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This is a bold and arrogant statement. The sad reality is that it is true. School does not teach you essential life skills. It doesn’t teach you how to work with money. This creates a money vacuum. Aristotle spoke of the “horror vacui”- "nature abhors a vacuum". By implication, nature makes sure that vacuums are filled. In the case of money and finance, this vacuum has been filled with misinformation from the financial industry. The financial industry has no interest in educating you – they only want to sell you stuff. They will give you just enough information to buy the product or service, but not enough information to truly ascertain whether the product or service is suitable. Regulators have tried to force financial institutions to pay attention to “suitability”. The problem is that these suitability tests are so broad and general that it is almost impossible to avoid misselling. Alvin Toffler says that “the illiterate of the 21st century will not be those that cannot read or write, but those who cannot learn, unlearn and relearn”. In this blog, we look at THREE money lies you need to unlearn. Lie #1: It is Easy to Tell the Difference Between Assets and Liabilities Accounting is taught in many schools – and is useful in finance. Your accounting teacher, however, failed to mention the huge difference between accounting and finance. Accounting teaches you that a house and a car are both important assets. Banks have jumped all over this and thrown money at prospective home and car owners. The problem is that both these “assets” are predominantly “liabilities”. In finance, the value of a financial asset is the present value of its positive future cash flows. When you buy a house, and you live in that house, are your monthly cash flows positive or negative? You need to pay rates, taxes, lights, water, insurance, and mortgage (if you financed the house). All these items are money outflows, indicating that this house is not a financial asset. The same is true for a car. You need to pay for petrol, insurance, maintenance, fines, parking, and monthly financing (if you are leasing the car or bought it on an installment sale agreement). What determines whether something is an asset or liability is not its inherent nature, but what it is used for. Robert Kiyosaki, the author of "Rich Dad, Poor Dad", expressed it best. An asset puts money in your pocket while a liability takes money out of your pocket. A house is only an asset when it generates positive cash flow (i.e. when you rent it out). A car is only an asset when it makes you money (i.e. when you hire a driver and put it into Uber). Financial freedom comes from understanding the difference between an asset and a liability and building up a portfolio of assets that generate a stream of high-quality and predictable positive cash flows. Lie #2: Risk is Bad Banks want you to put your money into a low-risk savings account. This is one of the best products – for them! What do you get in return? You will receive a very low-interest rate. The bank, on the other hand, will lend your money out at a far higher interest rate to another customer. This is how traditional banking works. So why do people deposit money into savings accounts? Our faulty brains tell us that risk is bad. Studies have shown that the fear of losing 100 is far greater than the joy of making 100. We are hardwired for self-preservation and risk avoidance. The problem is that without risk, there can be no meaningful return. If you want more returns, you need more risk. Jeff Bezos of Amazon became the world's wealthiest person in 2018 by taking risks. He put all his eggs in one basket. He went all-in on a little company that sold books over the internet. As of September 2021, Amazon boasted a $2.5 trillion (that is almost the size of the United Kingdom’s GDP) market capitalization. Risk is good as long as it is managed. If you start a business, and you believe in the business with all your heart, mind, and soul, go all in. Commit to it and believe you will succeed. This belief, commitment, and drive will act as a risk management tool. The same is true with stock market investing. You need to do your homework on the stocks you buy. The more you know about the company, the better you will manage the risk associated with that company. If you want your money to truly work for you, you need to take calculated risks. Lie #3: Debt is Evil This lie does not come from the banks – it comes from financial advisers. The first thing financial advisers tell clients is that they need to pay off ALL their debt. Why do they say this? Because they are financially illiterate! Credit cycles drive economic cycles and without credit, economic growth would be anemic. You need to differentiate between good and bad debt. The determinant of whether the debt is good or bad is not only the interest rate, it is also how the debt is used. If you use debt to acquire high-quality assets, it can be a very powerful generator of financial freedom. For example, interest rates in most countries are at historically low levels. If you buy a car on credit, pay a 10% interest rate, and get it working in Uber generating a net yield before tax and interest of 20%, you are generating a return of 10% out of fresh air (assuming you did not have to put a deposit down on the car). Even if you put a deposit down, your return on investment would be through