In this world of rising inflation, it is refreshing to see that costs of mobile network have been decreasing over the years due to intense competition among the different network service providers.

Beginning last week, mobile phone users can switch from one network service provider to another network service provider without needing to change the mobile number. This service is known as Mobile Number Portability (MNP). Users will no longer need to worry about losing contacts when switching networks.

I took this opportunity to evaluate my current mobile package. And not surprisingly, my current network provider has come up with a new cheaper package in its effort to retain its subscribers and rein in subscribers from other networks. I updated my package to this new package. Though I am not a heavy mobile user, this will still save me some spare change.

The illegal Chinese money lenders, better known as loan sharks, have a saying “Loan 9, collect 13.” This simply means giving out a loan of RM9, charge an interest of RM4 and collect altogether RM13. The interest works out to be 44%.

Guess what? The banks charge an even higher interest. The following is a screenshot of an advertisement by a local bank. It is in related to the personal loan promotion offered by the bank.

An advertisement of personal loan by a local bank.

You borrow RM5,000. You pay RM133.33 for 5 years. Your total repayment works out to be RM8,000. Yes, RM3,000 goes to pay interest which is about 60% of the principal you borrowed.

I too was a victim of personal loan. About 4 years ago, I took out a personal loan on my Citibank credit card through their “Phone a Loan” program. The tenure was for 12 months. The interest was high. I wanted to pay off this loan early to avoid further interest. However, upon my early settlement, the bank insisted on charging me for ALL FUTURE INTEREST that would have accrued if I had not paid off the loan early. Can you imagine that? I wrote to the bank threatening to bring the matter up with the Consumers Association but the bank did not waive the “interest”. The bank basically bullied me into paying them. I canceled the Citibank credit card immediately.

This simple advertisement and my painful experience with Citibank show how foolish it is to fall into the trap of a personal loan. However, we still fall into this trap because of a lapse in judgment or temptation for the hassle free, easy and readily available money.

Bottom line, if it is too good to be true, it usually is. It may seem a like a good deal when the loan is processed with virtually no hassle in paperwork. However, the interest rate will be high and it may be too late when we realize and feel the pain in our wallet.

Really. Not Cash Color, but Cash Cow. That’s how I felt when I first heard the Budget 2009 tabled by the Prime Minister on August 29th.

The recent hikes in prices of gasoline, electricity, and food have caused a broad increase in prices of many products and services. Expectations were high for Budget 2009 to reduce the household and individual financial burdens. Alas, I stand to only save a maximum of RM150 in income tax. The middle income group feels let down by this budget.

The Government must have the impression that people in my group (Single with no children, earning middle income, potential stock investor) are Cash Cows.

Last year, the Government announced as an effort to simplify corporate tax administration, the corporate tax system will switch from Imputation System to Single-Tier System. This simply means that a tax at the corporate level is final. And investors in the lower tax brackets will no longer be able to claim tax refunds for the corporate taxes paid.

This year, a high allocation was given to the poor and lower income group. Even the richest people get a tax rate reduction from 28% to 27% saving them thousands, possibly millions in income tax. My group gets a tax rate reduction from 13% to 12% resulting in a potential maximum tax savings of only RM150.

Why is the Government turning a blind eye to the cries of help from the middle income group? Why is the Government reluctant to increase the tax brackets? Why didn’t the Government allow home mortgage interests to be used as tax relief like in the past?

The reason as I see it is because my group is the Cash Cow. The Government cannot continue to tax the poor and lower income because they can no longer afford to pay the same level of tax as prior years due to the increase in cost of living. Also, the Government has to close the loophole and reduce the gap between the corporate tax rates (25%) and the individual tax rates (now from 28% to 27%). This leaves my group as the only group of taxpayers the Government could depend on for consistent income tax revenue. This is why the Government wants to milk my group as much as it can.

I can feel the pain in my wallet. “Moooo.”

