I know it has been a long long while... alot has happened... and I didn't know whether to blog about it or not and even if I wanted to, I didn't really know how to start... so thus the slience. My sincere apologies...
Life has been trying during some of the years of my disappearance... and life has taken quite a huge turn over the recent years...
I was asked by close confidante to start writing all over again about the experience I have gained during the times without having to blog every single horrid detail. Cos she found that she learned alot over the recent years while walking through the journey with me... and since the blog was about helping people, I should continue...
So there... after a good 5 years of Grace from God, I have emerged victorious in some of my life battles... and will continue to write with my head held high...
I will start writing... on a new blog because it is about a new beginning, isn't it?
The new site : sevengenwealth.wordpress.com
If you can be most kind and gracious to me and be willing to read my humble sharings... please, join me there.
With gratitude, I thank you...
Monday, May 26, 2014
Tuesday, December 15, 2009
How To Respect Money
Sorry that I have been away. I have been busy with my work. In these few months of busy work, I have met so many people and it has dawned onto me that alot of us are busy making money and yet somehow something is amiss. And I realised one BIG thing, people, including me, do not respect money as much as we should be.
I thank God that I am in my line of work cos seeing people, meeting them and understanding their viewpoints and learning from their lessons, all of that helped me tremendously. All that I have learned helped bridge my knowledge gap and allowed me to learn my life lessons faster.
So that reminds me of this great article I have read by Barbara Stanny : How To Respect Money.
---
There's a big difference between making a good living and enjoying a good life. You demonstrate respect and appreciation for money the same way you would anything else of value in your life, be it an heirloom rug, an expensive hand tool, a close friend, or cash in hand. If you want it to last, you've got to take care of it. Throw it around carelessly or ignore it completely and guess what's going to happen?
Remember, your goal is not just to put a fatter paycheck in your pocket. You want to achieve financial independence, which means making a good living and enjoying a good life, where money enhances your well-being, not exacerbates your stress. Financial independence does not come from what you earn. It comes from what you do with what you have. No matter how sizable your salary, the money will slip through your fingers if you bypass this step.
Yet this step is frequently neglected, even by the best and the brightest. It was the biggest surprise I had when interviewing six-figure women. With earnings that ranged anywhere from $100,000 to $7 million, the whopping majority, as confident as they were professionally, were surprisingly insecure financially. They were so busy making money they didn't bother to take care of it.
Of all the people I've interviewed for my books, or met during my travels, I can safely say, the ones with the highest net worth were not necessarily the ones who made the most money. They were the ones who took the best care of their money.
Rampant, unintentional spending is often the culprit. Like Pavlov's dog salivating when it hears the dinner bell, as soon as people boost their earnings, 'Ka-ching,' they bump up their spending, then wonder where those extra bucks went.
THE CHOICE IS YOURS
Making conscious, deliberate choices about what you do with your money is precisely what this step is all about. And as I see it, there are only four choices you need to make to fully respect and appreciate money. I call these four choices the Four Rules of Money.
1. Spend Less (Only buy what you can easily afford)
2. Save More (Pay yourself first)
3. Invest Wisely (Put money in assets that grow in value over time.)
4. Give Generously (Use your money to make a difference )
Most of us have the giving generously part down pat. But unless you handle the first three, giving can become an act of self-sabotage. Not only do you jeopardize your future security, but you diminish the impact you can have with your money.
The success of this step rests in following the Four Rules in the order they're listed. That means, before anything else, don't spend money you don't have. And then make darn sure there's something left over for savings. Believe me, it's next to impossible to overcome underearning if you're still whipping out credit cards while bills go unpaid. Even if your debts aren't completely paid off, do not—I repeat DO NOT—add to them. Not only does debt drain your energy, but it lulls you into a false sense of sufficiency.
"If you use debt to meet your needs, you'll never be free of underearning," agrees Jerold Mundis, author of Earn What You Deserve. "Debt is the cruelest form of poverty. It gives you the illusion that you have far more than you do."
THE BIG MUST FOR OVERCOMING UNDEREARNING: STOP DEBTING NOW!
Debt SUCKS. It weighs you down. It drains your energy, your resources, your peace of mind, and your quality of life. Until you get rid of your credit cards—tear them up, hide them from sight, or freeze them in ice in a tin can—and start paying down your bills, you'll have a very tough time reaching the next level of your life that you aspire to.
BEWARE OF GOING TO EXTREMES
Careless spending or continuing to debt is like boarding a train traveling the wrong way. You'll never get where you want to go. At the same time, you do not want to head in the reverse direction—DEPRIVATION—where your emotional and/or physical needs are not being met. Important message to all underearners: Spending less does not mean misery and hardship.
Deprivation is endemic to underearning, being both a symptom and a source of the condition itself. Doing this step does not require either scarcity-thinking or severe self-denial. But it does require a certain amount of delayed gratification. There is a difference. Cutting back is not the same as cutting out completely. And financial prudence does not imply forsaking necessities, or even some pleasures. The distinction is critical. Discernment is the key. Cut back by taking little bits out of each category. Otherwise, budgeting becomes like crash dieting. Deprivation creates a hunger that will drive you right back to the stores on a buying binge.
MAKE YOUR MONEY WORK FOR YOU!
But budgeting is only the beginning. You've got to be willing to take some risks in order to make a little extra. In truth, our biggest financial risk is not market volatility. Our biggest risk is to do nothing at all. Sure, the market's ups and downs are scary. But you can significantly cut your losses with due diligence, a long-term approach, and adequate diversification. On the other hand, if all your cash is sitting in the bank—or worse, under your mattress—you don't need a crystal ball to predict your future. Your purchasing power will shrink like a bunch of steamed spinach. Unless a portion of your savings is in assets that grow faster than inflation and taxes eat it away, your greatest danger is that you'll outlive your money.
For instance, say you've just gotten a $1000 bonus. You're smart enough to save it, so you put it in the bank, where the return is guaranteed and it earns about two percent. In about 20 years, your original investment, adjusted for inflation, will be worth a grand total of $500 (assuming inflation doesn't rise above three percent.)
But if instead you put that $1000 in a stock mutual fund earning ten percent and never add one cent to it, in 20 years you'd be looking at over $6,000. Big difference.
What if you don't have $1000 lying around? Here's the truth: You don't need a lot of money to create wealth, not when you consistently set aside small amounts over a period of time. Mere pocket change adds up surprisingly fast with the magic of compounding (where you're earning interest on your earnings as well as on your original investment). For example, if every day you aside 50 cents to put into a mutual fund earning eight percent (a reasonable return today), in 20 years, you'll have $10,000.
THE MONEY APPRECIATION GUIDE
Check the statements which are true for you.
* I am clear on my financial goals.
* I know my net worth* I have no credit card debt.
* I have enough savings to live on for three to six months.
* I have money invested in a retirement account.
* I have investments outside a retirement account.
* I understand the investments I own.
* I will have enough money to live on in retirement.
* I have a will.
* I know where all my financial documents and records are.
This is what respect and appreciation of money looks like. Pay special attention to the statements you did not check—that's the work you need to do next.
Author's Bio
Barbara Stanny, the leading authority on women and money—is on a mission—to revolutionize women's relationship with money. As a bestselling author, sought after speaker, workshop facilitator, and money & wealth coach, Barbara teaches women to earn the money they deserve, build the wealth they desire, and step fully into their power! Visit BarbaraStanny.com.
I thank God that I am in my line of work cos seeing people, meeting them and understanding their viewpoints and learning from their lessons, all of that helped me tremendously. All that I have learned helped bridge my knowledge gap and allowed me to learn my life lessons faster.
So that reminds me of this great article I have read by Barbara Stanny : How To Respect Money.
---
There's a big difference between making a good living and enjoying a good life. You demonstrate respect and appreciation for money the same way you would anything else of value in your life, be it an heirloom rug, an expensive hand tool, a close friend, or cash in hand. If you want it to last, you've got to take care of it. Throw it around carelessly or ignore it completely and guess what's going to happen?
Remember, your goal is not just to put a fatter paycheck in your pocket. You want to achieve financial independence, which means making a good living and enjoying a good life, where money enhances your well-being, not exacerbates your stress. Financial independence does not come from what you earn. It comes from what you do with what you have. No matter how sizable your salary, the money will slip through your fingers if you bypass this step.
Yet this step is frequently neglected, even by the best and the brightest. It was the biggest surprise I had when interviewing six-figure women. With earnings that ranged anywhere from $100,000 to $7 million, the whopping majority, as confident as they were professionally, were surprisingly insecure financially. They were so busy making money they didn't bother to take care of it.
Of all the people I've interviewed for my books, or met during my travels, I can safely say, the ones with the highest net worth were not necessarily the ones who made the most money. They were the ones who took the best care of their money.
Rampant, unintentional spending is often the culprit. Like Pavlov's dog salivating when it hears the dinner bell, as soon as people boost their earnings, 'Ka-ching,' they bump up their spending, then wonder where those extra bucks went.
THE CHOICE IS YOURS
Making conscious, deliberate choices about what you do with your money is precisely what this step is all about. And as I see it, there are only four choices you need to make to fully respect and appreciate money. I call these four choices the Four Rules of Money.
1. Spend Less (Only buy what you can easily afford)
2. Save More (Pay yourself first)
3. Invest Wisely (Put money in assets that grow in value over time.)
4. Give Generously (Use your money to make a difference )
Most of us have the giving generously part down pat. But unless you handle the first three, giving can become an act of self-sabotage. Not only do you jeopardize your future security, but you diminish the impact you can have with your money.
The success of this step rests in following the Four Rules in the order they're listed. That means, before anything else, don't spend money you don't have. And then make darn sure there's something left over for savings. Believe me, it's next to impossible to overcome underearning if you're still whipping out credit cards while bills go unpaid. Even if your debts aren't completely paid off, do not—I repeat DO NOT—add to them. Not only does debt drain your energy, but it lulls you into a false sense of sufficiency.
"If you use debt to meet your needs, you'll never be free of underearning," agrees Jerold Mundis, author of Earn What You Deserve. "Debt is the cruelest form of poverty. It gives you the illusion that you have far more than you do."
THE BIG MUST FOR OVERCOMING UNDEREARNING: STOP DEBTING NOW!
Debt SUCKS. It weighs you down. It drains your energy, your resources, your peace of mind, and your quality of life. Until you get rid of your credit cards—tear them up, hide them from sight, or freeze them in ice in a tin can—and start paying down your bills, you'll have a very tough time reaching the next level of your life that you aspire to.
BEWARE OF GOING TO EXTREMES
Careless spending or continuing to debt is like boarding a train traveling the wrong way. You'll never get where you want to go. At the same time, you do not want to head in the reverse direction—DEPRIVATION—where your emotional and/or physical needs are not being met. Important message to all underearners: Spending less does not mean misery and hardship.
