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Table of Contents v Introduction v Skill #1: Develop the Rich (Wo)man Mindset v Skill #2: Set Clear Financial Goals v Skill #3: Create A Strategy Plan v Skill #4: Manage Your Money Wisely v Skill #5: Protect Your Wealth v Skill #6: Increase Your Income v Skill #7: Invest – Put Your Money To Work v Skill #8: Networking v 8 Skills To Become Rich
Introduction Become Rich. Becoming rich is something that many people are going after. It does not only happen now. It happens generations ago where our ancestors had been going after. And it will continue in the future generations. Since it is something that happens for so many years, why do only the top 10% of the world population are rich? How do they get rich? How can I also be rich like them? I am just like you and many others who hunt for the solutions to become rich and achieve my own financial success. My name is Nick, from Singapore, a prominent city in the South East Asia, where it is famous for various reasons, such as a financial hub of South East Asia. If you are not familiar with Singapore, Singapore is a small and developed city. She is one of the top few higher costs for standard of living in the world. As the cost of living continue to rise and more exposure for higher quality of living, I embark on my path to financial success to provide more for my family and myself. Like many others, my path is not smooth sailing. I faced many challenges and failed many times. Gratefully, I learnt a lot from many millionaires and peers along the way. Because of all the supports and knowledge that I gained along the way, I am lucky and blessed to have improvement in my quality of living. As such, I wrote this Ebook to reach out to more peers to share my experiences that I had so far and hopefully in some ways or the other to help you along your path to financial success. Not everyone who is rich is born rich. Millionaire really can be created if you have the right skills to develop yourself to become a millionaire. In this Ebook, I will be sharing with you the 8 skills that most rich people have that help them to create a great amount of fortune and become rich. All right! Lets begin …
Skill #1: Develop A Rich (Wo)man Mindset “As You Think, So Shall You Become” -‐ Bruce Lee
Let’s be honest, the very reason why you are working so hard day after day is because YOU want to achieve Financial Freedom. Yes? But, looking at your current finances, do you still feel like you have got a long way to go? Why are the rich people rich and the rest of the population are just barely getting by? Take any millionaire or billionaire and look closer at them, you will know that they looked similar as most of us. They have a pair of legs, arms, eyes, ears and a nose and mouth. Some of them are even the same ethnic and/or same nationality like us. So what is the difference between us then? Yes! You are right. The key difference is what is in their brain. It’s the mindset that they have that set us apart from the reality. T. Harv Eker, a successful coach who teaches millions of people about millionaire mindset, stated in his book “Secrets Of Millionaire Mind”: Thoughts -‐> Feelings -‐> Actions = Results “Thoughts lead to Feelings. Feelings lead to Actions. Actions lead to Results.” Isn’t that simple and straightforward to understand? Yes? What you think will lead to how you feel, how you feel will determine the actions you will take and your actions will bring you the results. Many people think that the rich are rich because they know how to play the rich game. They have strong knowledge about businesses and investments that helped to earn them lots of money. Yes, partially that is true. Those are skill sets, which anyone can learn and acquire other a period of time. However, what really matter are the thoughts that they have to ignite the feelings and take the right actions to get the result that they wanted (become rich). Before I share with you 5 points in developing your millionaire mindset, you are required to acknowledge that you have to make changes – make changes to your thoughts, your feelings and actions to get a different result that you want. Why is this important? That is because as what Thomas Edison, an inventor of electricity, said, “Stupidity is doing the same thing over and over again and expect different results.” I choose to believe you are smart and you know what to do.
Here are 5 points to kick-‐start your development of millionaire mindset. 1. Positive beliefs about wealth. We know that to become rich, we need to think and act like the rich. Rich people have positive beliefs that allow them to have more money. Before you can become rich, you need to make sure that your beliefs about wealth are positive and propelling you towards more wealth. However, your beliefs are not. That is the exact reason why you are at where you are today. You need to change them. Some examples: Positive: I can achieve financial success by age 30. Negative: Money is the root of all evils. How do you change your negative beliefs to positive? 1. Write down all your beliefs and acknowledge them, regardless positive or negative, on a piece of paper. 2. Classify each belief in the list as positive or negative. 3. Take another paper and change all the negative beliefs into positive. 4. Add in new positive beliefs if you want to 5. Place this list of beliefs somewhere that you can read them everyday. 2. Know your ‘WHY’ you want to become rich. Do you know that anyone CAN be rich? If an individual has the right thoughts, with the right feelings and take the right actions, he or she will get the positive results and become rich. However, the truth is not everyone HAS to be rich. All rich people are rich because they know their ‘WHY’ reasons of becoming rich. Unfortunately, many people do not know their reasons why they want to become rich and that is the reason why most of them failed to become rich. They retreat back to their original state when they face challenges along the path to financial success. The stronger your ‘WHY’ reasons, the more likely you will become rich. Why? Strong WHY reasons means you have strong thoughts, which will create strong feelings and you will take massive actions to create the results. How do you know if your ‘WHY’ reason is good and strong enough? Ask yourself this question: Is it an absolute MUST for the reason to happen? Another question you may ask: Is it ok with me if it doesn’t happen? If your answer is yes, that means the reason is not strong enough.
