Tuesday, January 30, 2007

How to live on $1K a month?

Is that possible? Yes, this is dedicated to those who are still in single and you really want to save. 4 golden ideas on how to live on $1K a month:

Cook yourself
Where possible, live with our parents or family. It also encourage for bonding and familial ties. If not possible, cook yourself. Cook yourself a breakfast and lunch. The money that you spend per meal should be ~ $3. So you spend $2 X 3 = 6 for breakfast, lunch and dinner, that is $6 X 30 = $180 per month.

Rent a house not a room
Again, live with your parents or family if possible. The strategy is rent a house and rent out rooms with higher price than the market value. I have a friend rent a house at $650 and rent out 3 rooms for $600 and he stays in the smallest room of the house. If you can ever rent out your rooms > $650, that is even best!

Skip your dinner
Dinner is not important. Skip it if possible. Take your breakfast, lunch and tea break at 5 pm. Dinner is not really that necessary.

Shop with your full stomach
As my previous post - How to Save In Shopping, talked to my colleague on this, it turns out that it doesn’t apply to him. Second thought, he may not be nature to like shopping. So, I guess this technique will most probably can be applied for those who love shopping in nature. Anyway, the key is still buy only what you need.

Sunday, January 28, 2007

Balance Funds

Balance funds invest in both stocks and bonds. Depending on the economy, the mix between stocks and bonds will change. Investors will receive returns in the form of interest, dividends and capital gains. These unit trusts are generally among the safest investments but also have lower return.

Personally, this is only type I fund I haven’t started to invest. If you look at it, it is a fund in between the highest risk funds (i.e. stock fund) and lowest risk funds (i.e. bond fund). If I want to take more risk, I go for stock fund and if want to be more conservative I go for bond fund, If I want to diversify my investment, I go for both. If I already diversity my investment (e.g. buying both stock and bond funds), do I really still need to go for balance fund? Will it be over diversity? I kind of think so. What about you?

Monday, January 15, 2007

Bond Funds

Bond funds are funds which purchase bonds for investment. Generally, these funds are income-producing funds with the unit holder receiving interest income. They are wide-ranging from very safe investments (i.e. government bonds) to very risky investments (junk bonds). Depending on your investment preference and risk tolerance, you can choose the right type of bond unit trust for your financial. Bond funds are especially popular during the economic downturn as it is typically have higher interest than fixed deposit. However, if the investment returns of a bond funds less than the fixed deposit, you can forgot about it. No point to invest at higher risk investment and get the lower return than the lower risk investment right? This is something possible especially when the economy of a country is in good shape.

Thursday, January 11, 2007

Stock funds

Stock funds are funds dedicated to the purchase and sale of stocks. The strategy of the fund can be either growth or income.

A growth fund is a fund that purchases stocks of companies that have strong growth potential. These companies pay little or no dividend. Distributions are mostly capital gains. These unit trusts are best for long-term investment due to the capital appreciation. On the other hand, these unit trusts are riskier than income trusts.

A income fund invests in stocks for their dividends. Usually, the return on these funds are made up of dividends received. The stocks of these companies are preferred for their income rather than growth. These unit trusts are good for the conversation investor who prefers current income over capital gains.

Some stock funds are dedicated to specify industries (e.g. high tech) or to specify country‘s stock (e.g. an Argentina fund). Because these unit trusts are highly-selective and highly-specialized, they are less diversified. In the case of unit trusts specializing in industries, the negatives affecting the industry cannot be offset. In the case of country unit trusts, the political and economic risks cannot be quantified easily, especially in the case of third world country. As a result these unit trusts are good for investors who prefer high risk.

Wednesday, January 10, 2007

Financial Independence by Eddie Solomon

A financial independence book by Eddie Solomon. It looks like have a very good review. Check it out.

Saving vs Investing

Saving and investment are 2 different things. Saving is putting aside some money to meet a short-term goal. The main characteristic of savings is that there is no capital loss as the money is placed in low risk vehicles, such as the savings account. But at the same time, there will also be little or even no capital gains in savings. Historically, savings have always failed to outpace inflation. Investing, on the other hand, is taking a measured amount of risk by putting your money in vehicles where you will get a higher return over a period of time. A very important benefit of investing is that the returns have always outpaced inflation.

Although saving money comes first and can therefore be considered more critical, it is not enough. Saving money will only allow you to live comfortably as long as you are working and have some regular income coming in. However, it will not maintain that lifestyle, not for a long time anyway, after that source of income is gone.

Financial independence and financial freedom can only be achieved through investing the money you have saved. Invested wisely, the assets have the potential of churning out more money than your current income. When that point is reached, you do not have to work ever again. Of course, you can choose to work if you want to. But wouldn’t it be out of this world to have that choice?

Tuesday, January 09, 2007

Overcoming Shyness

One of the most inhibiting obstacles to personal growth is the feeling fo awkwardness that afflicts many of us when we feel uncomfortable and tongue-tied in unfamiliar surroundings. This feeling of shyness exists at different levels of severity in all of us.

