New site on singapore stocks trading

Hmm.. Decided to branch off a bit and do a mini site on singapore stocks. One of the main reason being that quite a number of friends are asking about it.

And since I couldn't find much online info for them, I decided to start my own

So here it is, Getting Started with Singapore Stocks

Why are you not financially independent? : Part 3

This is part 2 of a series. Read the earlier parts of the series here first. 1 2

In the previous section, we focussed more on the external factors of why its not that easy becoming financially independent. In this section, we shall discuss more on internal factors.

One of the most common problems in our society nowadays is the issue of money management. Unfortunately, our education system, in Singapore and all around the world, focus heavily on technical education. Technical education is definitely a necessity; It drives companies, helps you get employed, and in short, providing a living. However, this has proven to be uneffective in the development of a person.

As such, life skills such as goal setting, personal development, social skills, and money management are all rarely taught in schools. While it can be argued if formal education should be responsible for teaching such skills, one must remember there used to be a time where children didn't have to study so much, allowing creative exploration, which in turns builds life skills.

One dominant consequence from this is instant gratification. People and organisations are all looking for the magical 'quick fix'.

Fat and want to lose weight? -> Take weight loss products, don't bother exercising though.. its a waste of time.

School ranking lousy? -> Drop 'non value-added' activities, cram more study sessions and generate hoards of people with no passion for education .

Not enough money? -> Spend all your money on lottery, don't bother about the personal development books, or learning more on improving your skills.

Splurges, smoking, drinking, luxury products. Most of the time, all these are instant gratification. Gratification to temporarily satisfy a underlying need. However, instant gratification does not solve problems. It will eventually pass, and you are back to square one. We have become a society that lives in the present. Taking on too much consumer debt and living a lifestyle of consumption.

The solution to all these is actually very simple. Choose delayed gratification. Instead of spending all your money now, choose to invest a bit in the future. You would most likely be able to purchase more of the same thing next time if you really want to. The other benefit is that you develop more will power. In the end, you will realised some of the things are momentary impulses. They will pass.

That brings us to the topic of money management. Money management in short, is to allocate your money so that you are more in control of any expenses, savings and debt. In itself, money management is a huge topic. Mountains of books have been written about the topic, and I seriously recommend everybody to get at least one.

In a nutshell, don't spend all your money now. Most people are actually spending more than they should. Just because you earn $3000 doesn't mean you've gotta spend $3000. In fact, its recommended that you save between 10-30%. Out of this, 10% should be in passive savings(i.e banks, low-risk funds, in short, things that don't require you to think too much), the rest should be into active investments. Active investments can be stocks, funds, or even a business.

Just a conservative example,
Lets say you manage to save $500 a month, into an instrument that gives you 10% returns annually. 20 years later, this turns into $343,650. Of course, thats really very conservative. As I mentioned earlier you should save about 30% of your gross income. That would mean $900 for a person earning $3000. And of course, most people do get pay rises in their lifetime. So the contribution amount should increase.

This topic is a pretty dry one, simply because there are so many other more alluring distractions in life. But definitely, it is one of the more important topics everybody should deal with in their life.(Preferably as early as possible in life)

Action: Change your approach to money. Save first then spend. Read books.

Recommended reading list:
Richest Man in Babylon - George S Clason

Why you're dumb, sick & broke. And how to get smart, healthy & rich - Randy Gage

We'll next look at the sea of drifters ;-)

Stay Tuned!

Why are you not financially independent? : Part 2

This is part 2 of a series. Read the earlier parts of the series here first. 1

So.... Since it sounds so easy to be financially independent, why aren't most of the people, especially in affluent Singapore, financially independent?

There's quite a large possibilities of reason actually. Some, such as financial education, government mindset, personal mindset, money management, etc. And from these, effects happen. An example would be credit lines and loans.

Now, I'm not saying that credit lines and loans are bad. In fact, nearly all businesses in the world would not be able to function if they are not allowed to take on debt(such as bonds, credit terms, etc). What I'm saying is, all these possibilities have come together in a way, that people do not properly perceive the dangers of credit lines and loans.

More and more people around the world become more reliant on credit cards. Such that, at the end of the month, they are laden with a huge credit bill. If you are prudent, you would actually have the cash to pay it off. In that case, credit cards are good, cause you have deferred payment for something you have bought earlier. But what if you don't? Then the power of compounding interest comes in to suck you dry.

Another example is study loans. These loans are made very freely available to people who want to take on tertiary education, usually with very little restrictions on guarantors. One advantage of such a loan is that sometimes there exists a deferred loan repayment scheme. This means, you only start accruing interest and start repayment after you graduate. In fact, if there is such a scheme available in you instituition, you should take it. Rather than pay cash, allow your cash to be invested, earning you some free money before you have to pay up your loan.

Lastly, car loans. Thats pretty much the most dangerous thing ever. In most countries, cars are actually affordable. But in Singapore, you pay $60,000 to $120,000 for a car thats not even a luxury car.(Sometimes, not even a 2000cc car) Knowing people, most take up loans for them. With the relaxation of the loan regulations, some people even take up 90% or 100% loans! Paying $0 to drive away a car. No wonder even a person earning less than $3000 per month are driving cars!