3. See money the way like the rich. Is your house an asset or liability? I’m sure you will say your house is an asset. If you have studied some courses of accounting, you have learnt from school that a house is classified as an asset. Academically, that is true. No doubt about that definition. If you have read ‘Rich Dad Poor Dad’ by Robert T. Kiyosaki, he mentions that your house could probably a liability instead of an asset. Ask yourself these 2 questions: 1. Is your house still on mortgage loan? 2. Is your house earning income more than your mortgage loan? If your answer is ‘yes’ for Q1 and ‘no’ for Q2, that means your house is not an asset, it is a liability. Surprise? I am equally surprise when I first expose to how rich people see money. Therefore, to become rich, you need to learn the way that rich see money. 4. Know how your cash flows When come to personal finance, in the mind of the average people, there are only 2 categories – income and expenses. Their monthly paycheck is their income and whatever they spend is their expenses. They are concern on how to balance between these 2 figures. However, for the rich, they have not 2 but 4 categories – income, expenses, assets and liabilities. This is similar to the income statement and balance sheet, which are commonly used by companies. So what does that means? It means rich runs their own personal wealth like how they run a company. Why do they do that? The ��bottom line of a company is to make profit and build equity. Similarly, the rich are building their net worth. So how does the cash of the rich flows? Rich people focus on building more assets and reduces liabilities. Why is that so? Assets help the rich to generate more income, however, liabilities takes away their assets. Therefore, rich will always focus on assets and reduce liabilities.
5. Be – Do – Have One of the keys that rich people are rich and average people are average is whether they have this ‘Be-‐Do-‐Have’ model in them. What do I mean by that? You have the ‘Do-‐Have-‐Be’ model like many others. Since young, whether in school or from your parent, you are taught to ‘Do’ the job right so that you can ‘Have’ the kind of money and lifestyle that you want, and then you can ‘Be’ the (millionaire) man or woman that you want to be. That is an absolute wrong! Because the wrong way of implementing the model, you don’t get the results that you desire. You need to ‘Be’ the millionaire first (although you are not), and ‘Do’ what the millionaire will do, and then you will ‘Have’ what the millionaire will have. This model is similar to what T. Harv Eker has evocate: Thoughts (Be) -‐> Feelings -‐> Actions (Do) = Results (Have) Your thoughts create your future. Think BIG & grow RICH! Recommended Resources There are many more millionaire mindsets that you will need to learn. However, it will be too long to be covered in this eBook. These 5 points that I shared will help you to kick-‐start your thinking process and change your thoughts of a millionaire mind. Here are 4 books that I highly recommend you to read them as they have a huge impact on the millionaire mindset of million others and mine. 1. “Rich Dad Poor Dad” – Robert T. Kiyosaki -‐ How the rich think and the way they see money 2. “Cashflow Quadrant” – Robert T. Kiyosaki -‐ The pattern of the flow of the cash for the rich 3. “Secrets of Millionaire Mind” – T. Harv Eker -‐ To be rich, think rich. To be poor, think poor. 4. “Think & Grow Rich” -‐ Napoleon Hill -‐ What your mind thinks, it will achieve.
Skill #2: Set Clear Financial Goals “Setting Goals Is The First Step In Turning The Invisible Into The Visible” -‐ Tony Robbins
Most rich people have goals and it is an important element for their success. Why are goals important? It sets a direction for you to work towards to. If you do not have goals, you will be just like a lost soul on the street and wondering around with no direction and destination in mind. Setting goals sound simple. Many people do that every year but why people failed to achieve them? 1. They are not connected with their goals. Your goals should be relevant and have strong reasons and meanings to you that you want to achieve. Many people set goals for the sake of setting them. Because they are not connected to their goals, they are also not committed to achieve their goals. This brings me to the next point. 2. They are not committed. Your goals have to be something that you MUST achieve and not something that you WANT to achieve. If your goals are something that must be achieve, you will do whatever it take to achieve your goals. However, if you only want to achieve your goals, most likely you will not achieve them because of distraction or you give up when you face challenges. 3. They have too many goals to achieve. All of us have many things we want to achieve in our lives but there are only that much we can do and achieve at any given time. When we have too many goals that we want to achieve, either we take too long to achieve them or we achieve them with lower quality. So focus on 1 – 2 goals at each time and do your best to achieve them before you move on to achieve other goals.
So now you know that you need to set goals and why people failed to achieve them, you might be thinking how to set clear financial goals that are achievable? If you have did some researches or did some goals setting before, most likely you would have heard of S.M.A.R.T. goal. In many of the articles on SMART goal, they usually advocate ‘For you to achieve your goals, you need to set S.M.A.R.T. goals!’ What does S.M.A.R.T. goal stand for? S = Specific M = Measurable A = Attainable R= Realistic T= Timely In my opinion and personal practice, I follow only the S.M.T. part of it. Example of S.M.T. goal: Good example: Have $100,000 in bank account within 12 months. Bad example: Be rich by end of the year. What exactly is S.M.T. goal? • Specific: Specific goals are clear and easy to achieve. When your goals are specific, it helps you to focus your efforts and define your direction to achieve your goals. There are 3 keys to set specific goals: 1. Why are your goals important to achieve? 2. What you going to do to achieve your goals? 3. How are you going to achieve your goals? • Measureable: If you can’t measure your goals, you can’t manage it. How do you know if you have achieved your goals or how much far away are you from your goals? It will be only possible if you can manage and track your goals. Therefore, your goals have to be measurable. • Timely: A timeframe to keep track By setting a timeframe to your goals, you set a deadline on your goals and make it clear for you to achieve it. It also makes the process measurable to keep track of your performance and how far are you away from your goals. With the tracking, you will be able to make strategies to achieve your goals within the timeframe.
