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Tea with TheMinimalist: If Personal Finance and Investing were a religion, what would be your denomination?

Tuesday, October 7, 2014

The Minimalist, a mysterious and wise man, has contributed another guest blog to ASSI. I hope you enjoy reading it as much as I have:

Over a podcast interview with AK71, he shared that “Investing is a religion”. I can relate to his statement on so many levels. Firstly, there are so many different denominations like value investing founded by Benjamin Graham and David Dodd or permanent portfolio by Harry Browne. Secondly, you cannot “force” someone to adopt an investing style that they are not comfortable with. For example, my best friend is a conservative investor and is satisfied with investment returns that match the inflation rate (3% to 5%). People like my best friend would be best suited for the Permanent Portfolio.

With so many religions in the world, which one is the best for me?

During my university days, I went through a “quarter-life crisis” and was very lost with what I wanted to do in life. Upon the advice of some friends, I decided to turn to religion. As I started reading different religious texts (such as The Bible; Dhammapada; Dao De Jing), attending services, I realise that these religions share common truth. I will share two points that have benefitted me the most. The first one is to engage in meaningful and purposeful work. The second is to love and serve people.

For readers who are new to personal finance and wish to take charge of their finances, where is the best place to start? In my humble opinion, the Bible of personal finance is “The Richest Man in Babylon”.

In this book, it states the 7 universal principles of personal finance. When you secure a copy of this book, read it once, read it twice and commit the principles to heart. More importantly, PRACTISE it. Success only comes by taking actions, NOT by reading. (I have never come across a book that is titled “Read and Grow Rich”) 

After reading the bible of personal finance, feel free to research the different styles of investing and adopt one that you are comfortable with. One of the best ways to shorten the learning curve is to be a mentee to someone who has successfully applied those principles. (Maybe, AK71 can start a mentorship program and start with coaching his mentees to eat oatmeal for breakfast, lunch and dinner. Cheap, healthy and nutritious!) 

Breakfast of champions'.

A word of caution.

Make sure you are learning from the RIGHT people. I am sure many of you have read of religious leaders in Singapore who have fallen into the money/power trap. Or finance trainers who promise infinite riches by paying $X,XXX to attend their courses.

The end goal of personal finance/investing should be financial freedom where our assets generate sufficient passive income to cover our expenses. The means should justify the ends. If your mentor makes his money through insider trading (illegal), excessive leverage (dangerous) or guess-work (lazy), you might want to reconsider learning from this person.

To end off this blog post, I feel that there is no religion that is “superior” or “right”. Everyone should make a well-informed decision on the faith that he or she is comfortable with. Do not convert yourself to a certain faith just because your wife/husband/best friend/teacher is of that faith (I am a deist for those who are curious about my faith). Similarly, there is no personal finance philosophy or investing style that rules supreme over all others. If you are uncomfortable eating oatmeal for breakfast, lunch and dinner, then don’t do it! (Right, AK71?)
Here are some actionable steps to get you started on taking charge of your personal finance:
(1)    Grab a copy of the book, “The Richest Man in Babylon”

(2)    Read and memorise the seven universal principles of personal finance

(3)    Plan and write down specific steps on how you would apply each of the seven principles. For example, you want to apply the first principle “Start thy purse to fattening”. To do this, you write down “On my next payday, 16th Oct 2014, I’ll set aside S$500 from my S$5,000 paycheck to a designated savings account with OCBC.”

If you like what I have shared in my blog post, feel free to e-mail or share with your friends on FB.

Richest Man in Babylon

Richest Man in Babylon
Buy pre-owned with free shipping worldwide at US$6.98 a copy.
Read and learn 7 important lessons in life:
1. Pay ourselves first.

2. Live below our means.
3. Put our money to work.
4. Always have insurance.
5. Our home is a consumption item.
6. Plan early for retirement.
7. Upgrade our knowledge and skills.

Read another guest blog by The Minimalist:
Financial planning? Start with why!

Related posts:
1. Getting paid more while waiting for opportunities.
2. Motivations and methods in investing.
3. If we are not rich, don't act rich.
4. A common piece of advice on saving.
5. Do you want to be richer?


pf said...

Cool post. But the thing is hor...i don't think the description of investing strategy as a denomination is appropriate. Coz i hv a few parts to make up 1 whole portfolio. Various parts hv diff investment horizon and investment costs. So, i use diff strategies. Although they may not all work or make money at the same time.

So, call me greedy. Lol. ...

Sillyinvestor said...

Just like in real last life, i am a free thinker and respect all religion although I am more attuned to 2 philosophy.

So, in investing, I too am open to all methods, and even if I do not have "fate" with one, I respect it.

I dun do TA, penny trading, contra, but is full of respect for those who can do those stuff. Will learn and perhaps like PF, try different methods too

SMK said...

Nice share, I just took 1 glimpse.

Always stick to basics.

Interestingly, from what I read, the book is from an old series of phamplets from insurance companies back in the old days in US.

times change.

SMK said...

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