Personal Finance 101

1. Go for quality

This will sound contrary to saving money but buying quality products will save you in the long run. Instead of opting for cheap items that require replacement every 2 years, go for quality items that will last for atleast 10 years. While it may cost slightly more during the initial purchase, it will be cheaper in the long run. One thing to remember in prolonging the life of any equipment – continuous maintenance is essential to keep any equipment running well in the long run.

2. Cut down on weekend entertainments

While we all need to chill out after a hard week’s of work on Friday, do we really need to spend Friday night, Saturday night and Sunday night at the pubs? Limit your weekend entertainment to a certain night and rest at home the rest of the weekend. You not only will get adequate rest but you stand to save some of your hard earned cash.

3. Exercise

Exercising helps reduce your overall health risk. Exercise makes you sweat and sweat cleans your skin and allows your body to ex foliate dead skin. Exercise also helps reduce your stress level, making you work and play better. Basically you’re more fun and sexier to be with. Exercise makes women glow and men tough, and reduce your visits to the doctor.

4. Buy Off Season

Buy you winter clothes in spring – stores will want to get rid of their inventory at a lower price rather than store them for another year (storage cost money too). Dont always go for the latest gadgets – electronic gadgets become outdated after a year or so, so be patient and wait for 12 months and you’ll be able to get the updated version the device at a much cheaper price.

5. Credit Cards

If I havent told you this before, I’m telling it to you now. Dont cancel your credit cards. Having more than one credit cards but not spending a single cent on it looks good on your FICO score. It shows the banks that you have a good line of credit without the associated debts.

But what you need to do is to decouple your card from Paypal or other online merchants. Having your credit card stored in these services makes it very easy to spend online and this is bad. So decouple them!

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You may be feeling that nothing is working. And there is no hope.

But there is hope. There is always hope. New things can bring in new experiences, so don’t give up.

Get a part time job. I am not asking you to work at McDonalds.

What are you good at? Can you create simple websites? Can you create simple programmes? Can you cook? Can you proof read documents?

If you can do these things, head over to Craigslist.org <http://www.craigslist.org/> or Elance.com and advertise your skill. Dont charge too high. Find your neighborhood in Craigslist and offer your service there. Charge low prices in the beginning in order to get some jobs. Jobs creates referrals. Do a good job and ask for a referral. And keep a list of jobs that you have done, this becomes your portfolio.

Work part time about 3 time per week. Work more if you really need the money. Eventually, you might earn more in your part time job than you do in your full time job. More importantly, the income from your part time job is the key to your financial freedom.

Every successful person stated in this way. When the going got tough, the tough started going!

1. Repair Your Old Clothes

Don’t throw old clothes. If you get to see how people in poorer countries live, you’ll learn to appreciate the clothes that you have. Sew your torn clothes and wear them. Don’t rush out and buy new clothes every other week.

2. Ask for a Rate Reduction

Ask and ye shall receive. At the risk of having NPL’s (Non Performing Loans), banks would rather lower the interest they charge you than to have you default on your debts. So don’t be shy in asking. You wont lose anything by asking. I managed to get a 200 dollar reduction in my monthly mortgage repayment, which actually allowed to me to keep paying my old rates and reduce the principal amount of the loan quicker.

3. Say NO to Starbucks and McDonalds

While the coffee from Starbucks might be slightly better than a regular Java, is it worth the USD8 that you pay for it, compared to the USD2 for a regular Java? The USD6 that you save on a daily basis comes up to USD180, which can reduce your credit card interest charges by a considerable margin. And the Big Mac from McDonalds might send you to the hospital with a cardiac arrest. Say NO to FAT. And while you’re at it, stop smoking and reduce alcohol consumption. All these will add dollars into your pocket and increase your life span.

4. Switch Your Bulbs

Switch all the bulbs in your house into energy saving bulbs. You’ll start reaping your savings within 10 months. And besides, you’re doing your bit for the environment.

5. Swap Books with Friends

Check out Craigslist for people who want to share books. Swap books with them, or friends and family. You’ll end up reading a lot more books for a lot less dollars.

