Why is getting rid of unnecessary debt important? Simple, useless debt is a drag on our personal finances, increasing our expenses with high interest expenses. Not only is the debt painful to the pocket, it is stressful to the mind and body as well. Speak to anybody under mounting credit card debts; you will know they are really stressed by trying to make payments.
Every useless debt we pick up takes us further and further away from our goals, instead of getting Passive Income, we are getting Passive Expense instead! Debt management is a really large topic in itself and I will not attempt to address every single aspect in this Five Steps Financial Freedom series, I will however try to cover the main points.
Let’s look at some of the main culprits.
Loan shark Debt/ Unlicensed Moneylender / Black market Moneylender
This is the worst scenario one can be in. Loan sharks/ unlicensed money lenders whatever you call it do not play by the rules. They often make the borrowing really easy but make paying it off extremely difficult. Interest rates of such debt are known to hit over 100 percent interest per month! Once you get in, it is very tough to get out. Worse still, they will make your life hell by harassing you and your family constantly. Never ever step into this category.
Licensed Moneylender Debt
This debt is only slightly better than the previous. However, the interest rates are also extremely high, as high as 200% a year. The good news is that they are regulated by the government; the bad news is that many of them still employ harassment tactics used by the loan sharks. For more information, read Staying Away From High Interest Rate Money Lenders. Again, stay away from these sources no matter what.
Credit Card Debt
Most young people are guilty of carrying credit card debt balances and rolling them over month after month just by paying the minimum charges. Many also do transfer balance from an existing card to a new card at lower interest rates, which is supposed to be good, but they end up charging their previously paid credit card to the max again. With a credit card limit of up to 2-3x the salary of an individual, it’s easy to see how people can end up owing lots of money with couple of maxed out credit cards.
Banks are also extremely cunning in that they allow you to pay a minimum of say $50 per month, but they will charge you up to 24% interest on your remaining balance! How often does one make investments which can yield over 20% per year?
Personal Loan / Credit Line
Banks are just as guilty of pushing personal loans as are licensed moneylenders. While the interest rates are not as high as credit cards, they can still be between 5% to 15% per year depending on your credit status and the loan amount. When the loan check comes in the mail from your bank, resist the temptation and just tear it up, remember it’s a loan, not cash.
Car Loan
Car loans are one of the most misunderstood loans as they are structured differently from a housing loan. People often claim that car loans which have 1-3% interest rates are very cheap, cheaper than housing mortgage interests in some countries, or is it? Car loan interests are calculated based on the principle for the whole tenure while housing loan interests are calculated based on the principal outstanding. A simple rule of thumb is that the car loan interest rate is nearly double in housing loan term rates! So a 3% car loan interest is actually closer to 6% if you want to compare to housing loan.
Now you know why you should pay up your car loan as soon as you can. For those who live in the city like Singapore, public transport is a viable alternative. If you have to own a car due to work or so on, buying a second hand car can be a huge money saver as well.
Mortgage Loan on a Non Performing Property
While housing mortgage loans are typically one of the cheapest loans you can get, it really doesn’t make sense to be paying financing costs for a property which is not generating any income or capital appreciation. Examples are where the location is not as hot as it used to be or the demographics have changed into one of lower income and increasing crime rates. It may also make sense to cut loss on a property if the fundamentals have downgraded dramatically. Since housing loans are usually very large in amount, clearing them off also helps to improve your leverage ratio dramatically.
As we can see, there are many types of unnecessary debt which can be a huge burden to us. We have to identify if we have any of these debts and understand the impact of what this debt has on us. As we work through the different classes of debt, we also find out that most of these debts have interest rates far exceeding that of many asset yields like dividends and rental. As long as we have these debts, Financial Freedom will be difficult to achieve. If you do not have any of the above debts, Congratulations! You are one Step closer to Financial Freedom!
This post has gone on to be much longer than I expected. As such, I will have to continue this Step 2 is the next post. In the upcoming post, I will discuss concepts like leverage ratio and tips to reduce the debt burden so you can be a step closer to Financial Freedom.
Friday, January 27, 2012
Boost your Active Income
Active Income is simply income you generate by trading your time and effort for money. For more on Active Income, read Passive Income vs. Active Income. The most basic Active Income everybody has is a job. Assuming that you don’t have a wealthy family or a huge amount of inheritance, all of us have to work for our money initially. Now, the key here is to maximize your Active Income. How do I do that? Here are a couple of suggestions.
