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Decoupling the Mind from the Market: Inception towards Financial Freedom

I caught the film “Inception” recently and was really intrigued by the concepts and themes explored in the film. You can read more about the film “Inception” here  in Wikipedia. The films talks about many things about how in the future, we will be able to share dreams and to use them to extract information (and secrets) as well as to plant idea into others.

Besides being an entertainment and thought-provoking film, “Inception” also planted some idea seeds within me that sprouted into this article on my journey towards financial freedom.

The Role of Dreams in Financial Freedom

Financial freedom to me is a dream. It is a state I desire to be in and it is a target I set for myself. But even so, I recognise the challenges facing me in being able to reach this dream. Dreaming is a powerful force to unleash our inner most desires from our minds into reality. But in order for the dream to crystallise into reality, we need to implement in our lives the day to day actions that make our dreams into reality.

This blog will increasingly be devoted to the day to day actions that I try to take in order to advance myself closer to my dream of being financially free where my passive income exceeds my lifestyle needs while leaving me time, health and energy to pursue the activities that generate the most meaning in my life.

It is important to realise that dreams are powerful drivers. I remember Napolean Hill’s famous quote that, “Whatever the mind can conceive and believe, it can achieve!” Thus, all human endeavour both successful and unsuccessful start with an idea or a dream.

Wasn’t it Martin Luther King who declared that “I have a dream” and not just an idea?  And how it helped in the process of the civil rights movement to advance opportunities for black Americans and minorities in the US to have greater opportunities regardless of race, language or religion?

Dreams can be very powerful if they inspire one to work hard to make the dreams into reality.

Living Your Dream

The journey towards finacial freedom requires us to take small actionable steps every day to move closer to our goal. In order for us to live the dream, we must ACT. The starting point is our mind and our ideas. I focus on financial freedom by remembering the core principles. Live within my means, to save and invest, to grow and to protect my means. Living within my means makes me think about what I am doing with my money and to track my lifestyle expenses so I know within a 99% accuracy whether I am living within my means.

Saving and investing also sees me rely on my expenditure tracking worksheet to see if I save money at the end of every month. If due to big ticket items I exceed my income for the month, I consciously try to make up by saving more in other months. This way, annually, I make sure I save more than the 10-20% of my income as recommended by most personal finance writers.

Growing my means currently relies a lot of my output and outcomes at work. As an employee, most of my income is earned income from salary and bonuses. Thus, I am conscious to work hard and work smart in my career to maximise the earned income I can generate in my productive years and I fully intend to work up to the prevailing retirement age and beyond so long as I am able to.

I realise that my investments and speculative punts in the stock market has taught me a lot about growing wealth using the stock market. My own sense is that the stock market helps to generate some passive income but the increasing volatility due to global financial markets mean that I need to cap the amount of my net worth in equities at any point in time simply because I do not know when I may need to cash out due to life’s exigencies.

Thus, I am comfortable with around 33% of my net worth in equities for the time being. There is no need to be link my state of mind with the upward and downward movements of stock indices. Thus, I decouple my emotions from the market and grow more dispassionate about stock market fluctuations as less of my personal net worth is riding on it.

Avoiding Nightmares

What I learnt from the Asian financial crisis in 97-98, dot-com crash in 2001-02, SARS 2003 and global financial crisis 2008-2009 is that unpredictability and black swans are here to stay. Thus, avoiding nightmares is as important as dreaming of achieving financial freedom. But you need to survive the journey there and having too much net worth tied up in the stock market messes too much with one’s well being and my emotional and mental health may not survive the gyrations over time.

The idea that has caught on in me since I started managing my own money is to realise that there are no shortcuts. Many who become millionnaires and billionnaires were partly due to “luck” or “fortune” in that they were in the right business at the right time. Increasingly, I believe that randomness in life happens more than we think. Take one’s health for instance, besides the lottery of being born with genes that may or may not be susceptible to lifestyle diseases. One’s health can be controlled by our own lifestyle choices but also by our environment.

Thus, I will focus on the controllable factors but also live a little each day to avoid regrets if *touch wood* God decides to take me from the earth before my time is up.

The film “Inception” really makes me think more about dreams and how they are our subconscious’ method of communicating to us what deep down we desire or wish for.

What are your own dreams in financial freedom?

Share with Panzer in the comments section.

Be well and prosper.

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The $26 million dollar (less) man

The headline “Local businessman loses $26m at RWS casino over 3 days” is a sobering reminder of the possible consequences of a gambling approach to financial freedom.

What is staggering is the amount; but underlying this story is what can potentially happen to any of us when we take a gambling approach towards financial freedom.

I have been to the Resorts World Casino in Sentosa. It was an educational and interesting experience to see groups of people who come together with a common purpose to gamble with their money on the various games provided by the casino. While individual motivations differ, the activity is the same. Taking a bet on a random outcome and potentially gaining or losing money in the toss of a dice or roll of the roulette wheel.