the roof! This is good debt. Bad debt is used to finance activities that do not generate any cash flow. For example, taking out a loan to go on holiday, remodeling your home, or increasing/decreasing the size of a body part. The poster child for bad debt is the credit card on account of its high-interest rates and often being used to acquire non-cash generating assets. Allow me a few words in defense of the often-maligned credit card. These are the most commonly cited reasons for credit card evilness: credit card companies make money out of you, you are setting a bad example for your kids, credit cards are like the apple in the Garden of Eden, and you do not need a credit card. Firstly, credit card companies do not always make money from you. There are two payment options on your monthly statement. The first is the minimum payment. Credit card companies pray you to choose this. It allows them to charge usurious interest rates disclosed in small print on page 89 of your contract. There is another option which is the payment to avoid interest. This is a thing of beauty. It will settle the balance at the cutoff date of the card. The cutoff date is normally ten days before the payment date. If your cut of date is the 20th, your payment date will most likely be the 30th. If you buy a Louis Vuitton bag on the 21st, you will only need to pay for that necessity on the 30th of the following month. You are the recipient of 39 days of FREE MONEY. I don't care where you are from, but that is a great deal. The banks make no money out of you in terms of interest. They may charge an annual membership fee but this is all the blood they will be sucking from your veins. The second argument is you are setting a bad example for your kids. Teach them about the 39 days of free money and that bad example turns into a good example. The third point is one of temptation. Credit cards present too much of a temptation. Whatever happened to self-control? At what point did self-control stop differentiating us from wild animals? If your credit card is your biggest source of temptation, then you may have bigger problems. The final point is that you do not need a credit card. This is just stark raving mad – you do not need two lungs, but you were born with two. You do not need wisdom teeth – they serve no real purpose – but most people are born with them and are a bloody nuisance to remove. I hate going to the shopping mall. My ex-wife could spend an entire day there. After half an hour, I want to rip my eyes out of their sockets. Amazon, on the other hand, is god's gift to men like me and is best done with a credit card – add to this list Netflix, Spotify, and Uber. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

Many of us are in an abusive relationship with our money. It controls us and makes us miserable. It rules our emotions and forces us into irrational and stupid decisions. To be financially free, we need to rebel against this relationship. Instead of working for money, we need to make money work for us. The master needs to become the servant. The first step in this rebellion is to understand our money DNA. In this blog, we will look at FIVE dominant money profiles, their associated risks, the probability of attaining financial freedom, and some words of guidance. 1) Olympic Saver If saving money was an Olympic sport, you would be a medal contender. Not only does saving make you feel secure, but it makes you happy. You extract happiness from not spending. This austerity may be traced back to your childhood, where your parents inculcated frugality and conservatism from an early age. You know you are an Olympic saver if: You mostly spend on necessities You only buy luxuries if deeply discounted You always order the cheapest item on the restuarant menu. You use tea bags more than once. You filter on price from lowest to highest when shopping online. Risks: Your extreme frugality is not done with a specific goal in mind. You are not saving for a vacation or a new pair of shoes. You don’t need to save. You have accumulated enough cash to go out and buy these things instantly. The underlying driver for your austerity is the feeling of comfort and security. This aimlessness means that it delivers no marginal increase to your overall happiness, fulfillment, and sense of security – the three major drivers for the behaviour. Probability of Attaining Financial Freedom: Relatively low, not because you will not have enough money, but because your unwillingness to spend means that you are too afraid to enjoy the options that this money provides. If you have been saving hard and investing wisely for 30 years, you have amassed an attractive net worth. The anxiety that you may outlive your money will, however, intensify your austerity as you get older. You, therefore, run the risk of being the richest person in the cemetery. Advice: You need to find a rational balance in your life. The problem is that this severe mental block on spending money will not be removed by logic alone. The goal is to loosen the purse strings and enjoy your money. 