Archive for January, 2007

Guaranteed Return In Investment!

Saturday, January 27th, 2007
Before I had gained financial education, I used to go after guaranteed return in investments. Usually, I will read about mutual funds giving a guaranteed return in newspaper advertisements. The best part is that they even provide guarantee on the invested capital. To me, this is too good to be true. Of course, I would grab the chance to invest in them.
After reading the book Rich Dad Poor Dad by Robert Kiyosaki, I realized that it is important to gain financial literacy. Thus, I invested my time, effort and money to study. With my newly gained knowledge, I discovered that a lot of the presented information in the advertisements could be rather misleading to someone who is not financially educated.
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For example, if I were to invest $1000 in mutual funds for 5 years for a guaranteed return of 3 percent per annum, then I would gain about $159.27 in interest at the end of 5 years. That is I would gain a return of about 15.93 percent return on my $1000 investment for a period of 5 years. The advertisement would usually display a guaranteed return of 15.93 percent for the investment instead of 3 percent return per annual for the investment. This is equivalent to putting my money in a fixed deposit that gave 3 percent return annually for 5 consecutive years. There is no distinct advantage to lock down my money in the mutual funds for 5 years.
Certain advertisements do mention about guaranteed protection for invested capital. By examining the terms and conditions about the mutual funds, I feel that there are always certain conditions that are unfavorable to an investor. At the minimum level, I will still need to pay for the sales charges either upfront or after I have cashed out the investment.
Using the earlier example, if I had invested $1000 in a capital protected fund with a 5 percent sales charge, then it simply meant that only 95 percent of my invested capital or $950 would be protected. I would loss 5 percent or $50 right away. If the fund were providing me a guaranteed 15.93% return for 5 years period, it simply meant that I would be getting $159.27 at end of 5 years. If I took away the $50 sale charges from my investment gain of $159.27, then my net gain would be $109.27. The return would be worst off as compared to putting my money in a fixed deposit or CD for 3 percent return per annum for 5 consecutive years. Thus, it really makes no sense for me to invest in such a fund at all.
Once I have understood that there is no such thing as guarantee in investment, I am forced to take responsibility for my investments. Before I make any investment, I will take up the responsibility of identifying the risks involved. Also, I will spend time and effort to look into the possibilities of managing the identified risks to increase my odds of making money in my investment. These are only possible if I have financial education. That why financial education is important as highlighted by the Rich Dad’s series by Robert Kiyosaki.
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For example, if I want to invest in a property to earn rental income, what are the areas that I may look at to improve my odds of making money in my investment?
Firstly, I may need to look at whether the population is growing in the area where I intend to buy a property. If population is growing, then there is a demand for housing. This mean that if I buy a property in that area, there is a high chance that it will be rented out most of the time.
Secondly, I may need to find out the political situation of the country. If the political situation is stable, then my investment will be relatively safe. If the situation is unstable, then there is a risk of sudden policy change that will cause a negative impact on my investment. This is especially important if I am investing in a foreign country. If there is a sudden change in policy on foreign ownership, then my investment will be affected.
Thirdly, I may need to learn about the relevant taxes of the country including the property tax and income tax. Property tax and income tax will impact on the return on my investment. If the taxes are not favorable, maybe I should not invest in a property in that country.
Lastly, I may need to research on the rental rates around the area for the past few years where I intend to invest. Are the rental rates increasing or decreasing? What are the rental rates? Based on the gathered information, I will be able to calculate whether there is a positive cash flow in my investment. That is the monthly rental income must be more than the monthly mortgage repayment. Then my investment will be considered to be an asset as defined by the book Rich Dad Poor Dad by Robert Kiyosaki because it earns passive income.
What I am trying to highlight here is that no one else is responsible for your investment except yourself. If you accept the responsibility, you will be able to do much more to improve your odds of winning.

Before I had gained financial education, I used to go after guaranteed return in investments. Usually, I will read about mutual funds giving a guaranteed return in newspaper advertisements. The best part is that they even provide guarantee on the invested capital. To me, this is too good to be true. Of course, I would grab the chance to invest in them. (more…)

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Affordable Sources Of Passive Income!