Deprivation is endemic to underearning, being both a symptom and a source of the condition itself. Doing this step does not require either scarcity-thinking or severe self-denial. But it does require a certain amount of delayed gratification. There is a difference. Cutting back is not the same as cutting out completely. And financial prudence does not imply forsaking necessities, or even some pleasures. The distinction is critical. Discernment is the key. Cut back by taking little bits out of each category. Otherwise, budgeting becomes like crash dieting. Deprivation creates a hunger that will drive you right back to the stores on a buying binge.
MAKE YOUR MONEY WORK FOR YOU!
But budgeting is only the beginning. You've got to be willing to take some risks in order to make a little extra. In truth, our biggest financial risk is not market volatility. Our biggest risk is to do nothing at all. Sure, the market's ups and downs are scary. But you can significantly cut your losses with due diligence, a long-term approach, and adequate diversification. On the other hand, if all your cash is sitting in the bank—or worse, under your mattress—you don't need a crystal ball to predict your future. Your purchasing power will shrink like a bunch of steamed spinach. Unless a portion of your savings is in assets that grow faster than inflation and taxes eat it away, your greatest danger is that you'll outlive your money.
For instance, say you've just gotten a $1000 bonus. You're smart enough to save it, so you put it in the bank, where the return is guaranteed and it earns about two percent. In about 20 years, your original investment, adjusted for inflation, will be worth a grand total of $500 (assuming inflation doesn't rise above three percent.)
But if instead you put that $1000 in a stock mutual fund earning ten percent and never add one cent to it, in 20 years you'd be looking at over $6,000. Big difference.
What if you don't have $1000 lying around? Here's the truth: You don't need a lot of money to create wealth, not when you consistently set aside small amounts over a period of time. Mere pocket change adds up surprisingly fast with the magic of compounding (where you're earning interest on your earnings as well as on your original investment). For example, if every day you aside 50 cents to put into a mutual fund earning eight percent (a reasonable return today), in 20 years, you'll have $10,000.
THE MONEY APPRECIATION GUIDE
Check the statements which are true for you.
* I am clear on my financial goals.
* I know my net worth* I have no credit card debt.
* I have enough savings to live on for three to six months.
* I have money invested in a retirement account.
* I have investments outside a retirement account.
* I understand the investments I own.
* I will have enough money to live on in retirement.
* I have a will.
* I know where all my financial documents and records are.
This is what respect and appreciation of money looks like. Pay special attention to the statements you did not check—that's the work you need to do next.
Author's Bio
Barbara Stanny, the leading authority on women and money—is on a mission—to revolutionize women's relationship with money. As a bestselling author, sought after speaker, workshop facilitator, and money & wealth coach, Barbara teaches women to earn the money they deserve, build the wealth they desire, and step fully into their power! Visit BarbaraStanny.com.
Thursday, March 26, 2009
Who is bigger? You or Your problem?
(Kind Note : For those who are not religious, please kindly skip to the next paragraph) I believe God answers my prayers and He also hears my thoughts, moans, groans and worries. Well, to say the least, it has been a little rough for me this week and I was feeling a little down this morning.
A dear friend sent me a lovely email this morning titled "Who is bigger? You or Your problem?". How apt! He showed me this site and after watching the video, I am encouraged and my spirits are lifted. Things are not as bad as I first saw it.
Now, I am really excited to share with all of you.
Learn the 3 Keys of How to Live Abundantly in Your Finances, Health and Relationships
http://www.lawtosuccess.net/blog/?name=andy&cbid=avatar47&tid=harrison
I have taken the liberty to put the video on this posting BUT please you must go to the site if you want the free coaching session. They will have an audio and a transcript to download to cater to people with different learning techniques.
This would be part of Money Management Technique Part 5 : Motivation and also part of your goal : EDUCATION!
God bless and may your monies greatly multiply!!!!!
A dear friend sent me a lovely email this morning titled "Who is bigger? You or Your problem?". How apt! He showed me this site and after watching the video, I am encouraged and my spirits are lifted. Things are not as bad as I first saw it.
Now, I am really excited to share with all of you.
Learn the 3 Keys of How to Live Abundantly in Your Finances, Health and Relationships
http://www.lawtosuccess.net/blog/?name=andy&cbid=avatar47&tid=harrison
I have taken the liberty to put the video on this posting BUT please you must go to the site if you want the free coaching session. They will have an audio and a transcript to download to cater to people with different learning techniques.
This would be part of Money Management Technique Part 5 : Motivation and also part of your goal : EDUCATION!
God bless and may your monies greatly multiply!!!!!
Tuesday, March 24, 2009
How to be rich and successful?
Over my years of financial advisory, I can say that I have met quite alot of people. And this year has been a pretty eye-opening experience for me. In just this quarter, I have met up, advised and consulted quite a handful of people. All of them are good people but what I realized from most of them is saddening.
Maybe we were not trained in school and not taught at home and topic of money is not brought up with friends... but I can see that all of us are paying the price. I am blessed that I am in this field and am exposed to my Mentors' teachings thus I have learnt how to manage my money properly. But it saddens me to see that there are still alot of people out there who are still unaware of that thin ice they are putting themselves on.
Of course, I have extremely savvy investors and very diligent savers but that's just a mere minority of them. I used to expect that the people who are educated would be able to understand money management techniques or principles. And in my starting years as a Financial Advisor, to my surprise, they can be the hardest nut to crack. I guess there are so many "teachings" out there that may have clouded their perception. But nevertheless, in such economy climate, I think it's best to go back to basics.
I deeply and strongly believe that the simplest way of investing is SAVING. Yes I know, I can hear all of you moaning out there about interest rates and etc. But frankly, in this climate, how many more ways are there? Let's talk about safer instruments for now. Alot of people are afraid and I don't blame you and many out there are at a total lost of what to pick and which to pick and when to go into or come out of the market! so with so much uncertainty and yet we need to meet our basic necessity of investing, what else more than a safe instrument for this time? SAVE.
You can choose the highest interest-paying bank which will pay you at best 2% or you can choose a safe instrument that can help you ride out the economy crisis like an endowment which could pay 5 to 8%.
I can hear all the murmurs about American International Group (AIG). Well, there are many more insurance companies out there : Prudential, Great Eastern are the 2 other bigger boys left.
Still you would need to follow the 6 systems in Money Management Techniques Part 3 -
System 1 : Financial Freedom Fund (Triple Fs)
System 2 : Long Term Saving
System 3 : Short Term Savings
System 4 : Tithing
System 5 : Reward
System 6 : Expenditure
Do what the rich and successful people will carry one doing.
I have talked to multi-millionaires in Singapore and Malaysia and I figured this...
Successful people are willing to do that which unsuccessful people are not willing to do.
All the rich and successful people are willing to do that extra mile, study about their investments, pay for their brokers, save, invest be it good times or bad.
All of which the unsuccessful people are not willing to do! I hear them complaining about the economy, how the government should help them, how they should not spend and also not invest for fear of the economy, how they should not invest in their own future just because they want to save for the rainy day.
But isn't this THE RAINY DAY?
Successful people are not willing to do that which unsuccessful people are willing to do.
Successful people are not willing to put off their plans for their success, they are not willing to just procrastinate and mop around, lamenting about the economy crisis or lament about the paper loss of their investments.
However, unsuccessful people are willing to shelf their saving plans, chop off their endowment, liquidate their investments all because they are afraid to ride it out and they want to grab and hold every single penny.
I am sure that there are some who needs to do all this to make ends meet. But the majority I'm referring here still have jobs, still have earnings yet they make the most unwise decisions at the most crucial time.
I am a little saddened by their actions. However, I am not willing to give up and am going to press on, just because I am blessed to be in the position to advise about financial matters, I will continue to do so because of my beliefs and my principles.
I very much still want to help all of these people understand and realize that they can and am able to manage money just as well as the rich and successful people.
Many times I have seen and I have done so myself that I would want to HAVE all the money in order to DO what the rich and successful do, then I can BE rich and successful. (HAVE -> DO -> BE)
Or many fall into the illusion to DO what the rich and successful people do in order to HAVE what they have so that we can BE rich and successful. (DO -> HAVE -> BE)
In face, the right way and the only way for us is that we need to do is to BE rich and successful, BE like them, DO what they do, mimic all you can, because once you BE, then you'll DO and you'll HAVE. (BE -> DO -> HAVE)
So stop procrastinating and start BEING rich and successful!
God Bless!
Maybe we were not trained in school and not taught at home and topic of money is not brought up with friends... but I can see that all of us are paying the price. I am blessed that I am in this field and am exposed to my Mentors' teachings thus I have learnt how to manage my money properly. But it saddens me to see that there are still alot of people out there who are still unaware of that thin ice they are putting themselves on.
Of course, I have extremely savvy investors and very diligent savers but that's just a mere minority of them. I used to expect that the people who are educated would be able to understand money management techniques or principles. And in my starting years as a Financial Advisor, to my surprise, they can be the hardest nut to crack. I guess there are so many "teachings" out there that may have clouded their perception. But nevertheless, in such economy climate, I think it's best to go back to basics.
I deeply and strongly believe that the simplest way of investing is SAVING. Yes I know, I can hear all of you moaning out there about interest rates and etc. But frankly, in this climate, how many more ways are there? Let's talk about safer instruments for now. Alot of people are afraid and I don't blame you and many out there are at a total lost of what to pick and which to pick and when to go into or come out of the market! so with so much uncertainty and yet we need to meet our basic necessity of investing, what else more than a safe instrument for this time? SAVE.
You can choose the highest interest-paying bank which will pay you at best 2% or you can choose a safe instrument that can help you ride out the economy crisis like an endowment which could pay 5 to 8%.
I can hear all the murmurs about American International Group (AIG). Well, there are many more insurance companies out there : Prudential, Great Eastern are the 2 other bigger boys left.
Still you would need to follow the 6 systems in Money Management Techniques Part 3 -
System 1 : Financial Freedom Fund (Triple Fs)
System 2 : Long Term Saving
System 3 : Short Term Savings
System 4 : Tithing
System 5 : Reward
System 6 : Expenditure
Do what the rich and successful people will carry one doing.
I have talked to multi-millionaires in Singapore and Malaysia and I figured this...
Successful people are willing to do that which unsuccessful people are not willing to do.
All the rich and successful people are willing to do that extra mile, study about their investments, pay for their brokers, save, invest be it good times or bad.
All of which the unsuccessful people are not willing to do! I hear them complaining about the economy, how the government should help them, how they should not spend and also not invest for fear of the economy, how they should not invest in their own future just because they want to save for the rainy day.
But isn't this THE RAINY DAY?
Successful people are not willing to do that which unsuccessful people are willing to do.
Successful people are not willing to put off their plans for their success, they are not willing to just procrastinate and mop around, lamenting about the economy crisis or lament about the paper loss of their investments.
However, unsuccessful people are willing to shelf their saving plans, chop off their endowment, liquidate their investments all because they are afraid to ride it out and they want to grab and hold every single penny.
