How to be truly "rich" when the world collapses?

There is a very interesting article in the weekend edition of The Business Times. It is by Cai Haoxiang and he asks the question "What asset do you flee to when the world collapses?"

We have heard people saying that bonds are now a bad idea and that equities are preferred. So, many are invested and even fully invested in the stock market. No emergency fund? No war chest?

Singaporeans, of course, have a never ending love affair with real estate with many thinking that real estate prices on our tiny island will only see prices going higher. 

Someone told me that there is never a bad time to buy a property. Well, never say never. Those who bought a property here before the Asian Financial Crisis in the late 90s just broke even recently.

Then, there are the bears who believe that a correction is overdue and that the longer the bulls continue charging, the bigger the correction is going to be. 

There are people who do not believe in the rally. What are they doing? Staying 100% or close to 100% in cash and waiting to buy assets on the cheap.

However, in a situation where the world economy really collapses like in 1929, who wins?

"... how long can Singapore survive if there is a sustained global economic crisis? With zero natural resources and an economy heavily dependent on global trade flows, Singapore's economy is especially vulnerable when nobody wants to trade and people worry about clean water and edible plants, not chemicals and electronics.

"In rich, sophisticated Singapore populated with financiers, lawyers and plenty of middle managers, skills actually useful to survive an economic collapse might be startlingly in short supply...

"Build up a set of skills and contacts that people will want in good times and bad and you will never go hungry for as long as you live."

We could have tons of money, even gold and silver coins. Could they be worth more than food and clean water if these should suffer from scarcity? If Singapore's economy should go into a tailspin, would the FTs still want to come here? Who would rent all the spanking new condominiums which have been built? Could we see vacancy rate in the double digits?

"... gold can't be eaten... try convincing the chicken rice seller to take your Bitcoins as you fend off squatters from your multiple properties."

A sobering read with a dash of humour. Get a copy of this weekend's edition of The Business Times. The article is on page 5.

Disclosure:
AK71 is a shareholder of SPH. Every copy of The Business Times sold could contribute to AK71's financial well-being.

Related posts:
1. How to tell if you are rich?
2. Jim Rogers: Why I won't sell gold?
3. Never lose money in real estate?
4. Change to become richer.
5. The Millionaire Next Door.

First-time car buyer? Get a Mercedes Benz!

I was reading the weekend edition of The Business Times and the front page story was headlined "First-time car buyers disappearing fast".

When I read that, I thought I could guess what the article was about. It would probably go along the line of how the "cooling measures" are working because 100% LTV is a thing of the past, I thought. Well, I was right but only partially.

Although the report said that most first time car buyers are young working adults and that most of them are unable to come up with the required 40% or 50% down payment, something very interesting was also reported.

While most first-time car buyers of entry level cars (which I understand from the article are those priced at around $120,000 each) have been priced out of the market, Mercedes Benz is still doing a roaring trade with first-time car buyers!

The A-Class

"We are seeing more kids bringing their parents to the showroom to book a CLA-Class or A-Class," said a senior executive at Mercedes Benz. Their A200 is priced at $156,000. "... it also looks like more parents are buying a Mercedes for their children."

The CLA at $179,888. Ouch.

Well, I suppose the cooling measures are not targeted at the rich. Rich people can well afford the luxuries in life and cars are definitely a luxury in Singapore. 

Even so, to have a brand new Mercedes Benz as a first car for a young adult given all of today's restrictions is ... er ...

Could someone help me with an adjective here?

The cooling measures have definitely worked to prevent the less rich to be more prudent because, in the past, it was possible to borrow 100% of the car's asking price with a loan repayment period of 10 years. 

A young person could then drive out of a car showroom in a brand new car paying as little as $500. He would probably have been wearing a big smile on his face and thinking to himself, "Wah! So affordable!"

Who says money cannot buy happiness?
(But buy already still have money or not?)

Related posts:
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2. Polish your own car and save money.
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Rich gets richer and poor gets poorer.

Point #1

Someone might have more money than another. He is simply richer. It doesn't mean that he is rich.

Someone might have less money than another. He is simply poorer. It doesn't mean that he is poor.


Compared to the needy, most of us are very fortunate.

