Ask and you shall receive


Article from the New Straits Times dated 11 August 2013


DON'T BE SHY: Malaysians generally do not have enough financial knowledge on how best to optimise their finances or improve their lot. Many rather fumble along than seek out expert help or advice. Even when there is free, independent advice and counselling available, like those offered by the Credit Counselling and Debt Management Agency (AKPK), many remain too shy to take advantage of it. Here, AKPK lends its financial advice to three different families with their distinct financial concerns, writes Tan Choe Choe.


Desperate but unable to make ends meet.

Aminah was only 24 when she first came down to Kuala Lumpur from Penang, freshly divorced and with a young daughter aged 4 in tow. There was only RM100 in her pocket. Pressed to make ends meet to feed herself and her daughter, she hopped from one job to another. Although she could not hold on to any of the jobs for long, they enabled her to get a few credit cards.


Even though the credit limit given to her was just about RM3,000-RM4,000 per card, she maxed out her cards and was not able to repay them.


"That was in 2006. I think the outstanding balance of both cards, with the interest and penalty fees, would have gone up to about RM20,000 or RM25,000, each."


Aminah, now 35, has moved house several times since 2006 and has not been reachable by the banks.


"I have just gone MIA (missing in action) on them. Now I am blacklisted in CCRIS (Central Credit Reference Information System) and CTOS (Credit Tip Off Service)," she added.


Apart from her credit card debts, Aminah also has an outstanding debt of RM32,000 with the National Higher Education Fund Corporation (PTPTN).


"I have not been able to repay even a single sen to PTPTN."


She remarried in 2008, had another daughter who was now aged 4 while her eldest had just turned 15. But her second marriage did not get a happy ending either. Two months ago, the couple filed for divorce.


In setting up home with her second ex-husband, she had racked up a loan of RM23,000 for goods from Courts Mammoth -- all for household items.


"He was supposed to pay off the household stuff, which is about RM600 a month. But ever since the divorce, he has not been paying up. So I took up the debt," said Aminah.


Several months ago, unable to make ends meet and with no one to turn to, she took a RM5,000 loan from an Ah Long or loan shark, an amount to be paid back in six months with a monthly instalment of RM1,350. Last month, she had had to top up another RM1,000 with the same lender.


"But my Ah Long debt is the manageable bit out of the whole mess because they have my ATM card. And I'm glad actually because it ensures repayment to them. As for my PTPTN, I approached them to

restructure the debt. They asked me to fork out RM5,000 first, but I don't have that much money!"


She also has a car, for which she is paying RM600 monthly.


"It's a friend's car that's on loan to me. So I service the hire purchase as I use it," she said.


She's currently working at an advertising agency with a salary of RM5,500, which means a net income of RM4,700.


But despite the obvious need for steady employment, Aminah recently resigned from her job. She would work only until September.


"I know it's very risky but I have become too depressed to work. No matter how hard I work, my salary is stagnant and I have to make ends meet. It doesn't seem practical now, but I'm dying here."


Unable to sleep or eat properly, she admitted to crying often and feeling as if she had lost the will to live.


"I've struggled so hard for the past 12 years and I feel I just can not see the light at the end of the tunnel."


Fearing that she would suffer a total breakdown, she went to seek psychiatric help at Hospital Serdang recently.


She also hoped that the flexibility she would get from not being tied down to a job would enable her to care for her children better, especially the eldest daughter, who is entering a rebellious phase.


Advice from Mansor Ali, head of branch operations department of AKPK:

I'm glad to note that she has been paying her Ah Long debt religiously and has not allowed that to snowball.


Right now, after deducting her monthly expenses and debt repayments, her net disposable income is zero or near negative at times.


So, she has to exert a lot of discipline and control to ensure her accounts balance each month.


Being an agency appointed by Bank Negara, we can only help her in managing her debts with banks, but she has to find out what the status of her credit card debts is with them first. Once legal action has been initiated, it is hard for us to intervene. 


Once your Ah Long is paid off and you have a positive net disposable income, come see us as soon as possible and we will detail a personalised debt management programme for you. If you feel shy about being seen in AKPK, we can even prepare a room for you.


Please do not despair, your debt is still at manageable levels. Though I understand that whether that debt is huge or small, it is equally burdensome to the person who is in debt.


[CASE 2 - Single mom with 5-year-old child]

Stressed out over providing the best for her only son Devi, a divorcee aged 42 with a son aged 5, is much better off than many women in her situation -- although her husband provides no alimony after the dissolution of their marriage, he did not saddle her with debt.


She is also gainfully employed, saves religiously, and she keeps her finances strictly under control.


But like most urban dwellers, she has a car that needs to be paid off, and a modest house that she is also paying for.