Shyness is a universal social obstacle, experienced by many people. Fumbling for the right words, inability to socialize, to mix freely among strangers, to relax and enjoy new friends, to say the right things at the right time, can develop into limitations that can stunt our personal enjoyment of like, and inhibit our self-confidence.

Shyness is basically caused by feelings of insecurity and low self-worth. It is a result of a lack of confidence in ourselves, and comes from a belief that we are not good enough.

It is useful to remember that these attitudes spring from your own mind. Confidence comes from within yourself. No one can give it to you. Only you can make yourself more confident and you can do this by convincing yourself that you are a worthy individual, that you are an interesting person, and that you have something special to offer to the world. You do not need to pretend to someone else, or to live up to other people's expectations all the time. By believing that you are a worthy and capable human being, you can feel adequate and self-assured anywhere, anytime.

Work at improving every area of your life that is causing you to feel inadequate or inferior. Work on improving your general appearance, your speech, you general knowledge or your social skills. This process of self-improvement will vastly boost your self-image and self-confidence thereby eliminating your shyness over time.

It is worthwhile to make an effort to overcome shyness, mainly because it is a major obstacle to personal growth. If you can overcome shyness, you will notice a different world. You will enjoy relationships and opportunities will open up for your and you will be much happier person. Perhaps the word financial freedom and financial independence will come to you automatically too. :)

Monday, January 08, 2007

Do not chase fashions

One of the save money ideas is not to chase fashions. Being seen wearing the latest fashions is very cool. It is all the rage and tells the world that you are with the in-crowd. But it is also very damaging to the wallet. It is much better and cheaper to be conventional. It never goes out of fashion! No matter what the seasons, no matter what the period, conventional clothes are always in.

The reason fashion designers come up with new looks every season is simply to sell more clothes and make more money! Imagine if fashions change only once every 5 years, all the designers will be out of work. Frankly, they may not even follow fashions in their normal life.

Cut down on phone calls

Another idea to save money is to reduce your phone calls. A lot of people do not realize that they are overspending in their phone bills. Especially with the technology today, cell phone (called hand phone in Malaysia – no idea why) is so convenient for us to talk. Think about it, you pay money just to talk and nothing tangible exists. Use short messages if can but remember don’t use it for urgent matter as the short messages will be delayed up to 24 hours.

Yeah, some people may argue that it can be used to maintain the bond between wives, husbands, parents and friends for far distant. But do you want to go for 2 hours? 10 minutes is plenty to show your love. Love is not just idle chit-chat. If you really want to chat until 2 hours, why don’t try phone over IP? Use the “Skype” software and the international calls are charges with local call. Good idea, isn’t it? As a general guideline, your monthly phone bill should less than $50.

How to save in shopping?

A very simple answer to that question is to shop with your full stomach. Try it out. Go shopping while you’re hungry and see how much you spend as compared to shopping with your stomach full. So change your strategy, go to your meal fist before you go shopping. Well, the best strategy is to list of the things that you NEED to buy and buy only those items on the list. Straight to your objective, buy and go. No discrimination here. I know this is a little bit hard for most of the girls from my experience. I have no ideas why this happens. Maybe you know the answer? Nevertheless, I will still suggest to go shopping with your full stomach. It works for me and most of my friends if you have intention to save. Happy shopping!

Saturday, January 06, 2007

The definition of Wealth

Don’t confuse the wealth is the same meaning with financial independent or financial freedom. Wealth is different from becoming financially independent and achieving financial freedom. Let me explain. Wealth is to measure how far you are from financial independence or financial freedom. Wealth is in time unit. The more time you have, the better you are close to financial independence or financial freedom.

The definition of wealth is “The number of days you can survive, without physically working and still can maintain your standard of living. For example, if your monthly expenses are $1000 a month, and if you have $3000 savings, your wealth is approximately 3 months or 90 days.

I learn this definition from Cashflow Quadrant: Rich Dad's Guide to Financial Freedom.

Friday, January 05, 2007

Change one thing, Change Everything, Responsible Everything

Our life today is the result of all thoughts we chose to entertain until now. Whether we are happy or not with our present day circumstances, we need to realize that we are fully responsible for causing them. We create our own reality by the way we think. If we had thought differently, felt differently and made different decisions in the past, our present circumstances would definitely have been different. Change one thing, change everything, responsible everything.

If we accept full responsibility for every decision we mad in the past, we cannot blame on anyone for our present circumstances. We are in full control of our life. However, we need to realize it is never too late to change our present circumstances to how we want them to be. Right now, we can wish for a different lifestyle, a different job, or choose to live elsewhere, merely by making a firm DECISION to do so. This decision has to be made before change can become a reality. Change one thing, change everything, responsible everything. This is also how I motivate myself by taking the FULL RESPONSIBILITY of my own life.