Point #2

Instead of lamenting how some people are getting richer, try to understand what they are doing to become richer. Unless seriously disadvantaged, anyone can become richer.

If we want it badly enough, we will make it happen!

只要功夫深，铁杆磨成针.

Related post:
The very first step to becoming richer!

Make money from your hobby.

I have blogged about how we should run our lives like a business. We should try to increase our revenue while keeping costs down. Like what the blogmaster of Bully the Bear says, there is only so much we can do to cut costs. So, we should consider ways to increase our revenue to build up our savings!

Now, most of us have full time jobs. We could possibly be formally employed in the evenings as well and make it two full time jobs, if our employer allows it. I was doing it for a while at one time.

We could also take on another job that requires us to work only on weekends to make it three full time jobs! We would be very productive but I guess we could be quite miserable too.

Why not make money from doing something we enjoy instead? All of us have hobbies, right? Why not make some money from our hobbies?

Here are some resources I found as I was going through the catalog in BetterWorldBooks.

If you enjoy writing, why not try writing a book in your spare time?
How to Publish Your Book and Immediately Make Money

Enjoy music and performing on stage? Could you make money from this?
You Can Make ... Money in Mu$ic

What about people who are good with a needle and thread?
You Can Make Money from Your Hobby: Building a Business Doing What You Love

If you are a homemaker (which covers both housewives and househusbands) and would like to make some money but are unable to leave your home, there are certainly some things you could do.
How to Make Big Money Without Leaving Your Kitchen: A Homemaker's Guide to Moneymaking Opportunities

While cleaning out your home, you found stuff you have not used or even set eyes on in years?
How to Make Cash Money Selling at Swap Meets, Flea Markets, Etc.

If you have an inclination towards doing everything online, you could be amply rewarded for your efforts.
How to Make Money Online with Ebay, Yahoo!, and Google: A Step-By-Step Guide to Using Three Online Services to Make One Successful

Spend some time thinking about what you are good at and what you enjoy doing.

You might be amazed how you could moneytise your talents and hobbies, all the while having fun. Make more money without holding down another full time job? Why not?

Related posts:
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"How to tell if you are rich" by Alexander Green.

I would like to share an article titled "How to tell if you are rich" which was published 4 days after my blog post titled "If we are not rich, don't act rich!"

Although the writer used the USA as a backdrop, providing some numbers to show what households in the top 20%, 10%, 5% and 1% in the USA make and have, the ideas on wealth building are universal.

If we own a car like this, we are rich, aren't we?

Alexander Green is the name of the writer and I like his style!

If our households are amongst the top earners in the country, do we run the risk of being "demonized by those who view hard work and risk-taking as a matter of good genes and good fortune"?

If our households are amongst those with high net worth, do we run the risk of being "frowned upon by redistributionists who resent folks that live beneath their means, save regularly and handle their financial affairs prudently"?

Instead of complaining about how we are not rich when others are, try to be rich!





See if what Alexander wrote sounds familiar:

How do you get rich if you aren’t currently?

The basic formula is pretty simple: 

1. Maximize your income (by upgrading your education or job skills). 

2. Minimize your outgo (by living beneath your means). 

3. Religiously save the difference. 

4. And follow proven investment principles.





Most millionaires – folks with liquid assets of one million dollars or more – are not big spenders. Quite the opposite, in fact.

...the most productive accumulators of wealth spend far less than they can afford...

The wanna-be’s, on the other hand, are merely “aspirational.” ..... Their problem, in essence, is that they’re trying to look rich. This prevents them from ever becoming rich.





I like how Alexander ended his article: "If you want to be rich, you have to stop acting rich… and start living like a real millionaire."

Read complete article by Alexander here:
How to tell if you are rich.

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2. The very first step to becoming richer.
3. Retiring a millionaire is not a dream!

Rich Dad, Poor Dad: 2 books are better than 1.

Anyone who has been reading local personal finance blogs regularly in the last few years would have no doubt come across many accounts by bloggers about how they read a book titled "Rich Dad, Poor Dad" by Robert Kiyosaki and that changed the way they looked at money.

