Now, here comes the more controversial part where some may argue my thoughts or strategies won’t work while some may agree. Whichever the case, remember, we decide our own lives and must be willing to accept the consequences of our decisions.
It is a cycle of life where your parents may have supported you and then you support yourself and maybe later you support your kids and maybe (only maybe) your kids support you. But we have to start somewhere. So, let’s start from when you start working. In today’s job environment, there are too many degree holders! Hence, when you have a degree, you still start at the very first rung in your corporate ladder i.e. management trainee or sales rep. Unlike in the past, we started at executives which are merely 1 to 2 grades below the manager.
Most people start their career with nothing. If lucky, the father lends them his car to go to work. Regardless of what, most people try to start their savings at this age. When you are starting at this stage, there are basically 3 important things you need to be clear in your mind:
a) what are the things you cannot afford to lose?
b) when you will break even given your current income?
c) what are you good for?
In the 1st part, you may notice that there is no mention on savings. Most young people attack this point. It is pointless to talk about saving when you have yet to accumulate some depreciating assets (eg. Car, mobile phone, gym membership), leave alone money-making assets. So, it is really not practical to start your working life by savings. Not only that it won’t work, in fact it can be very discouraging when you realize that after a few years of savings, you basically still don’t have any savings! And probably end up with even more debts!!
So as you first start, stop thinking about savings. The time will come but definitely not now. What is important is to focus on things that you cannot afford to lose. Can you lose a job? No! Can you lose your health? Definitely no! So, your first wealth accumulation is your life assurance. We all know, we are worth more when you are dead or sick than when we are alive :(
Then, you begin your journey of accumulating ‘depreciating assets’. These are simple things that you have with a salvage value. For example, when you buy a car and sell it off 5 years later, it still has a residual value. Why is this important? That’s because once you own some of such assets, you basically pay the differences when you change to a new car rather than paying full price. Accumulating such assets is also in a way forced saving. With interest rates for car running at 3% p.a., go for it man! Even your fixed deposit is generating about the same amount of interest. But remember, you must include your maintenance as part of your car purchase. If your car maintenance cost is higher as your salvage value, you are back to square one. House? Yes if it is cheaper than renting after you pay your down payment. Don’t expect to make money on your first house. Treat it as rental. It makes getting the 2nd house easier in the next round as you start paying the difference, not from zero. Remember, consider maintenance cost as well. There are jokers who renovate their house more than the salvage value. Other depreciating asset will be your mobile phone, house air cond, computers but all with the same guideline, make sure maintenance and upgrades do not exceed salvage values.
At this stage, always remember that your savings on your current salary will not get you anywhere. It is time to earn more, not save more. Ask yourself a simple question. If your salary is RM3k per month, and you can save 100% i.e. RM3k, will you have a perfect life ever after? If the answer is ‘no’, then stop talking about saving at this stage! It is a time to make more.
How do you make more? If you are an employee, always remember to upgrade your skills. Ask yourself what you are good for. Never see what you need to learn from your current position. See it from where you want to be. Imagine yourself being in that position, look back to your current position and ask yourself what skills you need to build. Forget about increment, at best it helps you in your inflation. But go for promotions as this is where you quantum leap. Always set your own horizon in your current job. To me, 3 years is good and renew every 2 years. This horizon will help you see what you need to do with your career and also put some urgency in your action plans.
The above principally addressed the 1st stage – accumulating some assets and building what you are good for. This blog is long and so I have decided to put the next stage in my next blog i.e. when can you break even.
Until then, continue accumulating depreciating assets with maintenance cost in mind, and continue upgrading your skills. Good luck!
Saturday, October 06, 2007
Saturday, July 21, 2007
The inconvenient truth about savings
Recently, there has been quite a number of discussions on saving money and retirement. After a few rounds with different friends and colleagues, I noticed that the outcome is almost like golf – more heartache than good memories!
Now, I don’t claim to be a financial expert and for the same token, I don’t think financial expert should claim they are the greatest financial planners as well.