Tuesday, January 9th, 2007
I learned from Rich Dad series that an asset is one that generates positive cash flow. If it does not generate income, then it is a liability. For example, a car is liability if it does not generate positive cash flow. If I rent out a car and it earns a monthly rental income, I will need to do a simple calculation to determine whether it is an asset or liability. Basically, I need to subtract the car loan monthly repayment and maintenance costs from monthly rental income. If the result is positive, then it means that the car generates a positive cash flow and thus it is classified as an asset. If the result is negative, then it means that means the car generates a negative cash flow and thus it classified as a liability.
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With this new definition of what is an asset, I understand that if I want to build up my wealth, I must investment only in assets that can generate positive cash. But do I just simply invest in any assets that generate me positive cash flow?
For example, if I were to invest in a business that is generating positive cash flow and this business take up all my time, is this consider a good investment? Since my time would be totally taken up, I would not have the time to think of building other sources of income. Thus, I do not think that this is a good investment.
But what if I were to invest in a business that generates positive cash flow but required minimum involvement on my part? If that is the case, then I will considerably free to pursue the building of other sources of income. My conclusion is that I should be selective towards investing in any positive cash flow assets. But I still have doubts regarding my conclusion.
When I learned from the Rich Dad series that I should be focus on building passive income, my doubts are removed. That means I should be investing in assets that generate positive cash flow as a passive income. What is considered a passive income? The way I have understood about passive income is that even if I were to do little or nothing for a long time, the cash will still come to me continuously.
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For example, if I were to invest in a piece of real estate that generate a positive cash flow by renting it out, then the work that I need to do per month will be like ensuring that my rental income is collected promptly. Maybe I can even automate this part by debiting the rental income from the lessee’s bank account and crediting it into my bank account directly. Then, the only work that I need to do is to ensure that my rental income is credited into my bank account monthly.
The opposite of passive income is active income. Active income means that I have to keep working to ensure that the cash keeps coming in. The moment that I stop working, the cash also stop coming in. A job is an example of an active income. The employer will stop paying me a salary if I stop work.
When I think of the idea that money keeps streaming into my bank account with little or no work, I am really excited! Since the idea is so enticing, I decided that I want to focus my attention on building passive incomes. But what are the possible ways to build passive income? Especially when I do not have much savings at hand?
One way that I can think of is to write a book. The main cost will be time on my part. But if I am able to convince a publisher to publish and sell my book, then I will be able to earn royalty fee based on the number of books that are sold. This is a possible source of passive income to build.
The other way that I can do is to build a network marketing business. It is also know as multi-level marketing business. In this kind of business, the distributor will need to get the license to sell the products from a parent company that is a network marketing company. The fee to be a distributor is usually very affordable. The distributor then tries to sell the products to potential customers and earn commissions from his sales.
Also, he can build a network of distributors under him. If he meets his sales quota and his team of distributors meets their sales quota, he gets paid for commissions from his own sales as well as his team of distributors. But if he did not meet his sales quota and his team of distributors meets their sales quota, then he will not get any commissions from the sales of his team of distributors. The tricky part to create this stream of passive income is how to choose a network marketing company that is legitimate, stable and big growth potential.
No matter which source of passive income that I am trying to build, I notice one thing in common. Hard work is definitely required to these building the passive incomes.

I learned from Rich Dad series that an asset is one that generates positive cash flow. If it does not generate income, then it is a liability. For example, a car is liability if it does not generate positive cash flow. If I rent out a car and it earns a monthly rental income, I will need to do a simple calculation to determine whether it is an asset or liability. (more…)

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Know More People Beyond Your Comfort Social Circle!