2) Obsessive Spender You are on the other extreme of the spending/saving spectrum. The moment money lands in your pocket (or your bank account), you need to spend it. You buy the stuff you don't need – like the tenth pair of jeans, or a wacky waving inflatable tube guy ( Google search: “weirdest stuff you can buy online”). Here are three scenarios that would reveal your OCD spending habits: You win the national lottery. To celebrate, you go hog-wild and spend it on gifts, travel, and new cars and houses for the whole family. It is payday. You have paid the rent, the car, and insurance. All you need to pay is your credit card bill. You pay the minimum balance of your credit card and blow the rest on eating out clothes and entertainment. Your friends invite you to a hip new expensive nightclub that charges 20 USD bucks for a Coca-Cola. You go – after all, it is the hippest joint in town. These high-roller antics are a reflection of your outgoing, gregarious, and “devil-may-care” attitude. This compulsive spending is often a symptom of something more deeply rooted. It could be insecurity that you will only be accepted if you act out on these lavish antics. Risks: The biggest risk is that this over-the-top consumerism does not treat the underlying psychological issue it is seeking to cure. The practical risk is that you fall prey to the marketing of credit card companies and soon accumulate mountains of debt – which brings with it its own phalanx of stresses and anxiety. Probability of Attaining Financial Freedom: Extremely low to zero unless you make radical changes. Any surplus income or windfall must be used to pay down debt. Once you are debt-free, you need to start investing. This is a hard sell. Investing is a long-term game - it does not present instant gratification. Spenders are looking for that adrenaline rush. Their brains are not hardwired to appreciate the long-term benefits of delayed satisfaction and financial discipline. So it is difficult to turn this money profile around. Advice: If you are in debt, the first step is to get out of it. You need to freeze all your debts (i.e. cut up your credit cards, calculate how much you owe, and how much you need to pay every month to get that debt down to zero in a reasonable period). The next step is a balanced budget: Total Monthly Earning = Total Monthly Spending + Debt Payment. You need to cut your spending down to the bone. Until your debt is paid down to zero, you need to become an Olympic saver. This is an extreme measure, and it is understood that there will be moments of weakness when you will backslide into your old spending patterns. The objective is to keep your eye on the prize. When your debt is paid down, the money you previously allocated to the debt payment needs to be invested. 3) Passionate Moneymaker You are exceptionally competitive and money is the scorecard of your success. You attach your happiness to your net worth. You feel the more money you make, the happier you will be. You thrive off the approval and recognition that is associated with financial success. You know if you are a passionate moneymaker if You love and embrace risk – this is embodied in a series of entrepreneurial ventures or the serial investment in high-risk enterprises such as private equity, venture capital, and small-capitalization public equities. You are a new adopter of pioneer capital assets such as digital currencies (such as Bitcoin) Risk is a game to you. You are addicted to the adrenalin of the potential of high returns. Risks: This obsession with money-making activities can affect other parts of your life – such as personal relationships. Your dedication to your career and financial outlook can also take a toll on your health as you work 80 hour weeks and expose yourself to high degrees of stress and strain. Probability of Attaining Financial Freedom: Relatively high, but there is a risk that you never have "enough" money. You burn yourself out before you have time to enjoy the freedom that comes from being financially independent. At the heart of financial freedom is the ability to change your relationship with money. This passionate moneymaker runs the risk of never being able to flip this relationship. Advice: You need to find that higher purpose. It could be to provide for your family or give back to your community or your country. It could be to free up your time to pursue what you find meaningful. In addition, you want to surround yourself with people that share your values. If money is your why, it will become an endless source of anxiety. You will never have enough. 4) Ambivalent-to-Money The first three profiles are of people that are OCD. The fourth profile is the exact opposite – you are indifferent to money. Money does not factor in the five most important things in your life. You know more or less how much you earn, but you are oblivious to how much you spend, and what you spend. You have no money discipline and no interest in developing this discipline. Money may have been big deal when you were growing up, and you have made it your adult life’s mission to ascribe to it as little importance as humanly possible. Risks: Your biggest risk is you don’t plan ahead for your later years. You live paycheck to paycheck. There is no discipline of investing for the future when your value in the financial workforce declines. You could potentially become a financial burden on your children later in life. The flipside to this lack of financial anxiety is your belief that you only need a modest amount of money to be happy, which is a healthy one. Probability of Attaining Financial Freedom: Medium because you don’t need that much money in the first place. Money indifference is therefore a two-edged sword. Some people get through life ok without focusing on their finances. Money is not their why, they focus on other things and money mysteriously falls into place. The other outcome looks less bohemian - you have to move in with your kids and that never looks pretty, Advice: You will never sit down and draw up a budget – it is not in your financial DNA. you need to commit to doing just one thing: invest a dedicated portion of your income into a well-diversified ETF. To reduce the amount of energy expended, get your bank to run a monthly debit order off your account into a predetermined ETF so you can start building some patrimony. 