I am sure that there are some who needs to do all this to make ends meet. But the majority I'm referring here still have jobs, still have earnings yet they make the most unwise decisions at the most crucial time.
I am a little saddened by their actions. However, I am not willing to give up and am going to press on, just because I am blessed to be in the position to advise about financial matters, I will continue to do so because of my beliefs and my principles.
I very much still want to help all of these people understand and realize that they can and am able to manage money just as well as the rich and successful people.
Many times I have seen and I have done so myself that I would want to HAVE all the money in order to DO what the rich and successful do, then I can BE rich and successful. (HAVE -> DO -> BE)
Or many fall into the illusion to DO what the rich and successful people do in order to HAVE what they have so that we can BE rich and successful. (DO -> HAVE -> BE)
In face, the right way and the only way for us is that we need to do is to BE rich and successful, BE like them, DO what they do, mimic all you can, because once you BE, then you'll DO and you'll HAVE. (BE -> DO -> HAVE)
So stop procrastinating and start BEING rich and successful!
God Bless!
Sunday, March 22, 2009
Your ticket to investing wisely
There was an article I read from the Straits Times dated 22 February 2009 and I've always wanted to share it. This was written by Ben Fok, who is the chief executive of a financial advisory firm and i thought that he wrote the article about investments in a very apt analogy which can be understood by all.
Now that I've scheduled some time to blog, let's get right down to it.
In difficult times like these, a plan-ride analogy may help you achieve your goals
Fasten your seat belt - To me the current financial crisis is the turbulence in our investment horizon. Investors can expect the market to be volatile. The markets will eventually recover, but we need to sit tight and rise out the market turbulence.
Over the last few months, I have counseled many investors who have lost money in their investments.
Over time, I realized that all they really wanted to know was : "What should I do now to get out of this mess? If the best time to invest is now, then tell me what should I invest in? do I have to follow every piece of advice given? How do I identify advice that is good for me?"
With this crisis hanging over out heads and no one knowing how long it will last, the best approach is to get back to basics.
I would like to use the analogy of taking a plane.
One of the things that air crews are trained to do is to adhere to a standard operating procedure.
Like air crews, an investor needs to have a proper investment procedure.
The first step is to know where you are going and how to get there. In other words, you need to know your destination and how much time you need to reach there.
To most investors, the objective of investing is to make as much money as possible. That is fine, but how much, and when do you need it? Without knowing your investment objectives, it is difficult to know what you should be investing in.
Most investors understand that investments span a range of risks. If you require a high return, you must be prepared to take a higher risk.
Using the plan-ride analogy again, once the plane is airborne, you as a passenger have already exposed yourself to greater risk.
Of course, the risk is mitigated by the fact that the pilot is well trained to fly the plane and to react to unexpected events.
Likewise when investing, you should consult a financial adviser who takes time to understand the risk level you can tolerate. Just as the pilot is trained to fly a plane, a financial adviser is trained to do the job of managing risk.
Your choice of investments must flow from your risk appetite. If you can take a 50 per cent drop in your investments, then high-risk investments like technology stocks/funds or aggressively managed funds like small-cal funds could suit you.
If you cannot tolerate too much volatility, opt for lower-risk investment like balanced funds where there is an allocation of 60 per cent in equities and the rest in bonds, for instance.
The idea is to make your risk appetite – not the investment opportunity – the reference point.
Most investment disasters happen when investors make the investment a reference point and then try to adjust their risk appetites accordingly.
Back to the analogy of the plane ride. When airborne, the plane may hit turbulence. For your safety, you are advised to return to your seat and put on your safety belt.
You will also notice that turbulence usually doesn’t last very long. Once the plane is out of the air pocket, it will be flying smoothly again.
Even pilots cannot tell the exact locations and severity of turbulence along their flight paths. All they can do is to build a good forecast by analyzing charts, flight monitors and weather conditions.
This is the reason they ask you to fasten your seat belt whenever you are seated, just in case the plan suddenly hits an air pocket.
To me, the current financial crisis is the turbulence in out investment horizon. Investors can expect the market to be volatile. The markets will eventually recover, but we just need to sit tight and ride out the market turbulence.
Finally, the place reaches your destination and you will be glad that the risks you have taken are over.
However, before landing, the crew will be busy checking landing procedures. This is akin to meeting your investment objectives.
The final phase of your investment horizon is extremely important. As you approach retirement, you should adjust your risk level and think about preserving your capital. Otherwise, you can have a hard landing like what many are experiencing today.
Once you step out of the airplane, you know that you have arrived safely.
Similarly, in investing, you will arrive at some point in the future and hopefully fulfill your financial objectives.
The entire process is the result of knowing your investment objectives, taking some risks and enjoying the fruits of your labour.
Now that I've scheduled some time to blog, let's get right down to it.
In difficult times like these, a plan-ride analogy may help you achieve your goals
Fasten your seat belt - To me the current financial crisis is the turbulence in our investment horizon. Investors can expect the market to be volatile. The markets will eventually recover, but we need to sit tight and rise out the market turbulence.
Over the last few months, I have counseled many investors who have lost money in their investments.
Over time, I realized that all they really wanted to know was : "What should I do now to get out of this mess? If the best time to invest is now, then tell me what should I invest in? do I have to follow every piece of advice given? How do I identify advice that is good for me?"
With this crisis hanging over out heads and no one knowing how long it will last, the best approach is to get back to basics.
I would like to use the analogy of taking a plane.
One of the things that air crews are trained to do is to adhere to a standard operating procedure.
Like air crews, an investor needs to have a proper investment procedure.
The first step is to know where you are going and how to get there. In other words, you need to know your destination and how much time you need to reach there.
To most investors, the objective of investing is to make as much money as possible. That is fine, but how much, and when do you need it? Without knowing your investment objectives, it is difficult to know what you should be investing in.
Most investors understand that investments span a range of risks. If you require a high return, you must be prepared to take a higher risk.
Using the plan-ride analogy again, once the plane is airborne, you as a passenger have already exposed yourself to greater risk.
Of course, the risk is mitigated by the fact that the pilot is well trained to fly the plane and to react to unexpected events.
Likewise when investing, you should consult a financial adviser who takes time to understand the risk level you can tolerate. Just as the pilot is trained to fly a plane, a financial adviser is trained to do the job of managing risk.
Your choice of investments must flow from your risk appetite. If you can take a 50 per cent drop in your investments, then high-risk investments like technology stocks/funds or aggressively managed funds like small-cal funds could suit you.
If you cannot tolerate too much volatility, opt for lower-risk investment like balanced funds where there is an allocation of 60 per cent in equities and the rest in bonds, for instance.
The idea is to make your risk appetite – not the investment opportunity – the reference point.
Most investment disasters happen when investors make the investment a reference point and then try to adjust their risk appetites accordingly.
Back to the analogy of the plane ride. When airborne, the plane may hit turbulence. For your safety, you are advised to return to your seat and put on your safety belt.
You will also notice that turbulence usually doesn’t last very long. Once the plane is out of the air pocket, it will be flying smoothly again.
Even pilots cannot tell the exact locations and severity of turbulence along their flight paths. All they can do is to build a good forecast by analyzing charts, flight monitors and weather conditions.
This is the reason they ask you to fasten your seat belt whenever you are seated, just in case the plan suddenly hits an air pocket.
To me, the current financial crisis is the turbulence in out investment horizon. Investors can expect the market to be volatile. The markets will eventually recover, but we just need to sit tight and ride out the market turbulence.
Finally, the place reaches your destination and you will be glad that the risks you have taken are over.
However, before landing, the crew will be busy checking landing procedures. This is akin to meeting your investment objectives.
The final phase of your investment horizon is extremely important. As you approach retirement, you should adjust your risk level and think about preserving your capital. Otherwise, you can have a hard landing like what many are experiencing today.
Once you step out of the airplane, you know that you have arrived safely.
Similarly, in investing, you will arrive at some point in the future and hopefully fulfill your financial objectives.
The entire process is the result of knowing your investment objectives, taking some risks and enjoying the fruits of your labour.
Friday, March 20, 2009
Motivation
I suddenly thought of a video to share with all of you. A video that has been around since 2005 but has never fail to inspire me. I am deeply motivated by this speech and it powers me through my lows.
So for all of you out there who may have felt the economy. This is for you...
So for all of you out there who may have felt the economy. This is for you...
Secrets of a Millionaire Mind
I have been busy with my business, my reading as well as my self development courses.
One of the books I've recently read : Secrets Of A Millionaire Mind
I personally think it's good book and very interesting to read.
This is T Harv Eker on the psychology of Millionaires.
If you're interested, you can go attend the Millionaire Mind Intensive at end of this year.
Drop me a note if you want tickets.
One of the books I've recently read : Secrets Of A Millionaire Mind
I personally think it's good book and very interesting to read.This is T Harv Eker on the psychology of Millionaires.
If you're interested, you can go attend the Millionaire Mind Intensive at end of this year.
Drop me a note if you want tickets.
Monday, December 29, 2008
Money Management Technique Part 5
Want another secret?
Do you want to stay motivated about money?
It's easy! Everyone can do it. Get more books, go to seminars, talks, get to know people with the same interest. Not only do you get to know more about the subject matter, with people of the same interest, you will get to exchange ideas, bounce off the positive energy, encourage each other. And maybe get together to start a business!
Cool?
There are a few companies out there who organizes good seminars.
Do me a note and I'll email you the list.
So now that you have successfully learn to be a money manger, mange your money now! It's fun!
Happy money managing!
Do you want to stay motivated about money?
It's easy! Everyone can do it. Get more books, go to seminars, talks, get to know people with the same interest. Not only do you get to know more about the subject matter, with people of the same interest, you will get to exchange ideas, bounce off the positive energy, encourage each other. And maybe get together to start a business!
Cool?
There are a few companies out there who organizes good seminars.
Do me a note and I'll email you the list.
So now that you have successfully learn to be a money manger, mange your money now! It's fun!
Happy money managing!
Money Management Technique Part 4
This is not difficult at all.
All you need to do is KEEP DOING IT! Yes! You just need to manage your money everyday.
Affirm your beliefs everyday. Remember in Part 2 Goal Setting? Everywhere you walk, you see your post-its and you read them aloud. And remember that feeling you have when you read those aloud. That feeling will keep you going!
Every time you make any transactions with money, jot it down and log it into the system! It's just so simple.
At the end of the month, look at all your accounts and see that amount of money growing! That will confirm all of your actions and propel you even more!
Affirm and Confirm -> Keep Doing It!
Cheers!
All you need to do is KEEP DOING IT! Yes! You just need to manage your money everyday.
Affirm your beliefs everyday. Remember in Part 2 Goal Setting? Everywhere you walk, you see your post-its and you read them aloud. And remember that feeling you have when you read those aloud. That feeling will keep you going!
Every time you make any transactions with money, jot it down and log it into the system! It's just so simple.
At the end of the month, look at all your accounts and see that amount of money growing! That will confirm all of your actions and propel you even more!
Affirm and Confirm -> Keep Doing It!
