Financial Resolutions

This cartoon Prompted me to write this blog..

Do you make resolutions every year!

When we talk about Financial Resolutions, all of us can have different resolutions that is relevant to us.

- Buy a house,
- Upgrade the car
- Travel overseas
-save for the rainy days
- save for a wedding... etc.etc...

For for anything that has to be financially planned, the first thing to look at is the Cash flow.

- Do you spend less than what you earn monthly.
- Do you save at least 10% of my monthly income.
- Do you have at least six months worth of my income as emergency funds.
- Do you pay my credit card bills and other debt obligations, in full and on time each month.
- Do you have adequate financial protection.

If you have worked out a Cash flow statement of how much you earn and how much you spend,
if you have a surplus then its good. But if there is deficit, then you need to do some serious Budgeting.
The three things that matter for a good Budget-

• Know what is your Income, 
• What are the expenses, 
• when the due dates are for each payment to be made. Budget is time sensitive. 

Once the Budget and Cash flow is done, you need to review it regularly to see the progress towards your goal.

For any resolution to be achieved, constant review is required. Wishing you all the best in achieving your Resolutions...

Time is Money

When we talk about Money, I often hear comments about how unfair it is that some have so much money and there are many who don't have even the basic for survival..

What stricks me is that many of us forget something very important. TIME. The Rich or the Poor, we all have one thing that is totally fair. We are all given the same amount of time and how we use it is totally up to us.

I would like to share an email I received with excerpts from a book First Thing Every Morning by Lewis Timberlake.

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If you had a bank that credited your account each morning with $86,400—with no balance carried from day to day—what would you do? Well, you do have such a bank...time.

Every morning it credits you with 86,400 seconds. Every night it rules off as "lost" whatever you have failed to use toward good purposes. It carries over no balances and allows no overdrafts. You can't hoard it, save it, store it, loan it or invest it. You can only use it—time.

Here's a story that drives the point home.

Arthur Berry was described by Time as "the slickest second-story man in the East," truly one of the most famous jewel thieves of all times. In his years of crime, he committed as many as 150 burglaries and stole jewels valued between $5 and $10 million. He seldom robbed from anyone not listed in the Social Register and often did his work in a tuxedo. On an occasion or two, when caught in the act of a crime by a victim, he charmed his way out of being reported to the police.

Like most people who engage in a life of crime, he was eventually caught, convicted and served 25 years in prison for his crimes. Following his release, he worked as a counterman in a roadside restaurant on the East Coast for $50 a week.

A newspaper reporter found him and interviewed him about his life. After telling about the thrilling episodes of his life he came to the conclusion of the interview saying, "I am not good at morals. But early in my life I was intelligent and clever, and I got along well with people. I think I could have made something of my life, but I didn't. So when you write the story of my life, when you tell people about all the burglaries, don't leave out the biggest one of all... Don't just tell them I robbed Jesse Livermore, the Wall Street baron or the cousin of the king of England. You tell them Arthur Berry robbed Arthur Berry."

Here are six terrific truths about time:

First: Nobody can manage time. But you can manage those things that take up your time.

Second: Time is expensive. As a matter of fact, 80 percent of our day is spent on those things or those people that only bring us two percent of our results.

Third: Time is perishable. It cannot be saved for later use.

Fourth: Time is measurable. Everybody has the same amount of time...pauper or king. It is not how much time you have; it is how much you use.

Fifth: Time is irreplaceable. We never make back time once it is gone.

Sixth: Time is a priority. You have enough time for anything in the world, so long as it ranks high enough among your priorities.
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Have a wonderful day and Prioritize your day well in advance so that you dont end up having a huge " LOST ACCOUNT".
Do post your comments.

3 steps to your Financial goals setting

Planning is a loborious process and when we break down the process to steps its easier to understand and execute.
The 3 main steps to Financial goal setting are

• What you have
• What you want
• How to achieve it.

What you have:

Reviewing current financial position is very important process. If you are in a lot of debt and want to save a million, it doesnt make sense, as reducing the debt is the priority before saving. A very easy process would be do a simple cash flow and find out how you are spending the money you earn. ( I have a template and if you want to use do email me)

What you want:

For this question, sky is the limit. A realistic goal which also takes little steps is achievable. Breaking down long term goals to small achievable short term goals is the best way to work this out.

How to achieve it:

For this step, categorising the goals is important. Savings, investment, protection, retirement etc. There maybe some overlaps too. This step requires time with your financial advisor to come up with a goal.

