Think you cannot reduce your spending?

I am always blogging about how we can reduce our expenses. A dollar saved is a dollar earned, isn't it? 

Well, sometimes people say it is difficult or even impossible to reduce expenses. Is it really difficult or is it too difficult to try?

Michelle Morton, age 43, is married and a mother of three. She took up a challenge to cut her spending and here is her story:

She started logging all her expenses on a daily basis. 






"It’s $4 here, $10 here and it doesn’t seem like that much but then when you go to put the receipts in it’s like Oh my God!"

“Really what needs to happen is to say ‘This is what we’re going to spend on groceries this week’ and when it’s gone, it’s gone,” she says. 

“And ‘This is what we’re going to have to spend on eating out,’ the same kind of thing. I have to stop telling myself that although we really won’t save any money this month we’ll make it up next month because that never happens.”






If you are in your 20s and if you have an active social life, well, you might want to learn from Meieli Sawyer who said:

“I understand being thrifty, but you walk a fine line, and you don't want people to talk about you and say you're cheap,” Meieli says. 

“So I’m just going to try to say, ‘Look, things are tight for me right now.’ I’m going to try and not be embarrassed about it.”

Read the full article: here.






Stop putting it off. Take up the challenge today.

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5. Financial freedom.

Motivations and methods in investing (UPDATED August 2018).

I recently started to blog about NeraTel and revealed that I increased my investment in the company. 

Someone asked me what led me to increase the size of my long position when I did since its share price shot up shortly after I made my move. 

Did I have inside information?

Well, I cannot say for sure if I did have a distant relative or two in Myanmar or not. 

Such is the reach of the Chinese diaspora. 

However, I am quite sure that I do not have the benefit of knowing anyone who might be in the know with regards to the Telco contracts awarded by the Myanmar government recently.

Indeed, increasing my investment in NeraTel had much more innocent motivations.




I have been blogging for some time about how the very low interest rates cannot persist forever and that they will one day rise. 

I have also cautioned that we should not be overly optimistic when it comes to real estate investments in Singapore and also S-REITs. 

So, what is someone who is investing for income to do?

A big portion of my investment portfolio is in income investing. 




I got into S-REITs in a big way during the GFC and bought more of AIMS AMP Capital Industrial REIT and Sabana REIT in late 2011 when prices took a hit. 

Whenever prices took a hit, I would buy more. 

For example, I quadrupled my investment in Saizen REIT in mid 2012 when its warrants were close to expiring and its unit price plunged. 

Conditions were benign for REITs and buying more with an increased margin of safety was, well, safe.

Now, with the spectre of increasing interest rates on the horizon, the sea that is called REITs could become less placid. 

It could become choppy. 




Of course, thinking that REITs will go the way of the Dodo simply because interest rates are going to rise is ridiculous. 

However, not recognising that S-REITs will face headwinds as interest rates rise in future is myopic.

So, the 10x increase in my long position in NeraTel stems from a need to look for alternative investments which are high yielding but with a low or zero probability of being affected negatively by interest rate hikes. 

I like the comfort that comes from having a steady stream of dependable passive income and this remains my biggest motivation for investing in the stock market. 




The following graphic gives a good idea of how I think.

Source: edwardjones.com

..




My investments for income, together with my war chests, form the wide base of the pyramid. 

On top of these but smaller in total value are my investments in certain stocks for growth and income or for growth only. 

At the tip of the pyramid and also representing the smallest total value are more speculative investments which sounds like an oxymoron, doesn't it?

Certainly, like I have always said, there is more than one way to growing our wealth in the stock market and I am not trying to say otherwise by showing the above graphic. 




My methods which are by no means immutable simply reflect my motivations for investing in the stock market.

Ask what are we trying to achieve (i.e. our motivations) and we will know where our money should go. 

Use the right tools (i.e. methods).

If you have read this blog carefully, position sizing is important too.

There is nothing to say that good investors cannot have speculative positions but good investors should keep speculative positions relatively small.




Related posts:
1. Never lose money in real estate?
2. Be cautious climbing S-REIT tree.
3. CPF or SGS?
4. Perpetual bonds: Good or bad?
5. For those who have paid higher prices.