As you might have suspect, I in fact receive tons of email everyday. Although I read most of them but I just couldn’t get time to reply each and every one. When I do, it is normally worth sharing with you. This is an email from Don (of course not his real name)

Dear KCLau,
I need some advice. You can share this if you want to but I hope to remain anonymous. I am an engineer working in an oil and gas company with a fixed monthly income of RM6500 average. I am now 27 and graduated from the same university you came from 3 years back in 2007. Below are my monthly expenses:-

All in RM
EPF = 627.00
Tax = 600.00 average
MyVi Car Instalment = 492.00
House rental = 150.00
Utilities = 90.00
PTPTN = 210.00
Food = 500.00
Fuel = 160.00
Handphone bills = 250.00 (I help paying my mum’s, sister and fiancée’s line)
Insurance = 400.00
Misc spending (credit card etc etc) = 500.00 average
Mum’s monthly allowance = 1000.00

Total savings per month = 1500 average

To date, below is a list of my assets/savings in hand:-

Savings = RM 24000.00

House bought from developer in Dec 2009 and expected completion Dec 2011 = RM 398000.00
• Loan for RM350000.00 for 40 years with rate of BLR-2.25%
• Monthly instalment for 40 years duration is RM1300.00. Installment begins in 2012.

Own 2 cars. Proton Saga bought with cash at RM9600 after grad with money saved during uni days. MyVi bought RM49700 in 2009 loan for 8 years due to loan conversion from company loan to AmBank loan. Still have 6 years to go
counting from June 2011. Down payment paid RM12700.

Total invested in stocks = RM8900. I just started to get active again after 2 years remaining dormant. Lost a bit of money previously due to stupidity, laziness and greediness. However, I have learnt my lesson and educated myself to learn to research before buying any stocks. So far, I am holding it due to its potential and have yet to lock any gains. In other words, I am doing okay and if I sell it I will get a bit of money.

ASW 2020= RM900

Current family financial situation which you may want to know:-

1. My dad lost his job. So he does not have any income. Total combine FD, my dad and mum, is just a mere RM30000.00.
2. My mum fetches children to school with a net income of RM2000. Minus all the expenses (utilities, insurance, food, sister’s education etc) and the monthly RM1000 allowance I give to her. Nothing’s left. Expected to lose her job by 2012 due to no school children to fetch.
3. Sister’s ambition to study aviation. Finish Form 5 in 2012. RM250000 is needed to complete aviation courses.
4. Brother’s working in oil and gas with an average income of RM3000. Contribute RM500 monthly to mum’s allowance. Rest is for him to save till he can own a house. He just graduted.
5. Fiancée monthly income is RM4000. RM1000 savings per month.

My target:-

1. Planning for marriage in 2012. Wedding dinner etc.
2. To buy a 2nd property, looking a condo/apartment, to be rented out.
3. To start an engineering business with my trusted friends by 2015 or earlier.
4. To earn my first million by 35.
5. To have 2 kids by 2015
6. To be able to support my parents

Why I can’t sleep every night that I felt like I am going nuts:-
1. By 2012, my parents will be solely depending on the RM1500 monthly allowance my brother and I give. I may end up paying them more for disposable expenses!

My reply:
This is unavoidable ..when the day comes, you still need to live with it. However, human can easily adapt to a situation. There are people living in the arctic that proves no matter how bad is the situation, lives still go on. Your parents may have to adjust to a more frugal lifestyle when the time comes.

Our government do provide additional tax relief to family caregivers.

2. I can’t save enough for my wedding dinner and I am thinking to just abort the dinner alone and, perhaps, just go for a honeymoon trip to have a good time together. However, I feel guilty for not doing it for my fiancée.

My reply:
You will get angpow from the relatives and friends you invite to the dinner. Invite more richer friends and you may have extra fund leftover after deduct the dinner cost. From my experience, some best friends and wealthier relatives give bigger angpow. I don’t think you will lose money in your wedding dinner.

3. Because of point 1, I may lose a chance to buy a 2nd property so it is affecting my plans to increase my net worth.

No choice. You need to make more money. You can also look into the possibility of buying properties without money down (through auction or desperate sellers). If your rental yield is enough to cover the installment, it means you don’t need money to buy your second property.

4. My parents’ house is in Sunway and it’s close to Taylor’s. I believe it may fetch good rental value and I am thinking of moving my parents to my new house while converting this existing house for rental. However, due to previous modification, I may need to fork out some money to add an additional toilet and to add new partitions all over the house for rental. Due to my personal plans, I do not have the money to finance such modification. How do I go about it?

You can refinance your parents’ house for more cash. The excess fund can be used for the renovation. This assuming that your parents’ house is fully paid off or has substantial equity built up. As long as your rents still cover the new mortgage payment after refinancing, it is a worthwhile investment.

5. Setting up a family with no parents support proves to be tougher than it looks. I fear that I may let down my fiancée due to my current financial burden and that I may not be able to support 2 children expenses.

