{"id":26562,"date":"2016-10-26T14:44:14","date_gmt":"2016-10-26T06:44:14","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=26562"},"modified":"2021-07-28T15:48:28","modified_gmt":"2021-07-28T07:48:28","slug":"do-millennials-lose-out-in-budget-2017","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/do-millennials-lose-out-in-budget-2017","title":{"rendered":"Do Millennials Lose Out In Budget 2017?"},"content":{"rendered":"

The Malaysian government proposes to spend about RM240 billion next year and is confident that it will achieve economic growth of between 4% and 5% this year and between 4% and 5% in 2007.<\/p>\n

While these are all good news, the question bugging many of us \u2013 millennials aged between 21 and 36 years old \u2013 is, how do we greet 2017? Is there any relief in the budget that could ease our burdens?<\/p>\n

Just days before the budget, a survey revealed young Malaysians were struggling to cope financially<\/a> with the rising living cost and unaffordable property prices ranking top on the list.<\/p>\n

This is also a group knee-deep in debt: Two-thirds of respondents carry a car loan, more than half have a mortgage with median repayment of RM1,081.71, and all are struggling with card debts.<\/p>\n

The survey comes on the back of a 50% rejection rate<\/a> for affordable housing, a soaring household debt<\/a> of 89.1% and about 1.3 million defaulting on their student\u00a0loan<\/a>.<\/p>\n

Whether it is because of lifestyle choices or extraordinary circumstances, millennials are feeling the pinch. So let\u2019s take a look at some of the key incentives and what is in store for the young ones:<\/p>\n

<\/span>Some relief for graduates<\/strong><\/span><\/h2>\n

Right after the 2017 budget, the National Higher Education Fund Corporation (PTPTN) said it expected an increase in loan repayments<\/a>. It urged borrowers to seize the opportunity to ease the burden of being straddled with student loan debt.<\/p>\n

Under Malaysia Budget 2017, graduates get a 15% discount on outstanding debt for full settlement; 10% discount for payment of at least 50% of outstanding debts; and 10% discount for repayment through salary deductions or direct debt. These are effective from October 22, 2016 to December 2017.<\/p>\n

Let\u2019s say Grad A wants to start repaying her debt in November 2016 and chooses to do that by way of monthly salary deductions, and her parents are BR1M recipients which entitles her to full financing for her first degree.<\/p>\n\n\n\n\n\t\n\n\t\n\t
Bachelor of arts and social sciences majoring in communication (Monash University Malaysia)<\/th>RM34,000 x 3 years = RM102,000 <\/th>\n<\/tr>\n<\/thead>\n
Type of Education Loan<\/td>Loan amount<\/td>Interest rate<\/td>Repayment period (years)<\/td>Repayment<\/td>Total interest<\/td>\n<\/tr>\n
PTPTN (Conventional)<\/td>RM102,000<\/td>3%
\n<\/td>		10<\/td>RM121,989.78<\/td>RM19,989.78<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nSource: Monash University Malaysia; afterschool.my; PTPTN.<\/i><\/font><\/span>\n\n

 <\/p>\n

How it works<\/div>
<\/p>\n

If Grad A pays her debt in full, she is entitled to a 15% discount which means she only pays RM103,691.31. That’s RM18,298.47 in savings!<\/p>\n

If she decides to pay through salary deductions, she gets a 10% discount for each payment made. For example, if the first month she is required to pay RM368.22, she now pays RM331.40. If she chooses the maximum loan repayment period of ten years, she pays an overall RM109,790.77. In this option, she\u00a0saves RM12,199.01.<\/p>\n

If she settles at least 50% of outstanding debts, she gets 10% off for the first half or RM60,994.85, meaning she pays RM54,895.37 for that half.<\/p>\n

With second half of RM60,994.85, Grad A decides to opt for a monthly salary deduction over five years. By the end of the fifth year she pays RM60,098.83. Despite these payments being discounted, she will pay an overall RM114,994.20. She\u00a0only saves RM6,995.58 in this option.<\/p>\n

<\/div><\/div>\n

Watch out for this: <\/div>
<\/p>\n

If you are student, you are entitled to a debit card worth RM250 that replaces the BB1M book vouchers.<\/p>\n

<\/div><\/div>\n

<\/span>Very little in terms of investment perks<\/strong><\/span><\/h2>\n

Retirement has been the buzz after the Employees Provident Fund (EPF) revealed only 22% of the 6.7 million active contributors aged 54 years have sufficient savings of RM196,800 or more to sustain themselves during retirement. That leaves a whopping 78% unprepared for retirement.<\/p>\n

To encourage more Malaysians to save for their retirement early, the budget revealed an investment perk for private retirement scheme (PRS)<\/a> contributors, where the government will increase the RM500 incentive to RM1,000 to contributors with a minimum accumulated investment of RM1,000 during the period of two years.<\/p>\n

