Pay yourself first: The richest man in Babylon

May 11, 2020

by Chengkok with 12 Comments Money Management Money Mindset Retirement

“Pay yourself first” is an investor mentality and phrase popular in personal finance and retirement-planning literature. In wealthdojo, I tend to focus more on the mentality of wealth management. This is because there are many ways and strategies to succeed but it all starts with the mindset.

One of my favourite example is about losing weight. The secret of losing weight has been around for the longest of time. We just to exercise more and eat less. But yet, why are millions of people in the world overweight still? It has all got to do with the mindset.

What is pay yourself first?

The key to paying yourself first is in these few elements.

Pay yourself first is an effective way to ensure you continue making your chosen savings contributions month after month. It removes the temptation to skip a contribution and spend the funds on expenses other than savings. Regular, consistent savings contributions go a long way toward building a long-term retirement nest.

To put it simply, it is a commitment to set aside money on a regular (best if it is automatic) basis for a saving goal.

Why does pay yourself first works?

As it is regular and automatic, our mind does a few of the followings. These are real life experience of my clients and friends who have decided to pay themselves first.

“I forgot about it”

Thomas (names have been changed) has been doing a typical endowment plan for the last 20 years. Just before his retirement, his endowment matured and I was privileged to give him the good news. He was presently surprised that he has amassed $100K just by putting aside a sum of money every month. Nonchalantly, he just said he forgot about it as it is automatic.

“I don’t feel the pain from saving”

Sally likes to shop. COVID (Here’s a special message during COVID19) or not, she will browse through the internet for things to buy. Every month, she have to spend a conscious effect to save and it tears her apart as she really does enjoys shopping. (Read more: Our best ways to manage spending) After doing an automatic saving system, she feels that she has shopped for retirement and don’t feel the pain of saving anymore.

In these 2 real life stories, pay yourself first works because the pain of saving was taken away. Building savings is a powerful motivator. Nothing beats seeing your balance grow. While money may not buy happiness, it can provide peace of mind. People with fat emergency funds tend to have fewer emergencies than those with lower or zero balances.

How do you pay yourself first?

We recommend 2 simple ways of doing it. Both of which is very powerful and regular. We recommend doing a combination of the 2 in whichever amount that you prefer.

Saving Goals With Your Bank.

The bank that I personally used is OCBC. This is because OCBC has this powerful tool called “Saving Goal”. You can set the regular amount you want to save and viola, every month, your money will be “kept” in this goal that is untouchable until you say so. The benefit is that it is automatic. The downside is that you can make adjustments to it easily. This means that when a temptation comes along, you might withdraw from this goal.

Saving Goal With Your Insurer

The advantage of this is that it is regular, consistent and it punishes you if you withdraw early. It is one of the most powerful way to save towards a goal. The disadvantage is that the time period is long and you will not be seeing the money in a while.

Conclusion

Take your pick. I strongly suggest any of these will be fine.

No one will care about your money as much as you do. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investing, I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

How to identify a scam?

April 25, 2020

by Chengkok with 8 Comments General Economy Money Mindset

Scams have been around for years and will continue to be around. Coronavirus or COVID-19 has forced many of us to work from home and we have become increasing reliant on technology. While we preventing our life from being a roller coaster by staying home, let’s also protect our loved ones from scams as they might not be able to identify scams as well as we do. (Is this a scam: Nanning investment)

Their Preferred Target

Guess what? Scammers preferred target will not be people who are technologically savvy. They will be targeting namely the older folks who might not be reading this article (It is your job to make sure they read this). Scammers target the older folks as they are not used to ignoring an email, whatsapp message or call.

This is because, they thought that it is meant for them.

The reason behind this is if they could be singled out, it must come from a certain authority. In the distant past, there was no such thing as whatsapp broadcast or mass email. If you want to reach out to them, you have to know their contact number.

If the scam is a positive one (one they will receive money), they must have thought it was a good deal.

Most of our parents or those > 50 years old will generally fall into this category and we have to do our part to educate them about scams. I will talk about the typical scam structure and how we can identify them.

Scam Style #1: A call from the Authorities but…

This is an old one. It was more popular in 2014. Individuals will get a call from the “authorities”. Most of the time, it will be a call telling the individual that they owe money to the certain authorities. The interesting thing to note is that the callers use Chinese as a main means of communication and they will not understand you if you use English.

