It’s weekend on Sunday and I’m doing my usual routine of recording my transactions and paying bills. This is when I noticed a mistake and it’s even dumber than forgetting payment and incurring late fee.

Basically, I made a payment to the wrong credit card. What happened is that I use my Citibank account’s online bill pay every month. I am not sure what happened. Maybe I’m in a trance. Or maybe I’m high off my rear on recent market activity *sarcastic*. I sent the payment intended for my Citi Dividend card to the MBNA card instead, which I hardly use anymore. I keep it around for the sake of credit history because it’s what I used exclusively in college, and 7 years hadn’t passed since then. (Looking back now, I feel pretty old…)

So here’s the corrective action I took. I quickly scheduled a payment to my Citi Dividend that will occur tomorrow. I also paid their customer service a call, and upon describing my situation, the rep pronounced that she has sent in a notice to suppress a possible late charge. I don’t see one now and it’s 6 days beyond the due date. As far as the credits on my MBNA card, I called them to send me a check. That’s it for now, and I will have to see about the late charge.

What a stupid mistake. I totally feel like digging my head into the sand. By telling you this, I hope you won’t make the same mistake I did. You can see how much troubles a mistake can cause. This is only for a small item. Imagine the big stuff like mortgage… it’s not pretty.

That’s why it’s important to avoid as many as possible by keeping yourself in the “know”. And when you do make mistake, don’t dig your head into the sand. Instead, take action to correct it as soon as possible.

When we choose to make changes, the first step can be scary like jumping off a cliff.

I take a group singing class at the local community college. Because it is an evening class, there are professionals among the college students. It’s my 3rd time taking the class now, and I have met and talked to the different set of classmates each time.

The class is truly one of the most magical places I know of. It’s magical because the class symbolizes change and the courage to change. Note, I’m not trying to sound like Obama or Clinton.

Most people in the class have little to no prior training in singing. Perhaps they had murdered chickens with their voices when they are in the shower, but that’s probably it.

In this class, there are 3 tests where you sing solo in front of all your classmates, accompanied only a pianist. Speaking from experience, hearing your own true voice, meaning without any AV equipment or loud background music, gives you the most uncomfortable and awkward feeling at first. Besides that, you’ll have to worry about posture, breathing, lyrics, and pitches. It’s truly a nerve wrecking experience, and a very personal one also because you share your emotions through your voice — whether you are happy, sad, confident, tired, or simply don’t give a crap.

Well, the first session of each quarter always has a lot of students showing up to see what’s going on. That’s standard. By the second session, the number decreases and sometimes drastically by half or more. It’s likely due to the intimidating expectation of the 3 solo tests.

That helps to show that the people who choose to stay are people who really want to accomplish some changes and also do something they want. They choose to do differently with their life, especially it’s never a required class. Registering for the class and staying to go through with it will probably be one of the most courageous things they will ever do. They took the plunge down the cliff. They choose to change. And there will be other instances in life where the changes and decisions need to be made will require the same courage – like having the courage to jump of a cliff or jump in the cold water. You simply go for it and never look back.

That is why I really enjoy the class, aside from the opportunity to sing. I enjoy conversing with my classmates. I enjoy being the audience of the others’ performance, observing everyone trying their best (despite it’s the same few songs). I enjoy singing in front of them. I enjoy an instructor who always acts and talks encouragingly to the students. He really is wonderful because he urges people to improve without criticizing ever, and at such a wonderful place, there is simply no room nor the need to criticize. We students all took the plunge to change, and he teaches and encourages us to keep swimming while we also do the same for each other.

I just want to share this wonderful experienc with you. Perhaps you will want to take a singing class like this too. Are you ready to change? And do something different?

Debt is a terrible thing… from what I observed during my childhood at least. It was a time (from what I recall) when a person would only take on debt when buying a house, buying a car, starting a business, and at most, paying for the children’s education. And home equity? It is only used as a last resort. And people who borrow to gamble will always end up in pieces somewhere in a back alley.

