With the petrol cost increase, electricity cost increase and the ever raising cost of living this is definitely a question to ponder. With the household expenses usually exceeding the income people had to work extra hours in a day to offset the rising cost of living.

A survey conducted by Fomca concluded that a household monthly income of RM3,000 was inadequate to sustain a family comprising two adults and four children in the city.

Expenditures – cost per month
Housing mortgage – RM600.00
Car Loan Mortgage – RM500.00
Food Expenditure – RM500.00
Transportation/ petrol/ toll - RM600.00
Education, tuition and reading materials – RM500
Clothes and household expenses – RM300
Total Expenditures – RM3,000.00

Sources from the Star.

It looks like enough! But actually not.

They forget to include a compulsory 10% saving to the longterm saving that we advocate to pay ourself first every time we receive our paycheck. This 10% financial freedom account must be done every month and everytime  we receive our income despite whether the ecomony is bad or good.

Here are some unpopular tips to overcome the problem.

1. Always pay yourself forst. Save 10% of the nett income to your long term financial freedom account.

2. From the balance 90% then work and rework out the monthly expenditure until it is equal or below the balance after paying to ourself. Cut down on unnecessary expenses or purchases and delete nonessentials from the list.

3. Avoid new debt. Be pratical with the credit card use.

4. Work part time either from home or outside the home. It may be difficult but it is better to have extra money than be comfortable at home. Earn that estra income. Again save 10% first then the balance either to be used in the household expenses or to pay off your debts.

5. Learn new skills. Computer, acccounting, salesmanship or interne or anything. Try to match these skills with your own interest or hobbies. One day you might be able to generate extra income to you.

Hope this help. I too have to make a new list for my monthly expenses.

To Your Millionaire Success
Michael Liew

People often confuse about being financial success and that’s including me. I once thought that to be financial freedom I must have work harder with higher income. But now when I look carefully the meaning of financial freedom is to have income every month enough to cover my expected monthly expenses. Especially my income has to be passive income and better still from the business income. That is how I interpret and it could have different to you.

Financial Fundamental principles
In financial plan can be a budget, a plan for spending and saving future income. It helps allocate future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long – term savings.

A financial plan can also be an investment plan, which allocates savings to various assets or projects expected to produce future income, such as a new business or product line, shares in an existing business, or real estate. This will give you passive income.

We should make it a habit to exercise prudence in all aspects of our lives, no matter what income level you’re at. This is because the money we have is all hard-earned throughout the years (at least for most of us) and if we are not careful, we may lose it all in a blink of an eye.

The other principle to keep in mind is patience. It’s hard to cultivate this virtue nowadays as everything is fast-paced and we’re living in an “instant” society – where everything has to be fast, easy and instant!

It’s advisable then to practice delayed gratification and it requires a great deal of patience too.

Last but not least, we need to have perseverance. To succeed in anything, we need to have that stamina to follow through our plans.

Some useful tips that I practice:

Budget
Everyone at personal level should have a long term budget and a monthly budget. A long term budget will guide you to achieve financial freedom goal and a monthly budget will make sure that you are on the track.

Do not spend beyond your budget and don’t spend more than your income.

Pay Yourself First
Once you have received your paycheck please practice this habit. Pay yourself first. Put at least 10% of your net income to a bank account every month without fail. These will not be use at all for any expenses or gift but rather it will be accumulated enough to invest one day.

Avoid unnecessary debt
Debt is a silence killer in our finances. Avoid debt at all cost unless it is a good debt. To me if I borrow money from credit card or bank to make money than I will go for it. Otherwise I will only use my credit card according to my month budget. At the end of the month I will usually pay all or maybe in 2 months max.

Start A Business Fast 
Start a business and make business income. That is one of the powerful ways to generate more income than working for people. The best is starting a part time business while working full time. Aim to be a full time business owner one day when you are ready and you know the risk involved. Having a small business is the way to financial freedom fast.

Invest in Stock, Bond and Real Estate
At any time if you have enough capital considers buying real estate like house, condo for rental income. Otherwise start with stock. Be cautious though investing in stock is volatile now a days and you must learn it and be proficient in this. The dividen income, interest income and rental income will help you further.

I am not the financial adviser but I practice this method and it help me one way or another in my financial success. Hope it will trigger you to seek more information in finances and come back for more.