Identify Scam Fact #1: If you indeed owe money to the authorities, you will be getting a snail mail. I believe this system will be here for a while.

Identify Scam Fact #2: The main means of communication in Singapore is English. If the authority don’t understand English, it is a tell tale sign.

Scam Style #2: The whatsapp good deal

This usually flourish in the group chat of our target audience. They work because of 4 reasons.

It looks harmless
It is an good offer that they might use
You just need to “click”
You can share with your friends easily

If it is free and it can be given away, there is no lost for our audience to forward it out. They might even feel good doing so (until it is too late). Here’s another one.

Identify Scam Fact #1: KFC/NTUC gives physical vouchers

Identify Scam Fact #2: If there is an online voucher, there will be dedicated app for it.

Scam Style #3: Recency effect

Scammer are also up to date. This above email is for SIRS Eligibility. The government is giving a grant for self-employed people to tie over the COVID-19 period. This is the real website for more information (https://www.ntuc.com.sg/sirs/). Registration opens on Monday 27 April 2020 (expected).

This is actually a very believable email. It works because of the recency effect and again the authority effect.

Identify Scam Fact #1: If the money is given by the Singapore government, it will not be in USD.

Identify Scam Fact #2: NTUC will not request for your personal and confidential information through such emails. (Source: NTUC U Portal)

Scam Style #4: Not enough money

Ladies and gentlemen, this is the most popular scam in Singapore. E-commerce scams were also identified as the top scam in Singapore with more than 2,000 cases reported in 2018 (Source: Yahoo News E commerce Scams).

According to the police, the common scams on Carousell involved transactions of electronic products, and tickets to events and attractions. E-commerce scams, which typically happen when buyers fail to receive items that have been purchased online, increased by 11.4 per cent to 2,125 cases last year from 1,907 cases in 2017. The total amount cheated rose to $1.9 million from $1.4 million over the period.

Buying online is tricky as we will only be able to get our good or services at a later date. Both the target audience and ourselves might fail into this trap especially when something is sold “too cheaply”.

Identify Scam Fact #1: Buy from verified sources.

Conclusion

There are many types of scams in the world. You can go to ScamAlert to record or look at what are the latest scams in Singapore. ScamAlert is an initiative by the National Crime Prevention Council (NCPC). They are a non-profit organisation committed to promoting public awareness and concern about crime.

Nobody will be concern about your money as much as you do. ~ Quote CK

Please do get the word out as much as possible especially to the potential target audience. We often fall into such scam because of the money mindset that we originally have. (Don’t be a low baller on Carousell =p). Use the Scam Fact as a way of identifying potential scams. I wish you all the best in your wealth management journey.

Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investing, I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

A Quick Ratio to look at investment now

April 7, 2020

by Chengkok with 2 Comments General Economy Investment Accumulation Money Mindset

The past few weeks have been a downward slope. Some companies have started to cut senior management’s salary, some have been asked to take unpaid leave while others struggling to survive.

With the world’s economy in a standstill, some companies will not be able to see revenue coming in until 2 quarter later (optimistically). An example would be the airline industry. During the coronovirus episode, governments around the world has stopped air planes from entering into their country to stop the virus spread. As a result, airlines all over the world practically stopped. Not only has revenue have stopped, they might need to do a refund for air tickets for people that are supposed to fly for the next few months. To add insult into injury, some airlines have massive debt!

Can these companies survive?

Navigating crisis is never easy. It will be good to prepare for an emergency even before one happens. For discussion, I’m assuming the business from these companies are affected by this current crisis. For companies to survive, they can do either of the followings.

Pray that the government will bail them out (let’s hope we don’t get there)
Borrow money from debt (which will just push the problem into the future)
Borrow money by issuing new shares (which will dilute shareholder’s equity)
Have enough cash to get over these crisis 😉

How do I know if companies have enough cash to get over these crisis?

In personal finance, most of us are familiar with emergency funds. Typically, the sum makes up around 6 months of our basic expenses. It is the same for companies. I want to know if they have emergency funds? Do they have enough cash to pay off their current liability? Does it means if the company have more assets, the better it is? That’s where we can dig into the balance sheet of the company.

Let’s look at Company A. Company A has $50000m worth of quick assets and $25000m worth of current liabilities. This means that is able to meet near term liabilities using it’s quick assets.

PS: Quick assets are assets that can be converted to cash very quickly.