You are free to call me “old school.”

Now more than a decade later, the world is a different place. Debt has become a commonplace. Consumerism is celebrated. Instant gratification is glorified. Debt is encouraged. The crowd would cheer as you sit on your European imported sofa, watching TV on your newest Sony Bravia LCD, inside your immaculately re-modeled home, which is complemented with a BMW M5 on your front porch. You may be swimming in a sea of debt behind the doors. But it’s aaaaaaalright. It’s totally fine to have debt.

Okay, I admit that the example is a bit extreme, and I know a majority of people don’t end up in debt due to such acts. Life situations could force us into debt. Nonetheless…the meaning of debt has become lost in translation (adverstisement) in this era. Way too much sugar-coating.

Debt Awareness

To begin to understand what debt means, I extracted some definitions from Dictionary.com:
Debt is something that is owed. Debt is an obligation to pay something.

In other words, when you have debt, it is an obligation to pay back what you owe. Debt is a responsibility. Since you are taking on debt, it means you don’t have much now, so you pay your debt with what you will have in the future. Therefore, when you take on debt, you are betting on your own future. If the future is unpredictable, debt becomes not so good an idea. And it a very bad idea when you take on debt – despite knowing that you simply won’t have “enough future” to pay back. How did we end up in financial crisis again?

Understanding that, it makes sense for a person to take loan for business purpose because they expect future gains that will enable both profit and payment for the loan. Debt is useful in this way. However, when people start consistently using debt to finance leisure and impulse purchase – things that produce no future gain, then there is a slight problem. The problem worsens in a capitalistic society where lenders set high interest rate to obtain sizeable profits, unlike if you borrow interest-free from a generous relative or friend.

Quotes about debt:

The indebted man “must smile on those he hates, he must extend his hand where he would strike, he must speak pleasantly with a curse in his throat”.

“He [borrower] wears dependence like a yoke.”

“The Borrower Is a Slave to the Lender.”

“Be frugal and free.”

Above all, I enjoy how all the quotes emphasize on the same theme of the “loss of freedom” because not only it’s very true, it relates to my biggest concern with taking on mortgage for a home. With a mortgage, I will be “mortally engaged” in the debt with the bank and a stable job to afford it. What if I am to lose my job? What if I want to do something different? I will have much less freedom to do so. I will be “dependent,” “a slave”, not “free”, and “must smile and speak pleasantly” with the bank and with the same job.

Debt CC

For those who would like some help with their debt issues, I introduce Debt Consolidate Care (Debt CC). Debt CC is internet’s first get-out-of-debt community that offers professtional help. It currently has over 100,000 members with thousands of practical topics regarding debt covered in the form of forums, wiki, and articles. And with the amount of members, you are almost guaranteed to find some information, tips, and advice concerning your debt scenario.

It’s good to know that Debt CC’s main objective is to make you debt free.

Below is the story of Debt CC and Denny, the found of Debt CC:

Debt – a four lettered word with a far reaching impact on an individual’s financial as well as personal life. Being in debt is an all consuming feeling that people carry around with them 24 hours– throughout their day in office and even at home while spending time with their family. It is rightly said that getting in debt is easier but getting out of it is harder and difficult to confront though it is not impossible. In fact nothing in life is not unattainable, with sheer determination hard work and patience, you can overcome biggest of problems. The story of Denny, the founder of debtconsolidationcare.com (DebtCC) says it all – from owning a company to sleeping in streets and frantically searching for a decent job to pay off his debts.

Way back in 2003, Denny started DebtCC with the sole intention to extend helping hand to debt crunched people. Since then it has been providing services on debt consolidation, debt settlement and credit counseling to assist people in getting their lives back on track. Being in debt can be very isolating and lonely. That’s the reason the site has an online community (Internet’s first get-out-of-debt community) that comprises of 106724 members where people can communicate with others who are experiencing similar problems. There have been countless instances where the experienced community members have helped individuals seeking financial help with their sound advices. There is a chat section too, where the members can discuss on topics ranging from debt to lost hair pin!