I’m writing a 2-part articles this time and for the first part, I prefer to bring out a few shallowly understood concepts and also some possible misconceptions.
Here we go:
Investment
We buy a new phone and just because it’s expensive, we call it an investment. Hello…when you are using something immediately, you call it ‘buy and use’. Not investment. Investment simply means something that today it costs more but in the long run, it is still cheaper. Does your phone appreciate in value?? Stop cheating ourselves with nice literature words :)
Depreciation
There are a lot of people that buy Japanese cars because of their relatively higher resale value. But we need to understand that this is only true when we are buying new cars so that when we want to sell it, we lose less in depreciation. However, if we are buying a second hand car, what‘s the difference? You buy at lower prices and so you sell it away at lower prices, right??
Packages of 10’s are cheaper?
Well, if you go for massages or facial treatments, you will always come across the promotional packages they are offering. No doubt that they could be cheaper to buy en bloc, but that doesn’t mean you see more money in your savings. Imagine this. I usually go for my massage biweekly and the attendant suggests me to buy sets of 10 for the price of 9. While it is true mathematically in my savings, but how sure am I that I will see the RM80 I saved in my savings? Can I be very sure that that I will not spend RM80 on something else for the next 4 months? But one fact is clear. I have to pay RM800 upfront first!! So, packages only work if you have a fixed pocket money but you intend to stretch it further.
Getting loan for investment
This is a real funny one. Investment usually refers to the money you ALREADY have and you try to invest carefully so that they work harder for you. But sometimes especially when during market boom, there will be guys who borrow money to invest. No money but plan to invest?? This is not investment. This is called trading i.e. buy low and sell high but using banks to finance the transaction. So remember, that’s called trading. Same thing for a house. When you plan to buy a house and go for 90% loan, you are not investing because you don’t have the real money. You are…TRADING. You try to buy a house at lower price and sell it at higher price and trying to finance this transaction through a bank.
Unit Trust
This area is also quite misunderstood. I’m not against trusts. I have some myself. But again, we need to understand that there are such things called commissions (between 5 to 6.5%) and management fees (0.5% to 1.5%). It could be front loaded or backloaded but the fundamental questions we must always ask ourselves are: if I today buy 1000 units for RM1,000, how much will I get back in REAL cash when I sell that 1000 units 3 years later? Most agents will tell that if the price is RM1.50 per unit, then you will get RM1,500. However, one must understand that the growth of 50% in the 3-year period is actually not 50% but probably 56% to 58%. That is because there is commission and management fee involved. So, buying prices need to be lowered to accommodate for the fees.
Financial planners
This is also quite interesting. It is good to talk to some financial planners and see their views and that’s a great way to cross check against your plan to make sure that it is still a sound plan. But, you still need to be caution because that very guy who comes and sees you and tells you how to achieve financial freedom is probably also actually a guy who has not attained financial freedom himself. There will naturally be discussion on diversifying risks in different investments, but at the end of the day, it still stretches from insurance on one hand to stocks on the other and are usually services from the company he works for. If there’s one guy that also considers buying property, opening a coffee shop, insisting you pay your credit card first, then he is most likely the right guy you can pursue. Otherwise, you could be talking to a salesman actually.
Save money for your kids?
It’s true that we need some cash. However, we need to know how much cash we need for our usual expenses and rainy days. But there are guys who try to save money for kids’ future. We all know that death is certain. So, why not ‘maximize your death’ by buying insurance? Then, your kids use your current and mid-term savings, but use your insurance money when you check out from earth.
Interest – tool or enemy?