5) Worrier Your money trait is summarized in one word – anxiety. You have a complete lack of confidence in your ability to manage money and always obsess over the worst-case scenario. You are the Woody Allen of money! You must turn this anxiety into something productive. Risks and Opportunities: The biggest risk is that you spend all your time obsessing over Armageddon. On the positive side, this “what if?” mentality is an important ingredient in risk management. Risk is an interesting animal. You can take her out, buy her flowers and even marry her. The only thing you cannot do is eliminate her. Risk, like Keith Richards' liver, cannot be eliminated. It can only be transferred and managed. Good risk managers are healthy worriers. You must use this paranoia and anxiety to become a good risk manager – but you need to take a risk, because with no risk there can be no return. Probability of Attaining Financial Freedom: Medium, but you need to find a way to monetize your anxiety. You need to dig deep and be honest about what pisses you off, what frustrates you, what causes anxiety. Then invest directly in those businesses that are working to alleviate these maladies. Facebook was founded on the need for companionship and social connection – the fact that it has morphed into something exponentially larger is beside the point. Uber, Lyft, Didi, and Bolt come out of the frustration of finding a safe, clean, and reliable taxi at 3 am after a bender with your mates. Tinder is deeply embedded in our fear of loneliness and the inherent sadness of trying to meet single people in the produce section of your local grocery store. Airbnb was borne out of the desire people have for new and unique experiences that avoided having to check-in at the lobby, the inconvenience of being accosted by a handful of bellboys trying to grab your luggage (which may or may not be filled with your fetish gear) and being ripped off for a bag of peanuts from the minibar. You get the idea. Advice: Many great businesses were set up to address basic human needs and inadequacies. All human beings are neurotic. We all experience feelings such as anxiety, worry, fear, anger, frustration, envy, jealousy, guilt, depression, and loneliness. You want to find ways in which you can monetize solutions to these modern maladies. The bigger and more original the problem they are trying to fix, the more successful they are going to be. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

Many of us dream of retiring early and living a life where we are not dependent on anyone financially. In fact, there is a movement dedicated to this very cause: FIRE (Financial Independence, Retire Early) is dedicated to a program of extreme savings and investment that allows proponents to retire far earlier than traditional budgets and retirement plans would allow. They envision a situation of complete financial self-sufficiency where they do not rely on a boss/master/institution to pay a monthly check. In theory, they could spend the next year, five years, ten years, or twenty years fishing, playing golf, surfing, hiking through the Himalayas, smoking pot, or traveling around the world on a motorcycle – and they would have a sufficient flow of income to fund their activities. It sounds great, doesn’t it? Not so quick. Financial freedom does not mean retirement. It means that you are free to choose the things you want to do. It means being active, following your passions, and filling your time with meaningful and enriching activities, In order to understand the importance of remaining active, you need to consider four reasons why a passive life can potentially be a death sentence. 1) The Brain is Not Good at Long Lapses of Idleness You have finished writing that bestselling novel, sold your business, or been laid off with a massive golden parachute. The reality is that when these things happen, instead of being filled with excitement and anticipation, supreme unease tends to descend upon us. Why is it that we feel so flat, disoriented, and perhaps a little tearful? The human mind works in uneasy and unusual ways. We believe that once the work is done and the goal is reached, we will be content and the mind will cease its restless and persecutory questions. The problem is that our minds are not good at honoring these promises. The brain can handle lapses of relaxation and idleness for maybe a day or two, and then it will resume its worries, questions and will force us to account for ourselves. It will question whether we are worthy or not. 2) Humans are Mobile Creatures As humans, we need to know where we are going. We do not experience any positive emotion unless we have an aim and we are making progress towards that aim. It is not so much the attainment of the goal that is satisfying, it is the process and journey towards the summit. 