Sadly, most of the people incur monetary troubles because of the lack of financial knowledge. Keeping this in mind, the site has incorporated articles section that has a wide range of information on financial topics written by expert content writers.

You must have heard of the quote by Margaret Fuller that says “If you have knowledge, let others light their candles in it” the wiki section is line with the thought. With the help of this section the community members who are empowered with adequate financial knowledge and keep themselves updated with the latest happenings in the finance world can also write articles to aid the financially challenged people.

Apart from offering out of debt programs, the site has various easy to use tools like debt calculator, e-books, and GPL licensed software that readily serve the purpose of the users.

Investing can be intimidating and confusing. For people who’s wholely unfamiliar, the slight thought could be scary and give a headache. It’s like stepping in a foreign land where people speak a different tongue, and one would be in deep trouble if nature happens and bathroom is nowhere to be found.

I was like that. But I was not ready to run away. So I “paid” the market to learn.

After 3 years, I am still no expert. I learned a few things from experience and much magazines reading, news studying, and internet browsing. I put together today’s post as a stepping stone for you who are beginning to invest or still thinking about it. Hopefully it will give you a sense of direction.

Why invest? And getting ready

Investing is for people looking to grow their money beyond the rate of high yield saving account and certificate of deposit. If you feel saving is not enough and too slow to lead you to financial freedom, it will do you well to learn to invest your money. As the saying goes, “Make your money work for you.”

Before you start investing, it will be good to pay off debt with high interest rate, especially ones with doublt digit rate and/or are not tax-deductible. Doing so basically means you make a rate of return equivalent to as if you invest the amount of the debt. Additionally, how can you invest with a clear mind when debt is nagging you constantly.

Once the debt is paid off, saving up a comfortable amount of money is the second line of duty. By “comfortable” I mean an amount of money that will allow you to stay cool in case of emergency (ie. loss of job, doctor visits, urgent car fix…). More on this later under risk tolerance.

Investing is not…

… a get-rich-quick scheme. If that’s what you are looking for, you are looking at the wrong place. It’s important that we get this clear.

Know your time horizon

You must know the amount of time you can keep your money invested in the market. Anything less than 5 years is not enough to ride out the turbulance of the market. It is the general concensus to assume your money to grow 11% on average in stock market, but remember that 11% is an average taken over couple decades. Correct me if I’m wrong.

I would suggest to only consider investing when you have at least a 5 years horizon. Time is your best friend and greatest asset in investing. The more time you have, the more time the money can grow. The more time you have, the better hedge you have against the turbulance in the market.

What about short-term trading? Day trading?

If you can only invest in less time than that, I suggest to choose either cash account or short-term bonds. If you plan to buy a house in a year or two, keep the downpayment money in cash saving. Obviously, you don’t want to lose that money. But I can’t stop you if you want to do otherwise. It is your choice.

If you want to trade short-term or even day trade anyways, first assure that you have the time and effort available to do homeworks:

• study and understand the balance sheet, income statement, cash flow, and other stats
• read news about the market sector and undertand its flow and future
• learn the structure and behaviors of the management of the company
• learn as much else about the company as possible (if you cannot make sense of the business, forget it)

Again, I don’t suggest doing this because it’s not easy, and it’s more dangerous than it is fun.. But I am not here to stop you, nor can I. I did it at the beginning myself to learn NOT to do it anymore. I paid to learn a lesson that I think is worth every penny. Short-term/day trading is more like gambling. Sure you can hit a jackpot, but you can lose it all just as easily. Plus, you will have “a lot of fun” entering your transactions at tax time.

Know your risk tolerance

Can you stand to see your money fluctuate a lot? Will you sell everything out of panic when you see your portfolio down 20%? You should select investment relative to your risk tolerance.

