New Year – Time for Reflection

Every new year will bring us closer to the day we dream of. The day we can stop being in the rat race, the 9 to 5 routine or the weekly 3-shift work we are in. Whether we want it or not we will eventually retire one fine day.

The last day of the year; 31^st December, always give me that feeling of underachievement. Of not doing enough or not completing all that I intended to. It gives me the déjà vu feeling, that I have been on this road before. Why?

It is time for reflection….. had we done what we had set ourselves to do at the beginning of the year or had we done enough for ourselves and for others?

Your Successes

Have you been successful in some of your endeavours; if you have, are they good enough for you, is it up to the standard you want? Are all your successes beneficial to you and to others? Are they good enough for you to repeat over the coming year?

Your Mistakes

If you fail in some of the ventures you have got yourself into this year, are you able to learn from these mistakes (I feel strongly about calling mistakes failures as I believe no one will ever fail, you just miss your target). Mistakes are there for us to learn, we learn not to repeat them and learn to correct them so we make them into successes.

There is No Comparison

I would urge everyone who is on their venture to become successful to avoid comparing yourself with others. You should compete with yourself and not others. Do not compare yourself with your friends, neighbours or even siblings. Set your own standard and target and the only person you compete with is yourself. Everyone is different in their making and everyone succeed at their own pace. You will only get frustrated if you start comparing yourself to others and that will definitely be detrimental to your mental health. You do not want or need that.

I find reflecting a very good way to move on with our lives especially if there are obstacles that we have encountered and reflections give us time to heal and repent and it is good for the soul… have a fun time doing that on the 1^st day of the year.

Plan Well to Retire Well

You have to learn to plan well to retire well. Year-end is usually the budget time for organisation and companies and it could be also the right time for personal planning. As I have said in my previous posts, if you fail to plan, you plan to fail.

Face Your Fear

I asked my young son “Why are you broke before the end of the month?” and he shakes his head with the answer “I don’t know”. Then, after pondering a moment, he said “Maybe because I earn too little, I am going to look for a better paying job.” Well, that may be somewhat true but frankly speaking, no matter how much you earn, it will never be enough unless you put up a good financial plan.

When asked to write down all his monthly expenses, his response was “No way, I am not going to shock myself”.

I felt this is the common fear people faced when its time to financial plan. I would advise all to take the bull by the horns and go for it. Face your fear and find out where you are wasting your money and what is causing you not to be able to save.

Take Time to Save Now

Dream your dream and reach out for the sky. Every success begins with a dream. I find saving as the best way for a novice investor to start creating wealth but it usually start with a dream, a need to save.

a) Obstacles to overcome

There are usually many obstacles on the road to success. Do not fear these obstacles as they are the experiences that you need to achieve success. Find them and overcome them one by one and they will make you stronger by the day.

b) Make time work for you; time makes a difference

If you were to save $100 a month and can earn a 5% interest, how long will it take you to achieve the goal of $10,000. You can find the calculator by typing “how much will be savings be worth” in any search engine to help you do the calculation.

c) Interest adds up

If you want to achieve your saving goals faster, instead of just $100 a month, you can work harder by taking up a part-time job over weekends and put all the earning into this saving plan. Lets say you earn $400 a month and you add this to your original of $100. See how much faster this will grow by using the calculator again.

Learn about compounding interest and how it can work for you.

Convert Your Dream into Reality

List the financial goals you want to achieve for yourself and work towards those goals. Remember, you have to write it down; better still if you let people know of your goals. Be specific; know what your goal is, how much money it takes to achieve that goal and when you want to accomplish it.

Again you will need to write out your plan and how you plan to accomplish your goal.

You need to plan well in order to retire well. Today is a good time to start your planning. Never put off what you can do today till tomorrow.

Giving Back to Society

John Wesley who founded the Methodist Church in the 18^th century used this simple rule to teach God’s love. Universally, God’s love is doing good works.

Do all the good you can,

By all the means you can,

In all the ways you can,

In all the places you can,

At all the times you can,

To all the people you can,

As long as ever you can.

By John Wesley

We read so much about rich people giving back to society what they got from society. People like Bill Gates, the richest man of the world, left his company to focus his time for society. He gave away his wealth for important issues like education and health. Warren Buffet invested $31 Billion to his foundation to help society.

