Excuses

Anything human made will have both pros and contras. So, as human being we must able to differentiate so that we can really benefit from those human made ideologies, products, etc. Similarly as we discussed for our savings that possibly implemented might be impossible for some other people. What would be potential causes to make it impossible to this group? Hehe! Back to the topic of this article, which is "Excuses". So, identify our excuses so that we can eliminate this culprit (excuses) to make our plan for savings to be possible.

Why is this culprit can exist and stopping us from taking action so that our dream can be materialized? Attitude? Education level? Be precise with the "education" my friend! Yes! Financial education level! What else could be the potential causes spreading this virus among us and stopping us from being rich?

How is this culprit or virus can be reduced and ultimately eliminate from our attitude in order to start implement our target for financial freedom which is the basis fundamental is by savings? Again, as highlighted in previous article on How To Start Saving - Part 1 and How To Start Saving - Part 2 we must very particular on our inflow and outflow to monitor the exact flow of our money. Hence, "Excuses" is just matter of attitude and can be eliminate slowly with some level of knowledge in finance subject matter.

So, how we can eliminate this virus from our attitude in order to achieve our financial freedom? Let us discuss in new article to be published soon. Coming soon!

How To Start Saving – Part 2

Let say you have started saving part of your net monthly salary but not consistent over the time because of some circumstances. What would be the scenario this could happen? Before that, any of us experienced it? Answer honestly so that it can be rectified. Be honest, nobody is perfect in doing anything. As a human being, people tend to do mistakes. So, learn from the mistakes to lift ourselves one (1) level higher compared to others that never attempt at all.

This scenario could happen if we started our saving with very high portion whereby it is not possible to allocate such huge portion if this is our first experience to allocate our income for the savings. Hence, be realistic with our intention where we could start with 5% our income then slowly develop discipline to maintain monthly saving. From there, we can gradually increase our saving based on annual basis with another 5%. Bear in mind that this is the portion or percentage whereby the absolute figures (savings) could be higher if there are salary increment or adjustment on annual basis.

How to increase the percentage of our savings from first year to the following years? As discussed earlier on salary increment or adjustment, there are lot more ways that we can increase our active income (hard-earned income). Some might ask how it is possible if we are just an employee with fixed monthly income and no other source of income. So, how is it possible? Is it a joke? Haha! Have you done with your laughing? Then, let us discuss how we can get extra income by maintaining our permanent job. Be frank, to discuss about how to get additional income could be a separate topic with more than 200 pages but let us just brainstorm what could possibly be done to increase our monthly income.

Definitely there are people good are certain area and willing to share it with others and the mean of doing so can be called as tuition or consultancy. So, by teaching to others with reasonable fees could surplus our normal monthly income. Great! Now you have extra source of income besides normal routine job. What?! You can’t teach? Then, you might sell something by buying in bulk and selling at retail price. Obviously we must ensure those are halal (for Muslim) and legitimate in our country.

There is indirect way to increase our saving which is by reducing our expenses, it could be unnecessary which might not be really needed but due to some circumstances we’ve been buying or subscribing. Hence, by stop buying or unsubscribing will give extra value to our savings. Again it is not difficult to allocate some portion of our salary for the savings where if we could do both scenario; increase active income and reducing expenses. By doing so, we may can allocate saving up to 20% because it is very rare case we need more than 50% of our salary if properly manage our expenses.

Last but not least, discipline and consistency is the crucial part in developing our skills for the financial freedom. All these only can be achieved with passionate to follow our plan systematically and consistently. Don’t wait my friends, start doing it because the moment you started you’re not too late.

How to Start Saving – Part 1

Key element to start to be financially free is discipline to do saving from the active income. If a person doesn’t has any saving then it is difficult to get along the right track for financial freedom. Why it is very important to start with savings prior to investment or to achieve financial freedom?

Whoever we are, how old we are, it is not too late as long as we just started a minute ago. The key point is that we must start have savings. It could be very difficult for us if we never practised to allocate our salary for the savings with so many monthly commitment to pay. If we have done it before then it is very practical for us. It would be much more helpful if we could make it as a habit to allocate part of our salary for the savings. For those who started career with less than a year could be much simpler to discipline ourselves by assuming no commitment in place yet.

It is very simple to start saving if we can follow our plan by listing our net salary with all the monthly expenses. Again it is not about the amount but percentage and consistency throughout our life towards our goal to achieve financial freedom. By listing the numbers, we can easily illustrate our savings because most of the time will not lie to us unless we lied to ourselves on the numbers. Clear? Or not really clear? Or totally blur? What I meant here is that we should be honest with listing so that more reasonable plan can be implemented. Let say we just started our career with no experience in savings, then don’t be too optimistic to put more than 50% of our net salary. I’m not saying it is impossible but we don’t drive start with higher gear to drive faster but we should start with lower gear to get speed and then slowly we’ll speed by changing to higher gear.