If you are not very risk tolerant, your portfolio should contain more stable investments that fluctuate less (ie. blue-chip companies and bonds). If you don’t give a darn about the money you are investing, you can bet on riskier investment vehicles. With greater risk, comes possibility for greater gain, and loss.

Your risk tolerance is closely related to how emotionally you are attached to the money you are investing. If you invest money that is of great importance like the fund for an engagement ring, consider yourself divorced. Go create your online dating account before dropping the money.

What I’m saying is that your chance of losing money is much higher due to panic caused by your emotion. This is why it is important to have saving for emergency before you plunge into the market. You don’t want to be forced to sell at a loss because you need to feed your dog.

Basically, the more you can emotionally detach yourself from your money, the better.

Allocation and Diversification

To lower the risk in investing, you diversify. Simply put, don’t bet it all on ONE thing.

Spread your money into different piles. That’s diversification.
Deciding how big each pile is. That’s allocation.

Once you know where to diversify, you decide an allocation that fits your risk tolerance. Your allocation should also change over time. For example, if you observe instability in domestic stocks for the near future, you will want to re-allocate bigger amount to bonds or foreign market. As you approach retirement when you cannot afford to lose your money, you will want to allocate to bonds or even cash.

Watch the expense

If you trade stocks, most brokerage account costs you each transaction, though I know that Zecco offers free trade (I use TDAmeritrade). Assuming otherwise, transaction cost can greatly lower your rate of return, especially if you day trade. If it costs you $10 to buy $1000 of stocks, you automatically lost 1% up front. Another reason to invest long-term.

This is also true for funds. You need to pay attention to its expense ratio. Don’t just look at the rate of return. Your true gain is the rate of return minus the expense ratio minus tax rate. Remember that.

The Simplest Way – Index Fund

Since I talked about cost, it would be blasphemous if I don’t mention index fund. An index fund simply traces a specific index in the market. If you bought an index fund that traces the S&P500, you would have made 11% annually for past few decades. If I further explain, it will becomes insulting to your intelligence.

The greatest benefit of index funds is their low expense ratio, versus traditional mutual funds or privately managed funds. You can have an entire portfolio of index fund, which keeps the cost low. And because they are already diversified, it saves you the tedious job of picking individual stocks and at the same time, provides you with safer and more stable growth than individual stocks.

If you go with index fund, all that needs to be done is to contribute regularly and control your portfolio’s allocation on intervals (quarterly or yearly). Doing so is enough to maintain a steady growth. It’s as simple and easy as it gets! Oh, and Vanguard has been wonderful.

Special accounts for retirement and college fund

Just a reminder… If you are investing for your retirement, you can open an IRA or Roth IRA account that provides tax benefits. Same goes for college fund, whether for you children or yourself, there are 529 plans available that differ by state, each with its own pluses and minues.

Some words of wisdom

Don’t be greedy because it can only be harmful. Don’t try to time the market because it’s a fool’s job. You can never catch the top nor can you catch the bottom.

Understand that a huge part of the market is based on speculation, and speculation is based on human emotion. Human emotion is never a predictable thing in itself and most fickle in nature. Conversely, how can you accurately predict the market? Especially when experts with advanced analysis tools have failed to do so.

Three key points

• pick solid investment
• diversify and allocate
• invest long-term

With that, I’m done. But don’t just take my words and because this is only a quick guide for beginner.
Go study, read, try, and learn from your own experience.
Go build your own intuition of the market.

Let me know how you are doing later.

Today, I share with you a story of myself, for the benefits of those of you curious about the writer of this very very exciting blog *laugh*. For those of you who are uninterested, you can stop reading now.

For those of you who are still reading, I will try not kill you with boredom.

I was airdropped onto a frozen part of America (mid-west) in the middle of winter as a pre-teenager from Hong Kong. As a small Asian male with very little fat cells, it was the perfect time and place to be. I hope you realized my sarcastic tone. I had a cold that lasted me that whole winter, and the winter was loooooooooooooooong.

