Monthly Archives: April 2014

How To Change Your Life, One Step At A Time.

We are all afraid to change, change means risk, danger, uncertainty or even perish since ancient time. In modern time, we gained more control over our life from risk of weather, animal, change of season or lack of food source. Our food production is now abundant, enough for every human being on this planet, but unfortunately very unevenly distributed.

Change is difficult, we don’t know how to get started to change our life to the better although most of us want it. But wants alone is not enough, only action bring changes. If you want to be healthier, don’t start running 5km tomorrow morning, instead spend 5 minutes walking if this is the first time in 5 years you are doing exercise. If you want to be better at work, spend more time learn about your job, get to know what is required to complete the job quickly and perfectly. If you want to have a better family relationship, make time for your family. Plan an outing with your family away from work and all other commitment, talk to them during the trip, pay attention to them during normal days, spend time celebrate special event with them instead of staring at the computer screen in the office.

However, talking is cheap. Anyone can write some thing on the internet like this post to tell you to change, but only you yourself hold the power to change your life to the better, one step at a time. My life has completely changed for the past few years, it took me many years to slowly improve my life for the better. Paid off student loan, bought a house, accumulate saving, started a blog, learning new skills at work, drafted a plan for early retirement, all this take time and effort to commit to it. And I am glad I took the steps and effort to complete all those goal.

I won’t tell you to set a goal or write down your goal and past all over your house and the place you will pass by daily. I believe there is always one thing that is always on your mind and that thing would be the most important and most suitable goal to chase for. For me, I don’t achieved all those thing on the above in one step. At any point of time, my focus is laser sharp, I would focus only on one goal unless that goal can be accomplished automatically like paying off student loan. During my paying off period, I basically did not have to put in much effort, I still maintain my usual spending habit and work my job. The only difference is I channeled my money toward clear off that debt. During buying house  period, thing is a little bit different. There is research to be done, where and what kind of house are we looking for, is there any new launch happening in the location we are aiming for? If there is, is the price point right for our budget? How big is the house we want to go for? What are the options available and which developer is reliable? All this question need to be answered before we can made one of the most decision in life, buy a house.

It is still a long way before I can see the early retirement light at the end of the rat race tunnel, now I am focusing on become the best employee I can be and fight for the highest income I can get. No matter how impatient I am now, I still maintain my pace and changing my life, one step at a time.

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Filed under Personal Development

Why am I saving money?

This is one of the most important question you need to ask yourself before you start doing anything about your personal finance. Always start with why first whenever you started anything. Why are you learning a new skill? Maybe because you want to embark in a new career. Why are you start running? Maybe because you want to have a better health to accompany your kid during his growing journey.

So, why are you saving money? Because you really do not have much material needs? Because you want to save up for that year end trip? Because you want to buy some asset and redeem back your time freedom from working life? Or maybe you are saving for a house payment after marriage. Whatever it is, without a clear reason behind your action, very soon you will feel that saving money is a sacrifice.

For me, I have passed that phase long ago. I realised I value time freedom so much that I don’t feel sacrifice when I am saving money. In a matter of fact, I actually feel very proud to be able achieve an increasing saving rate although my income remains the same, imagine how fast will my progress will be when my income level rising over the time. My best bet now will be working super hard and super smart to increase my professionalism and my income.

The idea of multiple stream of income has became more and more popular as more and more people value freedom and they realise that they don’t want to work in an unfulfilling job all their life and place the control of their life on the hand of another person. However, what this idea fails to capture is that we should build the multiple stream of income one step at one time. Focus on your regular job, sharpen your professional skill and making sure that you main source of income is stable and strong enough before explore other source of income. It is always your main job that has the most potential to earn you the most money compare to whatever side line you try to pursue during your night time and weekend. No doubt there are people who are able to create large income source using their night time and weekend hours, but they are in the minority. For the most of us, our best bet is still with our day job.

Back to the topic of saving money. Change of mindset is a must. And reading and implementing those saving tips that spread all over internet is not helpful. For example, instead of shopping around for the car that provide the best value for your money, try bus, MRT or bicycle. Instead of comparing between various value phone plan, choose a basic phone and prepaid card. Maybe you would say most of the people are holding a smartphone, what is wrong with that? Why am I asking people go back to ancient time and use those ancient phone with limited function and unpressable button. As I mentioned in my previous post, a $42 monthly commitment required you to invest more than 10K into an investment vehicle that has a return of 5%. With this calculation in mind, I certainly think twice or even thrice before I sign my name on any dotted line.

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Filed under Passive Income, Save, Spend

Don’t let debt control your life.

I was meeting one of my friend and had a few hours talk that day. One of his idea intrigued me, which is about how took up mortgage and car loan make him a better person, a more responsible person. His argument to me was with more loan/mortgage, he felt he had more responsibility financially. It motivated him to work harder, went out to work more often, earned much more income. As the conversation get longer, I started to feel more and more uneasy with his ideas. Somewhere inside me feel that maybe he got the sequence wrong, it was not those debt/mortgage that made him a better person, he became a better and more successful person before he can afford those loan/mortgage.

It is a popular idea to divide debt into good debt and bad debt nowadays. Good debt by definition is the debt that can earn you money, create more cash flow for you, bad debt is the opposite side of good debt. Accumulate bad debt is easy, just go out there and buy that fancy car or that latest gadget on the shelf on credit when you have no idea how to pay off the other two credit card that you has used up their credit limit. Good debt is a bit tricky, I read a few books on this, and I still confuse. The idea seems to be you borrow money  you don’t have to invest in investment vehicle that nobody can guarantee its return. If return on investment of that vehicle is higher than the interest on the money you borrowed, you are called ‘leverage’ else you are ‘over leverage yourself’.

Right now, I am not ready to take on double risk for my own personal finance planning. Saving accumulation still the number one priority on my list now, professional development for a higher paying job is second on the list. Sometime I get into discussion with friend about whether high saving rate or high income is more important, that discussion always ended both parties agree that both are important. With living cost in Singapore maintain at certain level, you cannot have a high saving rate if your income is too low. In theory, a person with a monthly income of 10K, A and saving rate of 80% is having the same live style as another person with monthly income of 2K, B and no saving. In this case, if B is able to increase his income without increase his expense, his saving rate will be growing without his knowing and not affecting his life style.

Back to the topic of debt, sometime people don’t realise the effect from their purchase. Take smartphone as an example, a decent smart phone can cost up to $1000 now. Assuming a typical consumer change their phone every 2 years, which means he has a monthly instalment of about $42. This instalment is permanent unless his behaviour changes and stop chasing the latest gadget every two years. Now let’s see what did he gave up for that smartphone. In order to produce that same $42 every month with a investment vehicle that return 5% per annual, he need to invest ($42 x 12)/5% which means $10080 invested.

Of course I am not suggesting that you are not allowed to buy a phone unless you have $10080 accumulated in your investment. You are free to spend your money anyway you want since you have put in the hard work to earn that money. I just hope that before you make decision that will affect your monthly cash flow, you are fully aware what are you buying into and you are perfectly comfortable with that.

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Filed under Debt, Save