Need opinions for a 30/m/bumi

[lindaleigh]

Hi All, first time posting here. Need your kind advice and guidance on my current financial position.

ASB: 70k
TH: 2k
Crypto: 2k

Salary: 5k/month

My commitments;

Car: 750/month (50k outstanding balance)

Personal Financing: 900/month (60k outstanding balance)

House: 900/month (200k outstanding balance)

Credit Card: 400/month (8k outstanding balance)

Just managed to save around 5% - 10% in ASB and crypto on monthly basis. Here are the few queries as per above financial summary:

A. Should I clear off my personal loan and credit card from my ASB savings? Since, both of these are the bad debts.

B. Should I refinance my house with a MV of 500k to clear off all the debts and consolidate it into 1 payment only everymonth? This will improve my monthly cash flow since the instalment will be lower than my current monthly commitments.

C. 70k savings for a male working adults is quite low compared to others?

D. 5% savings into ASB/crypto is adequate?

Looking forward to all of your responses.

Thanks in advance!

 

[hispoiema777]

@lindaleigh Clear off ur bad debt ASAP. What is the interest on these debts?

 

[lindaleigh]

@hispoiema777 Using my ASB? Then, I dont have much savings after that. Is it advisable?

Ah.. I dont really remember the rates.. Haha

 

[adhidw]

@lindaleigh Check the rates for personal loans and cc debt, those are usually the ones with higher interest. Get those done first, others stay with monthly repayment.

Increase more asb contributions IMO, it's too good of an investment, and the safety net and liquidity of ASB is a good foundation to build upon for more risky investment later on.

 

[lindaleigh]

@adhidw Mu current focus is invest more on crypto since I already had around 12 months of savings in ASB..

In order to get those PL and CC done first, should I pay more into it so that it could settled earlier?

 

[adhidw]

@lindaleigh Yes. I'd prioritise the one with higher interest rate. Check you latest statement / call your bank and inquire about procedure to pay them off earlier.

 

[lindaleigh]

@adhidw Thanks so much man! Will do that first thing in Monday morning!

 

[adhidw]

@lindaleigh No worries! For my instance, cc is 18% interest per annum, which is HUGE! So usually, CC debt is the one to pay off first.

 

[vinhhali]

@lindaleigh A. Take care of your credit card debt immediately -- like this coming Monday. Credit cards have really high interest. Use your ASB to pay it off. ASB is like 5%-7% every year. Credit card interest will be easily more than that, maybe in the 10% to 18% range. 70k - 8k = 62k emergency fund left.

Personal debt - this depends on how long is the tenure and how many years left. Because of the rule of 78, your repayment goes to mostly paying the interest instead of the principal in the first few years. So settling loan late in the tenure may not be wisest thing to do! (reference: https://loanstreet.com.my/learning-centre/how-banks-fooled-you-with-the-rule-of-78) Let us know how long is the original loan, interest rate, and how many more years to go.

B. If your personal loan is new, yes, refinancing your house should be worth it. But there are many many factors involved like interest rates, tenure, and etc. You'll have to do some calculation yourself.

I'm sure you know this but don't take out more than you could though. If you have a flexi loan, you can immediately put back the 400k (say refinancing 80% of market value) - 200k (outstanding loan) - 60k (personal debt) = 140k into the flexi loan. Remember to check if there's any terms and conditions - hidden fees, early settlement bonus, early settlement penalty, refinance fee, and what not.

C. Irrelevant. 70k is a lot for some people, 700k can be a tiny amount for someone who makes 40k per month. Don't compare.

D. No comment on this one.

Another idea is something I haven't done so myself, but I think it's worth investigating: taking out an ASB loan. If ASB loan has a lower interest rate, you can effective swap out your personal loan with an ASB loan. Like this: ASB loan -> ASB -> Personal loan. Just a concept though. Again, remember to do your own calculation.

 

[albert0]

@lindaleigh Immediately clear the CC debt. Carrying 8k outstanding @ 18% compound interest and making minimal payments is just stupid. Take out the money from ASB if you need to because you're losing over triple that amount in dividends (i.e. 24k worth of ASB's dividends at 6% per year is being nullified by the CC debt interest). With your income you should never have to carry a balance and you shouldn't. Don't spend if you can't immediately pay it off. Saving more is pointless if you're paying more in interest than you're receiving from your investments.

I can't say much about you taking up a personal loan for family since it's too late for that talk. Personally I would never give anything like that since I don't expect to get it back. For me any money given to family and friends is gone forever and getting it back is just a bonus. 60k is just way too much free money to give away and I can tell you're already having issues with it so I don't want to add too much to that. I'd advise you to look into the terms of loan agreement to see if you'll get any benefits from paying it off early or making additional payments. I know some loans have the total interest factored in regardless of early payment or penalize you for paying it off early.