Company B has $100,000m worth of quick assets and $100,000m worth of current liabilities. Even though Company B has more quick assets than Company A, it has more current liabilities. It means that Company B is not as “comprehensive” in preparing to handle its current liabilities as compared to Company A. If we want to compare between 2 companies, we compare their Quick Ratio.

Quick Ratio

The quick ratio indicates a company’s ability to pay its current liabilities without needing to sell its inventory or get additional financing. The higher the ratio, the better a company’s liquidity and financial health; the lower the ratio, the more likely the company will struggle with paying debts.

In the case, Company A’s Quick Ratio is more ideal as compared to Company B.

In my own personal investment, I look at companies with a good quick ratio. This is because I want the company to be able to survive whether in crisis times or not. The health of the company is one way to find out how well the company is run. Why would you want to invest in a company that is heavily in debt?

Bottom Line

Is it too late? How do I prepare for an emergency?

April 5, 2020

by Chengkok with 5 Comments CPF Accumulation General Economy Insurance Investment Accumulation Money Management Money Mindset

How to prepare for an emergency: Oh shit~

Many countries in the world have started with various attempts to separate humans from each other. It could come in the form of social distancing, working from home and quarantined. It seems like a global emergency is just around the corner and we are scrambling to prepare for this emergency. The Singapore government just announced a SGD$55B Resilience Budget package to help Singaporeans tie over this period.

Is it too late to prepare for this emergency?

From the Oxford dictionary, Emergencies are serious, unexpected, and often dangerous situation requiring immediate action. I feel the most defining thing about emergencies are that they are unexpected. Looking back, the reason why COVID-19 went out of control is that not many believe it to be serious and so it becomes unexpected.

While governments out there are trying their best to take care of their citizens, is there anything we can do during this emergency? And is it too late to prepare for this emergency?

Keep Calm and Prepare

Wealthdojo is a personal finance blog and so the suggestions will be finance related. We do understand that being mental strong and physically healthy is important in this period, but that’s an article for another day. It doesn’t matter where you start, it only matters that you start now. Here are some financial preparation that you can consider in this emergency.

Emergency Fund

This is the bedrock of your financial planning. When your income source stops (in normal days, it could be a lost of job), bills will continue to pile up. You will still need to eat, have a roof to stay and also feed your dependents. COVID-19 has pressed the pause button for millions of people in the world. Look at Singapore Airlines, senior management pay cut by 10-15%; staff offered voluntary no-pay leave. This would mean that the employees income source will take a pause for this period of time. If they do not have an emergency fund, how will they be able to continue to feel themselves in the months to come?

Solution: Have an emergency fund of between 6 to 9 months of your expenses.

This will ensure you can continue to live your life while waiting for the situation to be better. (Read more: Life Hedge: How to prevent your life from being a roller-coaster (Part 1))

Insurance

How to prepare for an emergency. Insurance

Call me bias but this is the most important time to review your insurance portfolio. Insurance takes care of medical conditions that are often unexpected (who can predict that they will have an heart attack) and serious. COVID-19 just serves as a reminder that health is the most important asset that we will ever have and COVID-19 is just one illness out of the whole repertoire of potential illness. Why are we resisting on planning for the other illness when they will rob us our ability to earn in the years to come?

Solution: Review your insurance portfolio

This will ensure you can continue to live your life while recovering from your illness. (Read more: Life Hedge: How to prevent your life from being a roller-coaster (Part 2))

Learn new things

There are so much information out there and I can never say that I truly know everything. In the midst of a crisis, the most important thing is to learn or even relearn certain things. It could be range from things like “how to maintain your relationship with your neighbor” to “gardening”. For Wealthdojo, we believe in continuous learning and reading. We have specially prepared 2 things for you to learn and explore new things during this COVID-19 period.

Solution: 3 recommended books to read and CPF Optimization and Opportunity Webinar

We will be having our first ever CPF Webinar on 23April2020. Do join us to learn more on what you can do with your CPF in the next webinar.

CPF Optimization and Opportunity - Launch 1 — CPF Optimization and Opportunity – First ever webinar

Watchlist

The last one is dedicated to all the investors out there. It is bargain season in the stock market now. Many companies are now priced at historically low levels. However, if you don’t have a game plan on what to buy and what price to buy, be prepared to let opportunities slipped away from your hands.

Wishing you the best in this period of time. We hope that everyone can remain calm and healthy during this season. It is a season of crisis but it is also a season of opportunity. Invest with what you have and don’t borrow money to invest in this period of time. If you are new to investing and need help, do talk to me using the contact form or any methods listed below.