Some feel that gambling is a vice. Others feel that it can be a harmless hobby if one plays within one’s limits and sees it as a leisure activity and not a money making opportunity.

I too have gambled on SGX. Punting on short-term movements in share prices of companies which I had little interest to understand and research. How different is that from gambling in a casino? I am also wagering my capital on the outcome of share prices in the future. The time horizon may be longer than the time it takes for the roulette wheel to finish spinning but the concept is similar especially if my mindset is that I don’t really understand the company and business much and am just watching for the volatility in share prices to buy lower and sell higher.

Ultimately, if one doesn’t really understand what we are getting into in terms of investments, then we are moving closer to a gambling mentality to investing rather than true investing.

The lesson from the $26million loss by the businessman is clear. Play within your means be it investment or gambling. Do not invest (gamble) on credit. And most important of all, know your limits and when to cut loss and walk away without destroying yourself and your own life savings recklessly.

Be well and prosper.

Mini Black Swans

I am constantly reminded about the unpredictability of life. Yesterday one of my colleagues injured herself getting down from the bus and was on a week’s medical leave due to a fracture in one of her bones. Another colleague informed me that she was tendering her resignation because she wanted to pursue full-time studies to get her qualification.

What does these seemingly unrelated and yet coincidental occurrences have to do with the picture above?

A World of Mini-Black Swans

After reading Nicholas Nassim Taleb’s books on “Fooled by Randomness” and “The Black Swan”, I realised that the human understanding of the predictability of life is grossly over-stated. We think we know more about the world than we actually do. In Taleb’s language, a black swan event is characterised by rarity, extreme impact and retrospective predictability.

It’s quite rare in my case for both my colleagues (and there are only three of us including myself in the team) – one having a serious fall through an innocuous activity of getting down the bus and the other resigning around the same time. The impact on the office could be big because if my injured colleague is on long-leave, by the time my other colleague is clearing her leave, I will have to man the fort alone until the new staff comes in which from experience lags a few weeks to a month after the staff has left the organisation.

This occurrence only serves to strengthen my belief that life is totally unpredictable and huge shocks can happen. My own life is filled with that as less than a month ago, I was facing a crisis in my own life, that of separation from my spouse. While we are for the time being reconciled, I cannot but feel that my own mini black swan is also lurking behind the corridors of time, and thus it is important that my life be measured by the experiences I have gone through rather than about the x or y dollars I have amassed while I live.

Being Prepared for A Totally Unpredictable World

The more I think about survivalism or TEOWAWKI scenarios, the more I realise we take for granted most things in life. Running water, a functioning state, security and health, career etc. Only when truly black swan events occur right in front of us and impacts us through the value of our homes, our equity (stocks and shares) portfolio or our own lives that we take stock about what we already enjoy and prepare ourselves for possible challenges ahead.

Being prepared means to have a scout’s mindset of always being ready. We cannot predict 100% of what happens in life and in the world but we can control ourselves in acquiring the useful skills and abilities that can see us through whatever comes.

I start to realise keeping healthy and fit is one way to make my body resilient and stronger to withstand the challenges of life. I start to realise cherishing the existing family relationships allow one to savour the sweetness of being in a family when it can be taken away. I also start to realise that I don’t want to live a life of regret and to start enjoying small luxuries within my means NOW before I reach a point when I am too old to enjoy them.

Even though my work staffing situation appears to be dire, it was fortunate that I have made some preparations. For instance, I got my staff to document her work and processes in electronic form to facilitate handover. I also am familiar with most of the things she is doing so can take over while she is away and before her replacement comes in. This is not because I had foresight or could predict this possibility but some months back my staff’s family member was very sick and she contemplated resigning to help take care of her family member. Fortunately, I managed to get her to rethink her decision and her family member’s condition improved enough that she managed to last another 9 months since that episode and she is leaving for other reasons.

In relation to my journey towards financial freedom, I am now still having 33% of my net worth in equities. I think the volatility in the market will continue with a tendency for a correction given that the economic fundamentals of our key markets, US, Europe and China not looking too rosy. The risk of deflation and double-dip recession in the US is very real and I cannot see how Singapore can be unaffected given our export oriented economy.

I have kept my cash and cash equivalents high as ammunition to fight the upcoming challenges that the global economy throws at me.  I sleep better knowing my cash position and am comfortable even if my equities go south as I am in a net asset position.

What mini black swans do you think about and how do you think you are managing it?

Share with Panzer.

Be well and prosper.

Healthy, Wealthy and Wise

I came across Bodyrock TV on youtube and through surfing the net. The personal fitness lady who demonstrates the exercise routine has such a killer bod that I always feel my fats and love handles each time I watch one of her latest workouts. I used to be slightly unfit in JC, lost quite a lot of bodyfat during full-time NS times, went through periods of fitness and relative unfitness in my 20s to 30s before the birth of my daughter 2.5 years ago let me shed my weight from 69 kg to a more manageable 63 kg now. I aim to maintain my current weight by exercising more and to do more exercises like those in Bodyrock TV.

