Showing posts with label finance. Show all posts
Showing posts with label finance. Show all posts

Tuesday, May 21, 2013

13 Books to Improve Financial Knowledge (A Guide to Financial Freedom)

1. The Millionaire Next Door: The Surprising Secrets of America's Wealthy
  • Book by William D. Danko
  • The book The Millionaire Next Door: The Surprising Secrets of America's Wealthy is by Thomas J. Stanley and William D. Danko. This book is a compilation of research done by the two authors in the profiles of 'millionaires'. Wikipedia

 “Whatever your income, always live below your means.
2. The Millionaire Mindset
  • Book by Gerry Robert
  • Why is it that when some poor soul wins the lottery he is often right back in the poor house within ten years? It’s because he never changed his thinking. He never acquired a Millionaire Mindset. Why is it that so many people work endlessly to grow a business or climb the corporate ladder but still struggle year after year? The Millionaire Mindset reveals how you can finally break the cycle of poverty consciousness and take control of your life. You will see the power that your conditioning has on your current results, and you’ll gain a powerful system for reversing that early programming. Mr. Robert leads you through a process of understanding yourself, your thinking, your goals, your finances, your time and your abilities. These are all common-sense strategies that have worked for the people who have attended Gerry Robert’s popular seminars. They will work for you. We can say this confidently because of the thousands of people who use these strategies daily. Not only that, but these very strategies have taught Gerry Robert how to raise himself from poverty to earning a multi-million-dollar income. The Millionaire Mindset gives you a treasure chest of practical strategies that will guarantee success for anyone.  atlasbooks 
“It’s sad that people who work for money their whole lives so often end up with little or nothing to show for their efforts.”

3. Think and Grow Rich
  • Book by Napoleon Hill
  • Think and Grow Rich is a 1937 motivational personal development and self-help book by Napoleon Hill and inspired by a suggestion from Scottish-American businessman Andrew Carnegie. Wikipedia
4. Richest Man In Babylon
  • Book by George Samuel Clason
  • The Richest Man in Babylon is a book by George Samuel Clason which dispenses financial advice through a collection of parables set in ancient Babylon. Wikipedia
   Better a little caution than a great regret.

5. Wink And Grow Rich 
  • By Roger Hamilton
  • A step by step guide to making a lot of money (even during a recession).
  • This is a parable; a story which holds the ‘keys' to wealth, but first you have to find the keys. They are hidden in this book.
  • Roger Hamilton is one of the best speakers on earth. He owns 11 businesses and runs none of them. He simply tours the globe teaching people the secrets of wealth.
  Your well is in your words.
6. Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money - That the Poor and the Middle Class Do Not!
  • Book by Robert Kiyosaki
  • Rich Dad Poor Dad is a book by Robert Kiyosaki. 
  • It advocates financial independence through investing, real estate, owning businesses, and increasing one's financial intelligence. Wikipedia 
“In school we learn that mistakes are bad, and we are punished for making them. Yet, if you look at the way humans are designed to learn, we learn by making mistakes. We learn to walk by falling down. If we never fell down, we would never walk.” 

7. Rich Dad's CASHFLOW Quadrant: Rich Dad's Guide to Financial Freedom
 “Can you personally make a better hamburger then McDonald’s?”
So far 100% of the people I have talked with have talked with about their new idea have said “yes”. They can all prepare, cook, and serve a better quality hamburger then McDonald’s.
At this point , I ask them the next question: “Can you personally build a better business system than McDonald’s?
Some people see the difference immediately, and some do not. And I would say the difference is whether the person is fixated on the left side of the Quadrant, which is focused on the idea of the better burger, or on the right side of the quadrant, which is focused on the system of business.
I do my best to explain that there are a lot of entrepreneur out there offering far superior products or services than are offered by the mega-rich multinational corporations, just as there are billions of people who can make a better burger than McDonald’s But only McDonald’s has the system that has served billions of burgers.

8. The Millionaire Mind
  • Book by Thomas J. Stanley
  • The Millionaire Mind Published February 1, 2000 by Thomas J. Stanley, draws from the authors' research of America's affluent to examine the ideas, beliefs and practices of the segment of the financial elite that use little or no consumer credit. Wikipedia
“The number one reason most people don't get what they want is that they don't know what they want.”