Cheers!
Monday, December 15, 2008
Money Management Technique Part 3
With your financial situation in check and your goals set, you are ready to start managing your money!
So what should one do to manage money?
In my professional opinion, in order to know how to manage, you must learn how to watch where your money is flowing.
I know it may sound tedious to some but frankly, it's really easy and it's pretty fun actually. To be honest, I was put off with the idea at first, but learning to track my money for 1 month, I was having so much fun, I started tracking my partner's money and then to my friends' money! I had so much fun and my expenses went down so fast as by 30% in just 1 month that I knew I must share with everyone else in the world. It's not for a noble cause really, but I know how it feels like to live in scarcity and I don't want to see that in others. That's why I want so much to share this with you.
Money Management Technique Part 3
1. Track your money!
There are alot of sites out there but I love this one :
http://www.moneytrackin.com
I love this because I could tag the transaction and can download everything in excel spreadsheet and do my own charting, reporting, etc. (Urm, yes, it may sound a little obsessive but it's really fun!) Also, since it's online and it's free, you can quickly track your money the moment you spend it on your phone connected to the wireless. So it's a fast, easy and no hassle way of tracking your money.
Background Information :
For those who already have cash surplus, don't think you get to skive! Money is something you need to manage in order to master. So check through those expenses to see whether you can save more out of your expenses or maybe you're not enjoying yourself at all! In life, we need to strike a balance... remember hoarders? You need to learn to relax :)
Now that we have tracked your money... let's move on to the second part and the most exciting part (for me, at least!)
2. Systemize It!
What? What is there to systemize? Of course there is... I call it System 6! For those in Singapore, System 6 would sound like lottery. Actually, if you follow this closely, you will be able to harness what Einstein says it's the most powerful law in the Universe. And that will be the "Power of Compounding Interest".
System 6 taps on to this power without sacrificing all the fun, laughter, peace and joy that you may have. In fact, it will give you more fun, more laughter, more peace and more joy if you follow this!
And as a financial advisor, I will always advise my clients that in order to be rich and financially ready to be free, you need to learn just 1 thing :
System 6 will teach you to do this...
Ready?
This is so exciting... I can't wait to tell you all!
System 6
OK, fine, so what do you do with this? Simple! You track your money daily, remember daily! Not monthly! Not weekly! This is because humans are habitual beings so make tracking your habit and in no time, it will be second nature to you. Putting it off to the end of the week will warrant you to putting it off to the end of the month!
All you need is jjust these 2 things :-
In my professional opinion, this is 10% higher than what I normally advise my clients. But let's work on baby steps and 50% is a good enough amount.
So there.... track your money and follow this system 6. It's just 2 simple steps to mastering your money. Anyone can do it! I did it! So can you...
So what should one do to manage money?
In my professional opinion, in order to know how to manage, you must learn how to watch where your money is flowing.
I know it may sound tedious to some but frankly, it's really easy and it's pretty fun actually. To be honest, I was put off with the idea at first, but learning to track my money for 1 month, I was having so much fun, I started tracking my partner's money and then to my friends' money! I had so much fun and my expenses went down so fast as by 30% in just 1 month that I knew I must share with everyone else in the world. It's not for a noble cause really, but I know how it feels like to live in scarcity and I don't want to see that in others. That's why I want so much to share this with you.
Money Management Technique Part 3
1. Track your money!
There are alot of sites out there but I love this one :
http://www.moneytrackin.com
I love this because I could tag the transaction and can download everything in excel spreadsheet and do my own charting, reporting, etc. (Urm, yes, it may sound a little obsessive but it's really fun!) Also, since it's online and it's free, you can quickly track your money the moment you spend it on your phone connected to the wireless. So it's a fast, easy and no hassle way of tracking your money.
Background Information :
About moneytrackin'
moneytrackin' is a free online webapp that allows you to track all your expenses and income easily and without effort, thus allowing you to have a clear view of your financial situation. It intends to be a simple yet powerful online budget management tool.
Main features
- Control as many accounts/projects as you want
- Log all your transactions (expenses/income) and tag them to organize them better
- Keep informed of your financial situation at a glance, viewing at any time where your money goes
- Share tips with other users and take advantage of the community knowledge to save money
- Anonymity, we respect your privacy
- Sharing budgets and collaborative working of many people together on the same account
- Public API to allow the integration with third party applications
For those who already have cash surplus, don't think you get to skive! Money is something you need to manage in order to master. So check through those expenses to see whether you can save more out of your expenses or maybe you're not enjoying yourself at all! In life, we need to strike a balance... remember hoarders? You need to learn to relax :)
Now that we have tracked your money... let's move on to the second part and the most exciting part (for me, at least!)
2. Systemize It!
What? What is there to systemize? Of course there is... I call it System 6! For those in Singapore, System 6 would sound like lottery. Actually, if you follow this closely, you will be able to harness what Einstein says it's the most powerful law in the Universe. And that will be the "Power of Compounding Interest".
System 6 taps on to this power without sacrificing all the fun, laughter, peace and joy that you may have. In fact, it will give you more fun, more laughter, more peace and more joy if you follow this!
And as a financial advisor, I will always advise my clients that in order to be rich and financially ready to be free, you need to learn just 1 thing :
PAY YOURSELF FIRST
System 6 will teach you to do this...
Ready?
This is so exciting... I can't wait to tell you all!
System 6
System 1 : Financial Freedom Fund (Triple Fs)
System 2 : Long Term Saving
System 3 : Short Term Savings
System 4 : Tithing
System 5 : Reward
System 6 : Expenditure
System 2 : Long Term Saving
System 3 : Short Term Savings
System 4 : Tithing
System 5 : Reward
System 6 : Expenditure
OK, fine, so what do you do with this? Simple! You track your money daily, remember daily! Not monthly! Not weekly! This is because humans are habitual beings so make tracking your habit and in no time, it will be second nature to you. Putting it off to the end of the week will warrant you to putting it off to the end of the month!
All you need is jjust these 2 things :-
- TRACK YOUR MONEY DAILY
- SPLIT YOUR MONEY ACCORDINGLY - PAY YOURSELF FIRST
Then when your pay arrives (once every fortnight or monthly), you will split yor money into these 6 accounts.
1. Financial Freedom Fund (10%)
This is the most implrtant account as your lifelong happiness depends on this. Tell me, who wants to have to work all the time for the rest of their lives? I mean, have to work not choose to work. there is a great difference here.
I would rather be financially free and choose to work just to keep myself happily occupied and surrounded with people I like to work with. Would you want to drag yourself daily out of bed and go to work only to face a lousy boss and gossip mongers as colleagues at the age of 60? NO! You should be enjoying life! Going for trips with family, rest, relax, enjoying time playing golf or your favourite game with friends, spend happy times at work cos it brings that extra income which you don't even need but it's just fun to do!
Great isn't it?
Then give yourself that 10%, you owe it to yourself. Remember, PAY YOURSELF FIRST!
2. Long Term Saving (10%)
I would call this your winter stack. Ha!
Generally, I would advise people to save at least 6 months into this account. You need to have 6 months worth of your current net income in this account BEFORE you can use it.
For those who think this is not enough, I will show you another rule of thumb I always use for my more prudent clients.
If your salary starts with 3, then you need at least 3 months to find another job and thus would need at least 3 months of current net income in this account.
If your salary starts with 6, then you need at least 6 months to find another job and therefore you would need at least 6 months of your current net income in this account.
You know the drill...
So how did I come up with such magical numbers? They're not magical. This is in accordance to the general Human Resources findings that people with a 3K salary, normally require about 3 months to find the next job.
I know some of you may ask, what about the current bear situation? I understand that being prudent is good, but overly-prudent can deprive you of grabbing the good opportunities that may come should you lock your money so tightly away.
Once you have your x months of your current net income in this account, you may choose to use this account to finance for your "big items" that you're dreaming of. that new big screen TV, family holiday, the downpayment for your 2th/3rd house perhaps? :)
3. Short Term Savings (10%)
For those who do not have a cash surplus and running into deficit and chalking up some debts, this is really important for you. You still need to save money. So split this into 2 : 5% goes into savings and 5% goes into debt repayment.
For those who have cash surpluses, put your whole 10% into this account. This account is good practise for spenders to help spend wisely and have enough for savings.
This account is good for investments. So with this current bear situation, start shopping for good deals and good investment opportunites, this is the fun dthat can help you grow your money!
4. Tithing (10%)
For Catholics and Christians out there, I know you are all too familiar with this. Tithing is a gesture of appreciation to God. He does not need this but it's for us to show that we thank Him for all that He has blessed us with and this small 10% is just an offering for Him in gratitude.
For those who there who may not have the same religion, please don't be offended with the name. Call it DONATE if you want to. This account is all about giving back to society. For whatever we reap, we sow it back. :)
So give it to your favourite charitable organization. You need to learn to give in order to receive even more...
5. Reward (10%)
For hoarders, I understand that the many years of stashing money may have deprive you of the pleasures you want to indulge but feel so guilty about. This is the account for you, this 10% is to be spent every month on the things you desire the most!
For spenders, I also understand that it may seem ridiculous to shrink your 100% or more spendings to a mere 10%. But do remember, there are alot of things that you hace spent on which you may not need. You need to learn to discipline yourself into deciphering what are the things you need and don't.
I read this on a website : Write the things you want to buy on a list and put it in your wallet. The trick is that you can only limit yourself o only 3 things. This helps you to prioritise your wants. Also, it also helps you buy some time off from impulsive buying. I know how you feel cos I was once like this. So just try this... it's not restricting you... it's just a new way of spending money :)
Would you rather have surplus or deficit? Think about it.
6. Expenditure (50%)
Last but not least, this is your expenditure account where your salary is creditted into. Daily neccesities should all come from this account.This is the most implrtant account as your lifelong happiness depends on this. Tell me, who wants to have to work all the time for the rest of their lives? I mean, have to work not choose to work. there is a great difference here.
I would rather be financially free and choose to work just to keep myself happily occupied and surrounded with people I like to work with. Would you want to drag yourself daily out of bed and go to work only to face a lousy boss and gossip mongers as colleagues at the age of 60? NO! You should be enjoying life! Going for trips with family, rest, relax, enjoying time playing golf or your favourite game with friends, spend happy times at work cos it brings that extra income which you don't even need but it's just fun to do!
Great isn't it?
Then give yourself that 10%, you owe it to yourself. Remember, PAY YOURSELF FIRST!
2. Long Term Saving (10%)
I would call this your winter stack. Ha!
Generally, I would advise people to save at least 6 months into this account. You need to have 6 months worth of your current net income in this account BEFORE you can use it.
For those who think this is not enough, I will show you another rule of thumb I always use for my more prudent clients.
If your salary starts with 3, then you need at least 3 months to find another job and thus would need at least 3 months of current net income in this account.
If your salary starts with 6, then you need at least 6 months to find another job and therefore you would need at least 6 months of your current net income in this account.
