" in just a matter of hours and found it to be both gratifying and a timely reminder as I head into yet another year full with global economic uncertainty and the usual political mess.A recommended book for reading nevertheless, if you haven't had RM1000 for tax rebate next year buy it now, if not do it for next year. Written in a straightforward, simple and accessible style, it reveals how modern society as we call it is rigged towards a debt-ridden economy and outlines simple ways to resist this. Below are some excerpts from the book:
First Rule of Finance: Not to spend more than 80% of your take-home pay.
Credit cards: Never carry a balance.
Cars: Pay cash for vehicles. No financing.
Castles: 20% down payment, maximum of 40% of take-home pay as financing payment.
The only rule I did not adhere is the third one. God I wished I could reverse time and bought myself a used car instead of a new one. A lesson has been learned.
Financial freedom is not about how much networth you have, it is on smart money management. If you drive up in a brand new luxury car and tell me that you borrowed a pile of money from a bank, I am not impressed. That's nothing special. Any idiot with a pen can do that.
Cars are a form of liability as I mentioned before as do other items that depreciate in value over time. Well I could not buy my car in full with cash, at least I made a cheaper choice and one more year to go in financing.
Living within your means freeing you from the job you don't like. Having enough cash to go about presents a path to wherever you want to go, because you know how to decide what you want and put away the money needed to get it. Smart money management will make it possible, not tying you to a job that you dislike for years.
A healthy reserve of cash in savings or assets (fd, equities, bonds, property) minimizes the impact of losing or changing jobs. I can quit now and still stay jobless with my current spending for almost 2 years. There is no use waiting for the paycheck every month's end just to clear off debts and borrowing. You are going to be tied down forever.
If you can't handle paying off your credit card each month in full, you can't handle stocks. Get the management of money part down first as the stakes are low and easy before climbing up the ladder to investing. If you can't control your finances before striking it rich on the stock exchange, what makes you think you will afterwards?
Indeed, if you can't control would mean losing patience. Investing in stock requires patience, if not you would be considered a speculator who has no clear investing strategy and might probably borrow to invest when you are actually gambling with luck.
The thing that made this book interesting for me is it touches upon the society of America where the government is of the corporations, by the corporations for the corporations. It takes you deep as to why health care is expensive, why oil dependency continues and why military spending remains high. It reveals the coordinated effort at work to suck dollars out of every taxpayers. It is not an American Dream.
Most people, your neighbours, friends, colleagues could have fell into this trap of borrowing and mindless spending. Don't be one of them and do yourself a favour by getting this book. If you ask me nicely, I might be Santa Claus and give you one for free :) Happy merry Christmas everyone, HoHoHo!!
2 comments:
Merry Christmas & Happy New Year, Nick.
Hope your venture into US stocks brings you much success in the new year.
Can we also see some analysis on bank stocks such as CIMB, PB, MBB?
Thanks JW! Well I would like to do so but bank stocks is a totally different playing field. We need to look at banking stocks from different financial ratios as their operations rely heavily on borrowings & deposits.
I would one day like to take a look at banking stocks but not now, I am a big fan of consumer/demand supply stocks. I would probably use the mutual fund way to get into banking stocks but as of now I only have HwangDBS SIF (70% bond fund)
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