Why I do not follow the ‘Attainable & Realistic’ parts? Before I explain, let me ask you … Can you imagine what the world be today without electricity? Can you imagine yourself lighting up candles at home? Can you what will be like without Internet, computers, and mobile phones? In the S.M.A.R.T. goals that method above, the goal has to be attainable and realistic. If many great inventors, like Thomas Edison, have followed the S.M.A.R.T. goal model closely, they would never invent what they have invented. In my opinion, your goals have to be big enough to be a dream that you want to achieve. Sometimes, by setting goals that are attainable and realistic it limits your beliefs and actions. You might end up setting goals that are too small for yourself, just to ensure that your goals satisfy the S.M.A.R.T. theory. What’s next after setting your S.M.T. goals? Setting your goal is one thing. Following through it is another. After setting your S.M.T. goals, how do you make sure that you follow through? The best way to keep your goals at top of your mind is to look at it constantly. You can either write or draw your goals on a piece of paper and place that paper at somewhere that you will look at it everyday. Under the Law-‐Of-‐Attraction, if you think about achieving your goals long enough, you are more likely to attract the outcome to happen. So remember the key to setting achievable goals: • • • • •
Prioritize your goals and focus on the top 2 Connect with your goals Be committed to achieve them Set your goals with the S.M.T. model Keep your goals at top of your mind
Skill #3: Create A Strategy Plan “A Goal Without A Plan Is Just … A Wish” -‐ Antoine De Saint-‐Exupéry
Once you have defined your S.M.T. goals, you are ready to create a strategy plan to achieve your goals. Many people create their strategy plan in the wrong way. They use the ‘Short-‐term to Long-‐term approach'. They set a small goal within a timeframe, usually in the near future, and another bigger goal in the future. If the person has 4-‐5 goals, the process repeats until the last goal is set. Their strategy is to achieve the smallest goal first and follow by the next bigger goal. They may achieve the first goal, but they are unlikely to achieve the next goal onwards. Why? If you need that amount of time to achieve your smallest goal, it will only be logical that you need more time to achieve the next bigger goal. If you plan to achieve a big goal in the future, you do nothing since Day 1 and only start working on it after you achieve the smaller goal, most often that not, the goals further into the future are usually will not achieved. So how do you set your goals? It is like eating up an elephant. How do you eat an elephant? Are you able to swallow the whole elephant? Of course not right? So what do you do? You cut the elephant into small parts, the front legs, back legs, body, etc. You further cut each part into small bite size so that you can chew on them. Similarly for your goals, you break down your goals into 1. 2. 3. 4. 5. 6. 7.
Long term (7 – 10 years) Mid term (5 – 7 years) Short term (1 – 3 years) Within the first year Monthly Weekly Daily
Don’t focus on the BIG goals, break down your goals and focus on the smaller goals. It is only logical that if you achieve all your smaller goals, you will also achieve your big goals.
Let me give you an example on how you can create a strategy plan. Your goal: Have $2.4 millions in 10 years • • • • • • •
‘Long Term’ Goal: $2.4 million by end of 10 years ‘Mid Term’ Goal: $1.2 million by end of 5 years ‘Short Term’ Goal: $720,000 by end of 3 years ‘Within The First Year’ Goal: $240,000 by end of 12 months ‘Monthly’ Goal: $20,000 ‘Weekly’ Goal: $5,000 (Assume 4 weeks basis) ‘Daily’ Goal: $1,000 (Assume 5-‐days work week)
If you focus on $2.4 million by end of 10 years, it might seem to be hard to achieve. However, if you focus on $1,000 a day, it might be more achievable. If you consistently achieve your daily goal of $1,000, you will definitely achieve your $2.4 million goal by end of 10 years. So how does that apply to your daily work? Assume you are working as a salesperson that sells big-‐ticket items. Each sale you made, you earn $500 worth of commission. You need to meet your clients through face-‐to-‐face to do a presentation before they buy and you need to do callings to book appointments. Daily Goal: $1,000 • Daily Sales Target: 2 • Appointments: 8 (Assume it takes 4 appointments to close 1 sale) • Callings To Make: 40 (Assume it takes 5 calls to book 1 appointment) So similarly, in order to achieve your daily target of $1,000, all you need to focus on is 40 callings and 8 appointments in a day. Do you see it? By breaking down and focusing on smaller achievable tasks, it will be easier and give you a higher success rate to achieve your goal than focus on the big goal itself. Go ahead and break down your goals now …
Skill #4: Manage Your Money Wisely “If you buy things you do not need, soon you will have to sell things you need” -‐ Warren Buffet
How do you know if you have achieved financial success, truly financially free? It is by your numbers. What numbers you may ask? How do you determine if you are rich? Usually, we measure by how much net worth you have. Net Worth = Assets – Liabilities If you have positive net worth, that means you are rich. Is that good enough? No. Having low positive net worth doesn’t that you are as rich as you want to be. To have higher net worth, you need to have more assets and lesser liabilities. So how to have more assets? One main source of assets is your income. However, does have high income means you have more assets and rich? No. Like many rich people will say, ‘it is not how much money you earn, it is how much money you can save.’ There are many high level executives, who earn high 4-‐figures or 5-‐figures income. They dress well, dine in high-‐class restaurants, drive a high-‐end car, etc. You may find that they are rich because of the kind of lifestyle they are living. However, if you look at their numbers, they are actually not as rich as you think. Let me give you an example: Person A: Income = $2500 per month, Expenses = $2000 per month Person B: Income = $10,000 per month, Expenses = $9, 500 per month Who is richer? Neither, they are both equally the same. Person B earns more, but he is not any richer than Person A. So your net saving is … Net Saving = Income – Expenses