I have seen a lot of friends who frantically compromise lifestyle in order to clear their loans. Interest, in their belief, is the no.1 enemy. I beg to differ. Interest from loans is actually like a knife. It can be used for cutting vegetable and it can be used for killing. But the knife is not the cause but the user is. The knife is merely a TOOL. I strongly suggest we don’t go bonkers about interest and treat it like your family’s foe. It’s a tool and use it wisely. Evil of interest is widely known and I will not elaborate. But I need to share some benefits of interests. Interests ‘fast forward’ time so that you can start using something before you are qualified to. If you need to save to own a car but your job requires a car immediately, interest comes to the rescue. If you have a business that will yield 20% returns but you don’t have the money, an interest rate of 10% will realize your opportunity. For those who still disagree, try to find yourself an aunt that can lend you RM200,000 for 20 years and do not need any collateral. If you find out, please introduce to me too!
Well, hope the 1st part is of some values to you. On the 2nd part, I shall talk about what I think we should do at different stages of life in the road towards retirement or financial freedom.
Sunday, May 13, 2007
Do you have a PCARD for work?
Nope, PCARD is not a passport or a green card for a foreigner to work. It's actually a mnemonic that helps me remember the generic skills that we need either in our work or life. These skills are so basic and so generic in nature that it is overly easy for us to overlook or ignore them as unimportant.
I'm sure most of us have heard terms like EQ, soft skills, people management skills and leadership. On the personal life part, you may have heard about discipline, managing time, socializing skill and learning piano especially nowadays where middle income group parents and above are frantically trying to equip their kids will 'skills of life' such as piano (pain-o maybe :)), art class, reading skill upgrade...(talking about stress, are we the victim or the perpetrator?)
If you are ever confused to put all these skills on a table so that you can plan and decide what's important, then may I suggest 'PCARD'. PCARD stands for 5 generic skills that after observing and testing them across all disciplines and aspects of personal life, they remain relevant and important till this day. So what are they? Here we go...
Projection management skill (whatever tasks that you cannot finish immediately or require others to do as well)
Communication skill (talking to business partners, long last friends, talking to kids...)
Analytical skill
Resource management skill (people, time and information)
Decision making skill
Not sure if the skills are 'fully transferable' from one job to another? from work to personal life? Well, let's see. Supposed a person works as an account executive. She needs to make sure the monthly reports are submitted on time (P skills), she need to work with other departments to get info or follow procedures (C), she needs to write a summary of what happens to the numbers (A), she needs to delegate some new tasks to her new management trainee (R skill) and she needs to decide whether she needs extra time to generate a last-minute report requested by the boss. After a hard day work, it is finally Saturday. She is assisting her sister in her wedding dinner (P), she answers calls of her long-last friend to suddenly appear to sell her some things (C), she detected a foul smell from the fridge and is checking what the cause is (A), she is planning a trip and try to apply for annual leave (R) and she has to decide whether should she accept her company's recommendation to move to Marketing as part of her career building.
If you check the skills against your current job, are PCARD skills required too? A marketer launches a new product (P), needs to talk to suppliers for best deal (C), needs to check the best way to launch it (A), check spending against budget (R) and decide which location to use for launch (D).
If you are with me now, it's always pcardpcardpcardpcard...
Most parents send kids to learn new skills such as music, reading and dancing. All those to me are secondary skills. What the kids should derive form these classes is trying to learn the generic skills of PCARD. For example, reading music notes and playing the right key on the piano are learning analytical skill. Some practice art. That's visual communication. Some dance. That's analytical skills too. Have you noticed dancers trying to check their posture in front of the mirror? Or in deep thoughts how they cannot make the turn swiftly? They are analysing. What about reading? It's about how to gather and manage information (resources).
So, I'm sure the mid year appraisal is coming. Check your technical skill gap such as software and marketing communication as well as your soft skills gap using PCARD. May be this time you want to impress your boss by using PCARD to assess your soft skills and what you need to improve. Remember: Impressing your boss is also a ______________ skill? Yes, communication skill!
I'm sure most of us have heard terms like EQ, soft skills, people management skills and leadership. On the personal life part, you may have heard about discipline, managing time, socializing skill and learning piano especially nowadays where middle income group parents and above are frantically trying to equip their kids will 'skills of life' such as piano (pain-o maybe :)), art class, reading skill upgrade...(talking about stress, are we the victim or the perpetrator?)
