As most of you might know, passive income, also known as after-burner income, refers to the income which you do not have to work physically for. Examples of Passive Income are:
1. Dividends (from business and shares)
2. Interests (from CPF, saving accounts, fixed deposits)
3. Realised Profits of Capital Gains from stocks,funds,bonds, properties etc.
4. positive Rental income (after deducting expenses and mortgage)
5. Currency Exchange Gains
6. Profits from Business
How many of the above passive income sources do you have at the moment? Many of us desire to have passive income - because it sounds cool to have money coming in without having to work for it. However the majority of us do not have enough passive income to stop working.
In Adam Khoo's book "Secrets of the Millionaire" he depicted 4 stages of finanical independence, all of which are related to the essence of passive income.
Stage 1: Financial Stability: a six months' worth of savings with no passive income
Stage 2: Fianncial Security: Passive income is just about sufficient to cover your basic expenses (like food, transport etc)
Stage 3: Financial Independence: Passive income is sufficient to sustain your current lifestyle
Stage 4: Financial Abundance: Passive income is sufficient to sustain your desired lifestyle (tour round the globe, throw birthday parties with celebrities etc)
I hope by now you would have understood the concept by now that financial independence is really a function of your passive income and your expenses.
Financial Independence = Passive Income - Expenses, and has to be greater than 0.
Which Stage are you in currently?
Monday, October 15, 2007
Sunday, October 7, 2007
Sunday Times Invest Section
It seems that I cannot live without reading this section on Sunday mornings. In fact I think it's an important read for those Singaporeans who are aspiring to pick up the art of saving and investing. Every week, the section would focus on a character who would share about his or her saving, spending and investing habits.
Like week it was on the guy who created the drinks ANYTHING and WHATEVER - he made his first million at the age of 27 and subsequently retired at the age of 34. Another rag to riches story and his first pot of gold was found in digital photography. He subsequently decided to venture into the drinks industry but being a new kid on the block and is up against the big boys, he said he had to be unique - which I personally think it's the key ingredient behind ANYTHING and WHATEVER. The next step is to actually bring them on the global stage. Great.
Like week it was on the guy who created the drinks ANYTHING and WHATEVER - he made his first million at the age of 27 and subsequently retired at the age of 34. Another rag to riches story and his first pot of gold was found in digital photography. He subsequently decided to venture into the drinks industry but being a new kid on the block and is up against the big boys, he said he had to be unique - which I personally think it's the key ingredient behind ANYTHING and WHATEVER. The next step is to actually bring them on the global stage. Great.
Saturday, October 6, 2007
Work Overseas and Get Paid More!
Whenever someone asks me the quickest way to increase your salary by 20%, I always reply them "work overseas!"
Being someone who has been working around the globe for the past
5 years, I know exactly what that means in terms of remuneration. For doing the same thing as in the home country, you get paid for accomodation, subsistence allowance, hardship allowance and occassionally you do get relocation package and a certain percentage rise in salary if your assignment is long(ish) enough.
Now, I can hear people shouting that overseas opportunities are hard to come by - which I disagree, to be brutally honest. It's true that people doing professional/technical work (like engineering, accounting, financial analysis, medicine etc) find themselves easier to move around than people involving in specific areas such as law and teaching, which are country-specific for more often than not.
Just this morning I read from the Saturday Recuit (6th Oct 2007) that IE Singapore are looking for a number of positions and apparently they are all required to travel.
So what are you waiting for?
Being someone who has been working around the globe for the past
5 years, I know exactly what that means in terms of remuneration. For doing the same thing as in the home country, you get paid for accomodation, subsistence allowance, hardship allowance and occassionally you do get relocation package and a certain percentage rise in salary if your assignment is long(ish) enough.Now, I can hear people shouting that overseas opportunities are hard to come by - which I disagree, to be brutally honest. It's true that people doing professional/technical work (like engineering, accounting, financial analysis, medicine etc) find themselves easier to move around than people involving in specific areas such as law and teaching, which are country-specific for more often than not.
Just this morning I read from the Saturday Recuit (6th Oct 2007) that IE Singapore are looking for a number of positions and apparently they are all required to travel.
So what are you waiting for?