Why am I talking about health and fitness?

No amount of money and financial freedom can be enjoyed if you don’t have good health.

I realise that I’m still not investing enough of my time to exercise (at least three times a week for 30 mins each) even though I can do so after my daughter is asleep or before she wakes up. I can also do so during lunchtime so I have absolutely no excuses other than my own laziness and inertia!

I’m posting a link to the workout video above to continue to remind myself to EXERCISE REGULARLY and GET FIT!

How do you invest in your health?

Share with Panzer in the comments section.

Be well and prosper.

Up Close with Resorts World Singapore (Casino)

I was at the Resorts World Singapore Integrated Resort recently and stepped into the casino for the very first time. The occasion was my mother’s birthday and she was staying at Hard Rock Hotel for her birthday vacation with my father. My parents are social casino patrons who do visit Genting and those Casino Cruises on occasion given their status as retirees who have provided for their medical and living needs.

It was truly interesting to see that even on a weekday afternoon, there were enough patrons to keep many of the tables at RWS humming along. Pai Gow, Pontoon, Blackjack, Caribbean Stud Poker, Roulette and countless number of Jackpot machines lined rows by rows with neatly attired croupiers and supervisors greeted the visitor who came in there.

Why am I talking about the casino at Resorts World Singapore?

Epitome of Singapore Inc.

The integrated resorts (aka. casinos) encapsulate what is the essence of Singapore. MONEY. The casino is a place where despite the $100 levy, Singaporeans and PRs queue up to throw money at the gaming facilities. It is a place where fortunes can be made or lost in a few short seconds, minutes or hours. It symbolises really that with MONEY, anything is almost possible.

In our quest for financial freedom, we tend to be focussed on MONEY. To have enough of investible savings that yields an income sufficient for our living expenses. To live within our means to generate savings. To use that savings to grow our investments. To grow our investments so that they yield returns even when we are sleeping. Financial freedom is why you read my blog and many others to learn more about the principles.

I walked by tables when the roulette wheel stopped spinning and stopped on the winning coloured number, majority of the punters had their chips systematically “washed” away by the croupier into the hole in the table. Before I understood the concept of financial freedom and embarked on this journey towards attaining financial freedom. My investments were closer to gambling bets in a casino than well thought-out moves to maximise returns at acceptable risks.

Thin Line Between Investing and Gambling

The fine line between gambling and investment is thin. What separates one from taking a gambling mentality versus an investing mentality is effort and understanding ourselves and what to invest in. Investing requires patience, hardwork to read about the companies we want to invest in for equities and about the risk-returns of other financial instruments. Gambling on the other hand, like putting money on a roulette table, requires one to only have  a very basic understanding of the rules of the game and then to put a wager on it. Gamblers put their entire capital at risk for quick returns. In the long-run the house always wins because of its larger capital and that the odds between payouts and outcomes of the casino games are weighed to benefit the house.

I realise that I used to have a gambling mentality in my quick punts on the stock market. I have since moved away from this approach and realise if I want to really gamble, the Marina Bay Sands resort and Resorts World Singapore are available for an entrance fee of $100. Better for me to take $300-500 as “play” money and have an entertaining time at the casino than see a couple of lots stuck in a blue-chip bought at inflated prices to make a return when I’m just gambling using a different vehicle and risking more of my capital.

Thus, I’m quite comfortable with my current investible savings allocation at 33% equities and remainder in cash and cash equivalents. Because I know I won’t be able to “get rich” overnight and be financially free simply by using the equity market alone. I need to continue to build up useful skills to help me generate more cash flows and to be prudent in my lifestyle. That has made me less of  a market watcher whose moods are affected by the swings of the Dow or STI.

Life is a Big Roulette Wheel Spin

Life is very unpredictable. We cannot control exactly what happens to us in life but we can control how we feel and react to it. I realise that even as the sands of time run out slowly like an hourglass, I need to conserve my life energy and channel it into meaningful pursuits. My career, family and personal growth are three key areas for me to focus. I know that many things inside my career, family and personal growth are affected by external factors; but I also know that I can concentrate my focus on things that matter to me in these three areas and work hard at them.

That is how I overcome the unpredictability of the world, to concentrate on what I can control and work on them.

In my quest for financial freedom, I can control my expenditure (to some extent) and to be open to new paradigms of either living a fulfilled life that is less dependent on material well being to growing my means to allow me to trade money for more of life’s experiences.

How do you cope with the unpredictability of life when it comes to affecting your plans towards financial freedom.

What are your thoughts if you have visited any of the Casinos in Singapore?

Share with Panzer in the comments section.

Be well and prosper.