Are You Wealthy?

Are you wealthy?

The term wealthy means a host of things to different people. Some people define wealthy as having an abundance of material possessions.

In the book The Millionaire Next Door, the definition of wealthy is defined based on one's expected level of networth.

A person who is earning only 1K per month and a person who is earning 10K per month should not be expected to have the same amount of wealth. If they do happen to have the same amount of wealth, it simply means that the person who is earning less is doing a much better job at accumulating wealth that the person who earns more.

What should you expected networth be?

In the book, your expected wealth should be calculated as such:

(Annual pre-tax household income multiply by your age ) divided by 10

So if a person who is 20 years of age is earning $100,000 per year, his expected networth is $200,000. If his networth is more than $200,000, he is building his wealth.

PAWs versus UAWs

PAWs are prodiguous accumulators of wealth versus UAWs who are under accumulators of wealth.

PAWs are simply defined as those whose actual networth are twice their expected networth

7 Factors

Eighty percent of America's millionaires are first generation rich! That is comforting news for us who were not born with a silver spoon in our mouths. The authors also discovered seven common denominators amongh those who successfully build wealth. They are:

1. They live well below their means
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth
3. They believe that financial independence is more important than displaying high social status
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.

Conclusion

I would also like to think that this method of defining wealth might be flawed in some ways. If a person has a sudden change in income over the recent years, this way of calculating wealth might not be accurate. Nonetheless, it still provides a pretty good gauge at how well we are accumulating our wealth.


The author is happy that based on the expected networth calculations and his actual networth, he is actually in the category of a wealth builder. However, he has not reached the stage of being a PAW where his actual networth is twice his expected networth. The author also hopes that he is in the right occupation.


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195 Posts and Counting

It has been a long journey.

When I first started out in 2008 to blog about my journey to financial freedom, I had little clue on what I was going to blog about and whether it would be sustainable.

This post is my 195th post on this blog and I must say that I am glad I have made it thus far.

What started out as a random project to record and increase my passive income every year has become a diary for me as well as a platform where I can engage others who are also striving to financially independent or free.

There are many times when I wanted to simply give up this whole project on financial freedom.

However, I have slowly seen how blogging has helped me to grow clearer in my goals as well as my knowledge.

In the same way, knowing that other bloggers are out there reading and watching just makes me want to be more accountable to the goals that I have set for myself. The knowledge that I have gained from other bloggers are tremendous and I must say that I have grown as an individual because of their suggestions, advice and blogging.

If you have been following this blog for the past one year, I will just like to say a big THANK YOU for taking the effort to read. I know I can write with a sort of "dizzying" effect as there are times when my mind is totally cluttered especially after returning from work.

As my committment to continue blogging, I hope to roll out a new template for this site to make it a bit more reader friendly. I hope to do this at the 200th post but I am keeping my fingers crossed as I can still be pretty busy at times.

Okay, Flash Forward is starting at 10pm and I really hope to catch this episode.

Signing off,

Financial Freedom

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Bank Accounts

I realised that I might be having a bit too many bank accounts and credit cards.

Lately, I forgot to settle one of my credit card bills and ended up with a late payment charge of $40! And that was for a credit card bill of just $80!

Are all these bank accounts necessary? I certainly think so.

Here is how I use all my bank accounts.

POSB Savings Account

This is my primary account which is linked to all the Giro, electronic payment for shares and stuff. It is basically the account which is linked to my ATM card and which I use to pay the bills.

POSB Current Account

This is the checking account which lets me write cheques. I pay $2 each month to maintain this account.

Citibank Step Up Interest Account

This is where my salary is credited. Based on the step up interest, I can earn close to 0.75% interest on my deposits. I will then transfer whatever amount of my pay I need into the POSB Savings Account to spend.

MayBank iSaavy Account

This is my emergency fund account which pays interest of up to 0.5% per annum. I hardly touch the money in here at all. I like this account because of the higher deposit rates it gives compared to other banks.