Does all these good doings stop with the rich people? Or do we wait to be rich to do good?

In this season of festivities while we are all enjoying ourselves and having fun time with our family and friends, let us stop for a moment to think about the lesser fortunate. Lets spread joy and goodwill and start to give to others.

I read somewhere that running after money is like chasing after the wind. My father always said that “money” has four legs and we only have two and it is hard keeping up with money. But, if you willingly give and give, they will come back to you. Give with your heart.

So while you are working hard earning money out there, spare some time to do some good this season and continue to do so the whole year round. There is no better time to start than like right now. Start by giving way to a car at a traffic jam, giving up your seat for the elderly in a public transportation, giving your change and a little more in the charity boxes….. in fact you can do a lot more on a daily basis if you are tuned in to giving.

One act of random kindness a day will add up to 365 kind acts you will have done for a full year.

“Retire Young & Rich” – Next New Year Resolution theme

December is the time of the year where people make resolutions to be better for the next year. The Christmas and New Year festivities allow us to spend relaxing time with our family and friends, reflect on the past year’s achievements and shortfalls and shout out our resolutions for the new year.

Yes, the usual resolutions are to lose that extra 10 kg you have gained over the year or to stop smoking or even to be a better person by promising yourself to do a few good deeds a day; give up your seat in public transportation to the elderly, disabled and pregnant etc etc. All these are fine and good but let us change the theme for this year’s resolution.

How about setting a goal to retire young and rich? It is a lifetime goal and if you have set this goal then your next 5 years’ resolutions will be set for you. In fact, your new year resolutions are set for life as you now have a life long direction. Here are 5 I can think of on top of my head; maybe you have more to share……

Year 1: Where Your Money Goes?

Do a comparison of your Income versus Expenses and readjust to balance your personal finance. Your resolution should be to reduce your expenses after your splurging on this festive season.

Year 2: Pay Yourself First

Start looking at ways and means to save so that you can now apportion part of your income to a special account. Target at 10% and once you have achieved your target, reset your goal higher. Instead of spending your bonus money on a new car, use part of the money to open up a special account where you can continue to put in money monthly.

Year 3: Let Your Money Earn Money for you

Following your Year 2 resolution of paying yourself first, your 12-month savings will be earning money for you by now, even as little as earning fixed deposit income.

Year 4: Learn to Invest

Yes! With your new portfolio you will by now have enough to put your money into some kind of investment to earn bigger money. If you are new to investing you will have to start on the safer type like mutual funds and fundamentally sound stocks. Go easy here and advance as you improved in your financial skill.

Year 5: Invest in Yourself

Take lessons on how to earn money or to build a sound business. Read as much as you can on financial literacy. Teach yourself to be an expert in your field of work. Learn, learn and continue learning.

Preparing Yourself for Retirement

Every one has to retire at one point or the other. Whether you retire early or late depend very much on your financial situation and your family background. Some who are late starters; meaning those who are almost at retirement age but still having young children might not be able to retire early even if they want to. Others are luckier in the sense that they have their retirement years all planned out.

Remember, when you retire you are expected to draw on your retirement funds and investment portfolios for at least a minimum of 25 years; some may be longer depending on individual life span.

Here are 3 things you need to do before you retire:-

1. Explore Investing Avenue for your retirement funds

If you are only starting to invest after drawing on your retirement funds, you will have restricted investment objectives, in other words, you cannot afford high risk investment and you definitely cannot afford big losses. You probably have to settle for dividends and interest income where your investment has assured earning.

a. Invest in Stocks

Start to look for fundamentally sound stocks with good historical dividends payout to purchase. Check out the stock historical price and set a target price that you are willing to purchase and look out for the stock movement. Once you draw on your retirement fund, you are ever ready to start your stock investing. Research needs time and its better to start now before you actual retirement date.

b. Invest in Mutual Funds

It would be good advice to put at least 50% of your retirement funds into a good mutual fund to grow your money. Do a survey on the funds available in the market and do a study on the returns of the funds you want to invest in. Again, you need to start looking for good investment funds now rather than wait for your fund to be available.

c. Foreign Currency Deposit

You might want to explore foreign currency investment which gives you better interest rates than your home currency. It will be to your advantage to purchase the currency when the exchange rate is low and put them into fixed deposits.