If you are ever confused to put all these skills on a table so that you can plan and decide what's important, then may I suggest 'PCARD'. PCARD stands for 5 generic skills that after observing and testing them across all disciplines and aspects of personal life, they remain relevant and important till this day. So what are they? Here we go...
Projection management skill (whatever tasks that you cannot finish immediately or require others to do as well)
Communication skill (talking to business partners, long last friends, talking to kids...)
Analytical skill
Resource management skill (people, time and information)
Decision making skill
Not sure if the skills are 'fully transferable' from one job to another? from work to personal life? Well, let's see. Supposed a person works as an account executive. She needs to make sure the monthly reports are submitted on time (P skills), she need to work with other departments to get info or follow procedures (C), she needs to write a summary of what happens to the numbers (A), she needs to delegate some new tasks to her new management trainee (R skill) and she needs to decide whether she needs extra time to generate a last-minute report requested by the boss. After a hard day work, it is finally Saturday. She is assisting her sister in her wedding dinner (P), she answers calls of her long-last friend to suddenly appear to sell her some things (C), she detected a foul smell from the fridge and is checking what the cause is (A), she is planning a trip and try to apply for annual leave (R) and she has to decide whether should she accept her company's recommendation to move to Marketing as part of her career building.
If you check the skills against your current job, are PCARD skills required too? A marketer launches a new product (P), needs to talk to suppliers for best deal (C), needs to check the best way to launch it (A), check spending against budget (R) and decide which location to use for launch (D).
If you are with me now, it's always pcardpcardpcardpcard...
Most parents send kids to learn new skills such as music, reading and dancing. All those to me are secondary skills. What the kids should derive form these classes is trying to learn the generic skills of PCARD. For example, reading music notes and playing the right key on the piano are learning analytical skill. Some practice art. That's visual communication. Some dance. That's analytical skills too. Have you noticed dancers trying to check their posture in front of the mirror? Or in deep thoughts how they cannot make the turn swiftly? They are analysing. What about reading? It's about how to gather and manage information (resources).
So, I'm sure the mid year appraisal is coming. Check your technical skill gap such as software and marketing communication as well as your soft skills gap using PCARD. May be this time you want to impress your boss by using PCARD to assess your soft skills and what you need to improve. Remember: Impressing your boss is also a ______________ skill? Yes, communication skill!
Saturday, March 24, 2007
Net deficit after 3 months...
Like most people on this planet, I joined the hopeful and like the hopeful, I set new year resolutions. As most of us have expected subconsciously, resolutions are not meant to last. The only hope is that may our resolutions last as long as long as our problems!
While I have no problems missing resolutions, this year was a bit different as I set myself for the first time a resolution of a new category. A few months ago, a client of mine gave me a few CD's with the title '4 lessons of Liao Fan'. In a synopsis, it's about a guy whose life was going 100% as fated until one day he made some good deeds. To his surprise, his fate started to change. The learnings are about how our actions can still change the destiny. Being motivated by these cd's, I made a resolution to do 1000 good deeds a year. For a statistician, that will mean about 3 good deeds per day.
First day, well...life was a bit slow so I missed my daily target. 2nd day...completed 2 but must work harder the following day to catch up with 'lost sales'. After a week, I realized that my best score was 2 per day. A week later my 2 remained the best score but the problem was that the quality of 2 dwindled. I had to include 'good deeds' like slowing down my car to allow a kid to cross the road, holding the lift door for a stranger...which was more of a courtesy than good deeds. But like any other sales guys, we have to do what we have to do.
I can miss my resolution to lose 3 kg or to improve my golf by 5 strokes and I don't think it has any spill over effects to the following days. But missing the good deeds as resolution is something very different. It blatantly tells me that I have not created enough good deeds to build a better aura for the future but that is still ok if there were also not many bad deeds done daily. But a quick check will easily reveal 5 incidents of bad deeds per day!
