Money Bombs! and my "risky" management of my finances

This post is a little inspired by a post by a new blogger I saw recently.
The post is at http://www.my15hourworkweek.com/2013/08/19/money-bomb-1-the-wedding/
and his blog is http://www.my15hourworkweek.com


The year 2013 has been quite fulfilling so far. Really learned lots, saw lots, thought lots and understood lots... But from now till mid of next year, I will probably be spending lots, more so than my income :p

Yep, wedding bells and bridal packages... Not that I am complaining :)
Also, my HDB BTO will probably be ready next year too... Renovation costs coming!

Just a short calculations of how much I need...
1) Photoshoots - $7k  =>  my wife-to-be wants one local and one overseas one (add another $1k)
2) Banquet - $30k  =>  I think ang bao will help cover some, although I don't think it will be 100%
These wedding banquets just get more expensive each year, with costs rising faster than income.
3) Renovation costs - $50k perhaps? Not so sure....
4) Rings and misc items... - $15k  => I probably over allocate some

My Reservist and what I have learned

I'm back from reservist. I really can't believe how I survived the past month of busy-ness. But back here I am, still in one piece, fortunately.

I talked to many of my peers while in reservist, and have quite a few interesting insights. Unlike what the newspaper make out what the age group of 20~29 to be (in terms of high debt), none I knew while in reservist were under that category. However, I was rather aghast that while most know that financial planning is important, most do not know how to plan their finances, nor know how to invest their monies.

Some of the financial stats of pple I talked to and asked are below. It was rather interesting and enriching.

Person 1. Masters student with scholarship allowance of $3k/mth
Surprisingly, he has  not much savings. While he's not in debt, he spend quite a bit on travel. However, that's not his main expenditure. Interestingly, he spends nearly $1k a month on insurance and savings plan, all "advised" by his financial advisor. As such, he has not much savings left. He has since graduated from his masters program, and starting on a salaried job soon. Same age as me.

True Financial Freedom for retirement?

* I realised I took very long to prepare this write-up due to my busy schedule :x *

Many a times, I see and hear people attempting to expound on their newly-read theories of financial freedom. The clichés of passive income, multiple streams of income, and all sorts of jargon that you can see and learn in any basic personal finance books all zoomed in the air towards you.

It strikes me as odd because if everyone in this world were to become disciplined and achieved their dreams of having a passive income exceeding their expenditure so as to be financially free, who in this world would still work? And if no one works, how will passive income still be generated?

To me, the 80/20 rule still applies. What most of the population knows (about passive income, etc) probably does work, but it is unlikely to bring us to the 20 of 80/20 any more. It's a wonder sometimes how some think that they have an advantage after reading just a few more personal finance books than others. The more I think, the more I believe that passive income generation is way overrated for the path towards financial freedom.

Again, another rule which I believe is that work is good for the soul. I believe the world is designed in such a way that work is necessary, else we will just waste away. Our souls and lives are like our muscles; if we don't do useful work with it, we will just waste away slowly since there's no need or use for us anymore.

My Maths Equation to Increasing Networth!

To me, at my late twenties age, I find that to massively increase our networth, three factors are extremely crucial. They are:
(i) Income
(ii) Savings
(iii) Investments

The three factors above are all equally important. My mathematical formula for gaining networth is:

Gross Gain in networth = Income * Percentage Savings Invested * (1 + Returns on Investments) + Current Networth * Returns on Investments


*Edit: Percentage savings invested as suggested by LP.

Want Success? Work hard for it!

Recent times, I have come across people who talked about getting out of the rat's race, who talked about being business owners employing "smarter people". They dream and talk lots about the concept of financial freedom and financial abundance, yet I have no idea why they believe that they can achieve so without working hard towards it.

In other words, they simply dream and believe that they can achieve it, but took no actions or little actions towards it. It really beats me...

Being Paid for your time?

I have to admit, I'm still stuck at being paid for my time. But while being paid for my time, I still harbour the thoughts of.... being paid by projects (or results) as well...

While high but unstable income (like tuition) is desirable, I believe the next stage would be project based work (on top of leveraging on others).

I'm tired....

I'm starting to tire... It seems to me that some signs of exhaustion is present in my on this journey towards financial freedom ever since I started this blog on my progress. Perhaps I really need a little break... One thing is for sure though... my networth is moving in the correct direction.... 

The journey towards financial success is indeed a marathon; there's little point exhausting all the energy in the initial stages of the journey.

Why get a job?

Although I'm employed with a job.... sometimes I wonder... why do we get a job? Why do we need a job? Income? Stability? Experience?

Getting a job is like... you trade your time for money. You are paid for the time you are working. Sounds good?

BUT!

You are paid only when you are working! Schools have been brainwashing us since young that it is reasonable and intelligent to succeed only when we are studying, which is true in a sense. However, we brought this to society thinking that it is too reasonable and intelligent to earn an income only when we are working! How untrue this is! Isn't it better to be paid as well when you are not working???

Thoughts on Financial Freedom -- 3

On having plans

How many times have we hear this from the 'gurus'? We must have a vision, we must have a goal, we must have a target. "YES, I WANT FINANCIAL FREEDOM! I WILL ACHIEVE FINANCIAL FREEDOM!" Then after that, we are riled up to be very motivated to achieve this goal, and believe that we can achieve it...