God Bless.

If you read until here, thank you again for your patience and your support over in 2019. I hope that in 2020, Wealthdojo can continue to value add you. Let us know what you think in the comments below. This is a working article. The above doesn’t represent my stock recommendation in anyway. Please read our disclaimer for more information.

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

3 books to read during the COVID19 period to improve your wealth management

March 25, 2020

by Chengkok with No Comment Money Management Money Mindset

Last week, I was taking the subway and am guilty of surfing Facebook brainlessly. One post caught my attention and I laughed at it. What started as a laughter resulted in a choke and I started coughing. *Yikes* Oh my god. I wish I could tell you more on the stares that I got. Anyway, here is the post that got me laughing.

Moving on, if you watch TV or surf Facebook, COVID-19 is everywhere. Most likely, you will be no where but home. Some of my Malaysian Friends are saying how bored they are at home. In a few weeks time, it could happen to my country or yours. Instead of being bored or regret, why not improve our lives by reading? Here are the top 3 books that I like regarding personal wealth management and I hope you like them too.

Dollars and Sense: How We Misthink Money and How to Spend Smarter

I’m obsessed with Behavior Economics and Dan Ariely is one of my favourite author in the world (no kidding). Dan Ariely is an Professor in Duke University who specializes in Psychology and Behavioral Economics.

The books tells us (or gives us a slap in the face) on how our misplaced confidence in our spending habits frequently leads us astray, costing us more than we realize. Emotions play a powerful role in shaping our financial behavior, often making us our own worst enemies as we try to save, access value, and spend responsibly. For people that are starting out in their financial journey, this book is a great start.

Some of my friends were hesitant to read this book, as they thought it would be another one of those How to Make a Budget type (still important!) of books. But after they started the first chapter, they were hooked.

My favorite concept: Anchoring. For example, if you first see a TV that costs $1,200 – then see a second one that costs $500 – you’re prone to see the second TV as cheap. (Although, it still cost $500)

The Richest Man In Babylon

This book is my all time favorite. Someone passed me this book when I was 18 years old. At that time, it felt like a story book and I didn’t really understood any of the concepts there. I could only remember the stories was amusing and interesting. It was after I started working that I felt I understood the meaning of the book.

Each chapter gives like a level in your financial journey. If you try to reach level 10 without having a proper foundation (chapter 1), you will always be at level 1. This books takes you step by step in your financial journey towards financial freedom in a series of easy to read stories. That’s what Wealthdojo hopes to achieve as well.

My favorite concept: Pay yourself first. Before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Saving a sum of money as emergency funds is a short of life hedge. (Read more: Life Hedge: How to prevent your life from being a roller-coaster (Part 2))

The Five Rules for Successful Stock Investing

Finally, a book about investing. There are many people who ask me why don’t I focus on investing. I mean I could. However, I feel that money management or wealth management isn’t just about investing. Investing is the most sexy section in money management but it is NOT the only section. In fact, if you do the other parts of wealth management correctly, investment will fall in nicely like the final piece of jigsaw puzzle.

Back to the book. I like Pat Dorsey because he is good at making complicated things simple and that’s very important for investing. His 5 rules for successful stock investing is universal and serves as a good reminder what kind of companies we would want to invest in this business climate. I feel that this book is suitable for both beginners and also people who have some knowledge in the stock market. I also like sharing when it comes to investing Mistakes I wished I knew earlier.

My favourite concept: Find economic moat. An economic moat is like a competitive/unfair advantage that a company have over other companies. Usually, that kind of advantage will enable a company to profit their profits in the long run.

God Bless.

Wealthdojo

What is pay yourself first?

Why does pay yourself first works?

How do you pay yourself first?

Saving Goals With Your Bank.

Saving Goal With Your Insurer

Conclusion

Their Preferred Target

Scam Style #1: A call from the Authorities but…

Scam Style #2: The whatsapp good deal

Scam Style #3: Recency effect

Scam Style #4: Not enough money

Conclusion

Can these companies survive?

How do I know if companies have enough cash to get over these crisis?

Quick Ratio

Bottom Line

Is it too late to prepare for this emergency?

Keep Calm and Prepare

Dollars and Sense: How We Misthink Money and How to Spend Smarter

The Richest Man In Babylon

The Five Rules for Successful Stock Investing

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