Undeniably, children cost a lot of money. I can buy a bungalow and pay the installment from the money I spend on my son. But anyway, there is too much fun being in parenthood. Just adjust along the way and you will be doing fine. When I look back at my parents, they manage to raise 4 kids with only average RM1000/month income. It is amazing, isn’t it?

When you have more commitment, you will learn to adjust to the situation either by spending less or making more money or both. You are motivated to do so.

6. I am an ambitious person. I love making money. And I came to realize that I could never be rich if I work in an organization. I got to go beyond the boundaries. But I fear that with this entire financial burden, my plans fall apart.

You already have planned to start a company with your friend. Focus on that. I think you will succeed. Wish you all the best! When you see a successful organization or company, it means that once upon a time, there was someone who made a tough decision and taking risk to call the shot.

KC Lau, with my current practice,
Do you think I can achieve my dreams and goals?
What can I do differently?
Is it advisable to convert the Sunway house for rental purposes and abort my wedding dinner for the renovation and to buy new furniture for my new house?

Please feel free to ask me more questions. I am so worried of my responsibility as an eldest son, a brother to my younger siblings, a husband who loves his wife so much that he wants to ensure that she is happy and worry-free, a father who gives good life to his children and a man who is financially free and rich.

Below is his email reply after mine:

First and foremost, thank you for sharing your insights and experiences about personal finances. I take your reply “I think that you worry too much.” that I am currently managing my finances good enough to achieve my goals. And all I needed is to adjust myself as I am going thru life along the way provided that I am prudent on my spending and desires.

I had previously thought about your reply in blue. But I am seeking some reassurance because it does seem to me that I am rolling my hard earn money without savings surplus. This does shake me up a little as I don’t see property or stocks as savings due to its time needed to liquefy it. For example, my nett savings for year 2010 has been hovering in between RM25000 to RM30000. My target was to save RM30000 per year making it RM60000 for 2010. However, I did not make it due to the increase in my parents allowance, the down payment for my new house and jewelries for my wedding.

Anyway, I hope I can share with you once more when I have achieved all of my goals and is financially free. Thank you KC Lau.

To you as a reader of our emails:
What does this story remind you of? What advice do you have for Don?
Post a comment below.


KCLau
KCLau

Personal finance author and trainer

    11 replies to "Financial Burden: Can the eldest son of retired parents achieve his financial goals?"

    • Jackie

      dont forget that your pay/ salary would increase as years go by… And when u do your own biz u will have unlimited potential income…

    • Tilaka

      Wedding dinner is must as its happen once and if ur marrying your sweetheart that even a fairy tale come true, Life after marriage is basically sharing and caring, why nt have a simple dinner yet memoriable and it is shared between both bride to be and groom to be..that is the 1st start of sharing of life begins..why burden it alone, after all it is love marriage! I like that part invite rich relatives, and I know well that in chinese wedding ang pows always big amts..it scare me that it even start as low as $500(that alots man!). dont forget your those days schoolmates..and collegemates 😉

      This is a fantastic time to be entering the business world, because business is going to change more in the next 10 years than it has in the last 50.
      ..Bill Gates

      Ask ur friend to get involve in part time business as much can, besides the 9-5 (income) – I do plenty of business and it always make me smile to see money credited in my accounts while im working at office, frm other source…..Infact im earning 5 figures frm my 9-5 job yet not enough..and money never enough and endless for me..with the price rise..hmmm what can I say RM50 worth like 50cent..I love to hear stories frm my aunties..with 5cents can buy so much of stuff..now that same 5cents cant even get a piece of chocolate….hhhaah;;.)

      @Tilaka S

    • Zyrontyez

      Like the others said, Don is worrying too much. His financial is good. Just keep going with it.

      What i want really to know, his insurance is with saving plan or just common insurance? I take common insurance and it just cost me RM30 per month. Maybe he can take another insurance with cheaper cost.

    • Peter

      Hi KC
      Do you have any recommendation about medical protection for people over 50years old?

    • Paddy

      Hi,

      I think Don is doing just fine, especially since he is only 27 yrs old!

      He has a tendency to worry a bit too much….but that worry will make him plan wisely for his future.

      I also think he will succeed in most of the target he sets for himself.

      Regards.
      T.P.

    • Netmask8

      Greetings + G’Day
      When compare property (building/real estate) with stocks and cash, the values of property and stocks in 20 years time will be higher than the cash we will have by then. But, the cynical economy will be wide fluctuations in which occurs around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom), and periods of relative stagnation or decline (a contraction or recession). Commitment ( Monthly rental collection and offset it with mortagage loan and you will get = surplus/ deficit account). If economy turns worse, it is very hard to rent out yr property while the banks may continous asking for monthly payment. With a big home, the mortgage loan is huge and may need a very long period of settlement ( 20, 30 or 40 years mortgages loan).

      My view is to get a small comfortable home (small mortgage loan and withdrawn yearly EPF Acct # 2 ) and live there until yr commitment is at safe stage, Any extra $$$, put it into your high net worth ( Stocks ) half-yearly. Buy + Sell Stocks do not need MONTHLY commitment. If you need money, you can sell smaller units and get yr money in less than a week. Whilst, it may took months to get off yr property if you plan to lock profits. Just a thoughts.