Now, you might be thinking ‘Ok, so if I have high income and low expenses, that will means that I am rich and financially free?’ No! You are rich but you are not financially free. Most people have the wrong concept about been financially free. They think that when they have high income and low expenses, that will means that they are financially free. You only achieve financial freedom when your passive income is greater than your expenses and able to sustain your expenses without you working. Let say how you have an income of $10,000 per month and your monthly expenses is $5,000. If one day you stop working, your income will be $0 but your expenses will still be $5,000. So you have to use your saving to sustain your monthly expenses. The question here will be how long your savings can sustain you and your family? It will come to a day that your saving will become $0. However, if you have a passive income of $5,000 monthly, through businesses or investments for examples, your expenses are covered every month. You can choose not to work and you don’t have to worry about the source of money to pay for your expenses anymore. Only at this situation, you are truly financially free. Financial Freedom = Passive Income > Expenses So you see, only by having higher passive income as compared to your expenses than you can achieve financial freedom. Most of the time, passive income comes the returns of your investments in your investment portfolio. In order to build up an investment portfolio that have a high returns, you will need to have enough money, generated from your income, to invest them first. Can you see the connection now? However, if you do not manage your expenses, it will require more effort from you to build up your income and passive income. So how can you increase your income, passive income and reduce your expenses? I will elaborate more about Income and Passive Income at the later sector of this eBook. Now lets look at how you should manage your money to become rich.
When comes to achieving financial success, I notice that most people dive straight into the subject of • Increase your income, and • Invest their money for more money. Guess what, over time, many of these people are still not as rich as they wanted to be. Why is that so? Let me share with you a story. There is this captain of a ship. He wants his ship to sail faster in the ocean so that he can reach his destination earlier. However, there are many holes on his ship. As he sail across the ocean, water slowly enters the ship. He has to harbor at the next port to empty out the excess water. As this situation delays arrive time, he decided to hire additional crews and purchase better equipment so that he can increase the sailing speed to reach his destination early. As the captain, he made the decision to repeat this cycle over and over again. But due to unforeseen circumstance, a particular port is 5 times the distance from the previous port. As the distance is longer, more water are filling up the ship and eventually, the ship sank. All valuables and crews go down with the ship, he lost everything. By now, have you wonder, why does the captain not want to patch up the holes on the ship first? Isn’t it more rationale to do that? The ship is the financial situation of most average people and they are the captains of their own ships. Most of them want to achieve their financial goals as soon as possible. However, their expenses and debts (holes) are draining them, yet they choose to focus on increasing their income instead of patching the ‘holes’. Eventually, many of them sank -‐ some starts all over again or some declared bankrupt. So how should you manage your money? If you Google on the Internet, you will find many websites that teach you how to manage your money. There are many ways you can do that and there is no way I can share all of them with you in this eBook. So, I have shortlisted 5 ways to share with you because I practice them and they have helped me in managing my money.
1. Reduce Your Number Of Credit Cards To One. Do you have more than 1 credit card? Yes? Then it is time to reduce to only 1 credit card, regardless of any reason why you sign up for it in the first place. Don’t get me wrong. I’m not saying that having credit card is wrong. I’m just saying that using credit card for your payment is not a good idea. Why is that so? • Banks charge annual fee for their credit cards. Imagine the total amount of annual fee you have to pay if you have more than 1 credit card? • The interest rates are high. Banks’ marketing gimmicks are made for people to believe that the interest rates are low, but in actual fact, they are not. • You are spending your future money for your current enjoyment. • They encourage you to spend more than you have. • Easily to fell into the trap of debts Therefore, it is advised to keep only 1 credit card for emergency uses. 2. Track Your Income And Expenses Do you have positive cash flow or negative cash flow at the end of every month? If you are unsure, then you need to track your income and expenses. Most rich people track their income and expenses because they wants to know if they are having positive cash flow at the end of the month. If they have negative cash flow, this means that they have spend more than they earn. So how do you track your income and expenses? For income is straightforward. At the end of the month, you will receive your paycheck. For expenses, start keeping your receipts for you to keep track of your expenses. With the advance of technology, you may download and use application on your smartphones or make use of your personal laptop to store your expenses. With the data of your expenses, you will be able to find out: 1. Whether you have positive or negative cash flow. 2. Which area are you overspending? 3. Which area can you reduce your expenses. Start tracking your income and expenses now.
3. Clear Your Debts First Like I shared in the story earlier, if you do not patch up your financial leakage, no matter how much money you earned, your money will leakage out to other people pockets. If you have debts, always clear your debts first before building your financial wealth. There are generally 2 methods to clear your debts: i. ii.