3) Humans are Not Adapted for Security and Utopia If you leave people free to pursue pleasure and self-gratification, soon they will start smashing things up to give themselves something interesting to do. Sure we like a degree of security, but we also want a foot in something with a hint of uncertainty. 4) But I will travel the world, work on my golf game, master the guitar Travel is great. Vacations are great, but the reason they are great is that they are rare and infrequent, This scarcity and novelty make the experience fresh and exciting. The logistics of travel and vacations are less exciting, but we overlook them for the abovementioned reasons, This all sounds fantastic. We see pictures of idyllic and exotic locations, and quickly romanticize how fulfilling such an experience would be. Consider, however, the realities: being forced into a confined space within a pressurised cabin for 12 hours, watching the backside of the taxi driver's bald head, the cracked wall of the cheap hotel, and the faded picture of Marilyn Monroe in the bathroom of the local restaurant. If this becomes a large part of your life, your level of frustration will soon escalate. As for golf and playing the guitar, do that every day for a week and you will be bouncing off the walls. Financial freedom does not mean you should retire early, or retire at all! Here are a few things you can do to meaningfully fill your days: 1) Help Others There is a Chinese saying that goes: “If you want happiness for an hour, take a nap. If you want happiness for a day, go fishing. If you want happiness for a year, inherit a fortune. If you want happiness for a lifetime, help somebody.” For centuries, the greatest thinkers have suggested the same thing: Happiness is found in helping others. Here are four reasons why you should consider incorporating a culture of helping others into your life : 1. Experience More Pleasure – the Bible says that it is more blessed to give than to receive. 2. Help Others in Need – there is no lack of people in need in this world. 3. Bring More Meaning to Your Life – there is more to life than working and paying bills. 4. Promote Generosity in Your Children - reinforcing positive traits in your kids is always good. 2) Start a Small Business - and Discover More About Yourself in the Process A small business is an amazing way to serve and leave an impact on the world you live in. Small businesses are the backbone of any economy. Most people start their exodus into entrepreneurship by analyzing the market to see what is out there. They then do one of two things – they either look for gaps they can fill with new ideas or they look at old businesses and find a way to improve them. Both are valid starting points, but I would propose that there is a better starting point. Instead of looking outwards, look inwards. Find what makes you unhappy, anxious, and frustrated – and then find a way to alleviate these maladies. Jeff Bezos says you should start with the customer and work backward. You need to understand the needs and desires of the user and ensure that your product or service meets that. Many entrepreneurs start with the product or service and then work to deliver that to the market. Recall the scene in Cinderella when the ugly sisters are trying to force the glass slipper onto their fat feet. That business strategy is not going to cut it in the 21st century. You need to spend time profiling your potential customers and you need to be ultra-specific. What better place to start than the person you have known your entire life – YOURSELF. Once you have set this up, you need to find someone great to run the business. Remember that this business is something to keep you busy and engaged - you do not set it up to overwhelm your life. You want to have the flexibility to pursue your other interests (which may or may not involve limited travel, golf, and guitar playing). #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

A small business is an amazing way to serve and leave an impact on the world in which you live. Small businesses are the backbone of any economy. Most people start their exodus into entrepreneurship by analyzing the market to see what is out there. They then do one of two things – they either look for gaps they can fill with new ideas or they look at old businesses and find ways to improve them. Both are valid starting points, but I would propose that there is a better starting point. Instead of looking outwards, look inwards. Find what makes you unhappy, anxious, and frustrated – and then find a way to alleviate these maladies. Jeff Bezos says you should start with the customer and work backward. You need to understand the needs and desires of the user and ensure that your product or service meets that. Many entrepreneurs start with the product or service and then work to deliver that to the market. Recall the scene in Cinderella when the ugly sisters are trying to force the glass slipper onto their fat feet. That business strategy is not going to cut it in the 21st century. You need to spend time profiling your potential customers and you need to be ultra-specific. What better place to start than the person you have known your entire life – YOURSELF. You need to dig deep and be honest about what pisses you off, what frustrates you, what causes anxiety. You only need to look back at great businesses to understand the needs they were solving. Facebook was founded on the need for companionship and social connection – the fact that it has morphed into something exponentially larger is beside the point. Uber, Lyft, Didi, and Bolt come out of the frustration of finding a safe, clean, and reliable taxi at 3 am after a bender with your mates. Tinder is deeply embedded in our fear of loneliness and the inherent sadness of trying to meet single people in the produce section of your local grocery store. Airbnb was borne out of the desire people have for new and unique experiences that avoided having to check-in at the lobby, the inconvenience of being accosted by a handful of bellboys trying to grab your luggage (which may or may not be filled with your fetish gear) and being ripped off for a bag of peanuts from the minibar. You get the idea. Many great businesses were set up to address basic human needs and inadequacies. All human beings are neurotic. We all experience feelings such as anxiety, worry, fear, anger, frustration, envy, jealousy, guilt, depression, and loneliness. You want to find ways in which you can monetize solutions to these modern maladies. The bigger and more original the problem you are trying to fix, the more successful you are going to be. To get you started, here are some examples. 1) Modern Education Sucks You may have young kids and their education may keep you up at night. Is school teaching them the skills they need to be happy and successful later in life? The current global education system is in a state of crisis. More than 617 million children and adolescents are not achieving minimum proficiency levels (MPLs) in reading and mathematics, according to new estimates from the UNESCO Institute for Statistics (UIS). Education methods have not evolved in over 100 years when schools were created as receptacles of information. How is it possible that kids, the most curious and creative creatures around, find school boring? Teaching techniques have not changed in a hundred years. The teacher stands in front of the class in his tweed jacket and Clark Kent styles classes and recites the five reasons why World War I was started. This may have been the best way to teach 30 years ago when schools and universities were the repositories of information, but now we have the internet. If there is anything you want to find out, you can find it on the World Wide Web. Kids do not need to be taught things. They need to be taught how to find these things and left to study at their own pace. To make money in the education space, you want to do the following. Firstly, you want to find innovative ways to incorporate technology into the classroom – such as augmented and virtual reality. Secondly, you need to realize that a one-size-fits-all approach does not work. Not all the kids are on the same level. You need to find a way in which kids in the same class can learn at their own pace. Thirdly, you need to flip the classroom – learn at home and do homework at school. This will go a long way to allow kids to learn at their own pace. Finally, you should look at project-based education and practical fields trips – this will help to bridge that massive gap between theory and practice. 2) Everyone Hates their Bank No one loves their bank. In a world where people tattoo brands like Harley Davidson, Netflix, and Apple, why is it that there are no bank logos on body parts? If banks launch a new product, do people call up their friends, raise a posse of disciples with camping chairs and a basket of sandwiches, and camp overnight outside the branch waiting desperately for it to open so they can storm in and fondle the new service? Do people sneak out of the office early on a Friday, head straight home, storm through the front door, and log into their bank accounts so that they can binge-watch the educational video on internet banking? Do people spend hundreds of dollars on hipster leather biker jackets with their bank logos emblazoned on their backs? I think not because banking is as enjoyable as sucking on Gandhi's dusty thong. The Millennial Disruption Index reports 71% of millennials would rather go to the dentist than listen to what banks tell them. That is a monumental kick in the nuts for the banks. Millennials would rather lie flat on their backs, open their mouths, and have sharp needles and drills perforate the soft vulnerable skin tissue around their teeth than interact with their banks. Banks suck and technology is going to drive many of them out of business. Finding what is broken in the finance industry is not difficult. Make a list of all the things that piss you off about your bank, stockbroker, pension company, insurance company, and financial services company. Then find companies that are working tirelessly to solve these pain points, or start your own company that will focus on filling these gaps. 3) We are Killing the Planet The thought of a dying planet may be a source of extreme worry to you. The sight of old commuter busses belching black smoke into the air as you drive to work may put you in a bad mood for the rest of the day. Over the past 10 years, we have made great strides towards the incorporation of renewable energy into the mainstream. Solar panels are getting cheaper, battery technology is improving, and power emissions are expected to peak in 2027. This means that the solution is in plain sight and you are able to monetize the salvation of the planet. The move towards renewable energy is happening in parallel with energy deregulation. In the past, energy