To Trade or To Buy and Hold

After years in the stock market, I still can't really figure out whether it is better to trade stocks for the short term or to just buy and hold them for the long term.

I have heard both sides of the arguments, have read books like A Random Walk Down Wall Street, and I must say - I agree with both TAs and FAs.

But I guess I will just choose the method that works best in making money.

While a stock might rise from $1 to $1.20 in 1 month, the person who holds the stock for 1 month only stands to earn a maximum of $200 per lot of shares.

The person who trades on the down and up trends might however be able to earn more than $200. By going in and out of the same stock, his POTENTIAL to earn is much higher. The probability that he losses money is of course also much higher compared to just holding on to the stock.

So what I do is to have two portfolios: One for holding and one for trading.

I enjoy the best of both worlds. There are benefits of buying and holding and there are benefits of trading. By doing both at the same time, I enjoy both benefits.

In addition, trading provides a form of income. More income brings me to financial freedom much faster.

The tortoise might win at the end of the day but the hare leads most of the way.

I believe that people can combine both approaches to bring out the best of both FA and TA.

Conversation with A Millionaire

It is not everyday that one gets to speak face to face with a millionaire.

Today, I got the chance to do so.

In fact, I spent one and a half hours with him speaking about various things in life like success, job satisfaction and wealth building ideas.

I am putting it down in words to share with all as I believe that not many people have actually gotten a chance to speak to successful people or millionaires.

About Money

Money does not buy happiness. But it does buy you the time and the alternatives. Basically, money gives you a wider range of options compared to the average person.

About Discouragement

Everyone feels discouraged now and then. It is important to not dwell on it and instead mix with people who are positive and successful.

About Helping Others

Sometimes, it might not be possible to be directly involved in helping others. How much can one help? Instead, use your God given abilities and channel your energies there. Every job essentially helps some one or somebody at some level or another. If you are able to make more money, you could donate to charity and get others to help.

For example, the leaders of our country might be good in terms of defence and security measures. But you don't see them sitting at the customs office right?

About Careers and Jobs

There are no dream jobs in the world. Each job has its pros and cons. The most important thing is to put your heart into it while at the job. Don't work for your boss or the company. Work for yourself and your family.

Being at the top has its loneliness. Even big bosses and CEOs think of quitting their jobs too.

Riches versus Wealth

Having access to riches does not guarantee wealth. Earning alot of money might not bring you wealth if you squander your money away.

Property Investment

The returns from rental property is very low based on his own experience. Instead, buying and selling properties makes money much faster.


Work Hard Play Hard

It is important to work hard and play hard. The reason why you are able to play hard is because you get a good income from your work.

All work sucks. It is how much you are compensated for it in monetary terms that matters.



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Standard Chartered Personal Credit

I have been receiving "cheques" from Standard Chartered Bank lately.

Basically, these cheques are given to me in letters which they have been sending.

So far, I have received 2 cheques.

The instructions states: Simply bank in the attached cheque and enjoy cash at 0% interest for six months with just a nominal fee of 2.5% on the cheque amount.

No gimmicks, No hidden cost?

It says that the promotional rate of 0% interest is valid for 6 months and thereafter, the prevailing interest rate applies. I am not too certain what is the prevailing interest rate for this credit line.

Still, it sounds like a pretty attractive option doesn't it?

I get a cheque for $8000. The 2.5% nominal fee adds up to $200.

So after 6 months, all I need to pay back will be $8200. If I am able to use this money to buy some stocks and the stocks happen to rise in price... I will be using Other People's Money to make money!

But of course, the reverse could happen where the stock prices are depressed after 6 months and I could be stuck in a serious quandry. To liquidate the stocks at a loss and still pay up the $8200.

Patrick Soh

Patrick Soh, a Singaporean, has opened the first fast food restaurant in North Korea. I remember visiting Waffletown regularly in my early childhood years during the late 1980s at a shopping centre in Bukit Timah, Singapore. That outlet closed after a few years in operation.

