Typing this on my new keyboard, yay it feels good! Based on the past few months, I posted only once every month and I think it could be like that for awhile, well at least there's still something. Just an update on uni, I am boarding an "aircraft" this semester and it's going full swing for 5 weeks, transits for a week and goes full throttle again for the next 8 weeks. I hope I will survive. But anyway, despite the coming up busy-ness, I'll try my best to keep this blog updated. It has changed to a completely different blog in the past year because things have changed for me and this is what is happening for me.
It's already coming to the end of February, so have you planned for the year yet? Well it depends on what are you planning for. For instance, if its work, you barely need to do anymore planning after spending majority of your productive time there every weekday and sometimes on weekends. If you're studying like me, it's all about doing the usual tutes and assignment and then going through test and exams. It still requires planning, but for the coming few weeks at least. I used to do new year resolutions way back many years but not anymore. But at this critical stage of life for me, I'd probably need to put a lot more importance on certain matters.
It's another personal finance topic today and it focuses on making your wishes come true. It's about making a plan. If you're about to start in the job market, making plans now would do you good. Ok, I'll keep it simple. It's all about improving your financial well-being, nothing else. Are you doing anything to improve your financial well-being? It doesn't matter what financial position you're at now, it's about continuously improving that position. One of the best ways is to create a financial goal. I've mentioned this before.
A financial goal can be "I want to a have a million dollars in 15 years", "I want to pay off my house in 5 years", "I want to retire at the age of 40" or "I want to double my returns every 5 years". Well, there are many other goals in life we would want to achieve other than being wealthy and it is equally important you have a plan to try to achieve them.
So think of a financial goal, time frame can be anywhere from 1 to 10 years. Well every goal definitely involves reaching a certain amount. I suggest you understand compounding interest and annuity to set your targets. Learn about different instruments that will help you achieve a better return than the cash rate, at least.
Turning a person who doesn't really understand money into an investor takes a lot of brainwashing. Good brainwashing of course! The fact that many people in this world today have the wrong perception about money or don't understand how money really works is hurting their finances. A few perceptions that you should get rid off.
Wrong Quote 1)Debt is Bad (Again Rich Dad gave me the idea)
There's probably very little positives you can take when looking at stacks of bills that are due in a month, every month. But there's good debt and bad debt you should learn to differentiate. Bad debt are debts that continuously drain resources from you, just like credit card debt and mortgage of a house you live in. Those are liabilities that you have to cut down or eliminate. And then there's good debt. Debt that makes you money. As in my previous post, debt is leverage. You can buy something with less of your own money. Most commonly, we are always referring to the famous example of real estate. The fine distinction of investing in real estate is its steady cash flows. Having sufficient and steady cash flows will give you enough money every month to repay your loan and assessments. And that is how debt does you good. It's still a liability in the balance sheet, but when you net off the amount with the cash flows into the current assets, you see the benefits.
Right quote: Accumulating debt is fine as long as it is good debt.
2)"The only way I can be richer is getting a pay rise".
This quote is also very common among the working class, highly depending on their pay rise to be improve their financial position. Well I've written about this before. It is simply is too risky to depend on your paycheck anymore. And the increase in wage rates are barely fighting off inflation. The solution is to generate income from other sources. Rich Dad's Cash Flow Quadrant is probably the best book for this. For a mere USD $10, it's dirt cheap to learn about generating alternate forms of income while still keeping your job.
Right quote: I need to generate at least 2 forms of income.
3)"I can't afford it"
Changing the way we say things can also improve our actions. The choice of words we pick is also highly important. Negative statements like "I can't afford it" needs to go and be replaced with more positive and optimistic one like "How can I afford it?". So ask yourself this question when you think of making an investment. Actually all the other quotes are the quotes to avoid.
4)Investing is risky.
Well, I've had many times come across people telling me this when I recommended them investing. And many of them are still unconvinced, maybe one day they will be. I've written on many occasions that investing is like a skill. Robert says its similar to flying a plane. You can't fly a plane no matter how many books you read about it. And you don't fly and land like a pro in your first few attempts. The secret is out, all you have to do is educate yourself and do it. High risk, higher returns? Let me give you something better. When you educate yourself financially, you can earn higher returns and you can lower your risk.
Right quote: Investing is not risky, being uneducated is. (Quoted from just about every book written by Robert)
5)Leave money matters to the experts.
In a world whereby there are so many people desperate to make more money and totally motivated by money, how on earth could you hand over your money to someone? If you haven't learnt your lesson, read about Bernard Madoff and Allen Stanford. See how people have their fortunes wiped out by so called "accidents" and "bad judgments". The fact is people who work in the finance field may not be as smart as you think they are, obviously I don't mean to offend anyone (even myself), but there are also really good ones. The truth is, despite being in the finance field, not all of them can give you good advice. People are profit-oriented, why would they want the best for you, generally. Whether you're a doctor, lawyer, architect, engineer or a student. If you are willing to invest in your financial education, you can outperform at least half the people who claim to be experts. Don't rely on anyone! Take over your finances NOW! So if its even possible, please brainwash yourself.
With planning, many things can happen. If if you don't achieve the 1 million dollars in 15 years, maybe you might take 17. But that would be better than not planning at all. Everything starts small. From the first budget you did or the first cash flow statement you prepared. It's definitely hard to imagine a few thousand dollars becoming a few hundred thousand dollars. But with a well thought of and realistic plan, those fortunes you have dreamed about might not be that far away.
Right quote; This is my money and I should take control over it.
"Knowledge and composure are two important aspects of a good investor. Being a good investor not only improves your financial well-being, it also improves you as a human being"~deyao