Monday, January 8th, 2007
I like to stick around with my comfort social circle of friends. This is because we have common views on most things and usually we shared a common experience. Maybe we have studied together in the same school. Maybe we have worked together in the same office before. Maybe we have grown up together in the neighborhood. Maybe we are in the same hobby club. Whatever the reasons, I rarely venture out of my comfort social circle to see what are out there in this world.
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After reading the rich dad series, I gather that it is important to know more people beyond my comfort social circle especially people who are more successful than me. By mingling and mixing with them, I will be influenced by them to raise my standard so that I can be as successful as them. As it really make sense to me, I decided to move beyond my comfort social circle of friends by knowing more people. Below are a few examples on the approach that I have used to know more friends.
One way is to get to know more people in seminars or courses. I will bring my name cards to give away or exchange. During break times, I will approach people to say hello. To start a conversation, I will ask them how do they feel about the seminar. If they briefly answered that the seminar is ok or fine, I will share my views about the seminar instead so that I can keep the conversation going. I will give my name card and request for their name cards in exchange. If they do not have a name card, I will give them a piece of paper so that they can give me their contacts.  And I will follow up and communicate with them after the event using email, phones or whatever. In this way, I hope that I can strike a rapport and make new friends.
Another way is to get to know more people online. I will invite people to be my friends in online social networking website such as myspace.com, multiply.com, friendster.com and so on. And I will follow up and communicate with them online if they accepted my invitation. As result, I can make new friends.
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I can also try to know more people in social gatherings such as wedding dinners, birthday parties and so on. I will be proactive and try to start a conversation with people. I will exchange name card or contacts where appropriate so as that I can follow up with them. The topics vary depending on the nature of social gatherings. For wedding dinner, the common topic will be on the bride or the groom. For examples, how are you related to the couple? How did you get to know the groom or the bride? Similarly for birthday party, the common topic will be on the birthday person. For examples, how are you related to the birthday person? How did you get to know the birthday person?  By this approach, I widen my circle of friends.
Alternatively, I can get to know more people at religious gatherings. By discussing about our common religious beliefs, I can easily form friendship with people. I can take part in religious activities and  share my views during discussion on certain topics in the religious teaching. In addition, I can volunteer to help out in religious activities.
Whatever approaches I use, my main objective is to get to know more people so that we can learn from each other. Whenever I chat with people that are beyond my current comfort circle of friends, I always get to learn more things because the topics that we talked about are different. Also, their views are likely to be very different from my comfort social circle of friends. This is because we come from very different backgrounds. This is especially true for online friends living in different countries with different cultures. We can learn even more things from each other due to our cultural differences.
During conversation, I will always keep an open mind and listen. If what I have heard is useful for me to progress further in my quest for financial freedom, I will try to adopt and practice it. If what I have heard is not useful for my quest for financial freedom, I will store them as my knowledge so that I can share with other people in future where appropriate. Either way, I have nothing much to loss for trying to get to know more people. The worst thing that can happen to me is that people reject my friendship. But if I do not try, I definitely will not have the opportunity to find new friends.

I like to stick around with my comfort social circle of friends. This is because we have common views on most things and usually we shared a common experience. Maybe we have studied together in the same school. Maybe we have worked together in the same office before. Maybe we have grown up together in the neighborhood. Maybe we are in the same hobby club. Whatever the reasons, I rarely venture out of my comfort social circle to see what are out there in this world. (more…)

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Fun with Cashflow 101!

Sunday, January 7th, 2007
When I first heard about Cashflow 101, I was very excited and wanted really to play the board game. To play the game, I faced two issues. Firstly, I needed to have a copy of the board game. Secondly, I needed to find a group of people who were willing to play the game together. Luckily for me, one of my friends had the board game. Also, I managed to find a few friends who had read the book Rich Dad Poor Dad. They were also very keen in playing the game. Thus, both issues were easily solved.
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I managed to play for a few times. And I had really learned a lot from just playing the game. Of course I did not have an immediate enlightenment on the concepts that the game is trying to teach! Neither do I claim that I have understood all the concepts. But before I go about describing what I have learned, it is important that you have a general idea of the game. This may help you to understand what I have learned so far from playing the game.
Cashflow 101 is a board game designed by Robert Kiyosaki, the author of Rich Dad, Poor Dad. It aims to teach the players the concepts of investing and building passive income. To start the game, each player has a score sheet to track his passive income and expenses. It is similar to keeping track of financial statements in real life. There are 2 tracks in the game. The first track is where everyone starts playing. It is known as the rat race track. In the rat race track, the player may be required to spend for vacation. He may also have another child that causes his expenditure to go up. He may lose his job thus no income for a few months. He will face financial worry or difficulties like in real life situations.
Also, the player will encounter opportunity to invest in shares, real estates, businesses and so on. Basically, the player will encounter very real life liked situations that required decisions on investments. He may also encounter a situation where he does not have the cash to invest in a golden opportunity.
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In order to get out of the rat race to the second track that is known as the fast track, the player has to learn to invest until his passive income surpasses his expenses. Once he has attained that, he will try to buy his dream or accumulate an additional $50,000 monthly cash flow to win the game.In summary, the game gives the players the chance to experience real life situations even before they have happened. It is like giving them a glimpse of the future of what may happen if they stay in the rat race. It also provides the players a glimpse of an alternative bright future if they get out of the rat race. This is provided that they learned about cash flow, expenses, investment and building passive income.That is just an introduction based on my personal experience of playing the game. I really loved playing the game. I hope that you can visual the board game to a certain extent. Now, let me shared with you what I had learned so far from playing the board game.
Firstly, if I were in the rat race track, I would be just waiting for paycheck after paycheck. My monthly salary would not increase much annually. And it would be like that for the rest of the years to come. In the board game, the rat race track is very short circular track. If each complete cycle were to represent a year, then time really flies fast on the board game. This gave me a glimpse of what my future would be liked in the next 10 years if I remained in the rat race track.
Secondly, if I did not invest in things that generate me passive income, I would take a very long time to clear my mortgage and debts by just saving. Saving is very important! But saving alone will not get me out of the rat race. If I want to get out of rat race in real life, then I have to learn to invest and build passive income.
Thirdly, I realized that if I was too greedy in the game and over invested beyond my financial means, I could easily go broke due to unexpected expenses or lost of job. Thus, it is important to manage my cash flow carefully in real life.
Lastly, I realized that it is important to save so that I could invest when a golden opportunity came knocking on my door. In the board game, I had a golden chance to invest on something that really gave good returns. But I did not have enough saving, thus I had gave it a miss.