Why the ice-land? The idea was to be close to relatives. Though, the main purpose for my parents to move to the States is still the education and future of their children. This is important because I would otherwise only have a “lowly” bachelor degree today. Kidding about the “lowly” part.

I never really enjoyed those early years in the U.S. because I had to help my parents due to English barrier, while my siblings were away at college for most of those time. Imagine a young teenager dealing with bills, writing checks, balancing accounts, reading work-benefits policy, visiting banks and insurance agency… Now imagine Paris Hilton reading the Constitution and studying mountains of text for Harvard Law. And I still had to deal with school work. I also had no idea about Simpsons and Dunkin’ Donuts and Backstreet Boys. I was as FOB-ish as can be in a mostly black and white community. It was impossible NOT to get picked on. And don’t get me started on the chores. It was definitely GOOD time. I did enjoy the part where they all think what Keanu Reeves said, “I know Kung Fu.”

An extra little fact is that during this time, I, this clueless teenager only knew some half-ass English, yet attempting to do translation. The “best” part happened with the insurance policy materials that contain “sophisticated” words and legal jargons. The result amounted to something like Chris Tucker trying to speak Chinese… But I digress. I did not write about all these to complain. Besides to humor you, I mentioned these experience because I believe they have a huge impact on what I would become and how I would handle money. Most importantly, I realized how money can become such big issue in life. Yeah, I am real brainiac :P Moving on…

For my undergraduate studies, I was lucky enough to obtain enough scholarships to cover the 4 years at a state university. Additionally, I worked half-time in my college department as a slave system administrator to support my lifestyle. During that time, I spent some and saved some, without paying too much attention. I paid off credit cards monthly and never carried any balance. I believe this is the result of family influence, without noticing it myself then. As a computer science geek, I am as big a party animal I could be. I spent money eating out and for some evening outtings as many fellow students did. I did not travel to exotic places to see women with beads as vacation, but I did incur a lot of expense as a fencing team member. Besides the athletic part of the fencing experience, I was able to visit many college campus in different states (even Florida!), bonded with my fellow teammates, and met lots of other students from other universities. Although it cost me a lot during the 4 years, it’s not something I’d give up. This goes to show how money isn’t everything.

The tougher time comes during my master degree. First, let me say that I did not plan nor want to do a master degree because (1) my desire to become independent, (2) knowing there will be little financial support from family, (3) my concern with debt, consequently, and (4) I was never a big fan of school. I was a brat who is ready to become the next Bill Gates or Steve Jobs… yeah right. Anyways… life is not without a sense of irony. I was accepted into Stanford, surprisingly. I finally decided to go for the sake of myself and for family expectation. Remember my parents’ purpose of coming to the States?

At Stanford, no longer with any scholarship, I spent most of my savings (from scholarships and part-time in undergrad), took out student loans, and stopped to work full-time (and continued half-time during the rest of my school) in order to afford the tuition while opting only for subsidized loans. I did my best to make it through the 2 years. I kept telling myself this is an investment into myself. Hmmm, self-hypnotizing… I was very fortunate to received help from my sister for a place to stay. Stanford’s environment began to shift my mentality and the tougher time makes me think, really think… It became the turning point for me…

To start learning about money.
To take charge of my own finance.
To try short-term stock trading.
To understand that long-term is the way to think.
To know that having a corporate job will only get me so far, without supplements.
And most importantly, to take full responsibility for myself.

I used to envy peers who received support for school and especially, for their first real estate properties. However, I know now such envy is unnecessary. I know I would not become as independent had I gotten an easy way out. I would not have the confidence I have today. I would not be an avid learner to study myself and the world around me. I am in the best place I can be. Oh, and of course, this blog would not exist otherwise either.

These experience also made it apparent to me, why a friend called me “a survivor” years back.

Hereby I conclude my little semi-autobiography. I notice I ended on more boring notes. My apology. Still, I hope you enjoy the read.