9. The Only Investment Guide You'll Ever Need
  • Book by Andrew Tobias
  • For more than twenty-five years, The Only Investment Guide You'll Ever Need has been America's favorite finance guide, winning the allegiance of more than a million readers across the country. Now this indispensable book has been fully revised and updated-covering all the new tax laws-and reorganized with a new user-friendly design. Concise, witty, and truly understandable, Andrew Tobias shows you how to use your money to your best advantage-no matter how much or how little you have.
    o How to spend smarter-and save $1,000 or more
    o When to invest in stocks, and how
    o The ins and outs of investing on the Internet
    o Tax strategies, from tuition to retirement
    o Whom-if anyone-you can trust to manage your money
    and much, much more.
 “If a monkey can invest as well as a professional, or nearly so, it stands to reason that you can too.
10. The Intelligent Investor
  • Book by Benjamin Graham
  • The Intelligent Investor by Benjamin Graham, first published in 1949, is a widely acclaimed book on value investing, an investment approach Graham began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd. Wikipedia 
    “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.”
11. Your Money or Your Life
  •  Book by Dominguez and Robin.
  •  A classic, and one of the foundation books for the simplicity movement. The authors play off the concept “time is money” in a very literal sense. They encourage readers to sort out priorities, to cut expenses, and then to seek passive income in pursuit of financial independence. A little New Age-y in spots. An excellent book.
12.  The Total Money Makeover
  • Book by Dave Ramsey. 
  • Ramsey is an anti-credit zealot. He made a $4 million fortune by his mid-twenties, and then lost it to bankruptcy. Now he runs a personal finance empire. He takes a lot of criticism for his support of the Debt Snowball, which he describes in detail here, but the thing is: his methods work. If you are struggling with debt, there is no better starting place than this book. Ramsey’s advice is permeated with his Christianity, but you can get a lot out of this book even if you’re not religious.
13.  The Wealthy Barber
  • Book by David Chilton. 
  • This book offers good, general personal finance advice in the guise of a novel. Several friends meet once a month at the barber shop where the titular character dispenses wisdom on saving, investing, buying a house, and so on. The advice here is excellent, often backed by clear examples. The book’s conversational tone may appeal to some who might otherwise be turned off by personal finance. 
See Also:

Sunday, April 21, 2013

Rule of 78: What??? After one year payment why my loan principle not much different?

On first April last year you have bought a second hand car. You have make car loan for $50000 with 7 years financing period. Interest rate for that loan is 5%. Your monthly installment is $803.57.
On 1st April this year, suddenly you want to make full settlement because your company give you 24months salary bonus. You have checked with your car loan bank and find out you have pay $45, 327.73 for full settlement.

Instead of check with your car loan bank, you also can estimate it using online full settlement calculator available in internet, In this case I will use online full settlement calculator from

The typical bank loan or Islamic financing using "Rule of 78" to calculate prepayment schedule and early  settlement rebate. Why it calls "rule of 78", it is sum of month number of the year  ( 1+2+3...+11+12 ) is 78. The earliest official use of the Rule of 78s to calculate the unearned portion of a loan’s finance charge was in Indiana in 1935.

You will  paying more interest in early repayment. From calculator above total rebate is RM12529.41. In Islamic financing, we call this rebate as Ibra'. The rebate above actually balance interest you should paid from settlement date until end of tenure.

Total rebate based on Rule of 78 formula is =  f *( k(k+1) )/ n(n+1) ),
where  f = total agreed finance charges; k = number of months paying off early( remaining months to pay); n = total term of loan in months.

Early settlement amount,
= Initial loan amount - instalments already paid + total interest - interest rebate (rule of 78) + penalty (a percentage of the interest rebate).

From repayment schedule above which I generate from , we can straightway pick interest rebate from "Interest left to Pay" on month 13.

The magic number in the table calculate using formula
=  ( total term of loan in months/ 2 ) * ( total term of loan in months  + 1 )
=( 84/2) * (84+1)
= 3570

This number will use to calculate interest portion for every month by using following formula:
= total interest * ( ( total term of loan in months- total month instalments already paid ) /  magic number )

For first month the interest paid is,

= 17500 * ( ( 84-0 )/3570 )

 This is why when you do early settlement too early, the settlement amount not much different from your  total loan.

This is also why bank so happy when you refinance or overlapped the amount. When you this, the interest portion will back same as month one.

For more information you can refer following web sites:

Thursday, April 18, 2013

Rule 72: Rougly estimate when your saving become double.

Let say you have $100k and you are thinking of to save it in your favourite bank. Your favourite bank everage dividen rate is 6% per annum. You want to know when is your saving become double because you  have plan something in future. By using rule 72 you can estimate your saving doubling time. The formula is : 72/rate per annum( or per day or months - result will in days/months)

Initial investment: $100,000
Dividen rate - compounding : 6% per annum
Estimate period: 72/6=12 years

It means, roughly 12 years required for your saving to be worth $200k.

Table below show the actual your saving balance if your bank interest/dividen rate is 6% every year.

Year Date                Balance
0 1-Jan-13                 100,000
1 1-Jan-14                 106,000
2 1-Jan-15                 112,360
3 1-Jan-16                 119,102
4 1-Jan-17                 126,248
5 1-Jan-18                 133,823
6 1-Jan-19                 141,852
7 1-Jan-20                 150,363
8 1-Jan-21                 159,385
9 1-Jan-22                 168,948
10 1-Jan-23                 179,085
11 1-Jan-24                 189,830
12 1-Jan-25                 201,220

For more accurate, you can use future value formula or use your financial calculator.