By Avril TanB. Com (Actg & Fin), CFPCertified Financial Planner

1

Why is Debt Management 债务管理 so Important?

Attaining Financial Freedom 财务自由 …

2

Build up your ASSETS 资产

(that can generate income

for you)

Reduce and eliminate your debt 把债务清除 TOTALLY

Have a business that generate

passive income 赚取被动收入

for you

3

Assets 资产 RM  Liabilities 负债 RM

House 350,000 Housing Loan 320,000((Car) 50,000 Car Loan 40,000

Personal Loan 10,000Unit Trusts 10,000 ASB Loan 190,000Amanah Saham 200,000 Credit Card Balance    20,000

Tax Payable 1,000

EPF 100,000Cash 5,000Fixed Deposit 0Gold 20,000

735,000 581,000

Net worth 154,000

Our True Wealth

+10%

+9%

Total Assets – Total Liabilities 资产 负债

= Net Worth 净值 / 身家

+ 10% + 9%

+ 1%

What are the implications of debt interest rates rising? 债务利息上升的后果。

The higher the interest rate, the higher the return…(time remains the same)

RM 200,000 4% 20 years RM 438,225

6

RM 200,000 8% 20 years

932,191

RM 200,000 12% 20 years

1,929,259

When BLR (base lending rate) increases, what is the impact on your loan?

RM 200,000 4.8% RM 1,050 30 years

7

RM 200,000 5.3% RM 1,050

34 years

RM 200,000 5.8% RM 1,050

44 years!!

BLR has been increasing recently!

Year BLR (%) Remark

 2011 6.6 Adjusted May 2011

 2010 6.3 Adjusted July 2010 2010 6.05 Adjusted May 2010

 2010 5.8 Adjusted March 2010 2009 5.55  

8

If we have many outstanding loans, will it be easy to build our wealth?

If we have many outstanding loans, can we achieve financial freedom?

9

NO!

Credit cardholders have amassed a staggering RM 24 billion in outstanding balances and Bank Negara is acting to curtail their ‘uncontrollable’ expenses

Total Assets – Total Liabilities 资产 负债

= Net Worth 净值 / 身家

+ 10% + 18%

- 8%

12

How to reduce our debt?

How to reduce our debt?

13

Refinance your

loan/Write in to your bank to request lower

interest rates

 Transfer credit card

balances

Always pay your

credit card bills in FULL!

Have a Repayment PLAN and stick

to it!

Try to make

PRINCIPAL payments

to your loan whenever you can

Stop taking up new loans

unless absolutely necessary

!

Some loans are worth taking up…

Example if you need to buy a family car, and are looking into buying a Toyota Prius.

Published interest rate 1.88%

But Effective interest rate is 3.54%

 7 year loan   9 year loan 

Instalment payment 1,697

1,364

Total interest paid 16,582

21,319

Extra Interest Paid                      4,738 

Excess Cash savings per month                   RM 333 

Save and invest in unit trusts with return of a least 8%

Period (years) 9

Future Value of saving up the excess cash every month for 9 years

                   53,504 

Why taking up a 9 year car loan is better than a 7 year loan

You gain more (53,504-4,738) RM 48,766 by investing the excess cash over 9 years

16

Assets 资产 RM  Liabilities  负债 RM

House 350,000 Housing Loan 320,000((Car) 50,000 Car Loan 40,000

Personal Loan 10,000Unit Trusts 10,000 ASB Loan 190,000Amanah Saham 200,000 Credit Card Balance    20,000

Tax Payable 1,000

EPF 100,000Cash 5,000Fixed Deposit 0Gold 20,000

735,000 581,000

Net worth 154,000

Our True Wealth

+10%

+0%

Thank you

Q&A