The book is about financial independence achieved through the ownership of income producing assets instead of working for a salary our entire life. Robert Kiyosaki is a natural story teller and the book is inspirational.

If you should be interested in getting a copy. There are great bargains at BetterWorldBooks:
 
Rich Dad, Poor Dad: What the Rich Teach Their Kids about Money--That the Poor and Middle Class Do Not! (Pre-owned copies available in good condition @ US$5.98 each)

Robert Kiyosaki also wrote another book which divides people into four distinct types:

E is for Employee
S is for Self-Employed or Specialist
B is for Big Business
I is for Investor

I would suggest this as a companion read to "Rich Dad, Poor Dad" as Robert tries to encourage readers to invest in financial education and to start investing for cash flow.

Rich Dad's Cashflow Quadrant: Rich Dad's Guide to Financial Freedom (Pre-owned copies available in very good condition @ US$6.98 each)

"It won’t happen overnight, and it will be hard work. But if you’re diligent, plan well, and execute your plan, you’ll be much better off in the future whether the markets are up or down." Robert Kiyosaki.

Buy pre-owned from BetterWorldBooks and you will be helping the environment and funding literacy for the poor. Free shipping globally.

Visit BetterWorldBooks here:


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Change to become richer. A need or a want?

Much of my writing is geared towards having people making positive changes in their lives. I also blogged about how some people told me that I should have good debt in life and how I have been described by some to have a peasant mentality towards wealth building. Are these people also trying to encourage me to make positive changes in my life?

There are so many types of people in this world all with their own ideas on how things should be. They have their own realities which are very much conditioned by their own beliefs. While it is true that what works for some might not work for others, we do not want to be dismissive. Why? What if it could work for us? We should keep an open mind, shouldn't we?

People often say, "If you don't try, you won't know."

There is a second half to this which is often not said, "Some things, you should not try."

So, we should not blindly adopt ideas and hope that they work for us. Then, how do we know which ideas to try out? There are so many ways to approach this but I feel that "self" is the most important consideration.

Sun Tzu said, "Know thy enemies and know thyself and be victorious in every battle."

We might have also heard the saying, "We are our greatest enemy." So, knowing thyself is more important than knowing thy enemies.

At the very basic level, we have to question our ability to see something through. This is, however, not enough. We also have to question whether we have the temperament to make an idea work for us. If we do not have the right temperament, it would be hard to have a strong will.

So, for example, I keep saying that one should take risk to protect and grow one's wealth but should a risk averse person do this? His temperament is clearly against this. Even if he had the ability to do this, he might not have the will to do so. He would worry too much and could suffer from anxiety.

Now, I have a preference not to have debt in my life, given a choice. I like the peace of mind that comes from being debt free.

To anyone who is thinking of taking on more risk, a pertinent question to ask is, therefore, how much risk would our temperament allow us to take on comfortably. Then, ask if we are willing to push beyond the limits of our comfort zones.

All of us would like to be comfortable in life. Is there any reasonable person who would rather be uncomfortable? However, sometimes, we cannot afford the comfort and that is when we would have to go out of our comfort zones. Sometimes, we are forced to make changes.

So, some need to change to become richer while some do not need to change to become richer although they might want to change to become richer. To change or not to change? This could be a question of necessity for some and a question of desire for others.

Related posts:
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A letter from a reader in his early 20s.

I received an email from a reader in his early-20s.  I was very pleased to read it as this is one of the things my blog hopes to do and that is to be a positive influence in the lives of ordinary people, encouraging them to save and invest for a more secure financial future. I am sharing the email here and I hope it would encourage younger readers to plan early and be financially prudent:

:) Read your posts, about financial planning. I realised that in recent months, i have pay for focus on the need to grow my money, even though it may be just 3000/year. I used to spend a lot, sales mean must buy. Now, i focus only on spending for trips to get the experience, and less shopping. Other than that, i did not spend much, and even find reckless spending, and credit buying quite disgusting.
travel means saving on accomodation through hostel or couchsurfing.

Aiming to save 50% of my salary, ex-CPF. 2600 salary, save 1k/month, 500 monthly expenses, 300 to parents, and 200 for whatever bills/medical expenses.

i think the current generations, not a lot of people focus on saving.... with my friends spending on branded stuff. haiz.