was provided by large state-owned utility monopolies. They controlled the whole energy process from transmission to distribution and consumers had no option other than being on the grid. There was some government oversight that insured that these monopolies did not gouge the eyes out of the poor defenseless consumer. Maximum prices and tariffs were set and environmental standards were laid down. This meant that the health and profitability of these utilities were essentially set by the government. Then, in the 1980s, airlines, railroads, and telecommunications started to be deregulated in the U.S. The results were overwhelmingly positive so the government decided to replicate this same model in the energy sector. The U.S. started to allow independent energy providers into the system, forcing the utilities to buy their output. By the mid-1990s, deregulation laws required utilities to sell their plants to these independents, which then created a retail market for energy suppliers. This deregulation is starting to happen globally. One way to make money from the move to renewable energy is by leasing your land or building a solar plant. It is simple and straightforward. You do not need to have a huge amount of technical expertise or capital. 4) Retail Revolt The only things that I hate more than shopping are root canal and slow internet. I, however, come from a family where the women are obsessed with shopping. In the weeks leading up to Christmas, I would drop them off at the mall at 10 am and when I offerred to pick them up at 6 pm they look at me as if you have taken leave of all my senses. Eight hours is not nearly enough time to do all that they need to do. For me, shopping is a military operation. You get a plan of the shopping mall. You then look at the weather to forecast the potential foot traffic in the mall. Rain means a higher than usual flow. If the flow is expected to be high, you investigate the opening hours. You then find the parking entrance closest to the store – find the closest parking spot, secure the perimeter and then make a full-scale assault on the store. You need to limit civilian casualties but if someone has to be sacrificed, that is the cost of war. You locate and then liberate the merchandise, pay with cash (credit card delays are too much of a risk), and then head for the exits. The entire operation is done within the 15-minute parking tolerance and you are out in the clear. Door to door you are looking at 30 minutes tops – you are back in the man cave watching rugby and drinking beer before the wife has chosen the pumps she is going to wear for the day. In retail, the trends are clear. Firstly, the move to online. Physical stores are under pressure as people migrate online. Amazon is the greatest thing since the 30-minute guaranteed pie delivery at Dominos. It has irrevocably changed the life of the simple man and to you, Mr. Bezos, we are all eternally grateful. Even shopaholics are welcoming e-commerce with arms wide open. They go to the store, find what they want and then go online to find the best deal. Secondly, the move to second hand and rental. By 2028, 13 percent of the clothes in women's closets are likely to be secondhand, up from 6 percent in 2018 according to ThredUp. The secondhand market, which includes resale, thrift, and donations, has grown 21 times faster than the retail apparel market between 2016 and 2018, to a $28 billion industry in 2018. It is projected to be $51 billion by 2023. 5) We Own Too Much Shit I get stressed out by too much clutter. The bottom line is that we own too much shit and we need to declutter. One way to do this is through minimalism which has become easier with the sharing economy. Forbes says that the sharing economy blows up the industrial model of companies owning and people consuming. The world's concept of ownership and usage is changing. There has always been a great debate of rent versus own. Within the rental camp, there are now two subcamps – exclusive rental and shared rental. The shared economy falls within this second subcamp and makes for a compelling argument. Most people cannot tell the difference between an asset and a liability. The definition of an asset and liability is very simple. An asset puts money in your pocket while a liability takes cash out of your pocket. You want to get rid of those liabilities that you believe are assets – such as houses, cars, offices to name three. Tech companies have already jumped onto this opportunity with companies like Airbnb, Uber, and WeWork. Maybe you have a spare room you can rent out, or you can create a co-working facility downtown. You can tap into the anxiety that people have of long-term commitment to things. This helps to solve the essential need for many to declutter and simplify their lives. Summary The future is uncertain. We do not know what is going to happen in five or ten years. For many, the desire to start their own business burns strongly within. Technology is forcing redundant workers and job market entrants into a corner where the only option is to start a business. Instead of entrepreneurship being an option for future generations, it may become mandatory. Many great businesses were set out to solve basic human unhappiness. Entrepreneurs refer to this as a pain point. The bigger and more original the problem you are trying to fix, the more successful you are going to be. Find that personal pain point and find ways to monetize the solution. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