    • henry

      Nice letter! Don started way ahead than the rest in his personal finance. Nice Advise too KC! Learned a lot from it. It’s good that you are taking good care of your parents!

    • rv

      Don is worrying too much like what KC mentioned.. Why I say that is because I am on the same boat and just 2 years elder. I earn good amount of salary working in a company minus savings as I have less than 5k.

      I have been worrying to much daily on how I can save for years, calculating and how to make other income and etc. In the end just spoiling my peace, mood and in the end not spending valuable time with family members.

      I’m the eldest son as well and I have 3 brothers and retired parents with income of RM 600 a month from pension. So I support my family fully including brother’s education. When it comes to money vs family I will choose family first as no one is going to live very long.

      With my high comittments to various expenses as I live out on my own while my parents are back in home town, I found that joint venturing with fiancee will help. I got married with a loan up to 30k together with my savings. I already own an apartment before married which could fetch me some rental but I am living there for now.

      I can’t afford another house, so I joint with my wife (who has less comittments) to get a second landed property which I will be moving into mid next year. From that point I will start generating income from the apartment I have through rental…

      Basically, commitments on parents expenses or siblings are not forever. Lets make it this way, in 10 years time income from salaried employment grows, comittment from loan reduces, committment from family expenses reduces gradually. Which all of sudden may feel that savings is increasing..

      In summary, I believe that our mind need to be in peaceful state to make right decisions and take the right opportunity at the right time. I have stepped out from my stressful period of thinking and thinking lot and learned to look at future of less comittments and just along the way look for opportunities to invest in properties together with trustable ppl by making the savings and putting turning into properties. When compare cash & property (building), the value of property in 20 years time will be higher than the cash we will have then. (my believe)

      I would get a group of trustable ppl to put their savings together with mine to get a small property and sell them off or look for rental income. (need to do this slowly for a long term and grab opportunities)… Not sure if it is a bad idea but I just satisfy myself with this idea to not overstress and look into family needs at the same time. Currently saving for our third property.

      And finally, Don is doing good with what he has for now and he can gradually grow with what he has. I always think that we dont have to be a millionaire or drive a bmw to look rich… drive a saga and have 5 properties i consider rich as well.

    • Michael Tan

      Greetings,

      First and foremost, i would like to congratulate you for having such great foresight as to plan for the next 3-5 years. It is uncommon for any fresh grad or school leaver to have such intricate financial plans. I love it for its ambitiousness and details. both tells me that you are an analytical person, and at the same time, you have dreams.

      KC dropped me this email, and asked for my advice. I’ve studied it, and will contribute in where I will think I can help, ok? These are only my ideas, but I hope they can help.

      First and foremost, I was wondering, does anyone else in your family, and your fiancee, know about your plans. One of the things I find most people should do, is to communicate their dreams to others. This way, it helps not just in the planning but also the support to get things going.

      Now, let’s talk about properties. My reply is simple. You SHOULD buy your second, third and forth property… if you would like plan for your kids.

      Focus on getting secondary market properties, which already give you excellent rental returns. Look for something at 8% or more. I still dunno where you stay, so i can’t comment where you should buy, however, a simple rule I have is to look for properties within 5km from where you stay.

      Second, you will need seed money, however, you can minimize on this, using strategies like No Money down.

      Third, calc your income (+ your fiancee), minus your loans, you should be able to still buy something within Rm300k and below. I suggest to go lower, and split up to 2 or 3 units. You need to invest into MORE, now, should you want to plan for your kids future. Again, look for rental income.

      I totally agree with you in terms of your planning with your parents. If they are willing to move, if would be great. Depending on the type of house and where it is, a home can ideally fetch RM1,500 to RM3,500 per month. Its a great area due to the demand from the students. Study the area, If you know how to add value to the property and cater for the students, you might even get up to RM5k for rent! I know some investors who do that!

      So really, I don’t see much of a problem. The rental from your parents home shall pay for most of their living expenses. I’m sure you’re parents will be more than happy to take care for their future grand kids, hence saving you baby sitting fees, if you invest wisely, you should be able to get your 2nd, 3rd and 4th property within the next 2years, and if you follow KC’s advise for the rest, you should be set for the next 3 years!

      Do drop me a note if you need more specifics!

      Happy 2012.

    • Sayeed

      Hi KC;
      It have been a long time…actually a year to exact…working on something past 1 year.
      This is an excellent article for all new comers to working life. Actually Don don’t have to worry so much about his financial situation coz :
      1. He is still young and already having good bank balances.
      2. He has the financial intelligence to check and seek help as many of us don’t normally…so he is already above average.
      3. He has plans to move forward, which comes as the biggest advantage.

      My final advise is marriage and children will make him even stronger and confident on planning his dreams…trust me, wife and kids are not burden, but blessing!!
      Good luck Don…all the best,..surely you are above average.

    • Suraj

      Thanks fro the interesting article. I could relate much too it and found some useful pointers.

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