I read The Warren Buffett Way, Second Edition from cover to cover in less than 2 days. The author, Robert G. Hagstrom has managed to explain and illustrate the way Warren Buffett invests in such clarity even a beginner will have no problem understanding the concepts and techniques discussed in this book.

Warren Buffett is recognized as the best investor in our time. Today, he is the richest person in the world. And he is the only billionaire to have made his fortune from investing. Who wouldn’t want to learn to trade like Warren Buffett?

Robert has studied many of Warren Buffett’s transactions and has identified similarities in Warren Buffett’s techniques to investing in stocks and businesses. He calls these techniques, the tenets. His approach is to invest in a business that is simple to understand, with predictable future earnings, honest management and buying at a discount. These tenets are easy to understand, and not impossible to imitate or follow. The author uses some of Warren Buffett’s popular investments (Coca-Cola, Gillette, Wells Fargo and others) to illustrate how Warren Buffett used his techniques in the real world.

Warren Buffett’s approach is as useful today as it was 50 years ago. Circumstances and businesses have changed, but the principle behind Warren Buffet’s techniques is as valuable and practical as ever. Towards the end of the book, Robert explains how he uses Warren Buffett’s way to invest in the New Economy, an area where Warren Buffet has stayed away from.

I enjoyed reading this book. This book is worth its weight in gold.

Books in my country are expensive. If you like my review, consider donating to my book fund. This will ease my book budget.

The Government announces the general inflation rate every month, usually between 2% to 5%. Taking this cue, my employer raises my salary by 5% a year. This is so we can keep up with the general inflation. However, I feel poorer and poorer every year. Do you feel the same? Here are some reasons why.

Personal inflation rate (aka Higher commitments)
Your personal inflation rate may not be the same as the general inflation rate. While the general inflation rate is 5% each year, your inflation rate could be higher as you go through different stages of your life.

For example, a working couple earns a combined income of $3,000. Out of this, $1,500 is used for paying necessities, $1,000 for savings and $500 for discretionary spending such as entertainment.

One year later, their employers raise their salaries by 5%, thus making their combined income at $3,150. Now they also have a newborn. The need to buy baby supplies, higher medical bills and the need to rent a bigger space have resulted in them spending $2,000 in necessities. They continue to save $1,000 but are left with only $150 for discretionary spending.

Because the couple feels that their discretionary money or “extra money” has shrunk, so they feel their incomes do not keep pace with the inflation. But it is actually their personal inflation that is causing them to feel this way.

We experience this when we move through different stages of life such as moving out, dating, marriage, starting a family, buying a home, kids starting school and colleges among others.

Higher standard of living
As we adopt a higher living standard, so will our expenses increase. Upgrading from a 2-bedroom to a 3-bedroom usually means higher monthly mortgage repayments. Some switch from coffee at McDonalds to coffee at Starbucks for your caffeine fix. Some install cable TV. All these will add on to our monthly expenses “committed” expenses.

Inflation rate differs from region to region
Historically, inflation rate in the urban areas is higher than rural areas. This is because more people migrate and live in the urban areas, resulting in higher demand for housing, transportation, food, goods and services. The higher demand urban areas causes prices to increase faster than the rural areas where the demand is lower.

Outdated methodology in computing inflation
Inflation is calculated by comparing the current prices versus last year’s prices of the items in the inflation basket. However, the items in the inflation basket may not reflect the expenses of the general public. People in the urban areas spend differently compared with rural areas.

In keeping the official reported inflation figure as low as possible, the Government could be motivated to use outdated methodology in computing inflation, or simply include only the basic necessities into the inflation basket. Items such as cars, computers, childcare and tuition are deemed “luxuries” and not included in the basket even though these expenses could form a bigger portion of our budget.

In my opinion, the best way to track your inflation rate is to look at how much and on what you spend last year. Compare that to how much and what you spend on this year. Then you would have a good estimate on your inflation that is coming from a change in lifestyle and the general inflation.