You know the drill...
So how did I come up with such magical numbers? They're not magical. This is in accordance to the general Human Resources findings that people with a 3K salary, normally require about 3 months to find the next job.
I know some of you may ask, what about the current bear situation? I understand that being prudent is good, but overly-prudent can deprive you of grabbing the good opportunities that may come should you lock your money so tightly away.
Once you have your x months of your current net income in this account, you may choose to use this account to finance for your "big items" that you're dreaming of. that new big screen TV, family holiday, the downpayment for your 2th/3rd house perhaps? :)
3. Short Term Savings (10%)
For those who do not have a cash surplus and running into deficit and chalking up some debts, this is really important for you. You still need to save money. So split this into 2 : 5% goes into savings and 5% goes into debt repayment.
For those who have cash surpluses, put your whole 10% into this account. This account is good practise for spenders to help spend wisely and have enough for savings.
This account is good for investments. So with this current bear situation, start shopping for good deals and good investment opportunites, this is the fun dthat can help you grow your money!
4. Tithing (10%)
For Catholics and Christians out there, I know you are all too familiar with this. Tithing is a gesture of appreciation to God. He does not need this but it's for us to show that we thank Him for all that He has blessed us with and this small 10% is just an offering for Him in gratitude.
For those who there who may not have the same religion, please don't be offended with the name. Call it DONATE if you want to. This account is all about giving back to society. For whatever we reap, we sow it back. :)
So give it to your favourite charitable organization. You need to learn to give in order to receive even more...
5. Reward (10%)
For hoarders, I understand that the many years of stashing money may have deprive you of the pleasures you want to indulge but feel so guilty about. This is the account for you, this 10% is to be spent every month on the things you desire the most!
For spenders, I also understand that it may seem ridiculous to shrink your 100% or more spendings to a mere 10%. But do remember, there are alot of things that you hace spent on which you may not need. You need to learn to discipline yourself into deciphering what are the things you need and don't.
I read this on a website : Write the things you want to buy on a list and put it in your wallet. The trick is that you can only limit yourself o only 3 things. This helps you to prioritise your wants. Also, it also helps you buy some time off from impulsive buying. I know how you feel cos I was once like this. So just try this... it's not restricting you... it's just a new way of spending money :)
Would you rather have surplus or deficit? Think about it.
6. Expenditure (50%)
In my professional opinion, this is 10% higher than what I normally advise my clients. But let's work on baby steps and 50% is a good enough amount.
So there.... track your money and follow this system 6. It's just 2 simple steps to mastering your money. Anyone can do it! I did it! So can you...
Tuesday, December 9, 2008
Money Management Technique Part 2
In Part 1, we have calculated your Net Worth and your Cash Surplus.
For those who have cash surplus, give yourself a pat on your back. Good job! Now, you need to maximise the use of that surplus.
For those who have a negative number for your cash surplus, congratulations! You have found the effect of your actions and now that we have identified the impact, we know how to deal with root cause this issue.
To get to all of the root cause, we need to ask you to do this :-
Now, with that list that you have finalise, hold it up, go through each and every single one of them, then :-
Done?
Good.
OK. I know you have all these questions racing through your head. Why 4 reasons? Actually, the more reasons you have, the better but in my professional opinion, you need at least 4 reasons. Look at a table, a chair, they all have 4 legs. Likewise, a building has at least 4 pillars to support it.
That's right, support is the key. For every thing that you want in life, you need to have enough support. This support will help you through all that hard you need to put yourself through to have it, to make it work for you. This is the support which I call "Burning Desire".
The more reasons you have, the hotter the brighter your burning desire will be. All the more you will work hard towards that goal.
Those 10 things that you want to do when you are financially free are your GOALS, your BURNING DESIRE.
Those 4 reasons are wood that feeds your burning desire.
That visualization is that feeling that will help fan your fire of your burning desire.
NOW.
I want you to write your GOALS on 10 peieces of paper. Then stick these pieces of paper all over the house in places which you most often visit. Your vanity mirror, your fridge, anywhere! Then read this list to yourself every time you see it. We call this process AFFIRMATION.
Now stick that feeling you have next to that piece of paper penning your goals.
So wherever you go, you will see your goals and next to it is the feeling you will have once you have achieved your goals.
If you have pictures of that dream house you want, that car you want to get, that high-tech sound system, stick it there too! This will help in your affirmation process and also aid in your visualization in attaining those goals!
Now, let's see what actions are to be taken to attain your goals!
For those who have cash surplus, give yourself a pat on your back. Good job! Now, you need to maximise the use of that surplus.
For those who have a negative number for your cash surplus, congratulations! You have found the effect of your actions and now that we have identified the impact, we know how to deal with root cause this issue.
To get to all of the root cause, we need to ask you to do this :-
- List 10 things you want to do when you are financially free
- Write down the 4 reasons why you want it
Now, with that list that you have finalise, hold it up, go through each and every single one of them, then :-
- Visualize how you feel when you have achieved them
Done?
Good.
OK. I know you have all these questions racing through your head. Why 4 reasons? Actually, the more reasons you have, the better but in my professional opinion, you need at least 4 reasons. Look at a table, a chair, they all have 4 legs. Likewise, a building has at least 4 pillars to support it.
That's right, support is the key. For every thing that you want in life, you need to have enough support. This support will help you through all that hard you need to put yourself through to have it, to make it work for you. This is the support which I call "Burning Desire".
The more reasons you have, the hotter the brighter your burning desire will be. All the more you will work hard towards that goal.
Those 10 things that you want to do when you are financially free are your GOALS, your BURNING DESIRE.
Those 4 reasons are wood that feeds your burning desire.
That visualization is that feeling that will help fan your fire of your burning desire.
NOW.
I want you to write your GOALS on 10 peieces of paper. Then stick these pieces of paper all over the house in places which you most often visit. Your vanity mirror, your fridge, anywhere! Then read this list to yourself every time you see it. We call this process AFFIRMATION.
Now stick that feeling you have next to that piece of paper penning your goals.
So wherever you go, you will see your goals and next to it is the feeling you will have once you have achieved your goals.
If you have pictures of that dream house you want, that car you want to get, that high-tech sound system, stick it there too! This will help in your affirmation process and also aid in your visualization in attaining those goals!
Now, let's see what actions are to be taken to attain your goals!
Monday, December 8, 2008
Money Management Techniques Part 1
In the previous article, we talk about what your money management style is. With you understanding your style better, you will know how to tackle this money management issue.
In Sun Tzu's Art of War, it is said that " If you know the enemy and know yourself, your victory will not stand in doubt". So you have problems with money, you have to learn about your money before you will learn to master the art of managing money. Simple.
So what do I need to do?
Money Management Technique Part 1 : Know Your Financial Situation
In Sun Tzu's Art of War, it is said that " If you know the enemy and know yourself, your victory will not stand in doubt". So you have problems with money, you have to learn about your money before you will learn to master the art of managing money. Simple.
So what do I need to do?
Money Management Technique Part 1 : Know Your Financial Situation
You need to assess and determine your current financial position. Then will you be able to do detailed analysis on the areas that needs to be improved.
To determine your current financial situation, you will need to do the following :-
- List all of your assets
- List all of your liabilities
- Calculate your total income
- Calculate your expenses
1. List all of your assets
Further breakdown your list of assets into 4 categories :-
Cash & Liquid Assets
- Cash Savings
- Bonds, Term Deposits and Investment Certificates
- Money owed to you
Marketable Assets
- Mutual Funds
- Stocks/Shares
- Unit Trusts / ILPs
- Investment Properties
- Business Investments
Long Term Assets
- CPF-OA
- CPF-MA
- CPF-SA
- Life Insurance Policies (Cash Value)
- Savings Policies / Endowment
Personal Assets
- Residential Property
- Recreational Properties
- Vehicles
- Household furnishing and equipment
- Collectibles (art, jewelry, stamps, coins, etc
2. List all of your liabilities
There are only 2 sections in liabilities :-
Short-term debt
- Credit Cards
- Overdrafts
- Car Loan
- Unpaid Bills
- Taxes (property tax or income tax owing)
- Others
Long-term debt
- Home Mortgage
- Other Mortgage Loans
- Others
3. Calculate your total income
Net Income = Gross Income (include bonuses) - Employee's CPF Contribution
Total Income = Net Income + Other Income
4. Calculate your expenses
Add up all your expenses from these categories :-
- Fixed expenses (loan repayments, insurance, savings)
- Personal (meals, transport)
- Family (groceries, utilities)
- Luxury (entertainment, vacations, country clubs)
- Others
Now that you have all these figures at hand, you will be able to know your Net Worth and your Cash Surplus.
Your Net Worth = Total Assets - Total Liabilities (sum of 1 - sum of 2)
Your Cash Surplus = Net Income - Total Expenses
Before you start thinking of ways to spend that cash surplus, hold that thought! Go to Money Management Technique Part 2 to find out what you should do with that money FIRST before anything else.
Happy Counting! You're one step closer to mastering your money. :)
Friday, December 5, 2008
Know Thyself : So What Is Your Money Management Style?
As a Financial Consultant, I am in contact with so many people out there and for those whom I have the honor to be their financial advisor, most of them have no idea how they manage their money.
Some spend all that they earn, leaving almost nothing to savings, some save just enough, some save so much because they are so terrified of that "dreaded rainy day", some avoid the topic of money, procrastinating their bills, some think money is not worth mentioning cos it's just part and parcel of this earthy world.
I think all in all, I can classify them into these 4 groups :
1. Spenders
The name of this classification speaks for itself. Yes, I do belong to this section as well. But I have also learn to control my spending habits, notice it's control and not curbing. There is always a balance.
Spenders are people who are generously spending their hard-earn money at their will and fancy. They do get to enjoy every single spending moment but would dread the moment the bill arrives. The usual month-end calculation is Salary - Spending = 0. That would be a good case of a spender. For alot of happy spenders and bill moaners, the 0 is no longer a zero but an 'O'. 'O' for Overdraft.
2. Hoarders
Hoarders are avid savers. They are usually frugal and more often than not, sting on anything and everything just because they are so afraid they don't have enough for that one rainy day. Don't get me wrong, we should always make provisions for accidental expenses/costs.
But to save everything and not spend anything on yourself? Hmm... I think you only live life once and I'm certainly not asking you to spend it all! Treat yourself... love yourself because you have worked hard and you totally deserve to pamper yourself a little. So hoarders, relax a little, my money management technique will help you ease up a little. So don't worry, you won't be spending more than you need to. ;)
3. Avoiders
Money can be daunting if you don't know how to handle it. And this is how avoiders feel. Seriously, sit back and think a little on this : I believe in a higher being, in my religion, I would call Him, God. So in this universe where there is a higher being, we are all made in the same image as this higher being, won't we be acting the same way as this higher being?
If your kid is afraid of the dark, would you ever shut your kid in the room and leave the poor child along and terrified? NO! You will get a little night light to be bythe bedside and allow the kid to slowly get accustom to be in the dark and slowly, when the kid is finally ready, the ligh night is no longer needed.