1. Read More, watch Less TV

Read more, books teaches you more than TV ever will, unless you’re watching the Science channel. Read books that teach you skills that can help you earn more at work.

2. Sell Your Junk

Everyone has ‘junk’ at home. What you consider junk may be something another person wants. So try auctioning the things that you don’t want or haven’t used in a long time at Ebay. No point in throwing away something when it can earn you a dollar or two.

3.  Be Loyal

If you usually shop at a certain shop or fly a certain airlines, try to stay loyal and enroll in their loyalty programme. Pile up the reward points and used them wisely. I had a friend who forgot that he had close to 300,000 points on his airlines rewards programme and allowed nearly half of it to expire. What’s the point of painstakingly accumulating those points if you’re going to forget about them? Don’t make the same mistake. If you really cant travel or redeem the points, donate them to your loved ones.

4. Buy from a List

When you’re out shopping, go with a list of things to buy and a budget. Cultivate discipline. Stick to you list and our budget and you’ll soon have your life in control.

5. Eat at Home

Eating at home is so much cheaper than eating out. It’s all right to bring friends over and cook for them.  Or ask everyone to bring a dish. You can save a lot.

More tips the next time…

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Quickest way to save some money – spend lesser than your earn.

When push comes to shove, cut down on frivolous expenses like cable tv, or movie rentals, start car pooling, dump your Starbucks coffee for regular Java.

These cutbacks are just temporary. Their painful but temporary until you get some extra cash with you.

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A bad credit card history hinders you from getting good interest rates for everything – from  your house loan mortgage to your car loan, to everything.

Learn how to clear your bad credit card history in 37 days.

The stock market is where the shares in companies are bought and sold, providing companies options to access capital, and investors opportunities to own a share of the company and enjoy potential gains from the company’s future performance. When you own a share of a company, you own a portion of the company. If the company makes profits, then the value of the share that you own rises, and vice verse if the company doesn’t make a profit.

The stock market offers people the opportunity to generate a separate income stream apart from their daily jobs, or income streams which are usually higher than leaving money in savings deposit accounts. But before you even think about buying and selling shares, you must know the fundamentals of the stock market and of trading.

Stock Exchange

You can only invest in stocks through a stock exchange, an organized marketplace where stocks are bought and sold under strict rules, regulations and guidelines. The most famous stock exhanges are the NYSE (New York Stock Exchange), FTSE International (London), Tokyo Stock Exchange and many more. The Malaysian stock exchange is called Bursa Malaysia. Bursa Malaysia has over 1,000 listed companies offering a wide range of investment choices to local and global investors.

Why Do Companies List on the Stock Market

The Stock Market was created by companies wishing to raise capital for their business. When someone says they have a listed company, it usually mean the company is listed on the stock exchange. All companies need cash to take advantage of growth opportunities. Many start-up companies however find themselves short of capital to fund expansion. One way to acquire this cash is to publicly float the company. This involves selling part of the company to private individual and institutional investors who are then able to freely exchange these stocks on an open market. Purchasing stocks in a company that is listed on the stock market is done through an Initial Public Offering (IPO).

Once an IPO has been issued, you can contact the company (phone, fax or email) for a copy of the Prospectus and complete the application to apply for an allocation of shares. Or you can wait until the company is floated and buy shares on the open market. Besides the stock exchange, stock brokers will also have information regarding IPO’s.

Companies that are already listed can also raise additional money on the stock market by offering existing stockholders the opportunity to buy more stocks in the company. For example, a listed company wanting to raise additional capital might issue one new share at 5 cents each for every three shares an existing investor owns.

When you buy shares of a company, you are buying a portion of that company. When the company makes a profit, your share in that profit is in the form of a higher share price or a dividend. Typically, the number of shares that have been issued multiplied by the share price gives us how much a company is worth. Similarly, the value of the shares you hold is the share price multiplied by the number of shares your hold.

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“Make your money for you.”

We’ve all heard of this phrase many times but what does it really mean? “Make your money for you” means using your money to get more money. We get money by trading our time for money. And we store the money in a bank account. With current interest rates, you wont get much interest on your money and your money will not grow fast.

