Investment - Savings

I believe most of us believe that the key element to start investment is start with investing in knowledge. I have written about investing in knowledge in previous article(s). What would be the next step or next level of investment after we started some research on knowledge either by reading, listening, attending seminars, etc.?

I also have written on savings which really important before start investing in something halal and legitimate. It is really important for us to have some savings before we start our investment and I believe most of us know the importance of it. What? Not really sure? Then, I suggest to read again on my previous articles on savings Part 1 and Part 2.

My personal opinion before we start invest, we should have our reserve fund for at least 6 months to sustain without any source of income. All these are not something to be developed overnight but it is possible if we practice very “healthy” Lifestyle over the time. Whoever really willing to start with some investments but there is none of savings then it’s like to construct a house without the pillars. How is it possible to have a house without the pillars? So, answer to yourself honestly before you take any further action. Always remember that better to be not-rich than poor! Why?! Spare some time and think about this.

I know there are people will claim that we can’t go far just by saving and I totally agree with this statement. I also believe in that where we can go nowhere just by saving. Again, remember that savings is one of the foundation before we start investing after we invested in knowledge. Why all these are important? Spare some time and read Real Investment.

Lifestyle

Why lifestyle is very crucial towards achieving our financial freedom? How exactly it affects our process to achieve our goal? How does rich practising their lifestyle and how about the other side? Not clear about the other side? Well, the poor I meant.

 

There are always myths are about the rich and the poor. Rich always are blamed to be too greedy and stealing money from others to become richer and richer. Poor always claim that they are always being discriminated by rich in most of the places. As long we believe that this myths are true then definitely we cant be the rich because we always see the rich is the villain and the poor is the hero.

 

Personally I don't agree with all the myths because I want to be rich and want my family, relatives, friends, and whoever reading this to be rich. Why don't you go back on some history of the rich people where they started with very poor family but ended up with indefinite wealth. No need for me to mention it here because almost all of the top 100 richest person in the universe are from poor family background.

 

 

So, what exactly the main criteria is differing between rich and poor? YES!!! The lifestyle of these two (2) different people is totally different! I believe that some might be thinking that "obviously different because rich spending like nobody business and the poor is spending wisely".

 

If we analyse wisely of this rich people's lifestyle, they have very systematic or proper recording of all their expenses. Why? Spend sometime and read some of my previous articles on Saving, Earning Vs Saving, Levels of Financial Freedom, and lot more. You will find the key elements on how to be rich slowly and steadily. The rich people also practising very systematic book keeping to monitor what is in and what is out. Most of the time, active income from rich people are untouchable or recirculated for investments. Last but not least, rich always allocate some portion of their wealth to be shared with others via charity.

 

How about the poor? Hmmmm.... They don't have proper recording at all, no book keeping, no traceable records, and always rely on active income only for their life. Hence, spend more time to invest on knowledge prior to take action to avoid unnecessary mistakes. Best of luck for us buddies! 

Levels of Financial Freedom – Part 2

We have discussed about the worst level or stage of the ranking in financial freedom ruler. Wow!!! It seems like music chart where we have ranking will be changing by weekly basis and similarly our aim to move on to be the best level in financial freedom ruler.

The next level or level five (5) will be the expenses is equivalent to the active income or the monthly salary received by us. This seems like not an issue but ultimately will affect our goal to achieve financial freedom. What would be the possible ways to bring our level to next level (level 4)? Exactly! Similar approach like we did to move from level six (6) to level five (5). What? Forgot? Yes, then you have to read, read, and read even the same materials until we take it into action.

After we have cut expenses and increase our income (mainly active income), we should able to move to level four (4) where our expenses is less than our active income which may put under savings which ultimately will be used as our fund or capital for investments. All this lift-up process of the levels will not happen overnight but will take some time and we have to be passionate and patient to move steadily. Remember about consistency!

So, we have some savings from surplus of our active income and we should have put somewhere to give us some return which is mainly some dividends because at this level this is the only potential passive income for us (even there are potential better investment with proper planning). Without noticing it, we have moved to level three (3) where we have some passive income but definitely much lower than our expenses.

Let us digest first these three (3) levels here before we proceed higher level which are level 2 and ultimately level 1. Digest here is not only read, read, and read but also understand prior to take action. Definitely later we must take action to make it realistic. Whoever have reached this level, CONGRATULATION! We’ll move ahead to higher level soon.

Define Your Basis

What we know about our basis? Why exactly we need the basis? In whatever scenario when comes to execution then we must have very clear basis so that we know what are we doing instead of what others know what we’re doing.

People always want to be rich and super rich. Very little people want to be not-poor because they don’t have clear basis in their financial goal. It’s good to be rich or super rich but it is essential to be not-poor so that no body hurt either physically or emotionally.

To be rich we must define our basis or step-by-step way forward to be rich or at least to reach financial freedom. In order to reach that, we must develop our basis to be followed along the way. How can we achieve this if we don’t have saving to start investment. How to get start saving if we don’t have proper to basis to follow? So, we must first define our basis prior to start saving which later lead to our investment portfolio. The basis could be modified and updated further once we start getting our minor goal based on our basis.

Let say we want to start with some investment in property but have no capital to start and what would be the strategy to define our basis? Definitely the property’s price will be the first basis for us to follow then will dictate the next basis which to acquire the amount of fund for the down payment of the property. Later the amount for down payment will be the following basis which we have to follow so that we’re on the track to get materialize our first investment portfolio. When defining the basis, the duration to accomplish the goal is a vital basis. So, we must define the basis how long we need to accumulate the down payment amount. From the duration we can define the monthly saving to be allocated for this investment portfolio.

To illustrate the scenario let us consider an example of case study. Let say Afnan want to buy a property worth of RM 120,000 as the first property and the first basis will be the property’s price. Then second basis will be the to accumulate down payment amount of RM 12,000 which later dictate following basis which is timeframe. If Afnan wants it to be materialized within a year then he needs to discipline himself to allocate monthly saving of RM 1,000. Hence, when Afnan follows step-by-step of his basis that he developed earlier obviously it’s not impossible to achieve his dream towards financial freedom.

Always remeber that when defining our basis, it must be rational so that it is feasible to follow and implement. So!!! What are you waiting for if you can define your own!