Consistency - Part 1

How consistency does important to us? How does it affect to our goal to achieve financial freedom? What it does? What are the benefits if we are consistent in doing something good for us?

You may have noticed that I’ve been telling the knowledge is very important to achieve our goal to be free financially. So, how can we get this knowledge CONSISTENTLY? We must align with latest information in investment world on banking products available, portfolio available, etc. And definitely all these are halal and legitimate! In order to equip with latest information or knowledge we have to ensure to read, share, and ask people CONSISTENTLY. When we read we know something new is available in the market or something we know is already obsolete in the market. When we know something new in the market we may want to share with our colleagues and later may ask them whether they are familiar or new to them. If they are familiar with our latest information, things get easier because we have someone can explain further on the information so that easier to digest. When we easily digest the information, then it is easier for us to take action which ultimately will give us the results.

When we develop our consistency in reading, sharing, and asking, we’ll benefit without noticing it. From this consistency we can develop discipline internally to keep on reading to gain more knowledge before take into action. Why is this so important before take action? Huh?! It’s simple because we can see the impacts based on lesson learnt people have shared from the readings. We may share our colleagues and they might have experienced it in reality and could be our benchmark prior to take action.

Since we go on with reading, sharing, and asking consistently we are indirectly gaining experience by reading to others experiences. Experiences are something very precious because they may save you from very big disasters. We must be very thankful if there are people to share their experiences even they are charging us with some amount. I would suggest to get this experience by reading so that we have ample time to digest and later we can ask somebody more familiar. This could be more efficient and economical!

While acquiring the knowledge and experiences by reading, sharing, and asking; you may indirectly have developed passionate and confidence in investment. This leads to develop interest in subject matter which is in this subject related personal finance and investment. It could be a bit difficult at beginning but believe me, you’ll feel the sweetness by doing it CONSISTENTLY!

Levels of Financial Freedom – Part 3

We have seen from level four (4) to level three (3) was like a magic where suddenly have some passive income but very minimal amount and cannot be used as our core income in our life due to insufficient amount. So, we can move ahead for higher level?

Again to achieve higher level is not something can be achieved overnight but will take some time and efforts to reach there. Now, to be in level two (2) where our passive income could cater our expenses or is higher than our expenses will be more challenging because we have trained ourselves to spend more than 50% of active income (very common scenario). Remember that our passive income still lower than our active income in this level two (2) but somehow able to cater our expenses. In this level, our passive income not possibly from dividends only but should be some other means like in property investment, businesses, etc. Bear in mind that all these must be halal and legitimate so that we are seen as the most handsome or beautiful person financially.

Similar to level three (3), we could reduce first our expenses so that we can develop our confident level to go ahead for sourcing some means of passive income. There so many means where we can get passive income but ensure we are well equipped with knowledge so that risk and loss can be minimized. Don’t simply attempt without knowledge, and the worst part is don’t simply acquire knowledge without taking any action (I hope you can get my point). Once you’re taking action, then experience will follow and you’ll find your skills much better than the beginning of your involvement.

Great! Now we have reached level two (2) and eager to go for level one (1) where anyone in this earth are looking to be in this level. What is the main difference? Obviously, passive income more dominant than active income and it could be passive income is much higher than total of active income and expenses. How it could happen? This is something like from level four (4) to level three (3) where the skills play a role to acquire more means of passive income; you’ll experience once you have reached level two (2). Many more to come on this passive income in future articles. So, stay tune with me!

The key element to be financially free here is that we must be very passionate and patient in achieving our target because there will be so many challenges along the way. Always remember “where is will, there are multi-ways”.

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.

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 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.

Knowing the Rules

One of key element to achieve financial freedom is via knowing the rules to be rich. We must fully aware and knowledge about the rules in financial matter including banking, taxation, etc. How we can benefit from knowing the rules?

To answer on how we can benefit is mainly on how we can fully utilize the rules to protect our savings or investments. As a footballer, he must know the rules on do’s and don’ts when playing for a team. Before ahead with skills, we must fully aware all relevant rules in any fields. Similarly, we must know the fundamental in finance subject matter then develop the skills as experience grows.