Work Harder on Your Career and Continuously Upgrade Yourself
Figure out where your career is going and how you can further improve in the climb up the ladder. All Companies want individuals who are willing to step up and contribute without being asked to. Show the initiative and work hard to prove yourself to the Company that you are ready for higher responsibilities. By doing so, you will eventually get recognized and be promoted, raising your salary packages and more. It is also necessary to continue upgrading yourself, be in taking new courses, getting an MBA, getting a CFA, picking up books on the industry and management. Learning never ends.
MaMake Sure You Are Paid Top Dollar for Your Job
There are a lot of people who for some reason choose to settle for a job less than what they are capable of. Either that or they choose to accept a salary package which works out to be a lot less than market rate. If you fall into that category, chances are you are probably working too hard and not get paid enough. All of us who come out to a job market should expect to get paid at least market rate for our productivity, otherwise it’s doing injustice to oneself. One of the first ways to figure that out is to look for job surveys published by recruitment agencies and job classifieds such as Jobstreet.com. They normally have ake Sure You Are Paid Top Dollar for Your Jobpay scale varied by industry and position level. Make sure your pay scale is at least in the middle tier or top tier. If you are not, you should start looking for a new job. At the same time, give your current Company a chance to raise your salary package by having a heart to heart talk with your current boss. However, make sure you are a valuable employee first before having that talk; you should know your contribution to the firm very well.
Get a Job with a Variable Package as Opposed to Fixed Package
A well designed salary package is often based on variable factors as opposed to a fixed salary. A good management knows that by tying rewards to contributions, employees are well incentivized to work harder. Similarly, you can try to get a job with a variable package such as sales, work really hard every month and you will see your rewards very quickly in terms of higher commissions and so on. Even if you are a manager on a fixed salary, discuss with your employer to see if they can tweak the salary package to one which is of lower basic but higher overriding or profit shared incentive. So when your division does well by having good profits, you get a higher compensation package as well, making it a win win situation.
Get a Part Time Job
This is a very practical solution for the young people who have a 9-5 job and don’t work weekends. There are many options here, depending on your education level, skill level and age. It can be as simple as working part time in a restaurant, retail shop or so on. Some of the more lucrative part time jobs include Insurance Agent and Real Estate Agent. However, being in the insurance or real estate industry is not simple. They are usually commissioned based and may require a huge commitment in terms of time and effort. Another very popular part time job these days is the tuition teacher. Parents are obsessed with their kids’ education from a young age and are willing to pay any undergraduate a decent sum to tutor their kids.
Freelance with Your Skills
There are some skills which are very sellable in the freelancing market. Such skills include web design skills, photography, graphic design, interior design and so on. There are always jobs out there which prefer to look for a freelancer instead of a full service firm due to costs, flexibility and so on. Many jobs are usually based on referral, so it is very important to treat every job seriously and perform them with utmost responsibility. There are many designers who get so much business from freelancing that they eventually quit their jobs to focus on their own business.
Work Harder on Your Career and Continuously Upgrade Yourself
Figure out where your career is going and how you can further improve in the climb up the ladder. All Companies want individuals who are willing to step up and contribute without being asked to. Show the initiative and work hard to prove yourself to the Company that you are ready for higher responsibilities. By doing so, you will eventually get recognized and be promoted, raising your salary packages and more. It is also necessary to continue upgrading yourself, be in taking new courses, getting an MBA, getting a CFA, picking up books on the industry and management. Learning never ends.
MaMake Sure You Are Paid Top Dollar for Your Job
There are a lot of people who for some reason choose to settle for a job less than what they are capable of. Either that or they choose to accept a salary package which works out to be a lot less than market rate. If you fall into that category, chances are you are probably working too hard and not get paid enough. All of us who come out to a job market should expect to get paid at least market rate for our productivity, otherwise it’s doing injustice to oneself. One of the first ways to figure that out is to look for job surveys published by recruitment agencies and job classifieds such as Jobstreet.com. They normally have ake Sure You Are Paid Top Dollar for Your Jobpay scale varied by industry and position level. Make sure your pay scale is at least in the middle tier or top tier. If you are not, you should start looking for a new job. At the same time, give your current Company a chance to raise your salary package by having a heart to heart talk with your current boss. However, make sure you are a valuable employee first before having that talk; you should know your contribution to the firm very well.
