Don't work for money, let your money work for you

Another beautiful statement but what has this statement got to do with you?............. Nowadays, young people with high qualifications get highly paid jobs and live in sheer comfort. Buy the biggest house they can afford, buy their dream car and the money they exchange with their time is being fully spent every month. Some even extend their credit by using multiple credit cards to keep up with the Joneses. Is this bringing you happiness? or more stress as you have to keep up with the credit payment not mentioning all the high taxes, high utilities and high mortgage payments. Your dwelling and car have now become a liability instead of an asset.

Lets change the picture here. Let say you are the highly paid young couple in your 30s, let say you decided instead of buying one big house, you bought 4 low cost houses near some college for rental to students and 1 medium cost house for your own dwelling, living in some comfort. You have a car each to take you to and from work, not a luxurious one but one that can transport you around. Whatever you collect for rental will probably pay for your mortgages so your 4 low cost houses are taken care off. Your own house maintenance is considerable and at the end of every month you still have money left over to put into your investment account.

I know you like the first picture, life is short and why must you be so frugal? You asked. But think about it......you will be happier in the 2nd picture, less stress equates to more happiness.

In the 2nd picture you have created four pipelines churning you continuous income. Imagine 20 years down the road, you have finally paid up your mortgages (1 by you and the other 4 by some other people whom you really don't care for and who don't really care for you but paid up your mortgages ----- how nice!!!) And from now on... you can retire ........

How old or young you retire is entirely up to you. If you are reading this and the ideas in this blog is giving you a good picture and if you are still in college........ immediately..... now..... put your feelings and thoughts into a plan and take action immediately.... you have decided to retire young. For those older ........ let me say this.... its never too late to change your style.

Bring this thought to bed every night and continue to think and feel that you are retiring young and I know you will........

Pay Yourself First

I first came across the term "PAY YOURSELF FIRST" in Robert T Kiyosaki's book "Rich Dad Poor Dad" and I thought to myself "How can I pay myself when I am working for others?" Then again I learned something from Rich Dad Poor Dad...... that is "Don't work for money, let money work for you". Another simple but mind boggling statement. What Robert Kiyosaki meant by "Pay Yourself First" is actually self-discipline. The power of self-discipline!! If you cannot get control of yourself, do not try to get rich......if you are on the quest to learn to invest, you are indeed trying to get rich, so there, listen to the financial guru. It make no sense to invest, make money and blow it. It is the lack of self-discipline that causes most lottery winners to go broke soon after winning millions - people like to say this "easy come easy go" and its true because what the lottery winner is lacking is "self-discipline". You see, it is the lack of self-discipline that causes people who get a raise to immediately go out and buy a new car or take a cruise.

The Richest Man in Babylon, by George Classen, is where the statement "Pay Yourself First" comes from. Millions of copies have been sold but while millions of people freely repeat that powerful statement, few follow the advice.
The 21 Success Secrets of Self-Made Millionaire by Brian Tracy mentioned "Pay Yourself First" in his Success Secret #8 and I share with you what Brian Tracy has to say ......

Resolve today that you are going to save and invest at least 10% of your income throughout your working life. Take 10% of your income off the top of your paycheck and put it into a special account for financial accumulation. If you save just RM100 per month throughout your working lifetime and you invest that money in an average mutual fund that grows at 10% per annum, you will be worth more than RM1 million by the time you retire. This means that anyone, earning minimum wage, if starts early enough and saves long enough, can become a millionaire over the course of his or her working lifetime.

(If you are in your 20s, this is the best time to start saving but if you are already into your 40s, its still the right time to start saving...... If you want to know how much you are worth, key in "What will my savings be worth?" on any search engine and it will tell you how much you are worth when you are in your 40s, 50s, 60s or even 70s. The point here is its never too late to change your mindset and start saving. By 40 you will probably be earning more and if you heed Warren Buffet's advice and not purchasing brand you will probably have more to put aside that those who are in their 20s.)

Developing the lifelong habit of saving and investing your money is not easy. It requires tremendous determination and willpower. You have to set it as a goal, write it down, make a plan and work on it all the time. But once this practice locks in and becomes automatic, your financial success is virtually assured.

(If you have read my first posting and if you are serious about getting rich, you would have by now calculated your worth, the least would be that you will have a mental plan of what you want, so let me nudge you a little....get on with it, put your thoughts and feelings into action....... write down your goals and set a plan and put it into action. Remember, if you fail to plan, you plan to fail.)

Practice frugality, frugality, frugality in all things. Be very careful with every penny. Question every expenditure. Delay or defer every important buying decision for at least a week, if not a month. The longer you put off making a buying decision, the better your decision will be and the better price you will get at that time.

(I like this simple statement above, thank you Brian Tracy! It works for me. If it works for me, it can work for you too. You will be surprise how many things you don't really need to buy. Majority of people, includes you and I, BUY ON IMPULSE.)