Experience in finance subject matter could be developed directly from own experience or indirectly by reading, attending talks, etc. Gaining experience not necessarily would be something positive but negative as well from both ways either direct or indirect. However, applying both experiences appropriately could lead to awesome results where almost all risks taken are measurable risks and able to minimize it. Rule of thumb in finance subject matter or developing investment portfolio it is recommended to gain as much of negative experiences from secondary sources.

How can we define our secondary experiences to avoid this happen to us while executing our tasks towards financial freedom? As highlighted earlier, we must able to gain somebody else experiences via reading books, attending talks, seminars, chatting, etc. which normally this well-known investor have published their books to be shared publicly so that people can benefit from their previous loopholes.

Gaining secondary experiences can be one of the way knowing the rules in developing investment portfolio where there could be something totally new to us since we are not familiar with the particular investment area. Hence, whatever investment portfolio we’re developing we must know the rules which is must be obviously legitimate in our country and it is halal for Muslims. Again, educate ourselves with knowledge so that we’re always up-to-date with latest rules and always conscious with any potential opportunities.

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!

Double Jeopardy

Double jeopardy is always one of the main key criteria in making any decision. Why is that so? Why we must always put some doubts on any products, services, promises, etc.? Sometime people may say that double jeopardy is not credible scenario but in reality anything is possible in this real world.

 

Hence, take this criteria as an opportunity to further refine any ideal ideas before implement it to be the real ideas. Bear in mind that there is no ideal scenario in this real world. How this can be applicable in our financial planning or towards our goal to be financially free from any burden?

 

There are many ways to achieve this financial freedom legitimately where most of the time many people may end up with scams if no sufficient knowledge in investment. How to get this knowledge? If you’re reading this and still passionate to read further then you’re in the right path in order to gain financial and/or investment knowledge.

 

Part of mechanisms to achieve financial freedom via buying financial related products and services in order we are secured and safe while executing our plan. They are so many salespersons want to sell their products or services claiming that they are the best among the best. The moment people claim they are very good, then, we must put some doubts on their products or services.

 

You may need this criteria when somebody is trying to sell you by saying that product A or service A from him/her is the best available in the market. Such statement is mainly from salesperson where want to sell their products only. Remember!!!! They just want to sell their products or services only!!! That is the reason we always require this criteria to evaluate the products or service.

 

 

 

So, how to get this criteria in to the place so that we can make unbiased judgement when buying products or services? If there is only one product or service then no choice to doubt on the product or service because from the definition itself states double or two. The simplest way to get this criteria by approaching some other competitors which offering similar products or services.

 

When we start comparing and asking couple of questions that the salesperson might notice that we're well aware of the product or the service that they're offering. Always remember that we must dictate what we need not what the salesperson(s) wants.

Simulation

Why do we need simulation tools or software in our life? There are both steady state and dynamic state simulation tools. Steady state is something which all the scenario are considered as ideal case whereby dynamic state is with some circumstances are introduced into it to see the impact to the results. So, how this simulation approach can be applied in this financial matter or our "Humble Financial Planning"?

We need to this simulation basically to develop some planning to be implemented into our real life for saving, investment, etc. This is something like to allocate certain amount for expenses, savings, and investment. We may come out with some plans where from the salary we're getting each month will be optimized in order to achieve our financial freedom. From this plan, we may able to accumulate at least RM 36,000 at the end of the year by saving RM 3,000 each month consistently. However, it may not be the real case where there are no savings some of the months; this may due to some emergencies, disciplines, attitudes, etc. We may end up with only 70%, 60%, 50%, 40%, or 30% of planned savings due to those circumstances. Hence, sometime steady state simulation may not be the real case but at least will give us some confident level to start saving, investing, and learning something related financial freedom. This simulation could be our own planning or with some attractive fun game which is via Monopoly, Saidina, Cashflow 101, etc. Those days these games seem like just for fun but actually can sharpen our intellectual in financial education.

Dynamic simulation mainly we introduce some disturbance similar to real situation and experiencing whatever possible consequences. Hence, by having dynamic simulation scenario will guide us closer to the real scenario.

Now, how to get the disturbances, scenarios, or circumstances when implementing our plan or in other words when start running the dynamic simulation? We must have certain level of financial education so that can apply whatever possible scenario; which this financial education has to be developed by reading, attending talks, listening to audio or video about finance subject matters. Always remember very popular proverb, "Failed to Plan is Planned to Fail".

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.