Clear the largest amount to the smallest amount Clear the smallest amount to the largest amount
There is no one perfect or prefer solution between these 2 methods. Both methods are effective but they have their pros and cons. Largest to Smallest Smallest to Largest Pros • Reduce the interests from the • Smaller debts will be cleared large debts soon and have lesser number of debts on hand • Clear off large debts and it gets easier and fast to clear the smaller debts Cons • Interests accumulated from • Interests accumulated on large small debts will be bigger as debts are huge, because of the larger debts usually will take a principal amount even though while to clear the percentage of interests is not high. • Smaller debts will take longer period to clear The key factor for clearing your debt is this: Focus on 1 debt at a time. If you spread payment amount and pay smaller amount to pay off every debt that you have. You actually take longer period to clear each debt and the interests will continue to accumulate. In the long run, it will create in impression in your mind that you will never be able to clear your debts. This will cause you to fell into the ‘Debt Mindset’ trap and you will live your life with debts.
4. Budget Your Income Are you a saver (Type A) or spender (Type B)? Type A: Save a portion of your monthly income and spend the rest. Type B: Spend your monthly income first and save whatever that is left. I am sure you have heard this many times. It is quite obvious that you need to be Type A. Why? It is because you may overspend and you will end up with little or no saving for your future. So if you are Type B, you need to change to Type A. However, by being a Type A, is it enough? The answer is NO! Many people save for the sake of saving because they are told to save. Rich people don’t save to save. They save to INVEST! I will explain more about investing at the later part of this eBook. Instead of saving without knowing purpose of saving, it is better to budget your income with purpose. How do you do it? Similar to what Li Ka Shing, richest man in Asia & top 10 richest men in the world, evocates, you should split your income into 5 parts: 1. 2. 3. 4. 5.
30% for investments 20% for long-‐term needs (including insurances) 10% for education 10% for leisure & entertainments 30% for living expenses
Rules to follow for budgeting You may make changes to the funds but MUST keep to these rules: 1. 2. 3. 4. 5.
The priorities of the funds are according to the order as above. You can have between 4 – 7 funds, no more or less than that. The #1 fund has to be Investment fund. Investment fund cannot be less than 20%. Leisure & entertainment and living expenses funds cannot be more than 50% in total.
To feel the effectiveness of this budgeting, I recommend you to prepare 5 envelopes or jars. For the first 6 months, place your income into the envelopes or jars according to the ratio that you want to budget. In 6 months time you will be able to see that you have real saving in your accounts. After 6 months, open up a new bank accounts for each fund or selected funds.
5. Know The True Value Of Your Spending Most rich people have the habit of ‘Delay Gratification’. In simple term, delay gratification means to delay your enjoyment to the future and focus on accumulating the assets now. With the temptation of stuffs in the markets, sometimes it is hard to resist buying things that we want. However, many times, we bought things that we actual don’t need them. So how do you control yourself? This method served me well and has helped me to control myself from spending unnecessary money. It’s the concept of ‘Future Value’. Use a financial calculator to calculate the future value of the amount that you are going to spend to derive if it is worth to spend it now. For example, every morning I will spend $7 on a cup of premium coffee. How do you know if this cup of coffee is worth spending? Let say, if you did not spend this $7, you will save it into an investment. This investment will be 20 years long and you will receive 15% per annum of returns. If you punch these figures (PV = $7, I = 15%, Periods = 20) into your financial calculator, the future value of this $7 of today money will be $114.57 in 20 years later. In other words, if you drink a cup of premium coffee a day, Present Value Future Value
1 Day $7 $114.57
1 Month (28 days) $196 $3,207.96
1 Year $2,555 $41,818.05
If you have spent $2,555 on premium coffee in a year, you are losing the potential of having $41,818.05 in 20 years through the investment. Wow! That is a lot of money to be spending on coffee. Will you still do it? Every time before you spend any amount on something, calculate the future value and ask yourself it is worth spending on. Why most rich people practice ‘Delay Gratification’ is because they knew that they would have more money to spend in the future if they invest first.
Skill #5: Protect your wealth “Protect What You Have, Before It Turns Into What You Had” -‐ Unknown
Protect your wealth, or else you are only the one to be blame of the lost. It is that simple, yet I have seen many people not protecting their wealth and put them at risk. Why work so hard to accumulate them and risk it away? Most people chose the wrong approach when comes to protecting their wealth. They chose the approach to accumulate more wealth first before they protect it. Wrong! You protect your wealth along the way. Let me gives you an example: You live in a small house in your neighborhood with your family. What do you do to protect your house? You may build metal gates and window frames to prevent people from breaking into the house. Say now you upgrade your house size to a bungalow, what will you do? You will build fence around your premise to prevent people from entering into your bungalow. If now you upgrade to a 1-‐level castle, what will you do? You will build a low wall around your castle. If you upgrade to more levels on your castle, you will also increase the height of the wall. Am I right? That is an example and theory that most people know. But in actual fact, most people took the action to build their home from a small house to a castle without any protection. If something were to happen in between the process, they stand the risk to lose the home and will have to start over again. When you have protections in place, you can protect your wealth in unforeseen circumstances. What kind of unforeseen circumstances will affect your wealth? For examples … • • • • •
Personal accident Death Critical Illnesses Hospitalization Disability
Your income or your saving will be affected when such unforeseen circumstances will to hit you or your family. Does this sound familiar? Yes, you are right. It is about insurance. Don’t get me wrong. I’m not here to sell you any insurance products. I just wanted to stress the importance to protect the wealth that you have. Now, I will share with you how you should tailor your insurance so that you will not overspend your money on insurance that are unnecessary. Disclaimer: The illustration below is general and should be use as reference only. Please consult your own local (and trusted) insurance agent to help you to review your insurance portfolio. Illustration may not be applicable to all people.