Earning a net income of RM2,894, she does not spend lavishly and splurges rarely, if at all, on anything for herself.


She takes food to work or if she eats out, she often goes to cheap food outlets.


The only thing on which she has spent a substantial amount on was a diploma in early childhood education, specialising in learning disorder management and child psychology from Universiti Malaya.


"My main focus is to make sure my son will have enough money to grow up safely and healthily, and that he will have enough money to further his education when he is of age," she said.


To ensure she always keeps aside a sum for her son's future, she invested in a medical and educational insurance for her son, one for which she pays a monthly premium of RM150, but which she topped up to RM250 two months ago.


"I wonder if I should top up more and where else I should channel my money to ensure that my son will not be left wanting when he grows up," she said.


However, despite keeping a tight-fist over her finances, she finds that her disposable income, after deducting her monthly expenses, is very little.


On a good month, she sees about RM500 left over. On a bad month, when it is the festive season or someone has a birthday, she is left with little to nothing.


Advice from Nirmala Subramaniam, a manager in the financial education department of AKPK:

It is very laudable for Devi to have such a strict control of her finances. 


However, I notice that for her so-called fixed expenses like the Astro bill, she is paying quite a lot for a working adult who is rarely able to catch what's on TV.


If she is only getting it for her son, I believe this RM113 can be pared down to something amounting to RM70 plus.


Her kindergarten fees can be slightly lowered if she sends her child to a government-run kindergarten, a taska. Do not write them off, these institutions actually have a very good syllabus that could be on par if not

better than privately-run ones.


And while she saves each month, RM100 out of a net income of RM2,894 is not enough. It should be at least 10 to 20 per cent of her net income.


She has also recently got her diploma, so she should start putting it to good use by taking on part-time employment. It is not only good for practice, but will also help her build up a name for herself, which will stand her in good stead when she moves into that industry.


[CASE 3 - Husband and wife with two young children, aged 4 and 5 months]

Almost out of debt and looking to invest Stephanie, 32, who is earning a net income of RM5,000, is freshly out of the AKPK debt management programme after having paid off RM70,000 worth of credit card debts early this year.


Her husband, Jeff, is still servicing the remainder of a RM50,000 credit card debt that the same agency has helped restructure. 


They originally got into debt when the husband's business failed, causing the couple to max out on their various credit cards to pay off the cost of doing business.


On top of that, they also partially-refinanced their family home for RM400,000 - a loan that the husband services.


Now that Stephanie is out of debt, and with property prices ballooning everywhere, the couple, who has young children aged 4 and 5 months, is worried about their future.


They feel that while they have been working hard to pay off their debts, the rest of the world - or at least the part made up of their peers - has been making tonnes of money from the property market.


"Previously people were talking about setting up education funds for their children. Now, I hear that the best hedge to ensure your children will have money for their studies is by buying each of them a house," said Stephanie.


She feels she can buy a house of RM400,000 each for them.


"It is not easy to get good property of that price range, but there are some which we think will escalate in value. Smaller places, but which we think will have potential in the long term," she added.


Despite not having much savings and no emergency fund set up for the family, Stephanie and her husband is considering taking up a personal loan of RM80,000 to help finance their purchases.


"If we don't buy now, it'll be more expensive later!" she added.


Advice from Desmond Chong, a manager in the financial education department in AKPK:

It is good that they have prepared a cash-flow spreadsheet of their household income. They have a net disposable income of RM4,620.


But the calculation is not complete. There are a lot of variable expenses that they have not taken into account.


The wife also admits that this amount is often used up for unforeseen expenses, like medical treatment for the children, groceries, and sometimes a nice meal or two outside.


These variables should be budgeted into their monthly cash-flow for them to see a better picture of what their real discretionary income is.


That is the amount that they can look to use for investing,according to their risk appetite.


However, this couple has not set up an emergency fund as yet. It should be an amount that will be sufficient to meet the needs of the family for up to six months, at least.


The savings out of their combined monthly income is only RM200, on the husband's side. That is insufficient. It should be at least 10 per cent of their income.


Their enthusiasm to invest in the property market is understandable, seeing as how it has been ballooning. Even with little savings, they are so tempted that they want to invest by borrowing money from the bank.


I'm not saying that they can't do that. But it is very dangerous for them to go into it without any safety net whatsoever.


They must also have a more detailed understanding of the cost of borrowing: for example, if they take a three-year personal loan of RM80,000 to pay a down-payment for a house priced at RM800,000 or two houses worth RM400,000 each, at an estimated effective interest rate of 20 per cent, as the wife believes she can get a 10 per cent flat rate for the personal loan, they will have to pay RM54,000, in interest alone, in those three years.


That is a very expensive cost of borrowing and should anything bad befall the family that results in a loss of income, can they repay the amount borrowed?