Same way, if you are constantly afraid of handling money, do you think the universe will give you money to handle? Of course not! The universe will resonate what your fears and beliefs. So since you are afraid of it, all the more you won't have it, or at worst, give you more money problems to handle! So until you get used to handling money, only then will you be on your way to be rich!
My money management technique will guide you through and you will find that managing money is not as hard as you think. In fact, once you've started, you will realise that it's so easy and you'll learn to enjoy every single moment of it!
4. The "Higher-Beings"
Now now, "higher-beings", I call you "higher-beings", not because I classify you as god, please note the inverted commas. You belong to this group of people who think that money is beneath you and that you are so spiritual that this earthy possession is just a trace and you are just constantly tested and tempted with this "earthy money" and you have to prove that you surface well above it. NOT!
People, get back to earth, while you are here, you might as well get used to our system here. Money is something you have to deal with. It provides for you, your family and your loved ones. It can also help others and even help them provide for their family. It can do miracles and can do good. You just have to know how to do it. Deal it as your level, not beneath you. Even if someone is your enemy, you cannot treat that person condescending, you need to treat that person as an equal with respect, only then can you turn this enemy to a friend. Likewise, since money is not your enemy, all the more you don't have to treat it this way, treat it as equal and then you can do so much good with it. Do good with money else it's not worth being rich.
Take some time to go through those classifications and identify which group do you belong to. Many will ask "So what have all these money management styles got to do with you?" Of course it does! You need to know what is your style so you can recognise your strengths and your weaknesses and then find out ways to strengthen your strengths and eliminate your weaknesses or turn them to your strengths instead!
Remember :
The first step to change is AWARENESS.
The second step to change is UNDERSTANDING.
So now that you are aware and understanding your money management style, you are a step closer to changing your current financial situation and making it BETTER and be where you SHOULD be.
Frankly, if you're not looking for a change, you won't be searching through the web, looking for ways to rectify your financial situation. The fact that you did search and land yourself here and reading this, means that you have taken a huge step towards acknowledging your situation and creating awareness for yourself.
Now that you are aware that you NEED to change, and you've understood yourself better, you just need to move on to learning the Money Management Techniques. This 5 part series will help you turn your financial life around!
Some spend all that they earn, leaving almost nothing to savings, some save just enough, some save so much because they are so terrified of that "dreaded rainy day", some avoid the topic of money, procrastinating their bills, some think money is not worth mentioning cos it's just part and parcel of this earthy world.
I think all in all, I can classify them into these 4 groups :
- Spenders
- Hoarders
- Avoiders
- The "Higher-Beings"
1. Spenders
The name of this classification speaks for itself. Yes, I do belong to this section as well. But I have also learn to control my spending habits, notice it's control and not curbing. There is always a balance.
Spenders are people who are generously spending their hard-earn money at their will and fancy. They do get to enjoy every single spending moment but would dread the moment the bill arrives. The usual month-end calculation is Salary - Spending = 0. That would be a good case of a spender. For alot of happy spenders and bill moaners, the 0 is no longer a zero but an 'O'. 'O' for Overdraft.
2. Hoarders
Hoarders are avid savers. They are usually frugal and more often than not, sting on anything and everything just because they are so afraid they don't have enough for that one rainy day. Don't get me wrong, we should always make provisions for accidental expenses/costs.
But to save everything and not spend anything on yourself? Hmm... I think you only live life once and I'm certainly not asking you to spend it all! Treat yourself... love yourself because you have worked hard and you totally deserve to pamper yourself a little. So hoarders, relax a little, my money management technique will help you ease up a little. So don't worry, you won't be spending more than you need to. ;)
3. Avoiders
Money can be daunting if you don't know how to handle it. And this is how avoiders feel. Seriously, sit back and think a little on this : I believe in a higher being, in my religion, I would call Him, God. So in this universe where there is a higher being, we are all made in the same image as this higher being, won't we be acting the same way as this higher being?
If your kid is afraid of the dark, would you ever shut your kid in the room and leave the poor child along and terrified? NO! You will get a little night light to be bythe bedside and allow the kid to slowly get accustom to be in the dark and slowly, when the kid is finally ready, the ligh night is no longer needed.
Same way, if you are constantly afraid of handling money, do you think the universe will give you money to handle? Of course not! The universe will resonate what your fears and beliefs. So since you are afraid of it, all the more you won't have it, or at worst, give you more money problems to handle! So until you get used to handling money, only then will you be on your way to be rich!
My money management technique will guide you through and you will find that managing money is not as hard as you think. In fact, once you've started, you will realise that it's so easy and you'll learn to enjoy every single moment of it!
4. The "Higher-Beings"
Now now, "higher-beings", I call you "higher-beings", not because I classify you as god, please note the inverted commas. You belong to this group of people who think that money is beneath you and that you are so spiritual that this earthy possession is just a trace and you are just constantly tested and tempted with this "earthy money" and you have to prove that you surface well above it. NOT!
People, get back to earth, while you are here, you might as well get used to our system here. Money is something you have to deal with. It provides for you, your family and your loved ones. It can also help others and even help them provide for their family. It can do miracles and can do good. You just have to know how to do it. Deal it as your level, not beneath you. Even if someone is your enemy, you cannot treat that person condescending, you need to treat that person as an equal with respect, only then can you turn this enemy to a friend. Likewise, since money is not your enemy, all the more you don't have to treat it this way, treat it as equal and then you can do so much good with it. Do good with money else it's not worth being rich.
Take some time to go through those classifications and identify which group do you belong to. Many will ask "So what have all these money management styles got to do with you?" Of course it does! You need to know what is your style so you can recognise your strengths and your weaknesses and then find out ways to strengthen your strengths and eliminate your weaknesses or turn them to your strengths instead!
Remember :
The first step to change is AWARENESS.
The second step to change is UNDERSTANDING.
So now that you are aware and understanding your money management style, you are a step closer to changing your current financial situation and making it BETTER and be where you SHOULD be.
Frankly, if you're not looking for a change, you won't be searching through the web, looking for ways to rectify your financial situation. The fact that you did search and land yourself here and reading this, means that you have taken a huge step towards acknowledging your situation and creating awareness for yourself.
Now that you are aware that you NEED to change, and you've understood yourself better, you just need to move on to learning the Money Management Techniques. This 5 part series will help you turn your financial life around!
Wednesday, December 3, 2008
Do you want to be rich?
I wonder how many of you out there actually asked yourself this question "Do I want to be rich?"
If your answer is no, ask yourself why do you NOT want to be rich, and maybe you should stop reading from here.
If your answer is yes, Congratulations! Good for you! You are 1 step closer to being rich.
"Really?" you will ask. The answer is an absolute yes! Because you have the intention to be rich.
I believe that you need to want something so bad and things will happen in such a way that you will have it!
I just watched KungFu Panda recently, the turtle said this "There are no accidents"
Things do happen for a reason. You have put yourself in the right place at the right time.
That is why, with your intention to be rich, you have somehow placed yourself here, the right place, at the right time, reading this...
You should have read this before "How You Do Anything Is How You Do Everything!"
So are you going to do something about your life so that you can realise your intention and that is to be rich? Read on!
Many people have different definition of being rich. Some say that once they earn 1 Million Dollars, they are rich. Some say that once they pay off their assets, they are rich. Some feel that as long as they earn 10K per month, they are rich.
All of this means that your comfort level is equal to your money level.
So how do you reach that level of comfort that you want? I have met alot of people, many of whom have become dear friends of mine, when we talked and discussed about how so many others out there are not able to realise their dream of being rich.
Some want it so bad but are so disappointed by their life results that they resort to feeling that they don't deserve to be rich or unworthy to be rich or even worse, they no longer want to be rich! We came to a conclusion. Many do not get what they want is because they do not know what they want!
"What? Are you kidding me? I just told you I want to be rich!" I think all of this will be running in your head.
Yes. I repeat. The reason why many people do not get what they want is because they do not know what they want.
Have you asked yourself why do you want to be rich? What are the things you want to do with your money?
"For family, for loved ones...." yes yes, those are just what EVERYONE wants to. But how about other people? People you don't know very well or don't know at all. How are you going to help them?
"Why should I" you will ask.
Ha! I asked the exact question to. You see, I got a little journal which I carry around and jot down ideas, thoughts and I left 2 pages blank. The header for that 2 page is "what is the purpose of my life?" For a long time, I was pondering over the purpose of my life. These 2 pages were left blank for a long time until I went for a life-changing seminar then I started to realise. Each and every single one of us here on earth, our purpose is to add value to other people's life. To make this world a better place.
No, this is not some lofty high and mighty idea. You see, we all want to enhance our own life,
which explains why you work hard for money and work even harder for more money through promotion or 1 2nd or 3rd job. And all that money is to provide for your basic lifestyle and you work even harder to have a better life, buy a bigger house, a nicer car, a better family holiday, give your kids a better life... all these are enhancements to your own life and the lives of your family members and loved ones. And if you have the ability to do so, why not expand this even further and spread this to others?
More often than not, this idea didn't cross our minds, is because, most of us think that it's hard enough to do this for your own family, let alone to others.
WRONG! That's precisely why you have to be rich. So you can provide for your family and even others. THIS is the way to enhance your life and the lives of others.
So you have to be really clear of what you want because only then can you harness the power of your intention and propel yourself to being rich.
We all want to be financially free. You are financially free the moment your passive income exceeds your expenses.
Passive Income can come in 2 forms :-
Investment Income often refers to your investment portfolio, rentals.
Passive Business Income refers to your business ventures, your royalities from best-selling books, music royalties, etc.
Passive means that the money keeps filling your pockets and purses and wallets even while you are sleeping or having holiday!
And anyone can be financially free if they follow this formula :
This formula is easily achievable from the Money Management Techniques that I am going to show you.
Translate all your Intentions to your Commitments, then Learn the techniques, Use those techniques and you will see Results.
And remember : Clariy is Power.
So if you still want to be rich? Start getting to know yourself!
If your answer is no, ask yourself why do you NOT want to be rich, and maybe you should stop reading from here.
If your answer is yes, Congratulations! Good for you! You are 1 step closer to being rich.
"Really?" you will ask. The answer is an absolute yes! Because you have the intention to be rich.
I believe that you need to want something so bad and things will happen in such a way that you will have it!
I just watched KungFu Panda recently, the turtle said this "There are no accidents"
Things do happen for a reason. You have put yourself in the right place at the right time.
That is why, with your intention to be rich, you have somehow placed yourself here, the right place, at the right time, reading this...
You should have read this before "How You Do Anything Is How You Do Everything!"
So are you going to do something about your life so that you can realise your intention and that is to be rich? Read on!
Many people have different definition of being rich. Some say that once they earn 1 Million Dollars, they are rich. Some say that once they pay off their assets, they are rich. Some feel that as long as they earn 10K per month, they are rich.