Thursday, January 04, 2007

Pay First, Travel Later

Another most common mistake people made is to travel first and pay later. In other words, enjoy first, worry about the payment later. If this is happening to you, stop it. Plan every budget that you need to spend for every travel. If not, I’m sure you’re going to spend a lot. You will buy things that you will never ever consider back home. That means that by the time you get back, the bills will total up to some BIG figure. I experienced it before especially my last trip to Shanghai, China in 2005. Unbelievable, I look at the stuff I bought from China in 2005, 90% of them are useless. I just put there for the sake of displaying. Why do I still buy it, then? I have to admit that the sales person do a very good job. He got my respect. Don’t believe me? Try visiting China and do not limit your budget. I bet you will end up buying more stuffs than I do. The only good useful stuff that I bought from China is the silk quilt. I use it every night. If you ever visiting China, buy only the silk product.

Should you stop traveling then? Hmm… I won’t agree to as I view travel is an investment. Why? Here are my 2 reasons:

  1. Can feel the different experience in the other side of the world. This is knowledge.
  2. Recharge my batteries and open the mind. Get all the inner healing.

Remember, when you’re in vacation, make sure you’re completely on vacation. Or else, your inner healing won’t work. Learn as much as you can (e.g. the culture). One last thing, do you aware to go on a $ 5000 vacation, you just need to save $ 500 per month for 10 months. So, why don’t just plan for it and travel every year? Plan and pay first, travel later.

Wednesday, January 03, 2007

Attack and defense zones in financial planning

Attack is to make money. Defense is to manage your money. Which one is the more important? Even though both are equally important but I vote defense zone in financial planning is more important. Why? This is simply because most people do not pay attention to it. Most people are just focusing on the attack zone. Everyday when we wake up in the morning, here is what we have in mind:

  1. Work hard
  2. Make more money.
Because of most people do not realize it, I vote defense zone is more important.

Concentrating on the attack zone by itself is not wrong. Unfortunately, most folks are so busy making money that they miss putting that money to work to make more money for them. As a result, the outflow of money creates age gaps in their defenses. Most folks try to overcome the poor defense by attacking even harder by putting in overtime or moonlighting.

While this can often bring in some extra cash, it is not the solution to the problem. The problem is the ignorance of defense zones. The holes and gaps must be attended first. Then and only then, all those attack strategies could only make a difference.

So, before we learn how to make more money, we must first learn how to manage our money. We must discover the reasons why we are just transit points for money. It tickles in but flies out straightway, leaving us no wealthier or better off. Focus on the defense zones before you attack. Plan your financial well before attack. Know your enemy well.

Housing Loans vs Mortgage - What is the differences?

They are the same! It is up to you to say mortgage or housing loan. Having say that, I prefer to call it “Housing Loan” than “Mortgage”. This is why:

The word “mortgage is derived from the French words “mort” which means “death” and “gage” which means “pledge”. So a mortgage is basically an agreement until death!

Since the mortgage is the agreement till death, I don’t want it. I don’t want to have agreement with bank till I die. Not worth it! Do you aware how much interest that I have to pay to bank? No way, man.

I want to settle my housing loan as soon as possible. Of course, I will settle my housing loan before my death. In my financial plan, I plan to settle every housing loan that I have within 10 years. It looks healthy so far with the 3 houses that I bought. Unless within one day I lost my job. No kidding. If I lost my job within this 10 years, I will be forced to sell my house. I need some backup plan.

Tuesday, January 02, 2007

This is how I spend my money in 2006

One of my goals in 2007 is to increase my insurance coverage and investment. As you can see in my chart, insurance and investment have only 1% or less out of the total money spend. Need to review my insurance coverage as it is only covered until 35 years old. I may want to consider the 36 critical illness insurance policy. As for the investment, the reason I spend so little in 2006 is because most of the money has been spend in my new house which is planned to be ready by this year 2007.

The Characteristics of Time by Chin-Ning Chu

Very interesting about time characteristic by Chin-Ning Chu in one of her books -Do Less, Achieve More: Discover the Hidden Powers Giving In:

  1. The reality of time exists only with us
  2. The experience of the length of time shifts according to our state of consciousness. 5 minutes may seem to be forever. 5 hours may seem to be fleeting moment.
  3. Although time consists of a past and present, with a potential for future, time only truly exists in the moment of “now”.
  4. Time is an infinite series of “nows” strung together
  5. Each moment, each “now”, carries the entire past and determines the entire future.
  6. The way we spend each “now” creates our destiny
  7. Managing time is about managing ourselves. It is about focus, purpose, and priority. When we are in the moment of “now”, we are in timelessness – the eternity, the time beyond time.
  8. When you live your life by reacting to a outer chaos, you are at the mercy of time and time victimizes you.
  9. When you operate your life from the serene stillness of your inner peace, time protects you and serves you.
  10. When our time is up, no amount of money can buys us a single extra moment.
  11. If our successes do not become reality before our death, we have only ourselves to blame – we have misused time, our moments of “now”.

I like the point 6. The more you spend your in moments of "now", the closer you're toward the success. One of the criteria to live happily is to spend the moment of "now". Focus at the present is the key here, in my opinion.

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