You Want to Win, or to be Safe?

On 31st December 1980 (wow ... yes ... in the previous century! ...I am a Centurion ... almost ...hehehe!), I bought a book - "Business as a Game" - by Albert Z. Carr.

At the back of the book cover, it said: "How to succeed in business by really trying. Is life in the executive jungle really a game? Yes, ... and the difference between the men who make it to the top and the also-rans is in mastering the business game's unwritten rules and hidden calculations..."

I read in the newspapers last week-end that there are thousands of unemployed university graduates. A mismatch between what the market demands, and the supply by the universities. So it seems.

However, who are the graduates who managed to get job offers? Yes, those who are are able to adapt.

Yes, those who are versatile. Have multiple talents. Played team games. Got involved in extra-curricular activities like the Boy Scouts or Girl Guides or St John's Ambulance Brigade. Got involved as actors/actresses in the school dramas. Played leadership roles. So, yes ... life is also a game! In this case, your working life ... your "getting a job" life.

In life, do you play to win? Or to be safe?

As an undergraduate, to play to win, you must be the best. Either academically, or (even better) both academically and in extra-curricular activities. You represent 5% of the undergraduates, when you are in this category. 1% when you excel both in and out of the lecture room.

Similarly with life. To be safe is to be mediocre. To be average. Like 95% of the people.

To play to win, you need to be in tip-top condition. To take be an Olympic Champion, you need to train everyday. Four years before the actual day, your training has to start in ernest. Do you want to be an Olympic champion?

Two "investment experts" exchanged letters in The Star newspaper. One said that savings kept in the Employees Provident Fund (EPF) earned better returns, than if they were to be invested in the local stock market.

The other said that investing your savings in the stock market is better than keeping it in the EPF. This expert (surprise, surprise!) represents a mutual fund company which encourages the public to take out their savings in the EPF, and invest in mutual funds.

Both are right. Huh? How can both be right? Surely there is Truth and there is Falsehood? Day and Night? Black and White?

Yes, you are right! And you are wrong! Heard about half-truths? Dusk and dawn? The colour Grey? Well, the two experts used different methods of computing the returns.

However, what may interest you is the conclusion by one of the experts. He wrote, "... based on the Sharpe Ratio, EPF is any time far better than KLCI (local stock market index in "Malaysia - Truly Asia").

"... we are 95% confident that the EPF returns will range from 3.7% to 9.7%. ...KLCI returns will range between - 51.6% and 72%. The lowest return from EPF is positive +3.7% versus negative -51.6% for KLCI".

The moral of the story? If you want to play safe (and average), play the investment (money) game using the defensive strategy. Get a maximum (potential returns) of 9.7%.

If you want to win (be rich!), play the game using the assertive (not aggressive) strategy. Get a maximum (potential returns) of 72%.

In short, life's a game. To play to win, be the best in your field. To play the money game, aim to be a millionaire if you want to win. Winners get a better deal!

I wish you Success in your undertakings and Good Health and Wealth to you and your family. Take care!

P.S. "But, wait!" ... (you scream), ... "I may lose 51.6% of my savings if I follow the so-called assertive strategy". Well, Robert Kiyosaki does not recommend you invest in mutual funds. Or play the stock market, as most of us play it (i.e. lose money ... no, not you, of course ... the other 95% of the players), precisely because of this concern of yours.

P.P.S. "So how?", you may ask. The answer? There is no instant path to wealth. No short investment advice. Read all the articles in this blog (hehehe!).

P.P.P.S. In short, life's a game. Making money is a game. To win the money game, you need to start by targeting an income of at least a million dollars. Passive income!

What is Your Net Worth?

Why is your Net Worth important? Because once you have a Net Worth (instead of net liability!), you will be able to proceed to more wealth! "The journey of one million dollars starts with one single dollar", said the famous philosopher MyFinancial$Sense.

Common folks talk in terms of having a salary increase of 30% (a promotion) or 5% (annual increase to keep up with inflation, but not with personal expenses!). Rich people talk in terms of increasing Net Worth. Common folks talk of increasing Working Income.