All of this means that your comfort level is equal to your money level.
So how do you reach that level of comfort that you want? I have met alot of people, many of whom have become dear friends of mine, when we talked and discussed about how so many others out there are not able to realise their dream of being rich.
Some want it so bad but are so disappointed by their life results that they resort to feeling that they don't deserve to be rich or unworthy to be rich or even worse, they no longer want to be rich! We came to a conclusion. Many do not get what they want is because they do not know what they want!
"What? Are you kidding me? I just told you I want to be rich!" I think all of this will be running in your head.
Yes. I repeat. The reason why many people do not get what they want is because they do not know what they want.
Have you asked yourself why do you want to be rich? What are the things you want to do with your money?
"For family, for loved ones...." yes yes, those are just what EVERYONE wants to. But how about other people? People you don't know very well or don't know at all. How are you going to help them?
"Why should I" you will ask.
Ha! I asked the exact question to. You see, I got a little journal which I carry around and jot down ideas, thoughts and I left 2 pages blank. The header for that 2 page is "what is the purpose of my life?" For a long time, I was pondering over the purpose of my life. These 2 pages were left blank for a long time until I went for a life-changing seminar then I started to realise. Each and every single one of us here on earth, our purpose is to add value to other people's life. To make this world a better place.
No, this is not some lofty high and mighty idea. You see, we all want to enhance our own life,
which explains why you work hard for money and work even harder for more money through promotion or 1 2nd or 3rd job. And all that money is to provide for your basic lifestyle and you work even harder to have a better life, buy a bigger house, a nicer car, a better family holiday, give your kids a better life... all these are enhancements to your own life and the lives of your family members and loved ones. And if you have the ability to do so, why not expand this even further and spread this to others?
More often than not, this idea didn't cross our minds, is because, most of us think that it's hard enough to do this for your own family, let alone to others.
WRONG! That's precisely why you have to be rich. So you can provide for your family and even others. THIS is the way to enhance your life and the lives of others.
So you have to be really clear of what you want because only then can you harness the power of your intention and propel yourself to being rich.
We all want to be financially free. You are financially free the moment your passive income exceeds your expenses.
Passive Income can come in 2 forms :-
Investment Income often refers to your investment portfolio, rentals.Passive Business Income refers to your business ventures, your royalities from best-selling books, music royalties, etc.
Passive means that the money keeps filling your pockets and purses and wallets even while you are sleeping or having holiday!
And anyone can be financially free if they follow this formula :
This formula is easily achievable from the Money Management Techniques that I am going to show you.Translate all your Intentions to your Commitments, then Learn the techniques, Use those techniques and you will see Results.
- Intention
- Commitment
- Learn
- Use
- Results
And remember : Clariy is Power.
So if you still want to be rich? Start getting to know yourself!
Tuesday, December 2, 2008
Investment Article - How to Keep Your Nest Egg from Getting Scrambled (by Natalie Pace)
If you are over 25 and you have lost more than 25% of your portfolio, please read this article now.
If you are over 25 and you lost more than 25% of your portfolio, your nest egg was never set up properly, nor was it "recession-proofed." Many financial professionals are paid on commission to sell you things, not to set up your portfolio according to the well-known plan, called Modern Portfolio Theory - an idea that won Harry Markowitz a Nobel Laureate in 1990 and was written half a century ago. This theory says that you ALWAYS keep, at minimum, a percentage equal to your age SAFE - i.e. not invested at all in stocks, equities, mutual funds, funds of any kind, etc. During recessions -- something I warned of in my ezine as early as February of 2008 and every month since that time -- you want to keep an additional 10-20% over-weighted into safety. That means that a 25-year old would have 45% safe and would have experienced only 20% losses in her total portfolio today. (Calculated based upon the closing of the Dow Jones Industrial Average at 9,065.12 on October 28, 2008 and the high of 14,165 on October 9, 2007.)
While you are hearing from many people you might think are wise that you shouldn't be doing anything right now because you would be selling low and that you should have faith in the markets and wait for a recovery, the truth is that if you lost more than 25% of your nest egg and you are over 25, the plan you have was wrong, is wrong and will continue to be a bad strategy going forward - especially considering that the "downturn", which hasn't been officially announced as a recession yet, is more likely to deepen before our economy improves. There were people who got the message when they lost everything in the DOT COM bust, and made the simple changes that I've been reporting on in my ezine since 2002, and are doing great right now.
Bill and Nilo Bolden have lost nothing - ZERO -- employing the strategies that I'm outlining for you below. They rebalanced in February of 2008, overweighting into safety, as outlined in more detail below. Even if you have already lost half of your nest, if you want to be on the winning side of investing and prevent further, unnecessary losses in your nest egg and position yourself for a more speedy recovery, it is imperative that you keep reading. This bear market is not over yet - not by a long shot.
It's a New World. Century-old companies are imploding. Stock returns over the last ten years are at 4% -- only slightly above the rate of Treasury bills, at 3.3%, with significantly higher risk.
While you are hearing from many people you might think are wise that you shouldn't be doing anything right now because you would be selling low and that you should have faith in the markets and wait for a recovery, the truth is that if you lost more than 25% of your nest egg and you are over 25, the plan you have was wrong, is wrong and will continue to be a bad strategy going forward - especially considering that the "downturn", which hasn't been officially announced as a recession yet, is more likely to deepen before our economy improves. There were people who got the message when they lost everything in the DOT COM bust, and made the simple changes that I've been reporting on in my ezine since 2002, and are doing great right now.
Bill and Nilo Bolden have lost nothing - ZERO -- employing the strategies that I'm outlining for you below. They rebalanced in February of 2008, overweighting into safety, as outlined in more detail below. Even if you have already lost half of your nest, if you want to be on the winning side of investing and prevent further, unnecessary losses in your nest egg and position yourself for a more speedy recovery, it is imperative that you keep reading. This bear market is not over yet - not by a long shot.
It's a New World. Century-old companies are imploding. Stock returns over the last ten years are at 4% -- only slightly above the rate of Treasury bills, at 3.3%, with significantly higher risk.
At the same time, over that same ten-year period, there have been three GIANT bubbles, one in DOT COM stocks in 1999-2000, another in real estate between 2002 and 2006 and another in clean energy in 2007. If you had a strategy to actually capitalize on these run-ups, you would be doing fantastic right now - well above the dismal market average over the last ten years. If you didn't, as most people didn't, then you watched the gains and losses gyrate like a rollercoaster in your portfolio without any clue as to what was happening - until recently when the most dramatic downturn in 80 years rattled you to the core.
The Problem with Mutual Funds
Mutual funds in general are old products that don't allow you to capitalize on industry, sector, size or style gains because they are full of everything and the kitchen sink. Many are invested in some of the worst dying industries on Wall Street - like tobacco companies and corporations that have debt obligations equal to more than ten or even twenty times the value of the company. General Motors' liabilities total almost $192 billion, while the company's value on Wall Street is a measly $3.5 billion. My warnings on General Motors as a "faded" Blue Chip began as early as 2004, at the same time when I was applauding Google as the greatest IPO of all time (something that came to fruition when Google became the first company to go from IPO to over $100 billion market capitalization in under two years). You can view these articles firsthand in volume 1, issue 50; volume 3, issue 8; and volume 1, issue 48, respectively, in the NataliePace.com online magazine archives.
Modern Portfolio theory and ETFs, with proper diversification and asset allocation, offer a strategy that allows you to capitalize on the gains of a particular industry, size, style or index, while keeping an appropriate portion of your nest egg safe. Most people think they don't have a choice and have to take what the 401 (k) provider gives them. That would be like thinking that the local fruit stand is the only option for food - untrue!
Just as the car made travel easier than riding in a horse-drawn carriage and planes made international travel easier than going by boat, Modern Portfolio Theory and Exchange Traded Funds are relatively new innovations that allow the investor greater security, higher gains with much less effort! The problem is that CFPs and brokerages with old school ways were not offering this way to you because they weren't paid to sell them to you. They were paid to sell mutual funds, which offer a much higher commission structure to the CFP. The online, discount brokerages are leading the charge for ETFs, however, and with a few minutes of your time, I'll explain how and why.
Modern Portfolio theory and ETFs, with proper diversification and asset allocation, offer a strategy that allows you to capitalize on the gains of a particular industry, size, style or index, while keeping an appropriate portion of your nest egg safe. Most people think they don't have a choice and have to take what the 401 (k) provider gives them. That would be like thinking that the local fruit stand is the only option for food - untrue!
Just as the car made travel easier than riding in a horse-drawn carriage and planes made international travel easier than going by boat, Modern Portfolio Theory and Exchange Traded Funds are relatively new innovations that allow the investor greater security, higher gains with much less effort! The problem is that CFPs and brokerages with old school ways were not offering this way to you because they weren't paid to sell them to you. They were paid to sell mutual funds, which offer a much higher commission structure to the CFP. The online, discount brokerages are leading the charge for ETFs, however, and with a few minutes of your time, I'll explain how and why.
Here's how the strategy of Modern Portfolio Theory (plus ETFs) works:
1. Invest in emerging products, energy and technology, not dying industries
2. Invest in wisdom, not the old way of doing things
3. Diversify and rebalance with a wealth blueprint that is appropriate to your age, instead of blind faith, buy and hold whatever my broker says
4. Know what you own instead of holding a big basket of everything, including companies you despise
2. Invest in wisdom, not the old way of doing things
3. Diversify and rebalance with a wealth blueprint that is appropriate to your age, instead of blind faith, buy and hold whatever my broker says
4. Know what you own instead of holding a big basket of everything, including companies you despise
It's easier than you think, faster than you can imagine and more effective than any other strategy on Wall Street for Main Street investors...
1. Invest in emerging products, energy and technology, not dying industries
Bill and Nilo Bolden used the following strategies to recession proof their portfolio and to date have lost nothing. Here's why and how.
Asset allocation (always keep a percent equal to your age SAFE)
During a recession, which I began warning of in February of 2008, you want to overweight into safety. This is not market timing; it is rebalancing. Bill is 55. Therefore overweighting an additional 20% into safety for the pending market downturn meant that 75% of his portfolio had to be in T-Bills. (Note that Bill then had 75% of his nest egg safe, not just the 50% outlined in the above pie chart for 50-year-olds during more normal market circumstances.)
Why T-bills and not money markets? We knew money markets were risky and they were losing money! It was easy for Bill to see that T-bills returning 2% was better than money markets at -2% return, which was available right on the first page of his 401(k) plan!
There are always industries, products and companies that are emerging and others that are suffering. A great financial news organization, like NataliePace.com, earns our reputation by keeping you informed. What are the track records of the pundits you are listening to on television?
Why T-bills and not money markets? We knew money markets were risky and they were losing money! It was easy for Bill to see that T-bills returning 2% was better than money markets at -2% return, which was available right on the first page of his 401(k) plan!
There are always industries, products and companies that are emerging and others that are suffering. A great financial news organization, like NataliePace.com, earns our reputation by keeping you informed. What are the track records of the pundits you are listening to on television?