You might be richer than you think. (How rich is rich?)

Someone asked me how to be rich? 

I asked him what did he mean by rich? 

That got him thinking. 

Is a person rich if he has $1m in cash? 

Is a person rich if he has $1m in cash and a property worth $1m at the same time? 

Or is a person rich if he has a net worth of $5m? 

What am I trying to say? 

To me, rich is a relative concept.






If we keep comparing ourselves with the next richest person, it can never end. 

Of course, if we became the richest man in the world, then, there is no one left to compare with but how many Bill Gates can there be? 

Stop comparing with others.




I think the most important measure of wealth in this world has to be "happiness"!  

Yes, I remember how I shared a moment with my younger sister about how our family was not doing very well when we were in our teens. 

She said "But we were happy."  

That was a simple statement but a very poignant one. 

What is the point of having lots of money but be unhappy?






Having said this, we should not be so blind as to think that we can be happy without money in this modern world as money problems could surface sooner than later. 

So, we still need to make money, to save money and to make our money work harder for us. 

This is so that we do not have to worry about money matters in future. 




The idea is to have enough passive income to take care of our daily needs and some wants.

Of course, what each person needs is different. 

So, how much passive income is required is also different from person to person. 






Just do not forget that being happy is more important than the pursuit of money. 

If we can be happy every day of our lives, we are truly rich.

If your life is a happy one, you are richer than you think.

If AK says so, it must be so!






Related post:
Passive income: A higher purpose.

Tea with AK71: Envious? Find our own way.

I recently had a conversation with a friend about how a friend of his keeps saying that he is envious of how rich my friend is and so on.

My friend keeps telling his friend that he is not rich and that he is using leverage to improve his cash flow.  My friend got fed up with his friend on one occasion and told him to stop whining and to do something about his life.

Make changes and be richer. 

This calls to mind a recent blog post of mine which asked "Do you want to be richer?"

Apparently, this person in question is in his early 30s and has a comfortable salary of $6K a month.  He is single, stays out and spends quite a bit of money having a good life.

So, to me, for him to become richer, he does not really have to work much harder to increase his income. He should work at reducing his expenses. He should think of planning for the next stages in his life.

For a person like him, if he is willing to listen, I would tell him that there are many roads to Rome and there are many roads to becoming richer. I have a couple of blog posts which were written with this in mind: "Roads to wealth creation in the stock market" and "Seven steps to creating passive income from the stock market".

For sure, there are many more ways to make money and my friend has found his own way to do so and that is to invest in real estate and renting them out for cash flow, taking advantage of the very low interest rate environment. It is something he does well and something he is comfortable with.

For me, a personal experience at a very young age of twelve when my family was on the verge of bankruptcy taught me that banks are fair weather friends and I try my best not to owe the banks large amounts of money if I can help it.

I do understand the need for leverage sometimes in order not to miss out on money making opportunities but I would try to repay my debts in the shortest time possible.

What am I saying? Everyone is different. Certain methods which are comfortable for some might not be so for others.

Finding the most comfortable path which would meet our goals in life is most probably a journey of self-discovery. Having reliable guides on this journey would be most helpful but decisions have to be made ourselves.

Ultimately, we have to find our own way.

Do you want to be richer?

The original title of this blog post was "Do you want to be rich?".  Then, I decided to change the last word as it would be more inclusive.  Almost everything is relative in this world, after all.  Few things are absolutes, such as death.  Even then, there could be debates on the different degrees of death. 

Oh well, modern society does complicate things.






This blog post was inspired by a recent late night chat in LP's infamous cbox. I was just sharing my ideas on how we could generate passive income from the stock market when a person mentioned that not everyone has $500k to begin with. 

Well, unless we are very lucky, I doubt anyone would have that kind of money from day one.  Then, a long discussion ensued in which I felt there wasn't any real engagement. 

Anyway, if someone feels that way, it could be possible that there are others who feel the same way.  Hence, the genesis of this post.

Let's go back in time. In an earlier blog post, I mentioned a personal aim for a minimum of $50k passive income from the stock market. I said that we just need $500k invested with a 10% yield.  I gave examples of REITs which I was vested in which I felt could help deliver this passive income target.  These are REITs which I blog about quite a lot and readers who are considering my strategy could be kept updated.