Cars are actually high depreciation objects. In fact, if you do break down the numbers to an annual basis, most cars will cost you an average of $10,000 per annum. Lets face it. Singapore has one of the best publics transport system in the world.(Yeah, buses are slow sometimes, trains are infrequent, people like jumping off rail platforms. But it works!) You don't need a car. A car is just to feed the ego.

Lets do a small little case study. Lets say, we have Tiffany. Tiffany is our dear university graduate that has just started work.

In Singapore, university fees are about $6000 per annum. And most people take on a 4 year direct honours course. On top of that, the universities also offer a form of annual allowance. I suspect, possibly to allow undergraduates to study without too much financial worries. The allowance is about $3600 per annum. Not a lot, but enough to get by a month.

So, when Tiffany graduates, she has approximately $38,400 worth of debt. If she did an overseas exchange, it will be more. If she took a computer loan, it will be more. If she lived like a normal university student, it will be more. *gasp!* a five figure loan, even before you have worked a day in you life!

Now, the prevailing bank prime rate is about 5% per annum and most education loan charges prime plus 1.5. For comparison sake, a government housing loan is approximately 2.6%(at 0.1% above CPF OA rate), a car loan is approximately 6.5 to 7.5% and a credit line/card is about 16-24% per annum!

Of course, the banks are all very generous people. They allow a person to to stretch out an education loan for up to 20 years. So that means, at 45 years old, you would still be paying for your education at 25 years old. So of course banks are generous! You'll be a customer for life! Literally.

Lets say you've got no money, so you drag out the payments. For a 20 year repayment period, you gotta pay $210.38 per month. For a grand total of $49,920. Thats 30% more than your original loan!

Now, maybe you're more prudent. More conservative with you money and you wanna get rid of the loan as soon as you can. Most undergraduates earn about $2500 to 3500 per month. Our dear Tiffany, decides to fork out a hefty $800 per month. It still takes you a good 4 years and 9 months to pay off the loan. Even then, you paid $45,901, or 19% more than your loan amount.

I'm not even going to talk about car loans, housing loans, credit debt, etc.. But thats how the banks suck away the money and a person's dreams of early retirement.

But wait. There is hope! All is not lost yet. However, the first thing you have got to do, is to know where are you standing now, financially.

The easiest way is to measure your networth. Draw up a list of your assets and liabilities. Assets, are things that can potentially earn you money. Thing such as cash, investments, or anything that you own.(priced at an amount that people will buy from you now.) Liabilities, are things that cost you money. Such as, credit debt, loans, accounts payable, monthly bills, etc.

Take all your assets, minus your liabilities, thats your current worth. If you're in the negative red, don't worry, you're not alone. If you're in the positive black, congratulations! Now you've gotta work on growing that networth.

Action: Measure your personal networth.

Recommended reading list:
Rich Dad, Poor Dad - Robert Kiyosaki

In the next of the series, we will look at how does a person's culture and mindset keep them from becoming financially independent.

Stay Tuned!

Why are you not financially independent? : Part 1

If you're living in the 21st century, you would have noticed a few things.

For one, people are increasingly reliant on government handouts such as social security(for you Americans) or things like CPF(the those Singaporeans among us). Or even smaller handouts such as election goodies, progress packages, things I would even call a form of welfare package.

Secondly, you see more and more financial plans to help old folks turn their assets into cash. An example would be the reverse mortgage schemes(Where you 'sell' your house to a financier, in return for a small monthly cash allowance.)

Thirdly, you see more and more people working longer than they would have liked, till 65 or 70. This is definitely way past retirement age and the golden years. In fact, since a large number of people die even before that age, it is indeed debatable if it's all worth it.

Have you seen these? I have. Lots.

It is increasingly common to be dependent on some person, some government, or some organisation to provide you a sum of money to survive. In short, you lose control of your financial status.

To me, financially independent is the ability to survive on the cashflow generated by your assets. Of course, this is fairly subjective. Some people can survive on $1000 a month, some need $20,000 a month. You just need more assets if you want $20,000.

Now, assets are yet another messy subject. Basically, that can be considered as anything that makes you a potential income. The more common examples would be cash(in the form of bank deposits), forms of investments( such as stocks), businesses(that have an ongoing revenue of course), and royalties(think Harry Potter for J.K Rowling).

And of course, you can argue that giving birth to 10 children who can each earn $5000 is an asset. But that is not what we're talking about here.

This may seem to be a huge foreign topic to most people, simply because it is definitely not taught in formal education. But one thing's for sure, everybody can be financially independent before 50. Financial freedom is another thing. But financially independence is definitely possible and attainable. What you do need is a prudent plan and the ability to stick to the plan.

I'll be posting a series of action steps you can perform, and also a list of recommended books that I feel would benefit, if you're interested.

Action: Commit to be financially independent by a pre-determined age(like 50 years old).

Recommended reading list:
Think and Grow Rich by Napolean Hill
* Free ebook version of the Think and Grow Rich classic is available here
The Strangest Secret by Earl Nightingale (special free online resource!)

In the next of the series, we'll be looking more into how the world is stacked against us becoming financially independent.

Stay tuned!

Coming soon: Why are you not financially independent?

Okay! Gonna start on my first series topic tomorrow.

Why are you not financially independent.

Its not gonna be about business(only)
Its not gonna be about investments(only)
Its not gonna be about loans(only)

So whats it gonna be about? Stay tuned.

;-)