Planning a budget

Here we will discuss few tips on how you can plan your budget.

Understand and estimate your current spending patterns: Track your monthly spending and try to account for every dollar spent. For the next month or two, think very closely about how your money is spent. Every time you buy something, pay a bill, or dispose of any of your money, make a strong mental note of what it is being spent on. Better yet, at the end of each day write down a list of each expenditure and what it was used for on a piece of paper or a spreadsheet.

Create your current budget: Now it's time to create your current family or personal budget budget. To do this, you need to quantify all of the spending patterns you observed in step one. Start by downloading our rather detailed Free Excel budget template spreadsheet or go to our browser based sample budget (a very simplified version). If you use the Excel spreadsheet you'll have to know how to use Excel well enough to tweak the formulas yourself. After downloading the personal household budget template, proceed to fill in the cells by classifying all the money you currently spend into the appropriate categories.

How to boost your credit score

At a time of financial turmoil when credit is hard to obtain, it is crucial to have your credit score in the best possible shape. There are numerous ways in which you can boost your score if you put in a little effort. It is a major deciding factor when you are trying to apply for loans or mortgages. Following are the few steps that will help you boost credit score fast.

1. Deleting errors from your credit report

This is the fastest possible way to boost your credit score. Credit bureau will send copies of credit report to you across mail if you request it. You must go through the credit report diligently. If you identify errors on your credit report, request the loan officer of the credit bureau to conduct a Rapid Rescore. Credit report errors can be easily removed by writing a simple dispute letter. Sending copies of the paperwork along with the dispute letter that proves the errors will make the credit bureau's task simple and you will obtain results faster.



2. Pay off Bills on Time

This is another most important way to boost credit score. Customers should make a habit of paying off bills on time. Late payment or overdue of the bills have adverse affect on the credit rating of an individual. It affects their payment history and eventually has negative impact on the amount of loan he wishes to borrow.

3. Don’t Pay Down All Your Debts

Your credit rating is an expression of how well you can manage your debt. Paying off all revolving debt at the same time leaves you with zero balance. Always pay off the urgent, oldest debt first and leave the balance to manage it well. This way you can maintain your credit score in a better position.

4. Don't Close Accounts

It will be easy to boost your credit score if you do not close all the existing account. It reflects a better financial position if your account is kept open for a long period of time with no negative reports. The ideal balance is suggested to be 30% of your overall credit limit by the credit experts.

5. Don’t Obtain New Credit

In order to boost your credit score you must be watchful about acquiring no new credit unless it is of utmost requirement. Your credit report undergoes an enquiry every time you ask for a new credit from moneylenders. This slightly drops your credit score. If you wish to obtain more credit other than housing, college or transportation expenses it is a good idea to ask for more credit limit on your existing credit card rather than applying for a fresh credit.

Personal Finance (4) : Asset Allocation

The movie, INCEPTION, besides it was extremely entertaining, reflected back to me a very profound message -> "What ever seed(idea) that is planted into the subconscious mind, given time, it will sprout!" Therefore, the show ended after the seed was planted onto the target, by knowing that it will be carried out in reality later on.

So, what does it got to do with this article on Asset Allocation?!?!

Well, after staying in the market for many years, only until recently, I suddenly realized that someone had first seeded the idea of Asset Allocation in my mind, which then lead me to have the burning desire to know how the stock market works.

Here is the story...

About 9 years ago, a former boss called me up and said that she had just attended an excellent 2-day seminar on "Personal Financial Success" which could lead to early retirement... And, she wanted to share with friends because she thought that could be helpful. Indeed, that was so helpful that it rocked my comforting chair in the corporation into pieces!

And, here is the Outline of the concept of personal financial Asset Allocation:-

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Asset Allocation can be defined as the process of evaluating and choosing among the possible asset class for investment. So, that it can generate Passive Income.

Recently I came across an survey that most US citizen has about USD25k of net worth when they reach their retirement age. That's less than one year of their salary! Not even the professional trader can live with this small capital account...

So, in order to have adequate saving, for the working class, one must first break the "Parkinson's 2nd Law: Expenses always rises to meet income". If one don't break this law, no matter how much he made over the years with increments and promotions, he would not have much excess money for investment, and lucky if he don't have debt with his credit card.