Some interesting Outlooks for 2010

January is generally busy for me as I attend a lot of Market outlook talks from different people- fund houses, analysts, and even laymen who are Pro in investing...

Here are some views to ponder on....

1. 2nd Year of US Presidency- Historical data of the market has done well in the first year of a Democrat President. ( exception of Mr. Jimmy Carter) and keeping in line with that the first year of Obama's presidency the market has gone up by 30+%. The second year has always been flat and so based on that, some analyst expect this year to be flat.
2. Decennial Year- Year ending with 0...2010- Again going back to early 1900, every year ending with a 0 has not done well or the market is flat... so some are expecting the same for 2010...
3. 4 year Market cycle- When it comes to Market timing, the Pro's always argue that there is a pattern and its very easy to find. The four year market cycle. The last low was in 2006. So you can work back words and forwards to get the market lows. http://www.tradersnarrative.com/the-amazing-four-year-stock-market-cycle-867.html
4. Financial Astrology- Staying in Singapore and not looking at what fung Shui predictions are is a must. The Metal Tiger Year- 2010 - The Year of the Metal/White Tiger, (which begins auspiciously on February 14th when Valentine's Day is also celebrated.) This is the Yang Metal Tiger Year. Yang Metal over Yang Wood. Tiger = Yang Wood. Inside the Tiger, there is Wood, Fire and Earth elements. Tiger is the mother of Fire = Wood = seed of Fire. Unfortunately, Metal destroys Wood, so this is a destructive cycle and have conflict relationship. In short this is not a Peaceful Year according to Fung Shui.
   

My views - In the Financial scene, inflation could be a major issue that has to be resolved. The stability of US economy will will important for the rest of the world.

So this year I expect volatility however, there is also be a lot of opportunity to enter the market especially if one didn't do it in March 2009.

Any other views.....

Protect your home

In the first 11 months statistics show that fire in homes has increased considerably. There are many reasons but most common one is Electrical overload and carelessness. Now with festive season around, almost all houses have electrical decorations, christmas trees etc.

The fact to note when there is a fire in one apt, it can cause external & internal damage to apartments above and below.

HDB/ Private property management and even Banks who offer the loan, makes it compulsory for all to take basic fire insurance. This covers the external walls and common area.

However, if there is a fire upstairs and your ceiling is damaged, this will not be covered by the HDB. You have to bare the costs of repairing the ceiling or false ceiling. If you are going to sue your neighbor upstairs, you will have to sort it out legally, which can be very cumbersome.

An easy way to handle such situations is to have a home content plan. This plans will cover the renovations & home content and much more. These types of plans also cover public liability, example should there be fire in your place and causes damage to your neighbors home, the cost of repair, legal cahrges etc, will be borne by the insurer.

There are always add-ons to Home content insurance. You will be covered for theft, loss of valuables, personal accident, and home protection when you are traveling overseas.

Again, the home content insurance has a range of premiums from different insurers.

In this high paced lifestyle we live in, we cant take anything for granted. Its always best to transfer RISK to someone who can handle it better.

Moneysense Bookmarks

Lifestyle Planning

Lifestyle is an important part of our lives. Everyone has a different description of Lifestyle. The most important thing is what ever maybe the lifestyle needed, one has to plan financial to achieve it.

Planning has to be done to

• identify the need,


• the money needed for that lifestyle,


• the time available


• how to acheive it.

The first step is quite simple. Lifestyle to travel overseas every year, need a holiday home, a sports car, a luxiourious home by the beach, etc etc. It can also be a simple second home, a financial free retirement. So you need to know how much you need.

The very important factor in planning is the time you have and the method you acheive it. The earlier you plan the higher the amount. This chart shows a simpe computation of Time value of Money.

Once you decided to save, the the risk that you can take has to be decided. If you dont want risk, the returns will also be low. High risk, High returns.

The options are

• FD in a bank for abour 1%-2% interest rate

• Bonds or tresury bills- 2-4% returns


• Balanced funds with exposure to bo equity and bonds with about 5-9% returns


• Equitiues either as Shares, Unit trust or Managed accounts with a potential return of more than 9%

Time is crutial to any planning. The earlier you start the higher the returns you can reach. Also, the amount needed will be lower.

Income vs Expense

Time and again, we have to go to basic to manage the income vs expense matrix.