Industry diversification
The remaining 25% of Bill and Nilo's nest egg should have gone into small, medium and large caps, value, growth, clean energy, international, health care products and gold. However, the mutual funds offered by the 401(k) provider didn't allow for that kind of diversification. Therefore, Bill and Nilo put EVERYTHING into T-bills while Nilo shopped for a provider that did offer ETFs and industry diversification. By doing the right thing - demanding good products and not simply doing what was easier by selecting the only products that were offered to her - Nilo hasn't lost a dime to date during the horrible Wall Street meltdown of September and October 2008. Many of Nilo's colleagues followed her example and have lost nothing as well. Nilo's bosses didn't believe Nilo's plan was better than the one that their financial advisors were telling them to do, and they have lost hundreds of thousands of dollars as a result. You can bet they are listening to her now.
Avoid Dying Industries
General Motors and Ford Motor Company today, combined, are worth less than one-tenth of Toyota Motors. In 2004, when Toyota won Motor Trend's Car of the Year with its Prius and Ford and GM were still invested in SUVs and Hummers, the companies were about equal in value. Google became the most successful IPO of all time and is currently one of the biggest corporations on Wall Street, while GM and Ford have lost 87% and 83% of their stock market value over the same time period, since 2004, respectively. There are Blue Chips that are fading and others that are becoming the new staples of the U.S. economy.
The Dow Jones Industrial Average Components (30 companies) in 2007 included General Motors, Philip Morris tobacco company, Home Depot, Morgan Stanley and other corporations that were poised to implode under massive debt obligations and declining customers for their products. In 2006, AIG was a top component of the Dow. Fannie Mae was one of the most popular mutual fund holdings in early 2007. These were some of the most popular holdings in the mutual funds that investors were blindly taking ownership in and relying upon for their futures. (Meanwhile, our readers were warned to trim Fannie, Philip Morris, GM, etc. out of the mutual funds beginning in 2003 and 2004).
So, how do you have the stability of blue chips (large cap companies) without the exposure to the faded blue chips?
The Dow Jones Industrial Average Components (30 companies) in 2007 included General Motors, Philip Morris tobacco company, Home Depot, Morgan Stanley and other corporations that were poised to implode under massive debt obligations and declining customers for their products. In 2006, AIG was a top component of the Dow. Fannie Mae was one of the most popular mutual fund holdings in early 2007. These were some of the most popular holdings in the mutual funds that investors were blindly taking ownership in and relying upon for their futures. (Meanwhile, our readers were warned to trim Fannie, Philip Morris, GM, etc. out of the mutual funds beginning in 2003 and 2004).
So, how do you have the stability of blue chips (large cap companies) without the exposure to the faded blue chips?
2. Invest in wisdom, not the old way of doing things
Nilo Bolden is shopping for a new 401(k) provider with products that allow all of the employees at her company to diversify and have proper asset allocation. The investors who have attend my Get Rich and Enrich Retreat have learned how to create their own basket of blue chips when they couldn't find an existing product with the companies they believed would make a strong foundation for their portfolio. Where there is demand, there will be products! Demand better products. Communicate with the ETF providers and let them know what you want.
Check the ETF providers websites to find the diversification you need to have a healthy nest egg, and when you don't find the products you want to see there, email them! Barclay's Global Investors (Barclay's Bank) owns iShares.com. PowerShares, WisdomTree and Wilderhill are all ETF providers. Also, check AMEX for more listings.
Check the ETF providers websites to find the diversification you need to have a healthy nest egg, and when you don't find the products you want to see there, email them! Barclay's Global Investors (Barclay's Bank) owns iShares.com. PowerShares, WisdomTree and Wilderhill are all ETF providers. Also, check AMEX for more listings.
3. Diversify and rebalance with a wealth blueprint that is appropriate to your age, instead of "blind faith, buy and hold whatever my broker says" strategies
So, why not just stay all in on T-bills? The Beauty of Rebalancing.
So, why not just stay all in on T-Bills, if that worked so well for Bill and Nilo in 2008? As the charts above on real estate, NASDAQ and clean energy illustrate, there were great gains to be enjoyed by investing in emerging technologies and companies. If an investor were rebalancing twice a year, then s/he could capture the gains of the small caps (NASDAQ stocks in 2000), capture the gains of real estate in 2006 (REITs, which is an industry I've not included in the diversification strategy this year), capture the gains of clean energy in 2007 all while rebalancing back to the desired exposure and keeping enough money safe, appropriate to your age. In this way, the nest egg grows without additional risk - always keeping a percent equal to a person's age in safer, yielding products, like Treasury bills. (Money markets, bonds (not bond funds) and CDs are safer investments as well, although these options are not desirable this year.)
Brokerages, 401(k) providers and CFPs
You'll need to find 401(k) providers and brokerages that have switched to the ETF product offerings. Period. The old way was mutual funds with a basket of everything in the kitchen sink. That plan doesn't work today and it won't work tomorrow either because there is no way of identifying which industry/sector or style has experienced gains or losses.
The easiest way to tell if your broker is a salesperson or a Modern Portfolio Theory person is to ask the question, "Was I properly diversified to begin with?" Did you lose more than 25%? If you did lose more than 25% and determine that your advisor didn't have you properly diversified, it is time to find a better financial partner and 401(k) provider.
When interviewing for new partners, the second question should be, "How are you paid?" New brokerages that encourage their associates to take a balanced view for their clients pay them on assets under management, not commission on how many mutual funds they sell you. I have an article on my home page that gives you ten questions to ask when searching for your perfect financial life partner, called "10 Hard Questions to Ask Your Broker and Yourself." Interview your CFP (Certified Financial Planner) as if your life depends upon it because your lifestyle does.
The easiest way to tell if your broker is a salesperson or a Modern Portfolio Theory person is to ask the question, "Was I properly diversified to begin with?" Did you lose more than 25%? If you did lose more than 25% and determine that your advisor didn't have you properly diversified, it is time to find a better financial partner and 401(k) provider.
When interviewing for new partners, the second question should be, "How are you paid?" New brokerages that encourage their associates to take a balanced view for their clients pay them on assets under management, not commission on how many mutual funds they sell you. I have an article on my home page that gives you ten questions to ask when searching for your perfect financial life partner, called "10 Hard Questions to Ask Your Broker and Yourself." Interview your CFP (Certified Financial Planner) as if your life depends upon it because your lifestyle does.
Here's the quick summary of the questions. Click on the link below to get the full scoop:
- How many years has s/he been handling portfolios and/or trading stocks and bonds?
- What is her/his education (university)? (Brokers do not have to be college graduates)
- What financial certifications does s/he hold?
- What is her/his investment style?
- What is her research criteria? (If they rely solely on "what the company tells them to pitch," they are likely more driven by company sales incentives than real gains in your portfolio.)
- What is the performance of her client's portfolios? (Be careful that you don't get a bait and switch on this one, where they point you to mutual fund pie charts, where the years have been carefully selected to present a positive picture.)
- Years of employment with current company (and where s/he worked before).
- Any complaints filed with the NASD? (Call the NASD to verify that there haven't been any complaints.)
- How much time and energy will s/he give to my portfolio?
- How many market downturns has s/he personally been through in her field? (Don't confuse wisdom with a bull market. This would be particularly relevant to young real estate brokers right now.)
Annuities
Please read what FINRA.org has to say about annuities. They have four articles on the FINRA.org website. In general, annuities are pushed hard by salespeople and are not necessarily the best strategy. Your 401 (k), IRA, health savings plan, college fund, etc., should protect you better than annuities from taxes, from lawsuits and debt collectors and position you for a better upside. So, the idea that annuities are safer is not necessarily the case, especially when the upsides of gains and safety of the well-planned nest egg, and the tax advantages and protections offered for the IRAs, health savings plans and 401(k)'s are considered.
Rebalancing
After you have interviewed and found the perfect Certified Financial life partner, plan on meeting with her at least twice a year to rebalance. In today's recessionary environment, make sure that you have your investments balanced correctly. That way you have the potential for earning some gains, while also supporting the companies, products, goods and services you wish to be an owner and a consumer of. (Those companies need to be healthy enough to make the stuff you need to live and your ownership in them helps that.) Meet again at the end of January to rebalance the portfolio, overweighting any gains you may have made during the Santa Rally (if there is one) into the safer portion of your pie. 2009 is predicted to be another hard year in real estate and the stock market. So, overweight back into safety, keeping a percent equal to your age, plus 10-20%, safe in Treasury bills. Money markets, CDs and bonds will be good safe investments again in the future, but for now, just stick with Treasury Bills. The balance between ownership in the companies of the future and safety during a recession is critically important, as too many wounded investors are now discovering. Rebalancing twice a year, in October and late January, allows you to do that.
4. Know what you own instead of holding a big basket of everything, including companies you despise.
Investing in the future is as simple as investing in the products, goods and services that you need to live and to enjoy your life. How many of you still use turn tables for your music or want to drive a gas-guzzler around? Quite simply, there are better products available and great companies making them.
The person who smashed your nest egg to begin with by not employing Modern Portfolio Theory, by not having investments in strategic, emerging industries, by overinvesting in dying industries and by ignoring sound recessionary strategies is not the person who can resurrect and rebuild your Buy My Own Island fund.
So, if you want to have a very healthy nest egg like Bill and Nilo Bolden, you have to start with opening your eyes very wide, trusting in the sound theories outlined in this article and leaning into the wave of the future, instead of allowing yourself to be swept downstream. The challenges of Wall Street and Main Street are not over yet. Act now to be in the best position possible and to be a beneficial part of the re-emergence of the U.S. economy.
The person who smashed your nest egg to begin with by not employing Modern Portfolio Theory, by not having investments in strategic, emerging industries, by overinvesting in dying industries and by ignoring sound recessionary strategies is not the person who can resurrect and rebuild your Buy My Own Island fund.
So, if you want to have a very healthy nest egg like Bill and Nilo Bolden, you have to start with opening your eyes very wide, trusting in the sound theories outlined in this article and leaning into the wave of the future, instead of allowing yourself to be swept downstream. The challenges of Wall Street and Main Street are not over yet. Act now to be in the best position possible and to be a beneficial part of the re-emergence of the U.S. economy.
First Things First.....
As a financial consultant, I strongly feel that the only advice that anyone can give during these turbulent financial times is to take a good look at your present financial situation.
For those who are invested, please, relook at your portfolio and ask yourself the following questions:
For those who are invested, please, relook at your portfolio and ask yourself the following questions:
- Are you overly invested? If so, what are your exit plans?
- What is your investment strategy?
- What is your investment strategy going to be like with such economical downturn?
- How is your portfolio doing? Down? Up? If so, by how much?
- When the economy was doing so fine and the funds were soaring sky high, are you there to reap the profits?
- And if you're thinking of investing, do you have the funds?
- If you have missed this boat, do you have sufficient fund to take on the next wave?
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