Last night, during the game of golf with two of my childhood friends, we talked a bit of how to make more money with the resources that we have now. We talked a lot about unit trusts, stocks, ASB, OD and so forth. To cut a long story short, this friend of mine, Mat, asks me about ways he could increase his savings. In saying that, earlier, I've given him this blog address for Mat to read and perhaps, take a tip or two to help him manage his finances. I'm not an expert per se, but certainly I can only give my opinion based on what I know with the limited knowledge that I have.
Hence, in my opinion, it is always good to start with an aim or an objective. For example, what do you wanna achieve at the end of the year. The objective must be achievable and of course doable. Mat said to me, if I can remember correctly, he would like to have RM100,000 in his ASB before he turns 40. He is now, 32 so we have about 8 more years to go. A RM100k in 8 years. That's like saving an average of RM12,500 per year, which comes to about saving RM1042 per month constantly for the next 8 years. This calculation is done if you have zero balance in your ASB. If you have let's say RM20k as your available ASB balance, obviously you another RM80k to go. Spread it to 8 years, you need to save about RM833 per month consistently for the next 8 years. That could be option 1.
Option 2.
You could top up your ASB by refinancing your house. Let's say, you refinance your house partly for about RM200,000. I do not know what will be the refinancing rate will be, so I'll just take a figure of 6.75%(refer to public bank's website at http://www.pbebank.com/en/en_content/personal/rates/mp2.html) and you refinance it for 25 years. If you calculate it correctly, you have to pay about RM1,382 per month for the next 25 years. (Total you have to pay including the interest at the end of year 25 is RM414,600). Let's say, out of that RM200,000, you take out RM50k and dump it inside ASB. Then, you'll have RM70k as your ASB balance with RM30k to go. RM30k in 8 years is easy in my opinion. (A mere savings of RM313 per month is enough to get you there).-Pls bear in my that I've not taken the dividend received at the end of each year as yet. For example, if you have RM70k in your ASB balance, at the end of your 1st year of saving, you'll get at least RM7k. Wow....sapa nak kasi bro? hehehehehe....RM70k+RM7k=RM77k. You are left with only RM23k in 8 years.
Hrrmm..in addition, I think this method is workable if the monthly payments are properly managed. If you could sustain the monthly payments, than this way could work.
Option 3.
With your ASB balance of RM20,000, perhaps, if you are a risk taker, you could pledge it to the bank and of course, you can get the OD facilities of about RM18,000. Then, perhaps, you could refer to my earlier blog with regards to this method of maximizing your ASB through overdraft. However, a question was ask to me about the OD interest. Hrrmm,....again, I'm not well versed on this interest thingy but I'll try to explain what I understand. OD interest is based on daily rest and will be charged for the amount that you actually used. For example, the rate of OD interest from RHB is about 6.75% (I think). Ok, now let's take an example that you have about RM18,000 of OD facilities from the bank. You take RM5,000 from that OD facilities to be transfered to your ASB account. Now, for that RM5,000 that you've used from that OD account, the interest would be RM337.50(RM5000x6.75%). However, there are tricks available for you to use to lessen your OD interest. Hehehehehe. Perhaps....I will write about these tricks when the time comes....
Have a nice day
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