Now, let say that one has the discipline to save portion of the money from his paycheck monthly, soon he will need to learn to manage the money for compound profits or the inflation will devalue them.

The core concept of the Asset Allocation is to divide the money into three portions. Imagine that you have three buckets, and you label them as "Security Bucket", "Buy and Hold Bucket" & "Speculative Bucket". Then allocate the money into there different buckets like planting seeds and letting them grow.

I) Risk Management

The purpose of separating them into three portions is to diversity the risk. One VERY IMPORTANT concept is that these three buckets MUST BE COMPLETELY ISOLATED. Meaning that, if one portion of investment incur losses, one must not use money from the bucket to fill it up again... Until one do his home work to find out what's wrong with the investment strategies...

Otherwise, it might just repeat the tragedy of the "Unsinkable Titanic"... The Titanic sank because of the partitions to isolate the sections of the ship was not high enough. So that the water can flow through the partition from the front section to the back after it hit the iceberg head on.

II) Allocation

And, as for the percentage of allocation of the asset... many text books and financial advisors from banks would recommend you to be more aggressive when you are younger (under 45), then become more conservative when getting older (over 60).

The following is a typical diagram can easily be found from the web... (Will comment on this later on.)

III) Rebalance

These bucket will need to be periodically revisited, preferably 6 months, and adjusted as needs and financial worth change.

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Comment: The above is yet another text book/class room theory for the beginner who did not spend time thinking of asset allocation before... In practical, one will then realize that there are flaws in the theory.

For examples:

1) Why recommend younger people to take higher risk in the market?!

It reasons that if the younger investor fail, then he can has more time to start all over again... That's completely nonsense!

Especially for beginner, it doesn't matter one is a CEO of a high-tech firm or a worker in the workshop... The experiences in his other careers and success don't count when it come to the stock market. All should start with "Very Conservative" in mind.

So, it should not be grouped by ages (as what the investment firms advise)! Rather, it should be grouped by professionalism! And, professionalism means adequate amount of learning, practicing and improving. And that got to do with personal time allocation. :-)

2) Why Buy and Hold for six month period?

Unlike fund manager, in the bear market, they can choose to rotate the fund among different sectors, but there are law to prevent them from cashing all out. Otherwise the market will fall to some point beyond imagination. But, as individual investor, you are free to do so!

"Every challenge we face can be solved by a dream."

- Dr. David Schwartz

Evolve and In Sync With Business Demand

《庄子·列御寇》："朱泙漫学屠龙于支离益，殚千金之家。三年技成，而无所用其巧。"

Zhuangzi once told a story:" A man, PengMan Zhu, wanted to learn the skill of killing dragon from a master, LiYi Zhi. He spent a great fortune for learning the skill. Three years later, he mastered the skill. But, he got no where to apply what he had learnt. (or in today's term, he cannot find a job.)"

The moral of the story is that one must lean a skill that can be applied in this reality world.

 

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Well, let's see how this story, when combine with the following story, may help one to look at thing in a different perspective in this modern society, which may help to rock one out of her comfort zone or develop a sense of urgency in change.

Looking back in our history, the main business of all the developed countries had gone through the phases of shifting from farming/fishing to industrialization(factories), then from industrialization to information age and eventually become financial centers.

The paces of the shift were happened at different rate in different countries/regions of the world. In general, it happened faster in the more developed countries...

Now...

Let's take a look at a real life example of such rapid change of my lovely country, Singapore, in the past 4 decades...

1.) Since the late 60's Merlion was the key symbol representing Singapore. Its name combines "mer" meaning sea and "lion". The fish body comes from Singapore's ancient name back when it was a fishing village.

Merlion

2.) Then in the 70's, Singapore attracted more and more foreign investors from the west to set up factories, and getting more and more industrialized. Changi Aiport Tower became another important symbol to represent that milestone.

Changi Airport Tower

3.) On the same time, Singapore had also developed many theme parks, such as the famous Singapore Zoo, Bird park, and the representative one is Sentosa, for tourism.

Sentosa

4.) Then Singapore evolved into a Financial Center with Shenton Way Buildings as a Logo.

Shenton Way

5.) Now, Singapore has its new logo -- Sands Singapore -- a world class glamorous Integrated Resort.