Wednesday, August 15, 2007
How to be an employee and millionaire at the same time
Whoever says you cannot be a millionaire simply by working for others?!
Okay-I do agree if you are talking about that sort of Bill Gates or Warren Buffet rich, then fine - you can never make it as an employee.
That said, a millionaire would means he has a total assets worth of over a million dollars (in fact the definition of HNWI - High Net Worth Individual would mean the residence property is not considered in the computation of the networth) and this is achievable by any employee.
Yup - any employee!
All it takes is just patience, discipline and a strong will to succeed.
Okay-I do agree if you are talking about that sort of Bill Gates or Warren Buffet rich, then fine - you can never make it as an employee.
That said, a millionaire would means he has a total assets worth of over a million dollars (in fact the definition of HNWI - High Net Worth Individual would mean the residence property is not considered in the computation of the networth) and this is achievable by any employee.
Yup - any employee!
All it takes is just patience, discipline and a strong will to succeed.
Tuesday, August 14, 2007
Expected Net Worth
Thomas Stanley's Millionaire Mind defines the expected individual net worth as follows:
Expected net worth = age x annual salary x 0.112
For example, if you are 30 years old earning an annual salary of S$30,000, according to the formula you should have an expected net worth of S$100.8K.
In his book, his respondents have a net worth of more than their expected Net Worth which actually demostrated that they are a group of wealth accumulators.
Somehow I think there should be a qualification to the above equation in terms of the time duration of maintaining the annual salary.
For example, a fresh NUS female graduate (say Jenny of 22 years old) is getting S$3000 per month. In the first year she gets 3000 x 13 (assuming 13th month with no other variable bonuses) = S$39,000.
Hence her expected networth is S$39,000 x 22 x 0.112 = S$96,096
How can anyone be "expected" to have a networth of at least 2 times more her annual income in the first year?
However if Jenny has now worked for 15 years (now 37 years old) and is commanding a salary of S$4500 per month, her expected net worth is S$4500 x 13 x 37 x 0.112 = S$242.4K
This is more palusible because if we assumed the total income she has brought in over the 15 years since she graduated her total income is S$3000 (using her graduate income instead of her last income for conservative sake) x 13 (number of months including 13th) x 15 years = S$585K
Hence her expected networth of S$242.4 is calculated to be 41% of the total income - in other words if she managed to save only 41% of her graduate income for the past 15 years, she would have hit her expected networth easily.
The key to the above example is to show that if one was to use the expected networth equation to work out his/her expected networth, we must be mindful that it's best to have a number of years drawing/receiving that income for a sizeable period prior to using that equation.
Make Sense?
Expected net worth = age x annual salary x 0.112
For example, if you are 30 years old earning an annual salary of S$30,000, according to the formula you should have an expected net worth of S$100.8K.
In his book, his respondents have a net worth of more than their expected Net Worth which actually demostrated that they are a group of wealth accumulators.
Somehow I think there should be a qualification to the above equation in terms of the time duration of maintaining the annual salary.
For example, a fresh NUS female graduate (say Jenny of 22 years old) is getting S$3000 per month. In the first year she gets 3000 x 13 (assuming 13th month with no other variable bonuses) = S$39,000.
Hence her expected networth is S$39,000 x 22 x 0.112 = S$96,096
How can anyone be "expected" to have a networth of at least 2 times more her annual income in the first year?
However if Jenny has now worked for 15 years (now 37 years old) and is commanding a salary of S$4500 per month, her expected net worth is S$4500 x 13 x 37 x 0.112 = S$242.4K
This is more palusible because if we assumed the total income she has brought in over the 15 years since she graduated her total income is S$3000 (using her graduate income instead of her last income for conservative sake) x 13 (number of months including 13th) x 15 years = S$585K
Hence her expected networth of S$242.4 is calculated to be 41% of the total income - in other words if she managed to save only 41% of her graduate income for the past 15 years, she would have hit her expected networth easily.
The key to the above example is to show that if one was to use the expected networth equation to work out his/her expected networth, we must be mindful that it's best to have a number of years drawing/receiving that income for a sizeable period prior to using that equation.
Make Sense?