Then?

Financial freedom is a destination. And like any other destination, a path, a route, is needed. However, paths and routes are always full of hidden dangers and traps; there may be dust, rocks, crevices, which are evilly 'placed' there to trip you up in your journey. And just like any important trip or journey we are taking, to travel along this path towards financial freedom, we need to plan and prepare well so that the probability of completing the journey is higher. Wanting it and being motivated alone won't get us there.

A plan is needed. A plan to follow. A plan to succeed.

My plan is simple.

1) I have a full time job.
2) I teach tuition.
3) I invest for growth and dividends.
4) I attempt to trade.
5) I have 2 blogs with adsense and nuffnang.
6) I put up some articles from my blogs to associatedcontent.com

and
7) I'm planning to write educational books on my tips to scoring for O and A level exams.

My plan includes 6 different streams of income, plus a possible 7th in the making. So far so good...

How about your plans? Have you made yours?

Thoughts on Financial Freedom -- 2

On Expenditure

If financial freedom really financial freedom if you have to scrimp and scrimp so that you spend less than you earn from passive income? I wouldn't think so.

I mean, all the talks about "it's about spending less than what you earn"... are too generic and doesn't contain sufficient information. It's just like a person who is dieting by eating less and less till he/she reaches his/her normal weight. Works? Definitely for the short term, but in the long run, it will result in a disastrous yo-yo diet syndrome where he/she will just get fatter and fatter.

The best way to get a healthier body fat ratio (or whatever) is a change in lifestyle, i.e. your choice of food, your planning of time for exercises, sleep, etc. Similarly, the best way to financial freedom is a change in lifestyle in spending habits, in choice of activities you do, choice of income sources, planning of cash flows and movements, etc. In both cases, nothing can be achieved overnight; having a clear goal in mind with meticulous planning and discipline is of paramount importance. And, you have to be happy with your lifestyle, and not be complaining everyday it's so tough to maintain your low expenditure lifestyle, but you have achieved financial freedom.

For example, my average monthly dividends is about $450. If my expenditure is <$450 monthly, I could claim I have achieved financial freedom! But what would my lifestyle be? $100 for instant noodles every meal for the month? Zero recreational activities, zero fan, zero air-con, no need for housing, etc... You get my drift...

Financial freedom is about having the choice to do what you like normally with little or no worries about money.

Of course, I'm not talking about financial abundance, where you could have your dream lifestyle with no worries about money. It's more about maintaining your current lifestyle with no worries, i.e. the food you eat, the recreational activities you do, the way you travel, etc.

Financial freedom is a way of life.

Just like a life of keeping fit and healthy is a way of life, financial freedom is about your way of life too. It's about your habits, the things you do, the way you see and analyse events, that shape your financial health.

In the world of bodybuilding, we say you are what you eat. So if you eat junk food, you will look like junk. Bring that to our financial status; you are what you do. A good plan and goal will result eventually in good financial health.

Financial freedom is a mindset.

You could be earning $100k in passive income a year, yet you are still not in financial freedom. Doesn't this reek of anorexic people who keep telling everyone they are still too fat? It's about how you see yourself, how you see your financial health. There's no point comparing with others. The most important thing in life is to be optimistic, and satisfied with what was given to us, be it intellectually or financially. Afterall, after another 100 years, all will be gone from us right? We will just be another dust below the soil.

Thoughts on Financial Freedom -- 1

On Multiple Income Sources

It's Pay Day!
Do you have the feeling of euphoria?
Do you feel like you can finally buy that IPOD you were eying?
Do you feel flushed with cash that you can finally bring your dream girl to an expensive candlelight dinner?

Or are you just happy that your networth has just increased again?


I used to feel happy that I have received my salary month after month, and I looked forward to it month after month. Then it dawned upon me; this habit will get me stucked forever in the rat's race.

Imagine this. A rat is running on a treadmill, trying hard to reach the piece of cheese dangling in front. However, because of the treadmill, the rat can never reach the cheese. And at the end of the run, the cheese is given to the rat as reward. The rat gets a good rest after that. The cycle then repeats next day, and the rat knows that if it carries on, it will get the cheese as food.

Let's bring the analogy to a typical worker. The worker works hard at the job. At the end of the month, he's given a salary as 'reward' for his time. The worker knows that if he continues at this job, he will get his salary month after month.

What's my point? It's bad to get used to a fixed pay cheque every month. That isn't the way to financial freedom! The way to financial freedom is not to be enslaved, and not to be controlled, by a fixed salary. In other words, get used without a fixed salary!

Ok, I know that sounds blur. Probably there will be questions on how to survive without a fixed salary when there are bills to pay, mouths to feed, allowances to give, etc. What I really mean is, to truly achieve financial freedom, we have to secure multiple income sources, and not just rely on a single fixed salary.

To me, financial freedom is about being able to choose what you want to do, to have a choice in your actions, to be able to live life normally and able to help others or do charity work without much worries about money. In short, don't be fixated to your only income source.