When comes to insurance, there are several different categories. (Please correspond each category according to your local insurance definition) 1. 2. 3. 4.
Life insurance Critical Illness insurance Hospitalization insurance Term insurance
There are more categories but they will not be covered in this eBook. Please do your due diligence to find out more from your insurance agent. Let me ask you, do you have such experiences? An insurance agent contacts you to do some financial review. After some fact finding and analysis, the agent says that you are under insured and you need to get more insurance. Because it makes sense at that point of time, you bought an insurance product to get yourself protected. Over the next few years, you have several more such encounters, either from the same agent or other new agents, and you purchased more insurance products. Have you ever wonder if you are properly insured and are your insurance products are effective? Lets find out … Why do you need insurance? From what you had read earlier, you will need insurance to protect your wealth. For circumstances such as … • Cover for your huge medical bills if you are diagnose with critical illnesses. • Leave an amount of money for your family to sustain for a period of time, in event that you move on to the other world. These are some examples of circumstances that with insurance protection, you can also protect your wealth.
With that, do you agree with me that at different stages of your life, you will need different level of insurance coverage? To put it simply, when you have higher responsibilities to take care of, the more insurance coverage you will need. For example, a married man with kids requires higher insurance coverage than a fresh graduate.
Source: National Income Life Insurance Company
From the graph above, you can see that your insurance needs increase as your age because you have more responsibilities at later stage of your life. However, this will not be applicable, if say, you choose to be single for the rest of your life, the insurance needs may not increase that much at the peak stages of your life. As you can see, as you move into your peak stages of your life, you have more responsibilities and even have dependents after you get married. Is this going to be permanent for the rest of your life? No. When your kids are older, they will start working to earn their own income to support themselves. At the stage of your life, they are no longer your dependents and your responsibilities will reduce. Therefore, for insurance there are stages in your life that you will need temporary coverage to boost your protect while most of the time you will need to have certain permanent coverage for your whole life.
So what types of insurances will you need? 1. 2. 3. 4.
Life insurance (Permanent Solution) Critical Illness insurance (Permanent Solution) Hospitalization insurance (Permanent Solution) Term insurance (Temporary Solution)
Let me give you a short introduction to these 4 types of insurances and why are they are classified as such. Life insurance: Life insurance is also known as ‘Whole-‐Life insurance’. It covers the life of the insured person for his or her whole life. In event of death or total permanent disabilities, the insured amount will be paid to the insured person or the family. At any point of your life, you will need to have this coverage. Therefore, it is classified as permanent solution. Critical Illness insurance: Critical Illness insurance covers the insured person in event that he or she is diagnosed with critical illness condition. The insured amount will be paid out to the insured person. As at any time in life you may be diagnosed with such illnesses, therefore, it is classified as permanent solution. Hospitalization insurance: Similar to Critical Illness insurance, hospitalization insurance covers the hospitalization bills that you may incur in the hospital. Therefore, it is also classified as permanent solution. Term insurance: Term insurance is similar to Whole-‐Life insurance but it has a limited coverage period. Term insurances are used to boost the coverage during the peak stages of life. Therefore, it is a temporary solution to your insurance needs. For permanent problems, you need to have permanent solutions. For temporary problems, you need to have temporary solutions. Unfortunately, many insurance agents are using permanent solutions for all problems. This is not beneficial to you because you may be overpaying for insurance coverage that you might not need. I would advice you to contact your trusted insurance agent to have your insurance needs and existing insurance coverage reviewed. With proper guidance and sufficient insurance coverage, you should be able to optimize your resources by freeing up some cash from your insurance premium that are not necessary.
Skill #6: Increase Your Income “Money Is The Seed Of Money” -‐ Jean Jacques Rousseau
Remember as mention in Skill #4: Manage Your Money Wisely, you have learnt: Net Saving = Income – Expenses You also learn that you need to budget your income into 5 funds as suggested: 1. 2. 3. 4. 5.
30% for investments 20% for long-‐term needs (including insurances) 10% for education 10% for leisure & entertainments 30% for living expenses
So why do you need to increase your income? 1. More income = More saving (provided your expenses remains low) 2. More money goes into the investment funds to grow more money 3. Better quality of lifestyle because more money goes into each fund Here is another reason why you need to increase your income. Remember in Skill #3: Create A Strategy Plan, I shared an example of how to break down your goals to have $2.4 million in 10 years – that is an average of $1,000 per day of income. You may be thinking how you can earn $1,000 per day when you only earn $2,000 -‐ $4,000 a month (~$100 -‐ $200 per day). In order to achieve your $1,000 per day target, you can either … 1. Start your own business -‐ higher earning power 2. Earn extra income from additional sources With the combination of multiple sources of income, achieving $1,000 per day is much more achievable than depending on one source of income only. How you can increase your income? There are 2 categories of avenues that you can increase your income. 1. Typical bricks-‐and-‐mortar businesses (offline) 2. Internet businesses
Which type of business is the best? There is no best type of business. Every business has its pros and cons. Typical Bricks-‐and-‐Mortar Business Pros • Easier to build customer trust as • they can see and test the • physical products before • purchase Cons • Location restriction • • Target audiences are local market before expansion into global market • High operating costs • Limited operating hours Typical bricks-‐and-‐mortar businesses (offline)
Internet Business Low operating costs Global market Operates 24/7 everyday Requires effective persuasion skills to attract customers
Method #1: Sell your own products If you have physical products, you can set up a store to sell them. Alternative, you can goes from doors-‐to-‐doors to promote your products and get people to buy them. However, this method will be more time consuming. To be in such businesses, it will be an advantage if your products have some competitive advantages over your competitors. It also requires good salesmanship for your sale staffs to be able to convince customers to buy your products. Method #2: Sell your services If you have certain talents or skills, you can offer your services to others. Such services are engage by people within the country, city or neighborhood. Some examples of services that you can offer: 1. 2. 3. 4. 5.
