Timing is flexible though.)
5. Earn a side income of RM8,000/mth by Jul 2009. Quit my job once this threshold is achieved.
6. Side income of RM10,000/mth by Oct 2009.
7. Trade up the value of my stock portfolio from RM8k to RM16k.

Love
1. Get out more often and get to know more friends of the opposite sex. This will increase my chances of finding The One.
2. Participate in speed dating, at least once

Friendship
1. I should start tracing my lost friends. If not, then I’d be lonely after I quit my job. What are friends for?

I started this blog about five months ago. At that time I came up with a list of short and long term goals. Today, I will review my short term goals and see how I have performed.

Short-term Goals

1. Increase my part-time income to RM4,000 a month.

(Review: Achieved. My part-time income now is about RM4,000 a month. Though there were some hiccups and setbacks along the way, I am happy that I was able to accomplish this feat.)

2. Double up my part-time income by end 2008. Then resign from employment to concentrate on my part-time venture.

(Review: Yet to achieve. I was not able to boost my income as fast as I had expected. Sometimes things just don’t go the way I want them to be. This will remain a goal for 2009.)

3. Save RM60,000 in CD by Jan 31, 2009. Currently I have RM30,000 in CD. I need to add RM5,000 CD a month until Jan 31, 2009.
(Review: On going. As of Dec 2009, I have RM55,000. I will bank in another RM5,000 into my CD account next month. So, I am very much on track with this goal.)

4. Buy life and medical insurance.

(Review: Yet to buy: I have decided to buy a life insurance when I buy a property. Because that is when I will start to have financial commitments. As for medical insurance, my employer has already bought medical insurance for me. However, since I am thinking to resign from my job, I will have to buy a medical insurance for myself. I should look into this together with my life insurance.)

5. Use my CD to buy a residential property by Apr 2009.

(Review: On going. I should start researching on properties already. However, the general consensus is that the real estate market will soften next year, hence the prices should be lower. I should be flexible on the timing of buying the property so I could take advantage of the market conditions. I should also not limit myself to buying residential properties, but also consider commercial properties.)

All in all, I am satisfied with my performance in 2008. This is also the first time that I have actually set goals for myself. Amazing isn’t it how a little financial planning and goals setting can contribute to one’s life?

Two days ago, the Government announced some measures to combat the economy slowdown, one of which is to reduce the employees contribution to retirement fund. This will put more disposable income into the consumers hands. The Government hopes that this additional disposable income will be spent on the economy.

However, this move has drawn fierce criticisms from workers and employers. And they are not without merit.

By reducing the amount of contribution to the retirement fund, the tax relief will be reduced and so the employees will be taxed more. This is true if the employee has not maximized his tax relief. The additional tax burden is higher the higher the person’s tax bracket.

Many view the retirement fund as a long-term savings account for the retirement years. By contributing less to the fund, we are saving less for our future.

When announced, this scheme was said to be voluntary. But the EPF has come out to say that everybody is automatically enrolled into this scheme. One can choose to opt-out by going through a formal application process. Many believe that “voluntary” means people who wants to contribute less will opt-in rather than having those who wants to contribute more to opt-out. No doubt the Government opted for this route because many people are too lazy to take action, hence the Government would have more people enrolled into this scheme.

There are some people who will be happy contributing less to the retirement fund. One often cited reason is the rate of return on the fund is low. These individuals believe that they would earn a higher rate of return than the fund. So they would prefer to manage their own money rather than having the fund to manage for them.

Others prefer to have more disposable income to pay for bills. Rising cost of living in the last 6 months have greatly eroded disposable income. The prices of many goods and services that have gone up in tandem with the energy costs increase have not gone down despite the reduction in energy costs now. Many families are finding it difficult to make ends meet and having more disposable income gives them some breather.

Also, some people who are opposed to bailout of companies will choose to contribute less. These people believe that the Government would use the retirement savings of the people to bailout companies.

The power window on the driver’s side of my car broke down yesterday. Luckily for me, my father knows how to repair the faulty parts.

My father is a mechanic and sometimes he salvages some good spare parts when his customers replace faulty sets with new sets. He changed the motor of the power window within minutes and it works just like new. He saved at least RM70 for me.

Last year, my brother started his business. He moved into his new office and we all helped to paint his office, installed lightings, cleaned the place and fixed up the furniture. This saved my brother at least hundreds, if not thousands. I am sure this helped to free up his limited capital for other important expenses.

We are all experts in our own areas. It’s a blessing to be able to tap into the different advice, skills and knowledge of the people around us. We should treasure and be thankful to our family, relatives and friends who help us.

The current financial crisis reminds me of a saying. “One bird in hand is worth more than two birds in the bush”.

I had just graduated from college during the previous recession after the Dot Com crash in 2001. The economy in my country was just starting to pick up after the Asian Financial Crisis of 1997/1998. Therefore, the impact of the Dot Com crash did not hurt much because we were already wiped out in 1997.

Another reason why the Dot Com crash did not hurt the economy in Asia much was because there were not many Dot Com companies in Asia back then.

This time around, I could clearly see the impact of the financial meltdown. I could finally appreciate the meaning of “globalization”. The financial crisis on Wall Street has affected share markets around the world.

Overnight, Lehman Bros lost 80% of its value. AIG lost 40% over a weekend. These are difficult times for stock investors. Billions of wealth have been wiped out since the outbreak of the sub-prime mortgage crisis in August 2007. The worst hit are those whose retirement funds are tied to these stocks.

In these uncertain times, investors may wake up day after day to find that their personal wealth has decreased again and again. Now is truly the time to embrace “one bird in hand is worth more than two birds in the bush”. Cash is King.