A major reason that people retire poor is because of impulse buying. They see something they like and they buy it with very little thought. They become victims of what is called “Parkinson’s Law”, which says that “expenses rise to meet income”. This means that no matter how much you earn, you tend to spend that much and a little bit more besides. You never get ahead and you never get out of debt.

(There you are..........resolve not to be a victim of "Parkinson's Law".......resolve to retire rich......)

If you cannot save 10% of your income, start by saving 1%. Put it away at the beginning of each month, even before you begin paying down your debts. Live on the other 99 percent of your income. As you become comfortable living on 99%, raise your savings level to 2% of your income, then 3% and 4% and so on.

(IMPORTANT: Once you receive your salary, the first person you pay is yourself!!! Transfer that all important 10% of your salary to your Investment Account -- DO NOT PROCRASTINATE!!)

Within one year, you will be saving 10% and maybe even 15% or 20% of your income and living comfortably on the balance. At the same time, your savings and investment account will start to grow. You will become more careful about your expenditures, and your debts will begin to be paid off. Within a year or two, your entire financial life will be under your control and you will be on your way to becoming a self-made millionaire. This process has worked for everyone who has ever tried it. Try it and see for yourself.

(CONGRATULATIONS......if you have come to this point, I know you are serious about getting rich and taking control of your life --- Take charge!!)

“A part of all you earn is yours to keep,

and if you cannot save money, the seeds of greatness are not in you.”

W. CLEMENT STONE

Put Your Thoughts and Feelings into ACTION

Open a special account for financial accumulation today. Make a deposit in this account, no matter how small. Then, look for every opportunity to add to this account. Begin to study money so that you understand how to make it grow. Read books and magazines by experts on the subject. Never stop saving, learning, and growing until you become financially independent.

(Remember that this account is not meant as a spare resource where you can withdraw during time of emergency. You must have another spare cash resource as I have mentioned in my earlier posting. If you are serious about getting rich you will "forget" about this account, put this savings into a trust fund that can churn you a minimum of 10 to 12 percent of earnings, compound this over 30 years...... you will retire rich!!!)

Interesting Aspects of Warren Buffet's Life

In an one-hour interview with CNBC news, Warren Buffet, the 2nd richest man who had donated USD31 billion to charity has the following interesting aspects of his life to share:-

1. He bought his first share at the age of 11 and he now regrets that he started too late!! Mmmmmm let me think.... where was I when I was 11? still in my primary years struggling to learn English......interesting isn't it?

2. He bought a small farm at age 14 with savings from delivering newspapers.
Mmmmm again, it brings back memories of my twin sister and brother selling newspapers in PESTA... it brought tears to my eyes seeing them so timidly trying to earn a few cents.

3. He still lives in the same small 3-bedroom house in mid-town Omaha, that he bought after he got married 50 years ago. He says that he has everything he needs in that house. His house does not have a wall or a fence.
Hey... what do you think? If you were only half as rich or has a fraction of his wealth would you not shift in to a mini castle???

4. He drives his own car everywhere and does not have a driver or security people around him.
This sounds fine with me.... at least he appreciates privacy....keep a low profile.

5. He never travel by private jet, although he owns the world's largest private jet company.
Wow...thats not enjoying life .....

6. His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEOs of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis. He has given his CEO's only two rules:-
Rule number 1: do not lose any of your shareholders money
Rule number 2: do not forget rule number 1
Nice boss to have.......

7. He does not socialize with the high society crowd. His past time after he gets home is to make himself some pop corn and watch television.
Here again, a simple lifestyle.... now you know why he is the 2nd richest man ...popcorn is cheap and watching television is the lowest cost of entertainment. Hey people, we should emulate....emulate....emulate

8. Bill Gates, the world's richest man met him for the first time only 5 years ago. Bill Gates did not think he had anything in common with Warren Buffet. So he had scheduled his meeting only for half hour. But.... the meeting lasted ten hours and Bill Gates became a devotee of Warren Buffet.
I suppose the only common thing they share is the amount of money they have!!!!

9. Warren Buffet does not carry a cell phone, nor has a computer on his desk.
Wow.... how did he survive that for so long, even a 6 years old these days carry a cell phone. And for computer... I wonder how can he live without blogging..........

His advice to young people:
"STAY AWAY FROM CREDIT CARDS AND INVEST IN YOURSELF

I second his advice

Moral of the story

Money does not create man, it is the man who created money
Live our life as simple as you are
Do not do what others say, just listen to them, but do what you feel is good
Do not go on brand name, just wear those things in which you feel comfortable
Do not waste your money on unnecessary things
Its your life, do not allow others to rule it!!!

Investing for Beginners

Beginning to Invest

I was born in a “hand to mouth” poor family of seven siblings aging from infant to 14 years old. My mother had to do odd jobs or simple small businesses to supplement my father’s meager income to feed 10 hungry mouths. Some businesses she ventured into were kind of illegal and I hated them but I was unable to do anything. Our environment does not give us encouragement to excel in our studies although my mother was adamant that all her children will grow up to be literate unlike her. My sisters and only brother did not do well in their studies and I was about the same in my primary years but I suddenly had this inspiration to work hard when I was in my secondary and I managed to work hard in the ensuing studying years.