Baby sitting House cleaning Tax preparation Gardening Tuition
The limitation of such services is geographical constraints. You can only offer your services to people that are within certain location outreach that is viable for you to make profit.
Internet businesses Personally, I will recommend you to explore the Internet business because most people are connected on the Internet and making purchases online. What are the ways to start an Internet business to increase your income? Here are 4 ways to start an Internet business. Method #1: Sell your own products online Similarly, if you have physical or digital products, you can sell them online. In this way, you can reach out to more buyers around the world to buy your products. You can do this in 2 ways: 1. Set up your own e-‐commerce website 2. Sell your products on existing e-‐commerce website, like Amazon, eBay, etc Method #2: Sell your services If you have certain talents or skills, you can offer your services online. There are people around the world who are looking for talented individuals to help them to do some works. Some examples of services that can be offer online: • • • • •
Writing Web Design Graphic Design Programming Video/Music composing
Method #3: Sell an affiliate product If you have nothing to sell online and no services to offer, you can sell someone else products. They are also known as affiliate products and you are the affiliate. By selling affiliate products, it saves you the time to produce the products. You are just like a third-‐party marketing company that you market your client’s products and you are paid a commission for the sales that you made. Method #4: Sell Advertising Blog sites are a good places to sell advertising because they have high number of people to view their website. With the high exposure rate, companies are willing to pay an amount to blogger who advertise their advertisements on their blogs. If you have a high traffic blog or if you intend to stay a blog, selling advertising is a good option for you to consider.
Skill #7: Invest – Put Your Money To Work “How Many Millionaires Do You Know Who Have Become Wealthy By Investing In Savings Accounts? I Rest My Case” -‐ Robert G. Allen
One cold hard truth about wealth accumulation -‐ you can NEVER get rich by saving money. NEVER! If you don’t believe me, you may go ahead to Google the top 50 or 100 richest men or women on earth. See if any of them are rich because they saved enough money to be rich. All rich people have some form of investments in their portfolio to help them to accumulate wealth. So if you have the belief of not getting involved in any form of investments (which I used to have the same belief), you might want to reconsider before it’s too late. If the rich invest to get rich, so should you. You might be thinking ‘But I know nothing about investing’. I have heard too many people telling me ‘Nick, I will not invest because investing is too complex. I do not have any background or knowledge about finance. It is better that I keep myself away from investing.’ Guess what? So do I. I do not have background and knowledge about finance & investment in the past. I graduate with a Degree in Information System Management. I am trained to write programs in the computers. I know nothing about finance and investment. There are many different type of investments in the market and there are different approaches and techniques to invest and make money. There is no the best way to invest and make sure that you will make money. I always advise my peers to go with the approach and technique that you better understand and keep away from those that you don’t. It takes time to learn but it always better than you don’t start. NOTE: NEVER invest in anything that you do not know. Many great investors always say that ‘Always stay invested.’ It is always better to stay invested than not investing at all. In the earlier part of this eBook, I mention that you need to save money to invest. So, what is the benefit of investing?
"Compound Interest Is The 8th Wonder Of The World. Those Who Understand It Earn It. Those Who Don't Pay it." -‐ Albert Einstein
By investing, you will take advantage of a great tool. What is that? It is the POWER OF COMPOUNDING because it can help you to get rich if you know how to correctly utilize it. So what is this ‘Power of Compounding’? To put it simply, we take an initial capital and put it into any instrument that can grow interests. It can be in the bank, mutual funds, stocks or property. The interests accumulated will be remaining in the instrument to continue grow more interests. Over a period of time, the interests accumulated will be a huge amount. $12,000.00 $10,000.00 $8,000.00 Interests
$4,000.00 $2,000.00 $0.00 0
Let me give you an example: Look at the graph above, say you make a one-‐time invest of $1000 into an investment. This investment earns you 5% interests every year. However, instead of taking out the interests that you earn every single year, you leave the interests in investment to grow more interests. As you can see from the graph, your initial capital remains at $1000, but say after 50 years, this investment has help you to earn around $10,000 worth of interests. So, if you have more money to invest, over the same period of time, you will have earned even more money. That is the reason why every rich people invest and get him or herself richer.
In the current market, there are many different types of investments, some examples are: • • • • • • •
Bonds Stocks Mutual Funds Property Commodities (Gold, Silver, Oil, etc.) Alternative (Foreign Exchange, Options, Futures, etc.) Etc.
Of course, there are also many different strategies on how to invest, some examples are: • • • • • •
Value Investing Growth Investing Diversification Dollar Cost Averaging Buy and Hold Etc.
There is no one single investment type and strategy that will make you rich. Like wise, having multiple investment types and strategies also does not means that you will get rich. All form of investments has risks involved. You can either get rich or become bankrupt from it. However, there are 3 key fundamentals about investing that you should know if you are a beginner. 1. Know yourself Before you select a particular investment type and strategy to invest, always know what type of investor you are. Find out what type of investor are you in these areas: • • • •
What is your risks appetite? What is your purpose of investing? What is your time horizon you intend to invest? What types of investment styles are not suitable for you?