For instance, take an example to get better picture on it. Case study; Afnan started career as an engineer with salary of RM 2,000 and force himself with saving of RM 1,000 whereby the living cost itself could be more than RM 1,000 with current market price for rental, transportation, foods, etc. Hence, he has to be realistic when giving driving force to allocate his salary for savings. So, what would be the saving percentage? I would suggest to go for 5% or 10% first then slowly develop skills to increase the portion as time flies. As time flies, don’t increase lifestyle but increase the saving portions and we can see the effect really tremendous without we notice it.

As highlighted earlier, when we allocate our money for savings, consistency play a big role towards our goal to create our investment portfolio and ultimately to achieve financial freedom.

Earning vs Saving

Everybody have the steady earning but not everybody have the steady saving. What is the real correlation between these two? Which one is more important? Why is that important? Why saving is important whereby people always discuss about inflation which current value will not be the same in the next five years? Better leverage our money for investment rather than just saving. There would be so many arguments about saving which is not really advisable relative to current fluctuation in economy. Before we go further, we always must remember that, "it's good to be rich but it's better not to be poor".

How many of us have started saving with steady saving every month from the beginning of his/her career life? Be frank, I admit that when first started my career life there are so many wishlists to be bought from the first drawn salary. As time flies, we might aware that savings is crucial to back-up us during any uncertainties. Some says, emergency fund must be six (6) months salary or one (1) year salary in case of any uncertainties. Why people always mention relative figure not absolute figure? Any idea on relative figure and absolute figure?

Relative figure is something subjective where it comes from the salary for specific person and absolute figure is a fixed salary, i.e. RM 2,000, RM 5,000, RM 10,000, RM 20,000, RM 30,000, etc. If a person having salary of RM 3,000, he/she having sufficient amount fund during emergency which is more than six (6) months salary and his/her living style is designed based on RM 3,000/month expenses. Whereby for those getting salary RM 20,000 or higher would not help much as the committed amount is only valid maximum two (2) months which is far lesser than minimum requirement, six (6) months salary.

Hence, it's not about how much we put aside for saving but how consistent and portion are we put aside for saving. For those never had consistent saving might start with very minimum saving which is as low as 10% and slowly increase by annual basis. Is it possible? Obviously it is possible if proper financial planning is in place by discipline ourselves on expenses which is indirectly reflect to our living style. So, back to how good the saving based on relative figure, i.e. which one is considered having better saving from two different individual with two different salary bracket;  if a person with salary of RM 3,000 can put aside RM 600 for saving and a person with salary of RM 10,000 can put aside RM 1,000? For me the person with salary of RM 3,000 and saving of RM 600 is wiser than the one with salary of RM 10,000 and saving of RM 1,000. Why? Don't look at the absolute figure but on relative figure, 20% versus 10%.

Slowly develop our discipline in managing our financial strategy in order to achieve financial freedom even while working as a employee. From the steady saving comes the steady investment because slowly the knowledge and experience being polished simultaneously.

Real Investment

Investment should be something giving us back some values; it could be monetary values, experience, knowledge, etc. Investment itself may sound simple but when comes to execution level, it must be done very strategically so that risk can be quantified. Nothing in this world is safe and genuine especially money related matters. Hence, really need  detail analysis in order to materialize it. The fundamental on investment must be very strong so that can stand for any uncertainties, at least we are ready with way forward to face the disaster or namely financial crisis.

In order to invest in any potential profitable investments, we must know the pro and con of the industry. How to know it? How to gauge the risk of the industry? What to gauge? Where to gauge it? When to gauge it? All the checklist could be different based on different industry; namely stock, real estate, direct selling, gold, etc. 

People may ask how to get or to know all the checklists prior to start investment so that we are able to mitigate potential risk before, while, and after investing regardless any industry. For me as simple as reading ABCs because in our level while reading this article considered expert in reading but not same for kids who just started to know the alphabets. Once we know the alphabets, we must know the words so that can write it properly and so on so forth. Similarly, before we start investing in any potentially profitable investment, we must conduct some evaluation via some researches. Research here is not by pursuing doctorate in that investment area but reading subject matter related books, articles, magazines, etc. Some may suggest to go for seminars or talks even with no fundamental knowledge on that area investment area. For me I would say that you may go for the talks (one to three hours) which is normally free as introduction before they (organizer) organize the actual course, we may get some key points for us to do some detail study before attending the paid course. 

Buying books authored by the speaker(s) would be a good strategy before attending any paid course so that you have some idea on issues that we may have foreseen in the books. Besides to have some ideas, it's better to read because our database (memory) will store all the information read longer than via listening. Definition for research itself could be subjective based on the materials or approaches you will be using and we have to ensure the research should really feasible before take action in investing. Or else, some disasters will come even without actual financial disaster.

Hence, spare some time, money, efforts, and/or anything that can lead to financial knowledge enhancement so that we know the right path when start our investment. So, start your investment with knowledge first before anything else.