Sands Singapore

Anyway, this is just to show the change in trend.

Needless to say in detail, there is really nothing to be proud of to have Casinos in the country... Though this will bring in progress in GDP, it would also bring along decay in other intangible aspects!

See... I once read about an interview with a VP of a Casino in Las Vegas, he described that his job is very challenging ->"On one hand, it is our business to suck up maximum profit from our customers; on the other hand, it is our job to keep most of them happy."

6.) What's next in the next decade?!

7.)  In what Stage of the Industry Life-cycle for the job that you are holding onto now?
      It may be a tough question to answer...  And, if one does not feel that kind of excitement he used to have when he newly join the industry, the answer is clear and need to say no more.

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With the above example, it shows that most skills that one can learn from the University would likely to be obsolete and out-of-synch with the market demand in about 10 years time. While a typical person working life span is about 40 years nowadays (say, 25 to 65).

Take for example, when the manufacturing plants move out to other countries, an engineering manager may choose to move together with the plant for start up... However, if he did not manage to learn some new skill, while he is working full time on the current job, he would need to follow the plant whenever and wherever it goes... and provided the plant is still exist and need him...

For this reason, just an opinion, self-initiated continuous learning of new things is suggested. :-)

"Without continual growth and progress, such words

as improvement, achievement, and success

have no meaning."

- Benjamin Franklin

Relevant Articles:
Project Freedom

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The Pyramid of Harmonic Wealth

Click on the picture to zoom in...

Above is a template that can be use to plan for personal goals and success. I first found the similar template, a few years ago, from a book (Fulfill Your Dream With A Diary) "记事本圆梦计划" by a successful Japanese businessman/ entrepreneur/ author - 熊谷正寿. And, it been very helpful to organize personal plans in a balanced and harmonic way. Such as, it can help one to focus on the ultimate goals rather than distract by the day-to-day activities. That is to focus on business rather than busy-ness.

Recently, while sharing the template with a friend, Clara Szalai, she immediately pointed out that something is missing... and inspired me to put in a very Key and Important factor that most of us had been taken for granted while pursuing personal goals --> that is the Factor of Environmental. Very true, we must intentionally preserve the environment while in the process of building individual wealth, that's the way for long term sustainability. Thanks, Clara.


O.K.
Having acknowledged the sources, now let's discuss on the philosophy, in brief, of the template and how it may be useful for individual.




As shown in the diagram above, there are stages in building the Personal Pyramid of Harmonic Wealth.

The Fundamental Stage consist of the building block of "Intellectual","Physical", and "Spiritual".
The Real-life Stage consist of the building block of "Personal" and "Social".
The building block of Result Stage is "Financial".
Now, think about it, where should this Whole Pyramid got to build onto? On the solid foundation on of mother earth... and that's why the "Environmental" got to be added - which is usually too conveniently forgotten.

In order to build a solid and stable pyramid, one should start work from the lower level. That is the Fundamental Stage. This take personal time and effort, such as learning and research of specialized knowledge, exercise, meditation, etc...

Follow by creating a harmony personal life and using his knowledge to contribute to the society. Then the Financial Wealth would follow automatically when one can bring value to the market place.

Take for example, there are countless examples of how some individual suddenly gain huge amount of money, but just not able to keep it and get back into poverty within short time. This is mainly that they do not have a solid foundation to hold on to the temporary financial wealth.

As for the environment factor....
It deserves everyone to put more attention to it, especially nowadays. Mainly because people did not pay much attention to it while on the way to build their own wealth.
Simple act such as bring along a bottle of water along when getting out rather than buying bottled-water which creates one rubbish bottle, etc...


Come across an amusing news:
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A recent survey posted by US Private Banks surveyed individuals with a net worth of US$38 million or more. Of those surveyed, 65% stated that they felt "financially insecure."

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So, apparently financial security should not be measured purely by the number of dollar alone...

Most likely their foundation for they pyramid got some problems to sustain the dollars that they had accumulated...

And, may be this could fix:

-> Downloadable Template and Planner <-

So, the state of being Financially Secure is not how much money

one had already been accumulated in the past, rather it is the

confidence in her own ability to earn enough now/future,

and to grow whatever she has at a rate faster

than inflation in the future.

:-)

Bless You
KH Tang