RE: The Beauty Of Budgeting : Story to tell

----- Original Message -----
From: fahmy khairuddin
Sent: Jan 19, 2007 10:15 AM

Salam fellows

I agree wholeheartedly with your En. Mahathir... i have an experience to tell, especially to the new young professionals (and a few older ones who got caught in lar)

Allow me to share this as i think this would help all the younger people avoid my mistakes. Others with other credit card nightmare stories please contribute lar. Together we can change the credit card debt problems that is plaguing our young professionals.

My Financial Nightmare Story

In early 2000s took a luxury car loan (due to inflated ego and constant urging from the gf) from one of the main local banks. Part of the loan they gave me a premium credit card with extremely high limits with all sort of perks such as privilege banking, cash withrdawal,etc etc. I already had when 2 cards from my earlier executive days. They werent maxed-up or anything like that, it was there used for mostly buying work clothes, treat dates for nice dinners, etc.

I was running two businesses back then, both were start-ups and one of the company was having cash-flow situation as payments was delayed, and at the same time business was booming. I ended up taking paycuts and irregular allowances (as i was the CEO/MD) and had to advance personal savings so that the personnel can be paid on time. Since cash flow was tight (although the company's sales growth was soaring) i ended up making my car maintenance payment - gas, oil change, parts, and so forth on it on monthly basis by using the cards to manage. I ended up at the end of the year with debts of RM20,000.00. I could plugged it monthly at the cost of RM 2,000, but theni realized then with the card i ended up having to pay more than the original monthly installments! Now to make matters complicated, the car engine blew up and gear transmission went KO and my annual bill on the maintenance blew to RM 30,000.00 .. uggggh mana mau carik duitt...

Now i am stuck with a hot looking car that spent more time at the mechanics than on the road, credit card time bomb, annual road tax at RM 3,000, a bitchy ex (hehehe) and i wont even tell you about the insurance. So time is ticking, i am paying through my nose, and i started having delays in all sort of payments. And i became unhappy overweight jerk who start losing my temper on the smallest of things.

So what do i do???

Who do i call... Well i talked to Johan Nasir (i think some of you guys know him, he used to do credit card restructuring and now still alive somewhere in MAVCAP). Went around and ask for loads of advice and pretty much even ask form loans from my from my business buddies. Best piece of advice I got was from a retired enterperneur -- he said "dont be emotional, just do it". Go out there and solve it, the hard way he said. So i took the blue pill and ....

Car goes first

First order of the day i got rid of the car. It was an emotional separation.. so i bought a used car (a Satria 1.3) although i had a van (more for transporting my staff). Some of my partners and friends lambasted me for "going backwards lar, bad for repo lar.. etc". Guess what? Car got great mileage, killer handling and cheap after-market parts and only rm400+ in monthly payments. In fact i didnt have to valet park the car all the time also helps! First it was kinda sheepish and ego-down driving a car almost 10% the value of my previous car. But i thought of it as a temporary measure..and it sure hell works. Plus the monthly commitment freed is incredible. I could move into a different housing sector altogether for the amount i saved. And yesss i can date more girls!

Credit Card Consolidation

Ok some banks allow credit card consolidation. It is not true for others, but they are banks that allow you to transfer your balance out to another credit card / bank. This can be done but there are time lag commitment for the transferred amount before you can turn it into personal loan which is also known as "term loan".

I wrote in to citibank for 2 cards and converted all my debts to term loan. At 7+% it is a significant reduction of the original interest ratesof 18.5%. For the premium credit card from local bank, i cut the cards in two, send the first half back to the bank. I commited RM 500.00 to its monthly payments, rain or shine. It was suffering a bit at first as initially i had to cover about rm 3,000 committed first before the actual payments goes through.

Lesson Learned...

Well lesson learned, 5 years later i have only 1,500.00 debts as of today and a few months time God willing it will be cleared..

For alternative, pre-paid debit card (VISA) is available, and that is used for hotel travel and tours. Rest carry cash lar...

I sold the Satria back about a year plus ago.. ya know.. it was more emotional to let the satria go rather than the original car. Ya know why? Cause the satria brought the memories of hard days and humbling experience. It taught me that looking good cannot override your budget at all COST. (Plus for some reasons too young girls like to be in Satria too.. that i havent figure it out till today hehehe). And when Proton debut the Neo, i was secretly wishing for it.. :)

I drive a simple sedan to and fro work now, and still worries much about toll, gas hikes, and maintenance as usual la.

Oh ya the company clear itself out of the cash flow.. and there are now new bills in form of taxes start to roll in... Life goes on...:)

... and wisdom to contribute

Avoid credit card pile up my friends... it is a flood gate that once opened it cant be closed that easily because of its complex relationship to lifestyle . This is due to the fact that most of lifestyles today are drilled by "i must have it" and competition to "out-spend" each other. Trust me, you dont need this form of competition.

The marketing executives are so sweet when they offer it to you and the some of the perks (like free cellphone, etc etc).. ... then watch what will happen when you default in your month payment. See the amount of harassment you get. The worst harassment i received was from Citibank. They "missed" call you on your cell from their IVR so when you call back you get a machine at the end of the line. And they did it during office hoursand critical meeting time. And you know the other end of the line is some fresh graduate who took the job up cause she cant find a place in the market and from the tone of the voice she /he really hates the job. And the bloody managers are always hiding behind their staff. I bet you they have a high turnover rate.. well that is different thread lah..

Oops and another -- Car is a deceptive asset. On paper it is a depreciative value over straight line period but in actuality the market gets worst off for 2nd hand cars. No matter how good it looks, it never increases in ringgit value unless you are into antiques. Buy cars with the lowest
(1) depreciation value,
(2) relative low maintenance and cheap parts,
(3) Cheap Loan interests, and
(4) easy to sell.

Hope this helps all you young 'uns there. Live FREE (Free of debts that is..)

cheers
Fahmy the moo