This Week at a Glance…

i) PM Anwar unveiled next year’s budget on Friday.

Themed at "Reforming the economy, [and] empowering the rakyat," the new budget promises to aid lower-income groups.

ii) EPF: RM600,000 required to retire comfortably today.

Pensioners need at least RM2,450 per month to live in major cities, considering the average lifespan of Malaysians has increased to 80 years.

iii) Explained: Why the Singapore dollar is so strong against the Ringgit.

The tiny nation relies on the exchange rate to control inflation.

Scroll down to read the details.

The (entire) Malaysian market, at your fingertips.

We get it, your time is valuable and you hate sifting through the web for information.

So let us do the work for you.

By joining our WhatsApp group, you’ll receive financial updates - best FD rates, currency movements, and more on a daily basis.

✅ 102 people have joined, and only 2 unsubscribed (so far).

✅ We don’t spam.

✅ It’s $0.25/week.

✅ Pay monthly, cancel anytime.

Quick Facts About Budget 2024

It is (yet again) the biggest allocation, coming in at a whopping RM393.8 billion compared to this year’s budget of RM388.1 billion.

Malaysia’s total expenditure has been steadily increasing through the years. Since 2000, the development expenditure swelled from RM28 billion to RM90 billion, while operating expenditure rose six fold.

How will the money be distributed?

16.91% of the Budget will be set aside for the Finance Ministry.

The second biggest recipient will be the Education Ministry at 14.91% and Health Ministry at 10.46%.

Highlights of Budget 2024

Next year’s budget aims to enhance the effectiveness of tax collection and seal leakages to broaden the revenue base.

Anwar also announced the gradual move away from subsidies to a system that primarily benefits lower-income households.

• Diesel subsidies will be cut in a phased manner – The government currently pays RM1.60 to keep the price at RM2.15 per litre.

• To continue reduced electricity subsidies for the top 10% of consumers - Previously saved the administration RM4.6 billion.

• Temporary price controls on chicken and eggs will be lifted.

• Inflation is expected to tick up due to the removal of some subsidies.

• Service tax rate (SST) to increase to 8% from 6% (except food and beverages, and telecommunications).

Biggest Winners and Losers of Budget 2024

Winners

Poor families: To receive a rebate of RM40 per month on electricity bills.

Electric bikers: RM2,400 rebate for e-Bike owners. Only for those earning RM120,000 and below annually.

Entertainers: Abolishment of 25% tax on entertainment.

Paddy Farmers: RM2.6 billion in subsidies to support farmers. Floor price of paddy raised to RM1,300 from RM1,200 per metric tonne.

Sports Enthusiasts: RM1,000 tax relief when you purchase sports equipment or training.

Poultry Industry: Price controls on Chicken and Eggs lifted.

Losers

Companies: 10% Capital Gains Tax (CGT) on sale of unlisted shares.

Shopaholics: SST to increase to 8% from 6% (except food and beverages, and telecommunications), Luxury goods tax to be introduced on watches and jewelry.

Sweet Tooths: Excise duty on sugary pre-mixed beverages bumped up from 40 sen to 50 sen.

Logistics and Entertainment: SST increase will expand taxable services to include entertainment activities (Genting Bhd) and logistics (Capital A Bhd).

Tobacco: Increase excise duty on tobacco products as part of the nation’s efforts to pursue anti-smoking legislation.

Read more about Budget 2024 here.

RM600,000 needed to retire comfortably today: EPF.

In 2019, EPF set a basic savings target of RM240,000 for members reaching the age of 55.

This translates into a monthly income of RM1,000 for the next 20 years.

But to retire comfortably in major cities today, EPF recommends at least RM600,000, or RM2,450 per month, considering the average lifespan of Malaysians is now 80 years.

As of Dec 2022, the average EPF savings of all age groups ranged from RM4,132 to RM127,952.

The majority of people are still far away from the basic savings target of RM240,000, and even further from EPF’s recommendation of RM600,000.

Worse, the people who are closest to retirement (ie. those who are 45 and above) only have half of the minimum target set by EPF.

This is alarming.

If no immediate action is taken, we may be hit with a retirement crisis soon.

How much do I need to contribute per month in order to achieve EPF’s targets?

Assuming that EPF pays 5% per year, you’ll see that it gets significantly harder to achieve both goals as we get older.

This highlights the urgency of starting early.

But here’s some good news: The calculations we provided include mandatory contributions from you and your employer.

So, you would only need to top up the difference to achieve RM600,000 by 55.

To achieve your goals faster, you could contribute more to your investments as your salary increases or whenever you receive bonuses.

But EPF locks my funds until 55, How?

You don’t need to voluntarily contribute a huge sum to EPF every month. Instead, you can opt for more flexible investment options.

For youngsters, you can afford to explore higher risk investments (international ETFs, unit trusts, stocks, crypto, etc) because you have time on your side.

For those who are older, you may require a mix of low-medium risk options (fixed deposits, gold, ASB/ASM, cash apps, local bank stocks, etc).

However, everyone’s financial circumstances are different. So be sure to assess your own risk profile before investing.

How can I save more?

i) Pay Yourself First.

We tend to save whatever that’s left at the end of the month, except there’s often nothing left.

To increase your savings, treat yourself as a bill at the start of each month. Allocate a fixed amount of your salary specifically for your future.

ii) Save whatever you can, upgrade less.

After setting a fixed amount to save, there will be some months that you can afford to save more. In these cases, do so.

iii) Upskill yourself to increase your income

You’ll be able to negotiate a better salary from your employer or look for a higher paying job, which will help you to save more.

Remember: Personal Finance is a journey, not a destination.

While reaching RM600,000 may not be feasible for everyone, it’s always better to have some money saved somewhere than have nothing at all.

Some may argue that this is pointless since we may leave this world anytime, but try thinking the reverse:

What if we live longer than expected?

Explainer: Why the Singapore dollar is so strong

The Singapore dollar closed at RM3.4478 against the Malaysian ringgit on Friday.

It is up 5.12% on a year to date basis and has cooled off slightly from its all-time high of RM3.4984 in July.

Many believe that this is due to the failure of the current administration (ie. political corruption, scandals, and greed).

While there is truth in this, the reality is that Singapore has been strengthening its own currency.

Singapore and Malaysia have very different monetary policies.

The tiny nation directly intervenes in the exchange rate (ie. strength/weakness of SGD) to control inflation.

Since Singapore highly depends on imports due to its lack of natural resources, a stronger currency will correspond to cheaper prices, thus lowering inflation.

Malaysia, meanwhile, relies on Bank Negara to set interest rates and government subsidies to control inflation.

We can’t implement Singapore’s policy because we’ll lose control of interest rates.

Imagine what would happen if our borrowing rates followed the global trend, say the US or UK.

Malaysia would instantly fall into a recession.

Contrary to popular belief, the Central Bank of Singapore, MAS, does not control domestic interest rates.

Since it directly intervenes in the FX market, Singapore has effectively foregone control over the borrowing rates within the country.

As of June 2022, Singapore has amassed $365 billion in foreign currency reserves, so MAS has more than enough firepower to control the strength or weakness of its currency.

Malaysia only has $111.4 billion as of 30 June 2023.

Read more about Singapore’s monetary policy here.

That’s all for this week’s newsletter!

DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice. The opinions of this newsletter are solely that of the publisher.

Shoutout to all Learners and Gatherers! Thank you for supporting The Futurizts.