10 Rules Piggy Lives by Financially

10 rules that I live by in financial aspect (I didn’t know I could come up with 10, yay!):

  1. Spend less than what you make.
  2. Use credit cards wisely – pay off credit card bills each month, make use of 0% APR offer for financing, use reward cards that accumulate points or have % cash back.
  3. Pay off “bad” debt – this includes any high interest rate debt that is not tax deductible, which is credit card debt for most people (there are pay-day loans which should be avoided at all cost anyways because of outrageous interest).
  4. Contribute to and fully utilize 401k – Most employers provide 401k these days, so contribute some or at least the % of employer matching (free money!) but also educate yourself of the available funds and pick wisely (hence the “fully utilize” part).
  5. Contribute regularly to saving.
  6. Develop your own investment portfolio – whether it be individual stocks or funds, but educate yourself first and invest in a style that suits you. I said “your own” because you should never just follow what others do because our needs, situations, and personalities are all different, so understanding yourself is essential here.
  7. Have a spending budget – this allows you to afford hobbies, gadgets, travelling, etc.
  8. Distinguish “want” vs. “need” – this is the most important to keep myself from spending too much because of how I LOOOOOOOOVE gadgets :)
  9. Invest in ourselves – classes, books, or things that contribute to our general well-being.
  10. Remember the ultimate goal – a reminder to be frugal and financial-smart but yet not becoming cheap :) In other words, balance is everything.

Originally posted 2007-04-12 21:40:49. Republished by Blog Post Promoter

What If You Receive 1 Million Dollars…

Or 5 million dollars, or 10 million dollars… It doesn’t really matter. The point is, let’s assume you receive a certain amount of money that provides you financial independence for the rest of your life.

What would you do?

First, why don’t you take a look at today’s market. See how far it’s plunged. 360 points! Everyone who has 401k and stock portfolio can probably feel it, ouch! For those of us looking at long term, it maybe less relevant, but nonetheless, my net worth is taking the hit temporarily.

The reason I mentioned that… Sometimes I feel this uncontrolled impatience inside myself. I’ll look at the amount in my saving, in brokerage, and then the amount of my loan. I look at my net worth, and I feel that it’s just not growing fast enough. I save, I invest, I contribute to 401k with discipline each month, but it’s still not growing fast enough for my patience. I want to be financially independent today. I want to be done. I want to be out of the rat race right now. And honestly? Don’t we all.

Though, I brought myself back to reality, back to my calm self and without losing sight. I think about what I would do if I do receive the money that enables my financial independence, be it 1mil, 5mil, 10mil, or 1bil…

Now I have hobbies, and quite a few of them. I have things I like doing. I want to help people. But as far as what exactly I want to do with the freedom and all those time that comes with the financial independence, I cannot say I am 100% certain, which is okay because I need go through what I am going through. The experience will continuously let me better understand the world around me and learn about myself. Only with such experience, I am what I am today and what I will be. And also more appreciative I shall be when the moment arrives. That’s why, I am and will continue to do my best, and there is no hurry. Enjoying and being in each moment, including this process, is important. There is no better place and moment to be.

As the saying goes (vaguely as I can remember it):
Every moment you spent wishing to be somewhere else is a moment of your life wasted.

Originally posted 2007-11-01 22:47:01. Republished by Blog Post Promoter

The Idea of Sunk Cost and Letting Go

Sunk cost is a most important idea I learned in a Decision Analysis class. In “technical” terms, sunk costs are costs that had already been incurred that is irrecoverable.

Why is this so important?

Sunk cost is an indispensable idea that enables you to have rational thinking and to make rational decision, and rational thinking and rational decision are what you need to prevail in many areas in life, such as investing, making business decision, deciding the next move in relationship/career/life, etc.

In a practical example of whether to sell your car, you can:

  1. Compare current selling price with how much you paid for the car and think about the loss (the difference) if you sell the car now. If the loss is too big, you keep the car.
  2. Think about how much you gain by selling (maybe use that toward a more fuel-economical car) and/or the maintenance and insurance you DON’T have to pay later, which will lead to more saving. And if those gain and savings do not provide more value than not selling, you will keep the car.

