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

Below are seven highly effective ways of debt management:

Control the use of credit cards
Just control the usage of your credit card. Treat them like cash. Use it if you have the cash ready but if you don’t have the cash now to purchase something, don’t even think about taking the credit card out of your wallet!

I have 6 credit cards and I just keep in the drawer and only keep two credit cards – visa and master card in my wallet. Every month I will exchange with those in my drawer.

Keep track of your money flow
If you can’t track it, you can’t manage it. Develop a personal habit of recording all your expenses for the month.  Some of your friends might laugh at you but just ignore them or do it quietly.

You keep all receipts and update in your computer or expense account book everyday. It is easy to do everyday then once a week as we might forget.

Add up your expenses and assess if you have over spend, by comparing it to your income. Analyze those items that are taking the most money out of your pocket and see if you can do anything about them. You’d be surprised how much you’re spending on those cigarettes, movies and “branded coffee”. The main thing is to never spend more than you make.

Only buy the essentials
The rule to manage your debt is to spend below your net income. Budget only to buy the monthly essential like food, clothing, home, life and health insurance and the likes are “need-to-haves”.

Do you need to spend more than a pack of cigarettes a day? Do you need to drink starbuck coffee all the time? You decide.

Go through your spending record and identify items that can be cut. Sacrifice.

Have monthly budget
One if the most effective ways of managing our debts ways of managing our debts wisely is through proper budgeting. A budget gives a “preview” of our financial position so that we can roughly estimate whether we would have a surplus or deficit. If our budget already shows a deficit, drastic action has to be taken – you could either increase your income or cut the “nice-to-haves”.

Look for cheaper alternatives
Revisit your monthly budget and see if you can use any other cheaper alternatives for the necessary items. For example, toothpaste – can we switch to brands which give better value for money?

Check its net weight and decide on purchasing the brand that gives you the same value for a lower price. Sometimes, cheaper may not always be better. What we should be looking out for is value-for-money.

Look for discount coupon and make use of that. Look for Mega Sale from any shopping mall as it is cheaper to do major shopping during this time.

Have another side income
If you don’t have enough to spend at the end of the month then consider work as part time to supplement your income.

That is the only way to have extra money for saving or for monthly expenses in order to avoid much debt. Consider part time home based business, internet marketing, multi level marketing (MLM) or a second job at night.

This will make you stay focus as you are serious in managing your debts.

Last but not least – treat yourself a nice reward
Managing our debt and getting out if it is hard but it doesn’t have to be painful. If you have done some of the above suggestion then perhaps you should reward yourself a well-deserved gift or treating yourself to a good hearty meal. By rewarding ourselves, we’d feel motivated to stay on track.

Don’t go and spend big money again as this will create new debt. Any saving from the budgeting will be good enough treat your self.

Hopefully this article will show you the effective ways of managing your debts wisely. We have to bear in mind that if we do not manage our debts wisely, they will manage us in return and it can be painful.

The road to managing your debt wisely would be a smoother one if we try not to think of all these as a scarified, but as delayed gratification.

To Your Millionaire Success
Michael Liew

Setting your savings goal
You should always “begin with the end in mind” as Dr Stephen R. Covey puts it in his book, The Seven Habits of Highly Effective People.

To be effective in our savings, we should set a goal and strive towards achieving it. In my millionaire journey I have set many different long-term goals and many short-term goals to save money.

Ideally, you should have a plan or an account for each money goal and commit yourself totally till you achieve them. To do that, make sure your goals are S.M.A.R.T. – it should be Specific, Measurable, Attainable, Realistic and Time-bound.

Pay yourself first
One of the most effective money management skills to saving money is to pay yourself first. Most people have the habit of spending first and saving what’s left only to discover that there’s always nothing left.
 
We should put a side at least 10 percent of our income each month into a saving account that you will never touch.

For the self-employed, you should then strive to save at least one-third of what you earn.

Every month, make a commitment to pay yourself a fixed amount of money before anyone else. Increase the amount with every pay rise and also pay yourself a bonus at the end of year end. All these money should not be used to support your current lifestyle but be locked in for future use.

Automatic savings program
One way to force ourselves to save more money is to set up an automatic savings program. This is one of the best money management methods.  It removes our weaknesses and stay disciplined with our savings as money is taken from our account before it reaches our hands.

There are a couple of ways to set this up and the best one would be via automatic deduction on your pay day.  Go to your bank and assign a standing instruction to deduct a fixed amount (about 10% of your salary) every month into another saving account.

If you still have doubts about yourself of not with drawing the savings, then set up a joint account with your spouse or another family member whose consent must be obtained before withdrawals can be made. This would ensure that the amount saved would remain saved till your goals are achieved.

Budgeting
Budgeting is a must for everyone to implement. Without a properly drawn-out budget, our saving program will most likely go haywire. A budget gives us a preview of our cash flows over a period of time and we will know precisely where our money is flowing.

Follow your realistic budget diligently and you will have extra money at the end of the month. Save the money into your long term savings account. Make your savings goals your priority.

Buy Blue-chip share
Once your saving have achieve a certain amount then consider buying some blue chip stock for long term investment. The return from the stock is much higher than the bank interest from the saving account.

If you are not sure which stocks to buy or never buy any share before then consider investing in unit trust fund. It will provide a good return in the long run. Consider also buying the unit trust every month as a way to cushion the up and down of the stock market.

Avoid Credit Card Expenses if you can
Having credit card is important in our budgeting and planning to save money but the overuse will certainly destroy our saving plan.

If possible only use your credit card within your monthly budget plan. If your budget allows you to spend $300 for fuel expenses then use credit card within that limit and pay the credit card at the end of the month with the $300 that you have budgeted. Can you be discipline enough to do that?

Staying disciplined with our savings may seem a Herculean task to many but with a burning desire and a meaningful goal, it will be relatively easy.

We have to understand that time is one of our greatest assets and we can just allow the power of compound interest to work for us, we will surely be able to achieve our desired goals to be a millionaire.

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

What do I do with my pay check? On my first personal money management tip I will transfer 10% of my pay check money to my Pay-Me-First account which is a saving account in a different bank. The money will be credited and I can not withdraw the money no matter what happen. I will consider it gone in my mind.

Then I will transfer another 10% of my pay check money to my saving account for emergency, year end car insurance or road tax and so on. That is my emergency account and I can withdraw if I want just for emergency fund. The balance of my money I will use to pay others like mortgage, car installment, and my own expenses for the whole month. Pretty cool right. I have been practicing this personal money management for many years. It’s work.

If I do have extra money at the end of the month and I will also transfer to Pay-Me-First account. After 6 months I will then invest in stock or bond for a better yield.

You must have this first personal money management tip on your personal finance regardless of whether you are working for people or working on your own. This is one step to becoming a millionaire.

To your millionaire success.