To Your Millionaire Success
Michael Liew

Following the herd will mean you need to change course each time, and this will take you longer to reach your goal.

So what can you do? Draw up your own investment philosophy. Investment philosophies are like promises you want to make to yourself and investment behaviors you wish to inculcate.

Here are 10 of the most common investment mistake:

1. Investing at the peak of an economic cycle

It is always easier to invest when everything looks rosy, when confidence is high and your friends tell you they are making money. Worse of all, when you join in the fray, the bubble bursts. So what do you do? You decide to stay out and let the investment value ride back up to recoup your capital. The problem is if you invested at the peak of the cycle, it may be another five to eight years’ time before you see it peak again.

2. Taking advice from an “accurate source.”

Most investment losses can be attribute to following third party “hot tips” and advice without doing homework. Some even claim they had insider information or that the news came from the horse’s mouth. If it sounds too good to be true, it usually isn’t true!

3. Afraid to value cost when returns are negative.

Value cost averaging is one strategy to average your cost and lower your investment’s break-even point. For this strategy to work, you must have enough funds to value cost, give your investment vehicle enough time to come back up again, and most importantly, your investment vehicle must have the capability to rise in value eventually.

This strategy is useful in investments which are diversified in nature, like managed funds, as they will not lose all of their value even in the worst market scenario. If you are investing in stocks with good value prospects, be prepares to value to value average too.

4. Unaware of the status of investments.

Many investors know exactly when their fixed deposits are maturing but have no idea when it comes to their more volatile and growth-oriented investments. Investments must be tracked more regularly than fixed income vehicles and knowing their value and how they have performed over time helps you to seize opportunities to sell or accumulate more for value average purposes. However, do not monitor your investments too frequently as it can cause you to panic and sell your winners too soon.

5. Not having a required rate of return.

Investors often do not set a target of return for their investments. Even if they do, they shift their targets as greed sets in, especially in a bullish market. This can be dangerous as a sudden event in the market can wipe out profits. What one needs to do in a bullish market is to sell the profits when the desired rate of return is met and continue to  monitor the capital for further market upsides. However if you are a new or conservative investor, it is be better to realize both your profits and capital once your “triple R” (Required Rate of Return) is met.
 
6. Not rebalancing portfolios

During the 2003 Iraq war, an investor announced that his investment planner had told him as the war could be a potential danger to his exposure to equities. I met the same investor again at the end of 2003. He said he had lost about 15% in his bond investments in the 2003 bond market crash.

Unfortunately for him, rebalancing portfolios was done as a single isolated event. He had forgotten that rebalancing must be done consistently in different cycles under which the specific investments are exposed to. My advice is to. My advice is to rebalance at the most twice a year, unless a sudden unexpected event happens.

7. Focus on popular investments.

Investors feel better when they invest in investments which have been highly publicized, advertised or the these are good investments and are worth looking into but do your homework. Check if they suit your investment goals and time-frame.

8. Focusing on “guaranteed” investments.

Having your capital guaranteed is fine but you need to realize what they are “guaranteeing” – capital or returns? This promise of “capital guarantee” usually deceives us in our understanding of balancing the cost of other investment opportunities during the holding period against the security of not losing our capital at the end of the tenure. Putting money into a guaranteed fund is only suitable if you do not need the funds within the holding period and you have a diversified investment portfolio.

9. Not having an investment philosophy.

An investment philosophy is just a simple statement of your investment style, what allocations you have determined for your investments, which investments you want to include in your portfolio and those you do not want to be included at all. The statement also outlines your purpose in investing, strategies to be undertaken should your investment go wrong, and the time-frame you have set aside for each investment. Your philosophy can be adjusted to suit the current scenario. Having an investment philosophy prevents us from being overly- greedy or overly fearful.

10. Transactional type of investments.

For most of us, the only purpose we invest is to make money. After that, what next? We need to have a  purpose for our investments. Why did we invest in stocks, unit trusts and property? Yes, but what’s the purpose behind that purpose? Your investments must be purpose-driven, for example, to clear debts, fund a comfortable retirement, or to send your kids to college. Remember, greed is not a purpose.

Article by Joyce Chuah. She is a certified financially planner who has been in the industry for 11 years.

To Your Millionaire Success
Michael Liew