2. Medical Check-up

For working people who has medical benefits with their companies, it is advisable to go for a full medical check-up before your final workings days. Ironically, once you retire you will probably discover some sickness that we weren’t aware of while you are busy working. So, take time off to do your much needed check; all the scans and tumor markers that are so needed. Mostly, we put off such check-up due to fear of finding out the truth but it is better to know while you are fully insured than to find out later when your working insurance has lapsed.

3. Do a Retirement Budget

Depending on your retirement portfolios… you will have to be realistic when coming out with your retirement budget. Obviously, without an active income, you will need to scale down on your expenses. If you put out a monthly expenses budget, you will be able to know how long your retirement fund will be able to last you. If your stretch is 30 years, then you are safe to retire in comfort, if not you will have to re-look at your expenses. If you can stretch longer years, then it looks like you are ready to retire and enjoy life.

Anyone can trade in the stock market

You don’t have to be a qualified analyst or have a degree to trade in the market. To earn good income from trading can be an option for anyone who has a keen mind and a willingness to learn. Time will help you excel in this skill. Here is a few pointers to help beginners get started.

1. Read, Read and Read

The man who doesn’t read good books

has no advantage over the man

who can’t read them.

Mark Twain

Every one of us knows this “Knowledge is Power”. We are in school a big part of our life, to do what? Yes, to learn, learn and learn. That doesn’t mean that the minute we are out we stop learning. Learning is a life long process which only ends on the last day of our life. So the best way for us to learn is to read, read and read. In order to learn about trading in the stock market, we have to find good book on stock market trading.

2. Do a “Phantom” Trading

If you are new to stock market investing, you might want to do a 3-month trial trading. This may help you get ready for the real investing you would like to go into. You will have to do the same thing similar to what you need to do if you are doing real trading. Pick a few stocks and start studying the company background, history, dividend payment and trading price for the past 10 years. Keep a record of these stock and see how you do in 3-month’s time. Once you are confident, you can start your first trade.

3. Join the membership of a live website

To do both, the “phantom” trading and actual trading, it is better to shop around for a good trading live website to join as a member so that you can use this site to help you track your portfolio. Most site might have a one or two- hour time delay, so, you can either do your trading online (this usually charge very low fee) or with a registered trader.

There are a lot of trading online websites available for you to join as a member so that you can use their site to control your portfolio. Most of these sites has a platform for forum, where investors can communicate and share their views on stocks and market situation.

4. Study the stock you want to invest

Background check on company, share prices for 10 years, do a search on the history of the companies you intend to invest in. Information are usually available on trading companies websites. Check them out and keep your own journals.

5. Diversify by concentrating on only a few shares

Diversification is very subjective. You may concentrate on a few stocks but avoid putting all your eggs in one basket by choose different category of products. I personally felt that one should not over diversify when investing.

6. Keep track – Create your own personal "Watchlist"

Use a reliable and near real time site to create your "Watchlist". This way you can keep track of your portfolio easily and you can also have a quick glance of how the stocks are doing every trading day. You may also want to keep a separate "watchlist" for any potential stocks you plan to purchase. By doing this, it will help you keep track of the price fluctuation in order that you can make the right decision at right time.

Strategise Your Investing

Sometimes when you read on “Investing” topics and “Investing” books, you get all kinds of advice, all kinds of strategies and all kinds of methods to invest. At times you even get contradictory strategy. Some says to diversify, others advise to stick to one; all with good reasons… So, who do you listen to?

Then, you might be told to listen to the successful ones and do exactly what they do and you won’t go wrong. Here again there are so many successful ones with different methods and ways. If you are new to investing, you get more confused. Some might just give up on their quest to invest.

For me personally, my strategies change with time and in order for us to invest wisely we must keep abreast with the current news and changes in the economic climate. Your have to learn to strategise as the earth is evolving as today maybe good to invest in REIT but tomorrow is Gas & Oil, then it just might change to pharmaceutical or even plantation. Stay resilient.