Question: How on Earth could an average worker amass $500k in capital through working and by being frugal? The operative word being "average". 

An example was given on how a Diploma holder making $2k a month would find it hard to achieve this. 

Well, if we were making $2k a month, we would have to make more money more quickly towards this end. 

However, if we did not do anything to change the status quo, we would continue making only $2k month. 

We cannot logically expect an improvement in our circumstances if we do not make an effort to change for the better. 

So, stop being "average".

For example, a certain full time private tutor I know managed to save $50k per annum! That's inspirational, if I do say so myself. He probably took on more students and worked harder. He should perhaps up his fees but that's just me. All of us could make incremental changes to our lives to be more productive.

What is the first step towards passive income generation? 

Find a job that pays us as much as we are worth or more than we are worth. Do not shortchange ourselves.  

If we are worth more than $2k a month, find people who are willing to pay us more.  If we are only worth $2k a month, find ways of increasing our value. Upgrade ourselves.

I would like to share another example here. I had a fellow soldier for a student when I was in the Army.  I gave him free English classes because he was not from a well to do family and the evenings in camp were pretty free anyway.  He took his 'O' Levels English paper twice before and he could not make the grade but he did not give up. 

I was then 24 years old and had just graduated from university but I was quite a bit older than he.

After a few months of lessons, I advised the student that perhaps there was another route that he could take. He should spend some time thinking of what he was really interested in and what he was good at.  Doing English was an uphill task for him.  

When I met him again a few years ago, he told me he was doing some IT stuff which involved laying cables and networking workstations. It was all Greek to me but he was doing very well with a pay of more than $6k a month! This is a success story which I still share with my students today.






Find your strengths and build on them.

Unless we are physically or mentally disadvantaged, if we would like to be richer, we could find ways of doing it.  

If we thought that making $2k a month was what we were supposed to make and that it was our fate, then, it would become a self-fulfilling prophecy. 

If we wallow in self-pity, the only people who would show us sympathy would be people with the same mindset. It becomes a reinforcing vicious cycle! 

We build our own traps!







If we want to be richer, make it happen. How? The will must exist and it must be strong. Where there is a will, there is a way! This rings true.

When we make money, we must know how to save money. Recognise what are our needs and what are our wants. Fulfill the needs and delay gratification of the wants. Save as much as we can. 

Once we have an amount of money which could cover a year or two worth of routine expenses, we can start thinking of investing the rest.

Must all that $500k capital be from working hard and being frugal? 

Going back to an earlier blog post, I mentioned that when we invest in income generating assets, the passive income generated could be re-invested or it could be spent. If we re-invest, our targets (be it $500k or $100k) could be achieved sooner.  

This is the power of compounding.

To illustrate the power of compounding, let me use an institution in Singapore that we are all familiar with: the CPF.  When I first started working, I was thinking of how probable it was for me to meet the CPF minimum sum set by the Singapore government by the time I retire. 

Most of our contribution goes into the Ordinary Account (OA) while a much smaller sum goes into the Special Account (SA). 

At the face of it, 2.5% interest for the OA and 4.0% for the SA have only a 1.5% difference per annum but think of it a bit more and we realise that that the SA pays 60% more in interest compared to the OA!  Furthermore, if we compound 4% per annum, it becomes a very powerful force!

So, I voluntarily transferred my OA money into my SA for the first few years of my working life. Then, I let the government and time help me meet the minimum sum required through compounding 4% interest per annum.  Every 10 years, the SA money would grow 50% even if the monthly contributions should stop.





Do you want to be richer? 

Obviously, you do, otherwise, you would not have reached this part of the post. How soon do I think we could amass S$500k from the day we start working? 

To give a specific time period is difficult because it would depend on each person's circumstances but my point is that if we have the will to achieve it, and if we are physically and mentally whole, we will find ways to do it.


Related posts:
1. How much to have or how much to use?
2. 7 steps to creating passive income from stocks.
3. Building and preserving our wealth.
4. A minimum of $50k in annual passive income.
5. Money management: Needs and Wants.