I believe that Singapore has no lack of entrepreneurs. Given the opportunity and education, most people would want to start their own business. It is just that they do not know how to. Hopefully, this article will give some inspiration to the next "Patrick Soh" perhaps.

Read the article below to find out more:
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You want more fries with that, Mr. Kim? How about a hotdog, Miss Park? Once condemned as evil "US imperialist" fare, Western-style fast food is now available in North Korea thanks to a Singaporean entrepreneur who is already drawing up expansion plans just months after opening his first outlet.

"There is a potential to develop this business over there," said Patrick Soh, who is bullish on the prospects of fast food in the isolated Stalinist state better known for famines than deep-fried delights.

Soh, 56, holds the franchise in several Asian countries for Waffletown USA, a relatively obscure brand in the region compared to the likes of McDonald's, KFC, Pizza Hut and Burger King, but he has big ambitions.

The first branch of Samtaesong ("three big stars"), as Waffletown is known in North Korea, started operating in May after Soh's company got the first licence awarded to a foreign fast food outlet.

Burgers, called "minced beef and bread" to mask their American association, are the biggest attraction at the eatery, which also sells fries, crispy Belgian waffles, fried chicken and -- the latest addition -- hotdogs.

"It is not only the locals who enjoy the food. Even the foreigners like the food," Soh told AFP in an interview at a Singapore outlet of Waffletown.

Soh will make his fourth trip to Pyongyang this month to explore the feasibility of opening a second outlet there. If all goes smoothly, it should be up and running in early 2010, said Soh, who is not deterred by problems like power outages and the unavailability of some items in Pyongyang.

His North Korean adventure started when he was approached last year by a Singaporean investor, who broached the idea of setting up a Waffletown franchise in Pyongyang.

Soh declined to name the investor or say how much it cost to open the Pyongyang eatery, saying his main role was to set up the operation and train local staff to run Samtaesong.

A North Korean delegation paid a visit to Singapore early this year to sample the fare at a Waffletown outlet. "They came and tried the food and liked the waffle, burgers and fried chicken," Soh said over coffee at the outlet, located in an upmarket neighbourhood near Singapore's Orchard Road shopping belt.

"They find that we have a bit more variety than other typical burger chains and that we don't sell junk food," he said.

Soh made his first trip to Pyongyang in November last year, taking four days to survey the site and see whether the fast food concept was workable in one of the world's few remaining communist states. He was pleased to learn that the site was in a choice location in downtown Pyongyang, right next to a subway station and within walking distance of various universities.

He went back to Pyongyang in December to begin preparatory work for the opening of the eatery, from arranging the layout of the restaurant to listing the kitchen equipment and ingredients that needed to brought in.

The seasoning for the chicken and the waffle mix are among items imported from Singapore but other ingredients like beef and the chicken itself are sourced locally, with suppliers using his recipes for the burger buns and patties, Soh said.

The eatery buys soft drinks from shops that cater to the diplomatic community and resells the beverages in paper cups. Local workers are very intelligent and eager to learn, Soh said. "I don't need to spend much time to train them. I take about two, three days and they have a grasp of the work."

Since Samtaesong opened its doors in May, customers, including foreign students from China and Russia, have been streaming into the 246-square-metre outlet, he said.

"The locals come in and know the food that they want to order," said Soh. Prices are set in euros, but US dollars are accepted as payment. A "minced beef and bread" costs 1.20-1.70 euros (1.77 to 2.50 US dollars) and about 300 are sold each day, said Soh. The most expensive item on the menu is the crispy fried chicken at slightly under three euros.

The communist state's per capita income was estimated at just over 1,000 US dollars in 2008, but this is not denting Soh's drive to open more Samtaesong outlets in the country. He thinks North Koreans enjoy the novelty of the food and environment in his restaurant.

"This is new for them. It's just like when McDonald's first opened in Singapore."
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