Get a Job with a Variable Package as Opposed to Fixed Package
A well designed salary package is often based on variable factors as opposed to a fixed salary. A good management knows that by tying rewards to contributions, employees are well incentivized to work harder. Similarly, you can try to get a job with a variable package such as sales, work really hard every month and you will see your rewards very quickly in terms of higher commissions and so on. Even if you are a manager on a fixed salary, discuss with your employer to see if they can tweak the salary package to one which is of lower basic but higher overriding or profit shared incentive. So when your division does well by having good profits, you get a higher compensation package as well, making it a win win situation.
Get a Part Time Job
This is a very practical solution for the young people who have a 9-5 job and don’t work weekends. There are many options here, depending on your education level, skill level and age. It can be as simple as working part time in a restaurant, retail shop or so on. Some of the more lucrative part time jobs include Insurance Agent and Real Estate Agent. However, being in the insurance or real estate industry is not simple. They are usually commissioned based and may require a huge commitment in terms of time and effort. Another very popular part time job these days is the tuition teacher. Parents are obsessed with their kids’ education from a young age and are willing to pay any undergraduate a decent sum to tutor their kids.
Freelance with Your Skills
There are some skills which are very sellable in the freelancing market. Such skills include web design skills, photography, graphic design, interior design and so on. There are always jobs out there which prefer to look for a freelancer instead of a full service firm due to costs, flexibility and so on. Many jobs are usually based on referral, so it is very important to treat every job seriously and perform them with utmost responsibility. There are many designers who get so much business from freelancing that they eventually quit their jobs to focus on their own business.