Six years ago, a friend of mine, a millionaire (must be, because he lived in a million-dollar bungalow, and also had just been given a million-dollar golden handshake, with more than a million dollars in his retirement fund, plus a few road/racing bicycles worth what 3 administrative assistants would earn in a year!) said of another friend, "Dick will be worth a couple of (more like 50) million dollars when his company is listed on the stock market." It's only now that I understand that rich people never talk of 5% or 30% increase in your working income.

How do you calculate your Net Worth? Simple: add (expressed in '$ & c') everything that you own, and then minus everything that you owe.

If you own: a house which you bought for $300,000 (market value $180,000 because of the U.S.A.'s sub-prime crisis), an apartment which you bought for $ 125,000 (market value $ 160,000 because it is situated in the Central Business District), savings bonds of $10,000 (fixed value), 60,000 units of mutual funds which you bought @ $1.30/unit but whose price today is $0.50 (because of the world's worst financial market in two decades), an 8-year old car bought for $50,000 but now worth $10,000 on the market, a 2-year old car which you bought for $ 37,000 (market value $ 9,000 because it's a lemon), and you owe: the bank $25,000 (loan for 2-year old car), what is your Net Worth? (A special prize awaits you if you get the right answer!).

T Harv Eker states that four (4) factors determine your Net Worth:
(1) Income, (2) Savings, (3) Investments, and (4) Simplification.

Income can be from Active Income, or Passive Income.

Active Income is when you trade your 'time' for 'money'. Your time is worth less (perhaps $4/hour) when there is a lot of supply (e.g. you work as a manual worker, perhaps packing items into a cardboard box). If you have specialised skills (like a neuro-surgeon, divorce lawyer for the rich and famous, or creative marketing consultant), your rate could be $10,000 per hour.

Passive Income is when you have an income stream whether you are awake or asleep (or gone to heaven!?! ... Elvis Presley - o.k., ok., his estate - still earns lotsa $$$$ from his songs' royalties). Or you write a best-selling book (not a best-written book, for heaven's sake!), and collect your royalties as you go on a tropical cruise.

Savings is critical because because they will become the seeds of your investment, once it reaches a minimum level. Savings indicates that you have the discipline not to let money get completely out of your hands. If you can't keep it, others will! Get the message?

From your savings (if you keep it in the bank, some banks offer 4% per annum, a few may offer 12% when they are really short of funds), you will accumulate over a period of time to use for Investments.

Investments in gold, property, stocks or business? For a Mc Donald's or Kentucky Fried Chicken franchise, you may need a $1,000,000 investment. For a network marketing company's rights to market their products, the 'franchise fee' could be less than a $100. Without an investment fund, you may miss golden business opportunities which require investments of between $10,000 to $100,000.

Simplification requires you to reduce your cost of living, so that you can increase your savings and investments faster. A property millionaire started his road to riches by simplification, when he realised that almost 100% of his income was on expenses, with little room left for savings and investments. How?

He got rid of his big car (he was a lawyer with his own firm) and changed to a compact car. He unloaded the driver (of his big car). His friends gingerly avoided him at the club (because they thought he was in dire financial straits). He's laughing his way to the bank now (and riding, with the breeze caressing his moustache, on his Harley Davidson around the country). FINANCIAL FREEDOM!

The moral of the story? Once you realise that your Net Worth is more important than your Net Income, you will be on your way to financial freedom. Focus on your Net Worth everyday (o.k., every month for starters), and you will see it grow.

I wish you Success in your undertakings, and Good Health and Wealth to you and your family. Take care!

P.S. Sshhh ... what about his big wife? No, no! The guy didn't get rid of his big wife (see story on Simplification above), in case you were wondering. Just joking (about his wife being big), for heaven's sake!

NeFiPELoG Money Management System?

Under "Is There a Simple Money Management System (MMS)", you were introduced to the NeFiPELoG system. You need some elaboration on the six accounts that T Harv Eker came up with?

Ne = Necessities Account. This is the 50% of your income (after taxes) that you use to pay for your necessities, for your basic needs, such as your food and lodging. Without these necessities, you would not be able to live, or go to work.