Monday, July 16, 2007
The relationship between the Rich and ermm..EXCEL Spreadsheets
Frankly I have not really thought about the relationship between the wealthy and EXCEL until I came across this Chinese personal finance book called "The 28 Financial Habits of the Rich"
It is about the analysis of a survey on personal finance with 681 young and wealthy Koreans (<40> USD 1 Million).
There's this summary of characteristics possess by this group of young and rich - and one of which is their abilities to use EXCEL proficiently. Because they need to keep track of their incomings and outgoings, in their different aspects of their financial decisions. In the process of wealth accumulation, these people deal with numbers almost very frequently and thus are extremely sensitive to numbers.
Come to think of it, I do use EXCEL alot, other than for work - and it seems to be useful in my path of accumulating wealth. The following sheets are my suggestions to what might be useful to keep track of your wealth:
1. Balance Sheet - to work out your Net worth
2. Passive Income Tracker
3. Shares Wins and Loss Records (If you are investing into the market)
4. Property Analysis (more applicable to analysing the Return of Investment ROI if you are buying a buy-to-let property.
Obviously the above list is not exhaustive and you are welcome to add on to your own list.
It is about the analysis of a survey on personal finance with 681 young and wealthy Koreans (<40> USD 1 Million).
There's this summary of characteristics possess by this group of young and rich - and one of which is their abilities to use EXCEL proficiently. Because they need to keep track of their incomings and outgoings, in their different aspects of their financial decisions. In the process of wealth accumulation, these people deal with numbers almost very frequently and thus are extremely sensitive to numbers.
Come to think of it, I do use EXCEL alot, other than for work - and it seems to be useful in my path of accumulating wealth. The following sheets are my suggestions to what might be useful to keep track of your wealth:
1. Balance Sheet - to work out your Net worth
2. Passive Income Tracker
3. Shares Wins and Loss Records (If you are investing into the market)
4. Property Analysis (more applicable to analysing the Return of Investment ROI if you are buying a buy-to-let property.
Obviously the above list is not exhaustive and you are welcome to add on to your own list.
Tuesday, July 3, 2007
If there's only one thing....
......about wealth accumulation, it would be this:
"The money that you work for should only be paying for your basic expenses. The money that your money worked for could then be used to pay for your luxuries"
-- The Money Shop, SG
If you have just started on accumulating wealth, you may find the above statement useful. The logic is simply this: save the most you can from your income and make those savings work extremely hard for you.
OK - I know it might be hard at times to be in a "just-to-survive" mode without any entertainments or enjoyments. What's life without some fun anyway?!
However, if you think or read about it, you would find a lot of successful people understand the principle of delayed gratification. Like what the Chinese normally says: bitter first, sweetness later. Obviously it's not sensible to suggest that you take 10 years to taste your fruits, that would make life so unbearable to sustain! You should aim to equip your knowledge in the quickest possible time, whilst keeping your expenses to the bare minimum.
Hmm..I know that's not easy, because I have been through that myself. Looking back I am glad I did that, because nowadays I don't have to work myself to pay for my vacations or movie tickets!
"The money that you work for should only be paying for your basic expenses. The money that your money worked for could then be used to pay for your luxuries"
-- The Money Shop, SG
If you have just started on accumulating wealth, you may find the above statement useful. The logic is simply this: save the most you can from your income and make those savings work extremely hard for you.
OK - I know it might be hard at times to be in a "just-to-survive" mode without any entertainments or enjoyments. What's life without some fun anyway?!
However, if you think or read about it, you would find a lot of successful people understand the principle of delayed gratification. Like what the Chinese normally says: bitter first, sweetness later. Obviously it's not sensible to suggest that you take 10 years to taste your fruits, that would make life so unbearable to sustain! You should aim to equip your knowledge in the quickest possible time, whilst keeping your expenses to the bare minimum.
Hmm..I know that's not easy, because I have been through that myself. Looking back I am glad I did that, because nowadays I don't have to work myself to pay for my vacations or movie tickets!
Monday, July 2, 2007
What the rich and poor says...
The poor says: Debt is Devil
The rich says: Debt can be an angel, depending on the kind of asset you incurred it on
The poor says: The only way to wealth is to work hard, really hard.
The rich says: How do I make money work hard for me?