There has been a lot told and written on how to manage the balance and of course ultimately save for a better living standard. Pyramid of needs, NEEDS vs WANTS etc.

Yesterday I attended a workshop on Money sense conducted by a STAR trainer called Abu.
His success story is very interesting on how a GOAL in life is so important (www.abangabu.com)

I would like to share some interesting ways he uses to manage money.

He uses the Compass to explain it in a simple way. Like the compass helps a person lost in a jungle to move to civilisation, the financial compass can help spend wisely and hence mange money well.Now looking at the financial compass, E- stands for Essentials. Food, clothing, children's education, house rent/mortgage payments, medical expenses all go into this category. This can constitutes upto 60% of your income.

N- signifies Necessities. Education, insurance, medical cover, savings etc come under this category. Up to 40 % of your income should go into these expenses.

Both these categories should be High priority in any ones financial plan.

Now looking W- Waste, things that account for unplanned items like spending on taxi because of waking up late, eating out unnecessarily. You can look back at your spending patterns and identify what you can categories under this. At anytime, this portion of expenses shouldn't be more than 5% your income.

Last but not the least is S- STUPID, SILLY expenses. These expenses are those we do to satisfy our False Prestige or EGO. To show off that we are doing well when the fact is not so.

Talking about this section, a lot can be said about how the RICH present themselves. For example, Warren Buffet the richest man on Earth, says his success is Simplicity. He still lives in a house he bought with his first income, travels by economy class and doesn't buy things he doesn't need. There are a lot of such examples.

Like the saying goes " Empty Vessels make more noise" its always the not so financially savvy who spend on POMP & SHOW. This component of expenses shouldn't be more than 5% of the income.

So, using these NEWS categories, one can easily plan for financial freedom. So next time you go shopping take your COMPASS along.

Financial Psychology

Have you ever wondered why money seems to work so well in some people’s lives and so destructively in others? Why some people control money while others allow it to control them? Or why some of us can manage it so effortlessly to fulfill life’s plans and goals, while others never stop to question how they want it to serve them?

Questions like these are not typically explored. Why not? Its probably because the answers do not lie in cold financial facts. One must look at both the financial and psychological factors involved in money matters to make sense of why people do what they do with money.

Emotions, culture, religion and personality has the major play while talking about Financial psychology.

Culturally, many societies have a believe that Money is evil, and cause of evil. So this is ingrained in the mind since young. So as adults, there is an aversion to money.

Most religion preaches against Greed and somehow Money gets associated with Greed.

Personality. There are many money personalities and the blue print for each is different. This has to be evaluated and analysed.

You only attract what you want subconsciously. That is the reason why we find different people having different ways of handling money.

If you are keen to know more about your personal money blue print, do give me a buzz... Swarna

Financial Literacy

Many people have asked me " why is the markets behaving like this all of a sudden? Why is credit crisis in US affecting us in Asia, etc. etc...

This proves one one thing. Financial literacy is very low. We all know about earning, saving, spending etc. but how to make the best of what we earn is something one has to learn.

Today, I want to talk on some books that a good to start the learning process. You can see some favorite books under my Money books.

I am not going to review any book in particular but most books want to convey the message of good Money management and how to achieve it. Here are some points which are important aspects of Money management

• Make financial security a priority- For everything in life we need a Goal. Without a priority in place, its like driving in the dark. Its also important to have a budget to work on.

• Spend less than you earn- Isn't it logical to say spend less than you earn. However, most of us have problems doing it. Its not what you make, its what you spend makes the difference.
  

• Save and invest regularly.- Its important to save and do that regularly. Its important to have a habit of saving and investing instead of do it by chance

• Pay down debt - The credit crisis now is an example for debt management. Credit card is just for convenience and treat it like the ATM. you can draw out only your money when u go to an ATM, isn't it?

• Own a home- According to Federal Reserve in USA, home owners save 34% more than renter. I think in Singapore, thanks to our visionary leaders, 95% of Singaporeans are home owners. However, the key point to consider a home, is it should be within the budget and affordable. If not in times of despair, losing a house is a problem. This is the major problem in USA now.

Read some of these books listed below and send me your views. If there is any other book you like and would like to share with me do let me know.

Signing off with this quote-"Education is a progressive discovery of our ignorance"-Will Durant (1885-1981) U.S. author and historian

Outlook for 2009

Hi all, Hope you had a good holiday and are back to work fully recharged.