As the norm, I started to work after my secondary education working as a Receptionist cum operator cum general worker in a hotel with a starting salary of RM80. At that time I was sure I will not want to repeat my parents situation, they were always fighting over money and it’s an unpleasant family environment for the children. I wanted different for my children. I vowed not to remain poor but how am I to get rich with my miserable salary?

I grew up still in my dream to be rich. I got married to a working man and had 2 beautiful children. I still work for others.

I started my investing with whatever I have saved from my salary, going into share market but what is the guideline, what are blue chips shares, to play it safe or to take risk. I was a new comer to this environment, I buy when my friends said they heard its good. I ended up losing money over a long period of time. To this day I still hang on to those shares that I bought 10 years ago and has lost its value by 80%.

I have learned through my investing experience to know what to do before venturing into investing. Here are 10 simple rules to guide young people who are starting to have a need to invest but do not know how……

1. Calculate Your Worth

Make out a list of all your assets, no matter how small they may seem right now. You may do it singly if you are not married or do a combine if you are married and your spouse is keen on a combined investing. You may have at this moment committed to a car for your own use or a house for your own dwelling. Remember that these mortgages are liabilities not assets. EPF (Employee Provident Fund in Malaysia) savings may be considered part of your assets for long term investing purposes only.

Making a list of your assets will assist you in deciding what type of investment will suit you and over what time frame.

2. Do not live in Debt

Nowadays with the easy access to credit cards, young people tend to spend more than they earn. Most people these days spend before they earn which is a very bad habit. If you are already living in debts, get out of it as fast as you can. There is no point considering investing in stock if you are already in this predicament. PAYING HEFTY CREDIT CARD INTEREST CHARGES monthly will eventually eat away any investment returns you may earn. If you are reading this it shows that you are ready to make a change. Do it and get out of debts as fast as you can by daily budgeting your expense; spend only on necessity. You will be surprise how fast you can get out of this hell hole. Continue to visit this post and you will have more stuff to learn as we go along.....

3 Know your risk levels

Think carefully of your future plans, talk it over with your spouse to get the general consensus. Where would you like to be in a few years’ time. How much would you like to have in liquid cash. Have an objective behind your decision to invest. SET YOURSELF GOAL. You may be aiming to retire young, or have a few houses all paid up to live on the rental earnings and free yourself time working for others. Your age, your drive, your circumstance and economic situation will determine what and how your investing will be. Remember low risk, low earnings and high risk high earnings but you may also lose your money faster.

4 Have available cash

Keep at least 3 months of your salary aside in available cash. Your investing should only involve any extras out of what available cash you have in fixed deposit. This is to keep you free of any financial entanglement and you will not lose out by suddenly having to liquidate any poorly performing investment at any unfavourable time.

5 Learn the basics

Find out about various assets classes and their characteristics. The market for property may appear favourable for first-time homebuyers, but a house is an illiquid investment. Equities are relatively volatile, but can be liquidated quickly.

6 Dollar-cost average

First time investors have a lot to learn. By contributing a small amount to a savings plan each month, you avoid having to decide when the time is right to buy or sell – a skill even most mature investors fail to get right. Regular contributions take the emotion out of investing.

7 Take Advice

Avoid following the herd and buying into the latest fashionable initial public offering. News takes a long time to filter down to the guy in the street and chances are that any hot tip is past its sell-by date. Spend some time with a financial adviser, read the papers or books on investing. That way, you can make educated decisions. Here, I would like to stress for people who are about to plunge themselves into investing to take time to study all kinds of investment avenues before making a decision on what and how to invest.

8 Build a core position

Create a core investment portfolio in something solid such as blue-chip stocks that will bring in steady gains over the years. Or if you do not have time to keep an eye on your share portfolio, you can consider Mutual Fund investment. Here again .... do your research.

9 Diversify

Once you have a core position, look around for satellite investments that may spice up your portfolio. Do not only buy equities, consider bonds, property or collectibles to protect yourself against poor performance in one asset class. Remember the age old saying of “Putting all your eggs in one basket”. Diversify......Diversify......Diversify.

10 Hang in there

Patience is a virtue. Stick to your plan, even if your investment seems to be floundering. New investors are often driven by emotion and react at the wrong times. Financial experts will tell you that timing the market is almost impossible, but time in the market will eventually pay off. Your financial adviser is only there to advise. He/She may not predict the market a hundred percent. You will have to make your own decision for the right time to sell or buy. Remember, do not be driven by emotion. If you follow the previous chapters correctly, you will not fail in your bid in investing. You may face some set back some of the times but mostly you will get out of it in time. Time is your best teacher.

These 10 guidelines are good for the starters......however reading them is not going to help you very much but by making a decision now and take charge of your life will. PUT YOUR THOUGHTS AND FEELINGS INTO ACTION!!!!