The PRS offers funds for Malaysians to invest in with retirement in sight. It is similar to the EPF and allows for employer contributions as well. But participation is voluntary and offers flexibility and investing options.<\/p>\n

As part of its incentive for youths, the government first introduced the RM500 incentive during the tabling of the 2014 budget to encourage young PRS members (aged between 20 and 30) to undertake long-term savings for retirement through the scheme<\/a>.<\/p>\n

In the same budget, a tax relief of up to RM3,000 per annum was also introduced to spur PRS investments. But in the latest budget, despite the increase in incentive, there is no increase in tax relief, which at this point would have been a welcome.<\/p>\n

<\/span>There\u2019s definitely BR1M and\u2026 ride-sharing<\/strong><\/span><\/h2>\n

\"BR1M<\/p>\n

Like the previous budget, the B40 and M40 groups were the highlight. Next year, households in the e-Kasih database with a monthly income below than RM3,000, BR1M will be increased to RM1,200 from RM1,050 and RM1,000.<\/p>\n

For households earning between RM3,000 and RM4,000, BR1M will be increased from RM800 to RM900. For single individuals earning below RM2,000, BR1M will be increased from RM400 to RM450.<\/p>\n

But the best way for millennials receiving BR1M to really stretch the benefit would be to take up ride-sharing. Part-timing for Uber<\/a> can fetch a monthly income of RM2,373 while one can earn RM 2,248 with GrabCar.<\/p>\n

Recipients of BR1M can use their handouts as down payment for a Proton Iriz and receive a rebate of RM4,000 if they use their vehicle for ride-sharing purposes.<\/p>\n

Now let\u2019s say Youth A wants to Uber on a part-time basis and he uses his BR1M of RM450 to pay for the down payment. After the rebate, he needs to pay RM39,859.20 for the Iriz, so his monthly instalment will be something like this:<\/p>\n\n\n\n\n\t\n\t\n\t\n\t\n\t\n\t\n\t
Model<\/td>1.3 Standard MT (Solid)<\/td>\n<\/tr>\n
On the road price (with insurance)<\/td>RM41,520<\/td>\n<\/tr>\n
Price after rebate<\/td>RM39,859.20<\/td>\n<\/tr>\n
Down payment<\/td>RM450<\/td>\n<\/tr>\n
Interest rate<\/td>3.1% p.a.<\/td>\n<\/tr>\n
Loan tenure<\/td>9 years\t<\/td>\n<\/tr>\n
Total per month<\/td>RM486.38<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n*Proton car loan calculator.<\/font><\/i><\/span>\n\n

 <\/p>\n

If Youth A is able to earn RM2,000 a month driving part-time, he will be able to pay its monthly repayment while still enjoying a surplus of RM1,513.60\u00a0every month.\u00a0 As for millennials who can\u2019t qualify for the BR1M but own a vehicle, perhaps Uber or GrabCar is the way to go.<\/p>\n

<\/span>Housing schemes are competitive but limited supply<\/strong><\/span><\/h2>\n

So the Finance Ministry\u2019s proposal to increase EPF withdrawals to 40% for first-time homebuyers was not included in this year\u2019s budget, but there are other schemes worth mentioning.<\/p>\n

According to the budget speech, the government will provide vacant lands at strategic locations to government-linked companies and affordable housing scheme PR1MA to build more than 30,000 with the selling price between RM150,000 and RM300,000.<\/p>\n\n\n\n\n\t\n\n\t\n\t
PR1MA eligibility<\/center><\/th>\n<\/tr>\n<\/thead>\n
A Malaysian citizen<\/td>Individual or combined household
\nincome (husband and wife) between
\nRM2,500 and RM10,000<\/td>\n<\/tr>\n
Single of married age 21 and above<\/td>Owns no more than 1 property between
\nspouses, if any<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n

Here\u2019s the difference between a conventional housing loan and a PR1MA one:<\/p>\n\n\n\n\n\t\n\n\t\n\t\n\t\n\t\n\t
Property purchase price: RM250,000<\/center><\/th>\n<\/tr>\n<\/thead>\n
Conventional housing loan<\/td>PR1MA housing loan*<\/td>\n<\/tr>\n
Loan amount (90% margin of finance)<\/td>RM225,000<\/td>\n<\/tr>\n
Loan amount: <\/td>100%<\/td>\n<\/tr>\n
Amount needed for down payment (10%) and other costs (10%)<\/td>RM25,000<\/td>\n<\/tr>\n
No amount needed for down payment or other costs<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n*According to Budget 2017, a special scheme will see easier financing for buyers with loans up to 90% and 100%. Rejection rates will be reduced.
\n*Application for this scheme is effective January 1, 2017 and lasts till December 2018. <\/font><\/i><\/span>\n\n

 <\/p>\n

Despite houses on offer being much lower than the market price between RM250,000 and RM400,000, this latest scheme comes with strings attached:<\/p>\n

<\/p>\n