Someone mentioned that there was huge hoarding in Mumbai near the Exchange, " Thank God, 2008 is over".

Well, 2008 was a year of surprises. Century old institutions collapsed. Almost everyday there were fresh news of financial turmoil.

Cycle of Life. Everything in life follows a cycle. I am going to concentrate on the cycles related to Money.

There are three major cycles-Economic cycle, Stock market cycle, and real estate cycle that affect our life financially. Commodities pricing, inflation, interest rates have effect on the economic cycle predominantly.

Economic cycle is now in recession. So this year we are going to see negative growth. In layman terms is it means, factory shut downs, pay cuts, job loss and unemployment, and increase in robbery, theft etc. This year can be traumatic for many.

The stock market started to crash from July 2007. At that time, economy was doing very well. Companies were still showing profits, good bonuses etc. From July 2007, the stock market has lost almost 60%.

The real estate cycle in Singapore, is still relatively high although the peak was sometime in May 2008 for private property and Oct 2008 for HDB. I think most Asian countries had the same pattern. Europe and US have different timings.

Now while comparing the 3 cycles and its relationships, The stock market cycle is always ahead of the economic cycle, and the real estate cycle lags the economic cycle.

So if you are looking for investment opportunities, its never possible to time the market, however, the stock market is comedown a lot since july 2007. So 2009 should be a good year to get in. Now, the question of the recovery package not being effective, interest rate cuts and inflation will only show up as volatility in the stock market. So it could be a roller coaster ride but for the long term it should generate positve returns.

Do post your comments or views so that it will benefit all.

Have a wonderful day..... Swarna

Disclaimer: This is not any recommendation. Any investment done has to be done based on Risk Profile

Planning for young parents

Everyone who has a child will agree that "having children is expensive". You need to plan well in advance how to manage time, career and money when it comes to children.

Here are 5 tips to consider

1. If both parents are working, re look at the priorities and careful plan how you are going to manage time and career. Plan on the chores each of you will do.
2. Re look at your insurance. Typically, you need to have at least 10 years of your basic expenses covered.
3. Education planning is a huge expense these days. the earlier you start saving the easier it would be on your purse.
4. Critical illness & Medical insurance for the child is also essential. It is not uncommon these days to see young kids having cancer or heart problems. The cost of treatment is high and this will be easy on your pocket. Also, cost of insurance is low when you start young.
5. If you haven't got a WILL written yet, get it done ASAP. Estate Planning is essential.

Financial Tsunami-Part4

Greetings to all, If your are reading these series for the first time, let me give you an intro. It is only appropriate to call this Global meltdown as " Financial Tsunami", 'cause we didn't know it was coming and none of us yet know the magnitude of this meltdown.
I would like to discuss a couple of points today...


This morning I was reading the New Paper on some comments on what recession means to differnt people. One person mentioned that he is going to live like a dying man without worrying about MONEY. There was another who said, instead of worrying about his shrinking Portfolio, he is going to look at things he has now. Family, Health and Friends.
I have been pondering on this comment.... Its good to look outside the BOX of money. What are the complications. How many of us can confidently say "money doesn't interfere in my relationships, be it family or friends." Its not that simple anymore. We are so engrossed in this materialistic world that sometimes everything seems to need money.

Have you been to a children's birthday party recently..Its a great occasion to celebrate. But children birthday's are no longer a simple event. Its a show of how well the parents are doing financially. The return gifts are more expensive than the gifts the child gets. Isn't there something missing.
On the subconscious level, the child registers this as " Expensive Party= Love you a lot, Simple Party= I don't love you so much". I don't think there is any normal parent who can love their child lesser.
NOW is the time for people to really go back to the basics of Money Management. Now is the time to really identify the NEEDS and WANTS. As a family. Involve your children. Don't under estimate them. They understand Money better than us. :)

• Need is something that's important for survival. Food, Shelter, clothing, transport, etc...
• Want is driven by desire. There is no end to WANT. Want is a double edged weapon. It makes us focused, ambitious, competitive and at the same time if we don't know the limits, greedy, unhappy and restless.

Many a times we can confuse NEED with WANT. Did you read the news on a retiree who wanted to buy a house but for a couple of months wanted better returns and ended up loosing 300k. Well, who is at fault. He wasn't clear on his NEED and WANT.
Priorities your WANTS and NEEDS and we should be able to surf through the Recession easily.  Thanks for your time..... I would love to hear your views...... Signing off...... Cheer!..... Swarna