Fi = Financial Freedom Account. This is the 10% of your income that you only use for investments. Or buying/creating passive income streams. The income derived from these investments must not be spent! It is to be further invested. Only when you retire (not necessarily at the formal/official retirement age) can you spend the passive income (i.e the principal remains untouched).

P = Play Account. The 10% of your income put into this account has to be spent every month! Why? Because if you just save, you may become addicted to saving only, and may become miserly. To nurture the habit of feeling good and being able to do things that your heart really desires (yes ladies - that cute Gucci hand-bag to match your sexy red shoes!), this play account money can be spent on anything that you fancy for the month. This makes you a 'holistic' person (I don't know whether you will turn into a holy man ... hehehe).

E = Education Account. You are familiar with the saying: "If education is expensive, try ignorance". This 10% of your income is for you to buy books, attend seminars, or pursue a course of study to improve your knowledge and skills. I met the General Manager of the Cameroon Development Corporation (Africa) in 1993, and found him very knowledgeable. I was impressed, and asked him his secret. He mentioned that when he was overseas and at the airport, he would buy books, because it was quite difficult to find a wide choice/range of books in his country. A few years later he was appointed the President of the Republic of Cameroon. They picked an excellent person. The right person, don't you think?

Lo = Long-Term Savings for Spending Account. This 10% of your income differs from the Financial Freedom Account in that it can use it anytime (and not only when you retire). The principle is that if you want to spend something, do not take a loan (especially a credit card loan!). Instead, save 10% of your income, and then spend when the accumulated savings is enough for you to buy the desired object (e.g. a new bedroom or sofa set, or a vacation to Tioman Island or Bora Bora).

G = Give Account. This 10% of your income is to be given out to your favorite charity or religious house. Winston Churchill said, "We make a living by what we earn - we make a life by what we give". Do you agree?

What is the moral of the story? If a multi-millionaire like T Harv Eker suggests that you manage your money according to the NeFiPELog system, doesn't it merit your attention? If he recommends the system, and he has the results to show for it, shouldn't you do your utmost to follow it? Even if you have $100 only to manage? That would be a measure of your discipline, isn't it?

Money, like everything in life, needs to be managed. If not managed, your money turns into a state of financial chaos. Isn't the global financial chaos a sign that you need to go back to basics?

I wish you Success in your undertakings and Good Health and Wealth to you and your family. Take care!

Is There a Simple Money Management System (MMS)?

Warren Buffet said, "Don't think that you have to be wealthy, before you can be an investor. You have to learn to be an investor, before you can be wealthy".

In other words, you don't have to have lotsa $,$$$,$$$ before you need to manage it. You need to manage it before you get lotsa $,$$$,$$$! Simple? Yes! But how many of you manage your money ... properly? Do you have a system to manage your $$$$$?

How much money do you receive over your life-time? Well, at least over your working life-time? For the majority you, it will be over $1,000,000! Wow! That's good news!

What's the bad news? You will spend most (if not all!) of the $1,000,000! How can this be? Indeed, how can it be?

But don't you agree, that oftentimes, truth is stranger than fiction? How can you personally check this out?

One way is for you to note your daily expenses for 30 days. Every single expense. Including credit card purchases.

A simple way to check other people's expenditure, in a roundabout way, is to check their bank balances.

Of course no one is going to show, (or allow you to check) their bank balance. But you can just (discreetly ... or like 007 ... your choice!) go to any automated teller machine (ATM), and collect the balance print-out slips. These are readily retrieved from the waste basket, or (not that many, though) from the tops of the ATM machines.

Check the balance slips. One set of slips - just after the beginning of the month. Another set of slips - just before payday at the end of the month. Can you please report to me your findings through the 'comments' on this blog?

The simplest Money Management System (MMS) is called E-S-I system. This requires you to separate your income into three separate items (or bank accounts!).

E = Expenses = 70% of your income.
S = Savings = 10% of your income.
I = Investments = 20% of your income.
Simple? 'Do'able? You doing it?