When I first heard about Cashflow 101, I was very excited and wanted really to play the board game. To play the game, I faced two issues. Firstly, I needed to have a copy of the board game. Secondly, I needed to find a group of people who were willing to play the game together. (more…)

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Selling Is Part And Parcel Of Life!

Saturday, January 6th, 2007
According to Rich Dad series, one of the important skills to learn is selling. I decided that I wanted to learn selling. This is because I realized the fact that I am always selling my ideas and information to someone everyday whether I like it or not. Selling is part and parcel of life!
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For examples, if I were to do a presentation, I would be selling the presented information to the audience. If I were to be in a discussion, I would be selling my views and ideas to the rest of people in the meeting. If I were to go for job interview, I would be selling to my prospective employer that I am capable of doing the job. If I were to negotiate for more time, I would be selling to the party that this assignment need more time.
How should I go about learning selling skill? Of course the best option is to have a coach to guide me. If I cannot get any, then this is my own learning formula. My idea on learning any skill is a three steps process. Firstly, I will read and listen to the theories on the skill that I will like to master. Secondly, I will experiment or practice the skill based on theories that I have learned. Thirdly, I will reflect on the practical experiences gained so as to learn from mistakes. I will make adjustments if necessary until I get a satisfactory result.
As I could not find a coach, I took actions based on my own learning formula. I bought a few books on how to do sales. In addition, I enrolled myself in a few courses and seminars. The information in the courses and seminars completely blow me away. I wished that I had learned all these things in school.
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One of interesting things that I have learned is the part on building rapport with your prospect. To build a rapport with a new acquaintance, there are a few things that I can do so that I have a higher chance of success.
Firstly, I have to observe how fast or how slow or how loud or how soft that person speaks. I may start the conversation by introducing myself first and then politely ask him to do an introduction of himself. Then I will observe his speech. If he speaks fast, I will follow suit and speak fast. If he speaks slowly, I will follow suit and speak slowly. If he speaks softly, I will follow suit and speak slowly. If he speaks loudly, I will follow suit and speak loudly. Basically, the idea here is to let him feel that I am like him since we have a common tone of speech.
Secondly, I will observe the language that he uses as he goes along. Alternatively, I will ask him whether he prefer to speak another language that we both know. If he speaks English, then I will speak English. If he prefers Mandarin, then I will speak Mandarin. The idea here is to let him feel that I am like him since we both prefer the same language
Thirdly, I will observe his body language. If he stands comfortably while talking to me, then I will stand comfortably too. If he stands straight in full attention while talking to me, then I will do the same. If he sits back and relax while talking to me, then I will do the same. If he sits up straight while talking to me, then I will do the same. Again, the idea here is to let him feel that I am like him. This idea will form the basis for a good rapport.
Another interesting thing that I have learned is the power of cold call. Basically for every ten cold calls that I have made, one prospect will likely to become my customer. The ratio may various from person to person. Some people have better ratio. Maybe out of every 10 strangers that they cold called, they get will get about 2 customers. Some people have poorer ratio. Maybe out of every 20 strangers that they had approached, they will only get 1 customer.
In conclusion, I realized that selling skills is not just about selling something to someone. It is all about networking and relationship building. If I apply these ideas one-step further in my life, I am basically enhancing my rapport with colleagues, friends and loved ones. If I apply the power of cold calls to get to know people during seminars and events, I will gain more friends eventually.

According to Rich Dad series, one of the important skills to learn is selling. I decided that I wanted to learn selling. This is because I realized the fact that I am always selling my ideas and information to someone everyday whether I like it or not. Selling is part and parcel of life! (more…)

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