The poor says: Life's short, play hard.
The rich says: Life's short, accumulate wealth in the shortest possible time.
The poor says: I like to read the Lifestyle section on the Straits Times.
The rich says: I like to read the Business section on the Straits Times.
Upon receiving 3 months' bonus at the end of the year,
The poor says: I am still thinking of paying deposit for my new car or a holiday in the UK.
The rich says: I'll review my portfolio to see which aspects need the money most to grow.
The poor says: I am investing in the market hoping I'll not lose any money.
The rich says: I am investing in the market knowing I'll not lose any money.
The rich says: Debt can be an angel, depending on the kind of asset you incurred it on
The poor says: The only way to wealth is to work hard, really hard.
The rich says: How do I make money work hard for me?
The poor says: Life's short, play hard.
The rich says: Life's short, accumulate wealth in the shortest possible time.
The poor says: I like to read the Lifestyle section on the Straits Times.
The rich says: I like to read the Business section on the Straits Times.
Upon receiving 3 months' bonus at the end of the year,
The poor says: I am still thinking of paying deposit for my new car or a holiday in the UK.
The rich says: I'll review my portfolio to see which aspects need the money most to grow.
The poor says: I am investing in the market hoping I'll not lose any money.
The rich says: I am investing in the market knowing I'll not lose any money.
Sunday, June 3, 2007
The classic HDB question
"If I had the ability to pay off my HDB loan, should I do so?" 
The simple answer to the above is that if you are able to generate a higher returns on your savings as compared to the HDB loan interest rate, then anyone's answer would be to hold on the loan.
For example:
Assuming HDB Loan interest rate is 2.6% (as of 2006/2007) and you are a savvy investor who is able to generate an annual return of 10% (be it from the business or shares market) - if you put the lump sum repayment into your investment, you would be able to earn an additional premium (10%-2.6%=7.4%).
A second point is that debt itself is not necessarily bad - if debt is incurred because you are buying an appreciating asset then this is good debt - you borrow money to help you gain more money. Hence in the above case, assuming the HDB flat will be appreciated in the future (more often than not - I appreciate it might not do so - but that's another discussion), it makes sense to hold on the loan. The only thing we have to overcome is the asian's mentality which oftens tell us borrowing is "bad".
The third point is that HDB being HDB, has a public role to play - whilst it has its responsibility to chase outstanding payments, but really they are much more lenient as compared to the banks in terms of chuting you out of your flat if you default on payments.
So, if you are eligible for HDB loan, borrow the maximum loan amount and for the longest loan period!
The simple answer to the above is that if you are able to generate a higher returns on your savings as compared to the HDB loan interest rate, then anyone's answer would be to hold on the loan.
For example:
Assuming HDB Loan interest rate is 2.6% (as of 2006/2007) and you are a savvy investor who is able to generate an annual return of 10% (be it from the business or shares market) - if you put the lump sum repayment into your investment, you would be able to earn an additional premium (10%-2.6%=7.4%).
A second point is that debt itself is not necessarily bad - if debt is incurred because you are buying an appreciating asset then this is good debt - you borrow money to help you gain more money. Hence in the above case, assuming the HDB flat will be appreciated in the future (more often than not - I appreciate it might not do so - but that's another discussion), it makes sense to hold on the loan. The only thing we have to overcome is the asian's mentality which oftens tell us borrowing is "bad".
The third point is that HDB being HDB, has a public role to play - whilst it has its responsibility to chase outstanding payments, but really they are much more lenient as compared to the banks in terms of chuting you out of your flat if you default on payments.
So, if you are eligible for HDB loan, borrow the maximum loan amount and for the longest loan period!
Friday, June 1, 2007
Welcome
Welcome to the first post in The Money Shop!
In short this is a blog on how to save, grow and protect your money. There are news happening every day which affects our pockets and there are some which we can pick money knowledge from. This is where I collate them, analyse them (occasionally) and more importantly how we can learn from them.
Speak later.
In short this is a blog on how to save, grow and protect your money. There are news happening every day which affects our pockets and there are some which we can pick money knowledge from. This is where I collate them, analyse them (occasionally) and more importantly how we can learn from them.
Speak later.
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