If I were to treat good and bad deeds as credit and debit, I have a NET DEFICIT!!! And why I'm still ok is primarily because I'm using my savings from past lives. But it's also quite true that opportunities for good deeds may also be hard to come by in our daily life style. For me, I'm in a car to work in the morning, office from 9am to 6 pm. During lunch, I'm surrounded by temptation of good hawker stores above everything else. Have dinner at malls or home. Watch TV for a few hours and...hmmmm. I guess that's it! While I'm sure there are opportunities, but it's so easy to miss if I don't pay attention.
Now, if we look around us, whether it's ourselves or our colleagues and friends, chances are low too if we do not make an effort to find. From time to time, we have heard comments like 'how could this happen to a nice guy like him, who does not do any harm all his life' (but the question is has he done anything good?). I have seen how religious people pray but sometimes it is more a 'request or wish list to God' than good deeds. God, please bless my kid so that he recovers fast, please bless my husband so that he travels safely, please bless my family to be free from harm...if you notice, the word bless is almost as good as 'help me'. So, where's the good deed? I'm not saying that we should not ask for blessing but I think that we need to do more than that.
One thing I benefited from 'missing my resolution' is that I have created a sharper eye for good deeds within the ecosystem of my work life. Example, we can read the paper and once we see any plead for donation and we think it's genuine, let's write a cheque while it's still hot. Put some inspirational cd's in the car for some moments of coaching while stuck in a jam, look for a vegetarian restaurant around the office and encourage colleagues to go green once a week, surf the net during lunch for some organization who need help. You need not donate but you can definitely send the mail to people like me who are desperate. Spread news that you like to help needy people in the office and I'm sure some will come forward iwth some charitable organizations they know. Use your 'authority' to set a target for your staff to find you at least 1 opportunity per week and I'm sure they are happy to help out. As you can see, the list can continue!!
Since I miss my target so badly, I shall include this blog as one of my good deeds...if you don't mind :)
While I have no problems missing resolutions, this year was a bit different as I set myself for the first time a resolution of a new category. A few months ago, a client of mine gave me a few CD's with the title '4 lessons of Liao Fan'. In a synopsis, it's about a guy whose life was going 100% as fated until one day he made some good deeds. To his surprise, his fate started to change. The learnings are about how our actions can still change the destiny. Being motivated by these cd's, I made a resolution to do 1000 good deeds a year. For a statistician, that will mean about 3 good deeds per day.
First day, well...life was a bit slow so I missed my daily target. 2nd day...completed 2 but must work harder the following day to catch up with 'lost sales'. After a week, I realized that my best score was 2 per day. A week later my 2 remained the best score but the problem was that the quality of 2 dwindled. I had to include 'good deeds' like slowing down my car to allow a kid to cross the road, holding the lift door for a stranger...which was more of a courtesy than good deeds. But like any other sales guys, we have to do what we have to do.
I can miss my resolution to lose 3 kg or to improve my golf by 5 strokes and I don't think it has any spill over effects to the following days. But missing the good deeds as resolution is something very different. It blatantly tells me that I have not created enough good deeds to build a better aura for the future but that is still ok if there were also not many bad deeds done daily. But a quick check will easily reveal 5 incidents of bad deeds per day!
If I were to treat good and bad deeds as credit and debit, I have a NET DEFICIT!!! And why I'm still ok is primarily because I'm using my savings from past lives. But it's also quite true that opportunities for good deeds may also be hard to come by in our daily life style. For me, I'm in a car to work in the morning, office from 9am to 6 pm. During lunch, I'm surrounded by temptation of good hawker stores above everything else. Have dinner at malls or home. Watch TV for a few hours and...hmmmm. I guess that's it! While I'm sure there are opportunities, but it's so easy to miss if I don't pay attention.
Now, if we look around us, whether it's ourselves or our colleagues and friends, chances are low too if we do not make an effort to find. From time to time, we have heard comments like 'how could this happen to a nice guy like him, who does not do any harm all his life' (but the question is has he done anything good?). I have seen how religious people pray but sometimes it is more a 'request or wish list to God' than good deeds. God, please bless my kid so that he recovers fast, please bless my husband so that he travels safely, please bless my family to be free from harm...if you notice, the word bless is almost as good as 'help me'. So, where's the good deed? I'm not saying that we should not ask for blessing but I think that we need to do more than that.
