Malaysia Financial Blogger | Financial Freedom Ideas | imDavidLee.Com

Taking a Loan Before Retiring

For retirees, it is best to live with cash. Wherever possible, try to pay with cash. Normally, a loan is taken to finance something that you cannot afford. So, for the retirees who do not have a steady income should avoid this kind of situation.

Sometimes, unforeseen events or emergencies may compel you to borrow. For example, an offspring may encounter financial problems and most of the parent may find it difficult to support. Or may be you start a business or invest in properties. It’s not surprising to find them applying for business or personal loans to finance their desire path. Apart from that, they might need to get housing loans from bank if they are quite active in the property market which encourages them perform buy and sell.

Most of the retiree nowadays will take loans to buy new cars or refinance their homes. Some of them may prefer to get a loan when purchasing big ticket items although they can afford them. This is because they think that they will be audited by the Lembaga Hasil Dalam Negeri (LHDN) if the items are paid in cash.

Generally, financial institutions deny loans to those who are not earning an income. Here are few tips to increase your chances of getting a loan before retirement age:

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How Much Do You Know About Malaysian Tax?

It’s clear that Malaysia has had its tax system which was implemented since many years ago. However, how many people of you really familiar with that? Generally, there’re broadly 2 categories of taxes, which are direct and indirect. A direct tax means the tax which bear by person and he/she need to pay for it. An indirect tax is paid by a person who claims it from the consumer of his goods or services.

Is income tax a direct tax or indirect tax? Yes, income tax is a direct tax because the taxpayer files his/her annual tax return and liable to pay the tax due. On the other hand, the trader who imports goods is responsible for paying the import duty and sales tax. He does not bear the tax but passes it on to the consumer by including the hidden amount in the price of goods.

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Why is Cash Flow Important in a Business?

Companies that generate high cash flows are expected to survive, thrive and deliver strong returns to their shareholders. Companies that generate higher levels of cash generally indicate that they are in the right business. It implies that they have been offering the right service or products at the right time and at the right place.

A high cash flow company has defensive qualities, which become the favorable option for investors during the volatility periods. Those companies have sufficient operating cash and capital will be stay longer in the market. In the other words, they are not relying on external sources of funds to pursue their opportunities.

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How Compound Interest Works?

Anyone who has ever had a savings account has received compound interest. For example, suppose you place RM1000, which is your present value (PV), in a savings account that pays 4% interest annually. How will your savings grow? At the end of the first year you will have earned 4% or RM40 on your initial deposit of RM1000, giving you a total of RM1040 in your savings account. That RM1040 is the future value of your investment that is the value of your investment at some point in time.

Assuming you leave the RM40 interest payment in your savings account, known as reinvesting, what will your savings look like at the end of second year? You begin the second year with RM1040, and you add the interest you earned in the second year (4% on RM1040 for a total of RM41.60 in interest) and you end up with RM1081.60.

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Will Renting Better Than Buying A House?

For most people, the rent versus buy decision is not just based on finances but also on lifestyle. Perhaps you want to rent a house because you want to have more freedom, or you may want to buy a house because you want to live in a particular neighborhood.

Let’s examine the advantages of both renting and buying. As you can see, many of the reasons for renting focus on flexibility because renting actually involves lower monthly payments and lifestyle flexibility as you can avoid the responsibilities associated with the ownership.

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