T Harv Eker has another (more sophisticated, or advanced, or complicated, ... depending on who you are?!?) system. There are six separate accounts or items, instead of the three for E-S-I system. It is the N-F-P-E-L-G system. For your easy memory retention, is it ok with you if we call it the NeFiPELoG system? Thank you for your kind agreement.

The six accounts are:
Ne = Necessities = 50% of your income
Fi = Financial Freedom = 10% of your income
P = Play = 10% of your income
E = Education = 10% of your income
Lo = Long-Term Savings for Spending = 10% of your income
G = Give = 10% of your income

T Harv Eker is 'a multi-millionaire many times over' (... I heard it right from the horse's mouth!). So if he says that the above is the key to your financial success, do you think we should have a debate with him?

The moral of the story? You are aware of friends or neighbours who earn more than $5,000 a month but who are broke (run out of cash before the end of the month! ... they love the month of February...hehehe!). You also know friends or neighbours who earn $2,000 a month but have cash left-over to be used the next month. How come the difference in results?

As T Harv Eker says, "The habit of managing your money is more important than the amount".

I wish you Success in your undertakings, and Good Health and Wealth to you and your family. Take care!

P.S. I read yesterday about a guy (in thirties or early forties) who experienced having his last $4.50 to be spent with his kid at McDonalds, and also of having his car reposessed, after having lost his job. He appeared to have had a very well-paying job before that. I do not know his exact background when he experienced all these 'sad situations' or 'traumas', but have you known your friends or neighbours being in similar situations? Hmmm ... care to share/comment? Thank you.

How to Manage Your Money?

What is the key to financial freedom?

Is it to have a well-paying job? There are many well-paid executives who have big cars and big houses. They also have big loans! (And big wives? ... just joking ... to check whether you are paying attention!). But small or zero savings!

Is it to be lucky, and win a million dollars through the lottery? You have heard of many stories of people who won a million dollars in a lottery, but are back to square one in a matter of 2-3 years.

Did you see the story in the newspapers of a grandmother who received more than a million dollars (because her piece of land was acquired by the government) but who then lost it all? She then became dependent on her neighbours to provide her with food.

Why did these people not keep their big money? The reason is that they did not know how to manage money!

If you do not know how to manage $100, you will not be able to manage $1,000,000! Similarly, if you do not know how to take care of 1 tree, you will never be able to take care of a forest or a plantation with 1,000,000 trees.

My wife has difficulty in looking after potted plants or flowers. Even the most hardy of plants - the cactus - will die (not a sudden, horrible death, I hope ... but more of a slow death, I guess) when she buys from IKEA and keeps it in the house. Would you want her to look after the Botanical Gardens at Kew, England? God bless the flower plants and the trees!

Haven't you heard of the following saying: "'Happiness' is when you have $100, and you spend $99. 'Misery' is when you have $100, and you spend $101"?

The financial tsunami experienced by the United States of America in 2008 is caused by this principle. When many individuals practise 'misery' in their daily lives, the result would be 'misery' on a national scale. Even on a global scale.

When you have $100 and you spend $99, you will have $1 savings. When your financial habit is 'savings' of 1%, you will save $10 when you get $1,000. Your 1% habit will make you save $100 when you get $10,000.

One of the secrets to financial freedom is that you must 'invest'. When you 'invest', your money is working for you! Instead of you working for money! Isn't that neat? Which is your choice?

When you have a financial habit of 10% savings when your salary is $100 a month, what would your savings be when your salary becomes 1,000 per month? What would be your savings when you earn $10,000 per m0nth?

When you invest all your savings (10%) above, beginning when you earned $100 per month, do you think that you could be a millionaire in 20 years' time? Or 30 years' time? Or 40 years' time? Or when you retire? Would it give you peace of mind?

The moral of the story? When you develop your financial habit of saving at least 10% of the money that you get, you will be on your way to financial freedom. Your 10% savings will allow you to invest - letting money work for you (instead of you working for money). T Harv Eker wrote: "Until you show you can handle what you've got, you won't get any more!...We are creatures of habits, and therefore the habit of managing your money is more important than the amount".

I wish you Success in your undertakings and Good Health and Wealth to you and your family. Take care!