One thing I benefited from 'missing my resolution' is that I have created a sharper eye for good deeds within the ecosystem of my work life. Example, we can read the paper and once we see any plead for donation and we think it's genuine, let's write a cheque while it's still hot. Put some inspirational cd's in the car for some moments of coaching while stuck in a jam, look for a vegetarian restaurant around the office and encourage colleagues to go green once a week, surf the net during lunch for some organization who need help. You need not donate but you can definitely send the mail to people like me who are desperate. Spread news that you like to help needy people in the office and I'm sure some will come forward iwth some charitable organizations they know. Use your 'authority' to set a target for your staff to find you at least 1 opportunity per week and I'm sure they are happy to help out. As you can see, the list can continue!!
Since I miss my target so badly, I shall include this blog as one of my good deeds...if you don't mind :)
Saturday, January 27, 2007
Passing Moment
In our routine morning to work, be it in a bus or a car, we will have the same vision of things around us moving towards the back as we charge forward to our office. The same physics happen as we hed towards home. We could be so used to the view that it may even become a blind spot i.e. we don’t even notice it’s there again.
Most of us know that those are the ‘passing images’ and they do not belong to us. We will not cry because we lose it nor we crave their existence. However, many of us are not aware that life itself is a journey like a car trip and the views surrounding us are the events and people that we come across. The difference with the actual car trip is that we do crave for that view to stay and we do cry when those views are gone!
When we have a kid, the kid merely comes to the world through the mother and into our life. However, it is actually still a different car trip. It so happens that your kid’s car is moving next to you and hence you see your child as the view. However, we tend to think that the view belongs to us and crave for it to stay that way. The kid’s car next to us are next to us as long as the factors remain i.e. it could be a traffic jam, it could be two cars waiting at the traffic light or two cars parked together. But we need to know that once the factors are gone, a new view appears. And it will be so as long as our car is moving.
As for the emotional state, we must also know that a lot of events that we get involved in are also passing moments. We may be exceptionally angry with a subject, but that subject itself is also a passing moment just like the view from our car window. If we start to see that all these negative events are passing moments (i.e. very momentary), we may then ask ourselves whether it is worth the anger for such passing moments.
So, next time whether you are in a car trip, at a Japanese fastfood restaurant with the conveyor belt, air plane or jogging, remember that our view around us is merely a passing moment. What can we do? Treasure it if it’s good, don’t over-react if it’s bad because it is another passing moment.
Most of us know that those are the ‘passing images’ and they do not belong to us. We will not cry because we lose it nor we crave their existence. However, many of us are not aware that life itself is a journey like a car trip and the views surrounding us are the events and people that we come across. The difference with the actual car trip is that we do crave for that view to stay and we do cry when those views are gone!
When we have a kid, the kid merely comes to the world through the mother and into our life. However, it is actually still a different car trip. It so happens that your kid’s car is moving next to you and hence you see your child as the view. However, we tend to think that the view belongs to us and crave for it to stay that way. The kid’s car next to us are next to us as long as the factors remain i.e. it could be a traffic jam, it could be two cars waiting at the traffic light or two cars parked together. But we need to know that once the factors are gone, a new view appears. And it will be so as long as our car is moving.
As for the emotional state, we must also know that a lot of events that we get involved in are also passing moments. We may be exceptionally angry with a subject, but that subject itself is also a passing moment just like the view from our car window. If we start to see that all these negative events are passing moments (i.e. very momentary), we may then ask ourselves whether it is worth the anger for such passing moments.
So, next time whether you are in a car trip, at a Japanese fastfood restaurant with the conveyor belt, air plane or jogging, remember that our view around us is merely a passing moment. What can we do? Treasure it if it’s good, don’t over-react if it’s bad because it is another passing moment.
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