了解自己的投资概况
“我有10万令吉资金。我应该使用这资金来购买价值10万令吉的产业而不必贷款？还是以这10万令吉作为20%首期款，再贷款40万令吉来购买数项总值50万令吉的产业？”
这问题看似简单，但并不易解答。欲得到答案，你首先必须了解自己的投资概况。
所谓的独特投资概况因人而异，下面我们一一来探讨。
（1）年龄
年纪越轻，代表你能承担更多风险。在生活上，我们总有冒险的时候，尤其在投资和吸取利润方面。
年轻时，你必须勇于冒险，否则就可能被逼在年长时面对更多风险。
（a）贷款投资产业也需承担一些风险。因此，越年轻，你应该借贷越多贷款。所以，你允许使用10万令吉作为首期款，以及贷款至少40万令吉来购买数项总值超过50万令吉的产业。此外，相对与较年长的人士，你能够选择比较长的贷款期限，从而减轻每个月的贷款负担。
（b）如果你已经退休或即将退休，以10万现金购买一项产业，是最安全投资方式。
（c）如果年龄处在中间阶段，借贷你有能力负担的贷款，是最佳选择。
无论你处在哪个年龄层，都必须确保你的潜能回酬超越借贷成本。贷款购买能增值的资产，如产业，一直都是合理的融资方式， 而不是贷款作没有价值的开支（如度假），甚至购买会贬值的产品（如汽车、电视机等）。
（2）风险承担能力
每个人应对和管理风险的方式都不同；一些人是超保守型、一些则可能非常积极，另一些甚至属于顽固的赌徒。最了解自己的人，是你自己。因此，不够了解你的人士，很难给予最适合你的投资或策略建议。
市场上有很多不同的风险承担能力相关问答题，而我认为，它们大部分都过于简单。我至今还未发现一些类似个人档案的风险或投资概况分析。个人档案能让你详细和客观地分析你的个性或强项和弱点、哪类型人士适合与你合作，你适合什么工作等。
另一个重点是，你的风险承担能力不会保持不变，而是会随着年龄增长和经验更丰富而改变。一般上，第一或第二项产业投资最让你困扰，因你的经验仍不足；但之后购买产业时，你会感到越来越简单。
（3）情绪化的心态
投资容易影响情绪，因这涉及你辛苦赚取的储蓄。
投资时常出现的情绪包括：贪心、害怕、耐心、守纪律、胆量、自我、担心、无法冷静等。若无法控制情绪，它们将是你最大的敌人。
（4）融资计划的速度和时间的长度
如果你想很快致富，比如在5年内取得100万令吉，你所承担的风险，相对会高过计划在10年内取得100万令吉的人。
时限短风险大
融资计划的速度越快，或者时限越短，意味着你必须承担更大的风险。
（5）个人的强项与缺点
你必须开拓你的强项，以及积极改进自己的缺点。若是已婚人士，应考量和依赖配偶的财务强点和弱点。
比如，你的个性是属于比较害羞，个人沟通与谈判技巧是你的缺点，那你可能很难在产业投资方面取得成就，因你必须与很多人接洽，如产业洽谈商、卖家、银行、律师、租户等。
总结：
投资没有一定的“正确”或“错误”方式，只有最适合你的方式。
有鉴于此，投资是种艺术，而非科学。
因此，我相信每个人有必要先了解自己，知道自己想要的是什么，再从中找寻最适合自己的答案。
我将这些所谓的进场前概况分成10种，这期先谈到这里，下期我们继续另外5种考量。
这问题看似简单，但并不易解答。欲得到答案，你首先必须了解自己的投资概况。
所谓的独特投资概况因人而异，下面我们一一来探讨。
（1）年龄
年纪越轻，代表你能承担更多风险。在生活上，我们总有冒险的时候，尤其在投资和吸取利润方面。
年轻时，你必须勇于冒险，否则就可能被逼在年长时面对更多风险。
（a）贷款投资产业也需承担一些风险。因此，越年轻，你应该借贷越多贷款。所以，你允许使用10万令吉作为首期款，以及贷款至少40万令吉来购买数项总值超过50万令吉的产业。此外，相对与较年长的人士，你能够选择比较长的贷款期限，从而减轻每个月的贷款负担。
（b）如果你已经退休或即将退休，以10万现金购买一项产业，是最安全投资方式。
（c）如果年龄处在中间阶段，借贷你有能力负担的贷款，是最佳选择。
无论你处在哪个年龄层，都必须确保你的潜能回酬超越借贷成本。贷款购买能增值的资产，如产业，一直都是合理的融资方式， 而不是贷款作没有价值的开支（如度假），甚至购买会贬值的产品（如汽车、电视机等）。
（2）风险承担能力
每个人应对和管理风险的方式都不同；一些人是超保守型、一些则可能非常积极，另一些甚至属于顽固的赌徒。最了解自己的人，是你自己。因此，不够了解你的人士，很难给予最适合你的投资或策略建议。
市场上有很多不同的风险承担能力相关问答题，而我认为，它们大部分都过于简单。我至今还未发现一些类似个人档案的风险或投资概况分析。个人档案能让你详细和客观地分析你的个性或强项和弱点、哪类型人士适合与你合作，你适合什么工作等。
另一个重点是，你的风险承担能力不会保持不变，而是会随着年龄增长和经验更丰富而改变。一般上，第一或第二项产业投资最让你困扰，因你的经验仍不足；但之后购买产业时，你会感到越来越简单。
（3）情绪化的心态
投资容易影响情绪，因这涉及你辛苦赚取的储蓄。
投资时常出现的情绪包括：贪心、害怕、耐心、守纪律、胆量、自我、担心、无法冷静等。若无法控制情绪，它们将是你最大的敌人。