In my opinion the only loan you should take is one that makes you money. House is good, car is eh but necessary. ASB loan is a generally good thing. Right now the interest outweighs the dividends but in the long term, compound interest means you'll still make hundreds of thousands in profits by the time it ends. It's one of the best possible loans and non-bumis are envious of you.

 

[soldout2christ16]

@lindaleigh A. You should clear your personal loan and cc loan as the interest rate is super high (at least 16%). Your asb dividend won't be able to beat it (which is around 6-8%). But whether is it okay to take out from asb or not need others to comment as I'm not familiar with it.

For PL loan, do ask on the clause if you want to finish paying it earlier.

B. Depends on your current house loan, no comment because not familiar with it.

C. Net worth wise, you're in the < 30% percentile most likely as your net worth is in the thousands (due to your savings - PL and CC loan = few k RM, may increase if there's appreciation in price in the house).

Savings wise, should be higher than median but likely not the 90th percentile.

D. depends on your retirement goal.

To get 1 mil in ASB (exclude ASB financing as idk how that works, talking about the conventional way), at 6% dividend, you need to put 500 ringgit for 40 years to get 1 mil.

Now you're putting in 250 so you will get 500k after 40 years.

Crypto wise, depends on your risk tolerance, put money that you can afford to lose and if you can't sleep, then you have put too much of money in it.

 

[3pete333]

@soldout2christ16 Currently ASB rate too low around 4.5% only.. so sad..

 

[snowbird16]

@lindaleigh I have a friend who was made bankrupt because he couldn't clear his credit card debts. He has been bankrupt for almost 8 years with no end in sight. So clear your credit cards first....

 

[godiscomingmyway]

@lindaleigh My opinion: you need to stop thinking that you have 70k in savings. Savings should be liquid capital - bad debt. In this case you have 70k - 60k - 8k = 2k savings.

Recommendation: refinance the house to extract enough to pay off the bad debt. Hide you credit cards for only emergency use. Then pay off the monthly house payment and all leftovers go to asb until you hit 200k. Refinance house because generally rates for houses are lower and asb is generating higher returns than mortgage interest rates. It's more efficient to refinance than to pull from asb.

At your current position, you don't have much room for risks. It's so hard to save up, you can't absorb the potential crypto losses. Unfortunately that means you aren't in the right position to potential obtain crypto gains if it does go up, it's just too risky.

Once you hit 200k in asb, the dividends should be what you consider for risk investment. Don't touch the dividends but use that to benchmark how much you can put at risk in volatile markets like crypto. E.g. 200k asb, 5% return = 10k for that year. So for that year, you can play with a maximum of 10k high risk assets, the rest goes into safe havens like epf or blue chip dividend stocks.

You should focus on keeping investments simple and spend very little time on them. Your attention should be on keeping costs low so debt doesn't increase and growing income through going above and beyond at work.

 

[crazeehell]

@lindaleigh First clear credit card debt. Try not using credit card
Second increase your Asb by buying about rm1000.00 a month.you could borrow half from maybank as interest is very low.your interest from asb will be higher than your borrowing.
Save hard for first 10 years and life will be good for u.
I am 75, a millionaire and to date, never bought a new car.

 

[alamal1]

@lindaleigh Maybe can share whats your long term goals looks like? E.g. getting married / kids, car, any plan to continue education, retirement goal?

This would help to prioritize resources into settling bad debts vs. other long term goals. Wish u only the best OP.

 

[josula]

@lindaleigh Have you heard of AKPK? I heard they can help you manage and advice on debts. It’s free service

 

[lindaleigh]

@josula Yeah, I know about AKPK. I dont really wanna call them since, it is quite manageable at my end. Just wanna know where I stand atm in terms of savings as a 30 year old adult with 70k savings. Am I bit behind or not.

 

[coled802]

@lindaleigh Bro, now is the time. CC has highest risk of bankrupting a lot of Msians as the interest is the highest. Don’t consider this a failure. Nothing could be further from the truth. If anything AKPK will help you get to FIRE earlier than you could imagine if it’s done right.

Make the call ASAP.

 

[albert0]

@coled802 This is horrible advice. You only have one shot to use AKPK's services (where they nego with your creditors to reduce the interest rate and setup an installment plan) and using it for a manageable amount of debt is not the way to use it. He has significantly more cash than "critical" debt and he can easily clear it in one shot by using that. The other loans are somewhat normal and have low/fixed rates since they're used for financing assets so they're not a big deal unless he loses his job, in which case he still has the ASB buffer even after paying off the CC outstanding.