Sunday, July 22, 2012

TakeAways from Private Retirement Scheme (PRS)

This post is specifically for Malaysian - our PM launched a new voluntary private retirement scheme (i.e. PRS) for all Malaysian! You can check the announcement here. Well, I think this  a good news. So, let's see what are my key takeaways from this announcement?

Key Takeaways

  • You may ask what is the difference as compared to EPF? The obvious one, EPF is mandatory and PRS is voluntary.
  • Tax relief is up to RM 3K as compared to EPF is RM 6K. Well, it is additional. What it means is if your tax bracket is 26%, you will able to save up to RM780
  • Contribution frequency is flexible where else for EPF is monthly.  I think this is very similar to mutual fund investment where you can also setup a monthly investment if you want to.  
  • You can only apply this PRS through approved PRS providers. They are AmInvestment Management Sdn Bhd, American International Assurance Bhd, CIMB-Principal Asset Management Bhd, Hwang INvestment Management Bhd, ING Funds Bhd, Manulife Unit Trust Bhd, Public Mutual Fund and RHB Investment Management Sdn Bhd.
  • You can choose what funds to invest but I guess that is still based on the term and conditions of the PRS providers above. You should check with your agents. For EPF, you only have partial freedom. Remember you can opt for withdraw the money from EPF for investing in mutual funds?
  • Withdrawal is similar to EPF, the entire fund in your PRS can be withdrawn when you reach your retirement age (55 years old - used to be 60), you die or you migrate to another country. For partial withdrawal for per-retirement, there will be 8% tax penalty. This is different from EPF where withdrawals can be made without penalty for specific purpose (e.g. pay for housing loan and education). Anyway, for detail you should check with your PRS provider to confirm. 

I believe the details on how to apply this PRS will be communicated by the PRS providers soon. For example, if you're using Public Mutual and I will expecting your agent will be contacting you about this scheme. If not, you can approach them assuming you're interested to apply.

I think I will go for this as it can help me on the tax relief. Will you? One risk that you must understand is the fund that you invest in may be losing money. To minimize such risk, I think the PRS providers will mostly offer those low risk funds rather than aggressive funds. So overall, I think this is safe to invest.

Sunday, July 15, 2012

Donate Money Can Make You Rich?

When I was young, my brother told me the secret to rich is to make donation. The more you donate, the richer you’re. So I asked him what exactly the donation that you mean? Did he mean giving advices or consultations? No, the donation is a real donation here in a physical "Money" form, he said. Huh? Is that really make sense? It didn't seem possible to me at all.

I still do not have the answer until today because he didn’t really explain that to me. Perhaps he did not know the answer himself and read this information from somewhere else but have no idea why. But anyway, I have figured out the answer by my own but still not sure if this is the real answer and let's see if my answer makes any sense to you.

Why it can be possible?

How can it be possible by donating money can make you reach? I have been thinking and I finally come to a conclusion why it can be possible. The ultimate answer is you're in control of your money by donating money.

(1) You're In Control

The first thing that you may ask, what is the return in terms of money when you give away your money? No, you don't get anything physically. However, when you are able come to a stage that willing to donate your money, it basically means that you're in control of your money. The control here doesn't exactly mean that you're good in personal finance. The "control" here  means you are in control of your  "emotion" towards your money. In other words, your emotion is NOT controlled by your money and I think that is the first thing or fundamental that everyone of us should learn in personal finance

(2) Make Better Judgement

When you're in control of your emotion, you can make a better judgement.  When you can make a better judgement, you can make a better investment. When you can make a better investment, you will get your higher return and in long term you will become rich. That sounds simply but I believe that is true. A truly rich people always have a very high Emotional Quotient (EQ). If you see those riches who have very low EQ, I bet their rich will not able to sustain and I have seen many examples as such.


In short, the fundamental of becoming rich is really on controlling your emotion! However, when you tell this to anyone, no one will get it. If this concept is easily be understood, then everyone will be good in manage their money already but this is not the case. You and I know that.

Therefore one clever fella came out this idea, instead of telling everyone that controlling emotion is the fundamental of becoming rich, he/she is telling everyone that donating your money can make you rich without telling the real intention that is when you start to able to let go the money, you're in control of your money rather than being controlled. So, people follow without releasing the fact that they're increasing their EQ and eventually they will get rich by donating.

It seems ridiculous but what do you think? The way I look at this, the only thing to argue here is do you think a person who is willing to donate his/her money means that they're better in control of their emotion? 

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