Now I didn’t cover every aspects and parameters involved in the decision of car-selling in real-life, but you get the idea.
Which do you think is a rational decision?

In the 1st scenario, you let something that has already happened in the past to drive your decision.
In the 2nd scenario, you consider all future potentials and base you decision upon those.
Pretty obvious.

The price you paid for the car is no longer relevant. However, you can imagine how people will choose not to sell like in the 1st scenario in real life.

Quickly, we can translate the same idea into making decisions in a business project and a personal relationship setting.

Instead of deciding whether a project should be continued with focus on how much money and human resources had been invested, you need to focus on how much potential investment return if the project is to be finished, the probability of the project failing, and how much more cost will be incurred, etc. You do not focus on those “wasted” resources because they are already sunk cost.

Now in terms of personal relationship, instead of deciding if you should stay with somebody based on the amount of time and effort spent, you evaluate about the current trust/confidence/comfort level you have with this person (that is a result of past experience, but NOT the past experience), the potential amount of happiness/sadness, whether he/she can change bad habits or if you can endure them, and many many other aspects involved in a intimate relationship looking into the future.

Those are just some very generic examples. But to put in more generic term of how sunk cost assist you to be more rational is that “what happened has happened and you should not let yourself get dragged down by the past”. I’m am not urging you to be completely rational and throw away the past, but it’s age-old wisdom that you do not let the past becomes the burden of future, especially the mistakes and bad experience. This is the same idea as we tell each other to “let go”.

Look into the future and based your decisions on those visions, my friends.

To have all the details and technicality on the idea of sunk cost, visit here.

Originally posted 2007-09-10 23:29:07. Republished by Blog Post Promoter

Weight Loss, iPhone, and Osama Bin Laden

Now you must be thinking, how in the world are these 3 subjects connected? Check out the article What We Want More Than iPhone.

In DietTelevision.com’s poll of more than 1000 members of the Facebook community, 32-percent of respondents said they would rather reach their ideal goal weight compared to 30-percent who said they would most want to get an iPhone. Only 21-percent of respondents said they would most like to see Osama Bin Laden caught, while a mere seven percent most wanted to have dinner at the White House.

Of the women polled, 44-percent preferred to reach their ideal goal weight while only 23-percent desired the new iPhone.

Couple thoughts from reading the article
– I am glad that people still care more about their weight, health, and appearance more than the iPhone.
– It is somewhat depressing that more people care for an iPhone than seeing the world’s top terrorist taken out. Can I say materialistic?
– Women ARE more conscious about their weight than their counterpart, which is parallel to the social trend.

Now I have a question for you.
What do these 3 subjects have in common?

Think about it. Now if you really think about it, these 3 subjects that people want are things that all somehow will enable us to have a happier life.

So in other words, happiness IS our ultimate goal, which we often lose sight of in the midst we wanting all these things.

We often don’t consciously relate our wanting of these materials with our desire for happiness. And it’s exactly the same when we lose sight of the goal to achieve happiness when we are so ferverously pursuing success in personal development and personal finance that we would put ourselves through unnecessary pain. Some pain is inevitable in life and necessary as sacrifice for the future, but focus should be on “the ultimate goal.” We must consciously and critically think about these things that we want and also things that we do, whether they will bring us happiness.

Some personal experience as analogy
When I sometimes become frustrated with learning and practicing piano. I feel that I’m not improving quickly enough. “How come I can’t play this piece perfectly already!?!?” Yes, no doubt I want to get better in playing piano, but I forgot that is not the main reason for me to play. I then remind myself that I play because I enjoy playing the piano and I want to continue to enjoy playing. Getting better is the part of process, not the focus, not the goal. I need to focus on the joy of playing the piano. The improvement will come.

Originally posted 2007-06-30 02:15:55. Republished by Blog Post Promoter

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