Note: Always remember that investment is a tool or channel. It should compliment with your plan to help and achieve your financial goals. It shouldn’t be you compliment into the investment type and strategy. Remember: Do not invest in anything that you do not know.
2. Always acquire more knowledge on investing It is ok if you are not a professional investor because everyone starts from the beginning just like you. However, what differentiate the elite investors and average investors is that they constantly learning new things about investments and strategies. By sharpening their skills on investing, they are able to spot better opportunities and make better returns. The best way to learn about investing is to learn from the real investors who made lots of money from it. There are many investors who are conducting courses to teach people how to invest. However, these courses usually come with a price. If you are really into investment, I recommend you to take up one of the course of your choice. The reasons are … • It shortens your learning curves. • You can learn from the coach investment experiences. • You will have support from the coach and his or her team. As much as been said, there are still people out there prefer not to pay for the courses because they find them expensive. They took the DIY approach to learn investments and invest on their own knowledge. I have seen many people got ‘burnt’ from the investment market. Some of them lost their family, house, job, etc. Is it worth saving the course fee and expose yourself to such high level of risks? I’m not saying that everyone will end up so if they choose not to attend any courses and learn investing on their own. I am just saying that the risks in there. You get to decide on your own. With that, I leave you a quote by Derek Bok: “If you think education is expensive, try ignorance.” 3. Exercise Independent Thinking You are responsible for your own investment gain and lose. Therefore, you are responsible for your own investment decisions. It is common in the market that people share the ‘Next Hot Tips’. It is ok to use them for references but remember to do your due diligences.
If you really have to ask me what investment and strategy I do, here is one. Shares -‐ Value Investing One of the investments that I am involved is buying shares and the strategy that I learnt and adopt is Value Investing. This is also the strategy that Warren Buffett, world richest man and probably the best investor, uses. Unlike stock trading, where you have to look at graphs and charts to make you buying and selling decisions, value investing looks at the fundamental of the businesses. Value investors invest into the businesses from the perspective that they are businessman who are investing into a part of the business. So what is value investing? In simply term, value investing means investing into a business when it is undervalued or at a discount. For example: Based on the valuation of the business using their financial numbers, Business A worth $1 per share. In the stock market, the share price of Business A is selling at $0.50. If the business has strong growth potential, it has the capabilities to earn more profits in the future. This means that the share price will most likely to rise. With the current price at $0.50, value investors will buy shares of this business now because it is like buying the share at a discount. By doing value investing you will look at the following factors: • Business Model – how the business earns money? • Economic Moats – does the business have strong moats against competition? • Management – does the business have a strong management team to grow the business? • Numbers – are the financial numbers healthy? • Valuations – what are the business financial ratios? This is just the tip of the iceberg about value investing. If you are interested to know more about value investing, it is recommended to read more related books or attend courses about value investing. In my opinion, with this strategy, you get to learn how to invest in shares and also get to learn how to be a good businessman to evaluate businesses.
Skill #8: Networking “You Are The Average Of The 5 People You Spend The Most Time With” -‐ Jim Rohn
Lets do a simple exercise. • • • •
Think who are the 5 people that you spend most of your time with. Describe how are the lifestyle of these 5 friends of yours. Describe the topics you and your friends chat about most of the time Describe the wealth that your friends personally have (not family wealth)
Are your friends the type of people that you want to be? If it is a ‘No’, then it’s time to change something. Don’t get me wrong, I am not asking you to ‘un-‐friend’ your friends. They are good people and I totally respect them. However, if you want to richer you need to get yourself surrounded with people who are rich – the kind of rich people that you want to be. Why? You may ask. Have you wonder why rich people hang around with people who are also rich? It is not because they become arrogant after they get rich and choose to put themselves into higher-‐class status. The main reason is because the topics they talk about. What are the topics that these 2 groups talk about most of the time? Average People Gossips Complains Media News/Entertainments Latest TV Series/Dramas
Rich People Businesses Investments Opportunities Experiences
When rich people get together, they are usually on the topics of business and investments. They will share their experiences, both successes and failures, and opportunities how to make money. Therefore, to get rich, get yourself surround with more rich people so that you will get to learn more from their experiences and opportunities.
8 Skills To Become Rich The Millionaire Way
Develop Rich (Wo)man Mindset Set Clear Financial Goals
8 Skills To Become Rich
Create A Strategy Plan
Manage Your Money Wisely
Increase Your Income
Protect Your Wealth
Conclusion I hope you have gathered some valuable information from this eBook. Of course, this eBook is not fully comprehensive to cover all aspects in details. However, it aims to provide you with useful information to get you to ponder and kick start your path to financial success. Remember financial success does not happen overnight. It will take time for you to achieve whatever you want and be whoever you want to be. But before that could happen, you need to take ACTIONS! Path to financial success is a continuous learning journey. You will have to keep learning from your experiences and others experiences. Last but not least, there are enough resources for everyone to be rich and everyone deserve a better lifestyle in his or her current lifetime. If you become rich one day in the future, remember that someone somewhere were once like you and wish to become richer and live a better lifestyle. Do share your love and knowledge to help more people to achieve their dreams. With that, I wish you all the best in your path to financial success and may your dreams come true! To your success! Nick Lee Founder www.8SkillsToBecomeRich.com