The following are the “holy grails” of a good investor:-

1. Emotional Control

2. Having Guts

3. Having a Clear Vision

All the above 3 points are actually integrated. If you have a clear vision to invest in some stocks, then you must have the guts to hang in there when the going gets tough and having a perfect control on your emotion. Ride out the rough water and you will then be able to enjoy the calm sea.

Select a few stocks and start monitoring the movement of such stocks, after a while you will feel more comfortable to invest in them as you will be able to gauge the company’s direction. Emulate some of the successful investors but come out with your own strategies where you feel most comfortable.

Happy Investing!!

Financial Literacy – your insurance to living

Today is Sunday, I woke up ready to have a lazy day but when scanning news online, I had headline like this “1,600 turn to Bank Negara’s AKPK unit every month” screaming at me. This is alarming for a small country like Malaysia.

These 1,600 individuals turn to the Credit Counselling and Debt Management Agency (AKPK) for help to manage their debts. What about those who are also in debts but are not aware yet and also there are those already in debts and trying to clear them on their own to save their pride. I am appalled by just thinking about it.

As reported by Rashvinjeet S Bedi, the number seeking help monthly has tripled since the agency was set up 18 months ago. And I am sure it will continue to rise if nothing is done to educate these people about how to handle their personal finances.

When I started this blog, my main objective is to bring awareness about how to value money to the younger generations; Generation X and Generation Y who should now be in the thirties and twenties and have just started to earn their own money and be out there to swim with the sharks.

I wanted so much to warn these young kids about “money danger” that some of my postings had become so dull, so boring, so not exciting and so annoying as a “nagging mum”. Yes, who wants to live frugally or live a simple life just to ensure there is enough money to keep us going when we are old. How uninteresting can that be? There are so many “happenings” out there that you would want to get your hands into.

To emphasise on why you should, here are the 2 real life examples quoted by reporter Rashvinjeet:-

“DR AZAM, 28, had it all: two flashy cars, a beautiful home and a flourishing career. He wore expensive clothes and lived extravagantly on credit.

He renovated his mother’s home and decorated it with expensive Italian furniture. He took a loan for the renovation and bought another house.

Without realising it, Dr Azam owed creditors RM400,000 in housing loans, hire-purchase loans and credit card debts.

Stuck, he approached the AKPK for help. Being single and with his mother being the only dependant, Dr Azam was advised to sell his house. He moved in with his mother and sold one of his cars.

In the end, Dr Azam was able to save 45% of his monthly loan payment.”

This is a typical example of living beyond your means and spending your money before you even earned it. At least Dr Azam can still be rescued and live a comfortable life. Lets look at the next example:-

“BEFORE the economic crisis of 1997, Allen was a sales manager earning a five-figure monthly salary, living a comfortable life. However, the economic downturn forced his employers to shut down operations in Malaysia.

At 43, it was hard for him to find a new job. To complicate matters, his wife has a medical condition.

Allen turned to loans and credit cards to fund his lifestyle. Soon enough, creditors began hunting him and threatening bankruptcy.

Suicidal, Allen turned to odd jobs, making less than RM1,000 a month. He skipped meals to ensure his wife had something to eat.

His wife changed his mind about suicide and suggested that he seek the help of AKPK.

Allen had RM200,000 in his EPF, although he could only withdraw the money at 55.

With a debt of RM130,000, AKPK advised him to consider bankruptcy as an option, so that he would be able to settle all his debts when he turns 55.”

I truly empathised with Allen. Earning a five-figure income in the 90s is a lot of money but obviously he did not foresee the economic crisis. What we can do now is to learn from this very painful lesson.

A good friend of mine thought me to use the “Worst Case Scenario” method of looking at every situation. Do a “worst case scenario” of your financial situation. How much mortgages, loans, debts do you have and if you were to lose your job today, how are you going to survive. Do you have “Plan B”? Really look at it, it is scary but it is necessary.

Change your ways. Do not spend indiscriminately or at your wimp and fancy. Think before you spend.

CHANGE

Time and again, we need to change but change is hard.

Sometimes we change due to living changes

or we will wait for “hurt to change”

but never wait till you have to “despair to change”.

It may be too late or too drastic, like in Allen’s case.