（4）融资计划的速度和时间的长度
如果你想很快致富，比如在5年内取得100万令吉，你所承担的风险，相对会高过计划在10年内取得100万令吉的人。
时限短风险大
融资计划的速度越快，或者时限越短，意味着你必须承担更大的风险。
（5）个人的强项与缺点
你必须开拓你的强项，以及积极改进自己的缺点。若是已婚人士，应考量和依赖配偶的财务强点和弱点。
比如，你的个性是属于比较害羞，个人沟通与谈判技巧是你的缺点，那你可能很难在产业投资方面取得成就，因你必须与很多人接洽，如产业洽谈商、卖家、银行、律师、租户等。
总结：
投资没有一定的“正确”或“错误”方式，只有最适合你的方式。
有鉴于此，投资是种艺术，而非科学。
因此，我相信每个人有必要先了解自己，知道自己想要的是什么，再从中找寻最适合自己的答案。
我将这些所谓的进场前概况分成10种，这期先谈到这里，下期我们继续另外5种考量。
判断一家公司的优劣
希望可以通过这样的方式协助你判断一家公司的优劣
首先，
我们必须知道这是一家什么公司，做什么买卖。（年报有详细的解释。）处于什么样的地位。（世界级？垄断的地位？）
接着，可以开始从年报下手。
我们从营收开始：
1. 他的盈利状况如何？ （盈利 / 营收=？ ）
【答案：10%】
2. 为什么会得到上述的答案？
接着，资产表。里面显示他的财务状况。（必须配合营收表来看而言，否则意义不大。）
1. 总债务严重吗？可以负担吗？ （ 总资产 / 总债务= ？ ）
【总资产 725 / 总债务 218 = 3.32】
2. 上述的数字代表什么？ （每三元的资产中，有一元是债务）属于可承担的程度吗？
3. 短期债务情况如何？ （ 流动资产 / 流动债务 = ？ ）
【答案：1.54】
4. 每一元的短期债务，有多少的资产承担？
【 每一元债务，有1.54 的流动资产承担】
5. 进一步检验流动资产的素质。（ 速动 / 流动债务 = ？）
速动= 流动资产 - 库存
6. 上述的数字是否安全？符合你的要求？
7. 公司握有的现金部位，你认为是否足够？
再来，以的收益的角度评估这项投资：
1. 本益比多少？ 是否合理？多少年可以回本？
2. 每年的派息率如何？
3. ROE 合理？
4. NTA 多少？
最后，以投资者的角度来看这项投资：
如果你有足够的资金，你会用什么价格把整家公司买下？
假如，今天SCIENTX 的市价大约是五亿七千五百万，也就是你把整家公司吃下的价格。你会舍得用这笔钱RM 575,000,000 买下它吗？买下他的机器、厂房、库存、现金等等。你觉得划算吗？
这笔钱RM 575,000,000 可以让你在未来赚回来吗？多少年？
设想，这家公司每年可以为你赚取 60，000，000～80，000，000 （未来还会增加）的利润 。那么，可以为你赚回所花去的钱吗？
评估之后，就可以做出判断了。
一宗好的的买卖，取决于你的出价。
好的投资，如果出价不好，就会变成不好的投资。所以，必须很谨慎的出价。
首先，
我们必须知道这是一家什么公司，做什么买卖。（年报有详细的解释。）处于什么样的地位。（世界级？垄断的地位？）
接着，可以开始从年报下手。
我们从营收开始：
1. 他的盈利状况如何？ （盈利 / 营收=？ ）
【答案：10%】
2. 为什么会得到上述的答案？
接着，资产表。里面显示他的财务状况。（必须配合营收表来看而言，否则意义不大。）
1. 总债务严重吗？可以负担吗？ （ 总资产 / 总债务= ？ ）
【总资产 725 / 总债务 218 = 3.32】
2. 上述的数字代表什么？ （每三元的资产中，有一元是债务）属于可承担的程度吗？
3. 短期债务情况如何？ （ 流动资产 / 流动债务 = ？ ）
【答案：1.54】
4. 每一元的短期债务，有多少的资产承担？
【 每一元债务，有1.54 的流动资产承担】
5. 进一步检验流动资产的素质。（ 速动 / 流动债务 = ？）
速动= 流动资产 - 库存
6. 上述的数字是否安全？符合你的要求？
7. 公司握有的现金部位，你认为是否足够？
再来，以的收益的角度评估这项投资：
1. 本益比多少？ 是否合理？多少年可以回本？
2. 每年的派息率如何？
3. ROE 合理？
4. NTA 多少？
最后，以投资者的角度来看这项投资：
如果你有足够的资金，你会用什么价格把整家公司买下？
假如，今天SCIENTX 的市价大约是五亿七千五百万，也就是你把整家公司吃下的价格。你会舍得用这笔钱RM 575,000,000 买下它吗？买下他的机器、厂房、库存、现金等等。你觉得划算吗？
这笔钱RM 575,000,000 可以让你在未来赚回来吗？多少年？
设想，这家公司每年可以为你赚取 60，000，000～80，000，000 （未来还会增加）的利润 。那么，可以为你赚回所花去的钱吗？
评估之后，就可以做出判断了。
一宗好的的买卖，取决于你的出价。
好的投资，如果出价不好，就会变成不好的投资。所以，必须很谨慎的出价。
Subscribe to:
Posts (Atom)