However, investing is a way of making your money work for you at a quicker rate. Investing in stocks has consistently proven to be one of the most profitable forms of investment available. The other avenues for investing are unit trust or mutual funds, bonds, property auctions and so forth.

Benefits of investing in the stock market

• Immediate Buy/Sell so you can sell part of your investment any time.
• Very low transaction cost.
• The freedom to work at your own place, at your pace in your own time.
• Easy monitoring — log in to the market from anywhere in the world.
• Being able to maximise returns whilst spreading your risk.
• A predictable form of investment if you know what you’re doing.
• Putting you in control and freeing you of fund management fees.
• Considerable tax advantages.

Things to be ware of:

• The market can be a volatile place.
• You must acquire knowledge of what you are doing.
• You must monitor your investments.
• You must learn the discipline to enter and exit the market on entry and exit signals.

Can Ordinary People Profit from the Stock Market?
Many people say things like “I’d love to get into the stock market” or “If I had more money, I’d invest in stocks”. Many people also believe that to make a profit from the stock market you either need to be rich already, be a full-time investment trader or be a financial whiz.

Far from it!

Investing in the stock market is a simple process. Just like everything else in life, there are risks you should be aware off.

Here are some examples of investing in the stock market.

Scenario 1:
Jonathan works in a manufacturing plant earning USD33,000 a year. After rent, living and personal expenses, Jonathan has managed to save USD1,500 over the past 6 months that he wants to invest in the stock market. Jonathan buys 1,600 shares in Enron at USD0.90 per share (USD1,440). He also pays USD32.95 brokerage fees for buying the shares. In total, Jonathan has invested USD1,472.95.

Six months later Jonathan decides to sell his shares. He has kept an eye on the performance of Enron and they have risen to USD1.19 a share. Jonathan sells his shares for USD1,904. He also pays USD32.95 brokerage fees for selling his shares, leaving him with USD1,871.05. That is a profit of USD398.10.

USD398.10 may not sound a lot, but remember, Jonathan only invested USD1,472.95 for 6 months, so he won’t make a huge return. Nevertheless, Jonathan made a 27% profit which is far better than he would have made by putting the money into his savings account.

Scenario 2:
James and Samatha both work full-time in professional jobs. Together, they earn USD120,000 per year. After mortgage repayments, living and personal expenses James and Samatha have managed to put away USD5,000 that they want to now invest in the stock market. They buy 1,500 shares in Exxon Mobil at USD1.48 a share (USD2,220) and 1,500 shares in Shell at USD1.33 a share (USD1,995). They also pay USD65.90 brokerage fees for the two transactions. Their total outlay is USD4,280.90.

Over the next 12 months Exxon Mobil shares have risen to USD2.60 a share and Shell shares have moved to only USD1.38 a share. James and Samatha sell their shares for a total of USD5970. They pay their broker USD65.90 and are left with USD5904.10. Their initial investment was USD4,280.90. So, they make a profit of USD1,623.20.

These examples show that investing in the stock market is a relatively simple process. However, one should always take a prudent approach when investing in the stock market. Never listen to rumours. Always do your homework, which is to study the background of the companies that you’re investing into.

I will explain more about investing in the stock market in the next post.

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There is no secret to getting out of debt. You’ve read this in many places before but I want to repeat it here:

1. Spend less than you earn.

2. Live frugally.

3. Earn more money.

4. Manage your money wisely.

There are no other rules.

The key to breaking out of your debt is to earn more money. Living frugally and within means is your first step. But if you want to escape the cycle of poverty, polish up one of your skills and be bold enough to go out there and sell your skills. There are a lot of websites like Elance.com where you can offer your skills at a rate and people will employ you if the terms are good.

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On my way to Nigeria, I spotted someone with this book. According to her, this is one of the best books she’s read on financial blunders. While it wont help you make money, it shows you the extend of human greed. CNBC correspondent, David Faber, looks into the truth behind the large crisis that hit the world.

He looked into the Sept 11 attack and its affect on world economy, the huge cash flow that moves around the world on a daily basis, he even talks to the most powerful man in US, former Federal Reserve Chairman, Alan Greenspan about Wall Street and Rating Agencies.

Read the truth behind the truth in And Then The Roof Caved In. Will it happen again?