In the 1900s, the average life expectancy for males in the U.S. was 46.3 years and 48.3 years for women. By 2018, the average had almost doubled to 80 and 84 respectively. While living longer may sound awesome, it creates the potential problem of outliving your money - especially if you have been saving religiously for most of your working life into a traditional pension fund. Pensions are financial monsters. Up until the 1980s, most pensions were defined benefit schemes.  They guaranteed a fixed payment to the participant on retirement.  This was back in the day when doctors were endorsing cigarette brands, sunscreens were an item of furniture, and we lived under the constant threat of the nuclear mushroom cloud. Also, interest rates were in double-digits and pension fund managers did not need to be singularly talented to match their assets and liabilities. In 1987 and 2000, the markets taught us the painful lesson that crashes were no longer a once-in-a-generation occurrence. Financial engineering, derivatives, and technology injected new levels of volatility into markets which triggered red flags in actuarial models.  Pension funds realized that it was dangerous to continue guaranteeing benefits in this volatile world and moved away from defined benefit to defined contribution schemes.  This meant that retirement benefits were no longer defined by the pension fund's ability to generate returns. Benefits were now based on contributions.  Pension funds waved the white flag and retreated like frightened hyenas with their tails between their legs. How often have you come across the following advertising message from pension companies: “Most people will not have enough money for retirement - you need to start saving more and earlier? You need to live below your means and save more”. This is genius marketing. Fear is a powerful motivator. In fairness to the pension companies, this is not a ruse. Most people will outlive their pensions because the formal pension system is no longer capable of looking after the interests of its clients. Many blindly believe that the people managing their retirement savings know what they are doing. I spent 25 years in the finance industry, working in and with banks, insurance companies, and pension funds. Pension managers are underwhelming at best.  The smart ones typically leave the mainstream organizations to start their hedge funds and family offices. The mediocre ones stay and are looking after your money. Here is a list of reasons your retirement savings are not in the right hands and you need to make radical changes now. Reason 1: Pension Fund Returns are in a Long Term Systematic Decline and are Heading towards ZERO In the modern pension world, consultants and regulators benchmark and compare the living crap out of fund performances. They publicly rank returns for all to see. It is a constant beauty pageant – the swimsuit competition where everything is laid bare. To maintain their sanity, pension managers adopt a simple strategy: if they take too much risk, they are ranked top one month and bottom the next month. No one likes volatility. Investors want Goldilocks returns - not too hot and not too cold.  The internal dialogue of a pension fund manager is as follows: "I will follow my peers and aim to be just above the middle of the pack. I will reduce my exposure to risky assets like equities and increase my exposure to less risky assets like bonds". Bonds are also known as fixed-income instruments and are less risky than equities. Pension funds are the world's biggest buyers of bonds. Bond returns are linked to interest rates. In 1981, if you bought a freshly minted 10-year United States Treasury bond and held it until maturity, you would have earned 16 percent without any risk. The United States Treasury bond is considered to be the safest financial instrument known to man. By August 2021, this yield had plummeted to 1.2 percent. This return is as exciting as a doctoral thesis on the lavatory habits of the Lithuanian pygmy gnat. You now need to understand the financial theory of the "least dirty shirt". Finance is a relative game – you do not need to be smart or fast, you just need to be smarter or faster than your competitor. A return of 1.2 percent is low, but how does that compare with the rest of the world? In August 2021, most developed markets were paying less than 1.2 percent on their 10-year government bonds. Germany was the worst of the worse with a return of -0.50 percent according to Bloomberg. Is that a typo? If you bought a German government bond in August 2021 and held it until maturity, you would have earned a negative yield. You were paying the German government to look after your money. This is like going to the bank, asking for a loan, and the bank pays you the monthly installments. But this is not the most horrifying data point – there are two more. Germany was not the only country paying a negative interest rate on 10-year bonds. There were several more including Switzerland, the Netherlands, and France. And here was the joker that will kick you in the ribs. Greece, not known as the bedrock of financial stability, paid a return of 0.50 percent which was 70 basis points below a United States Treasury. The financial world was more distorted and disfigured than in a Picasso painting.  If we continue down this rabbit hole, pension returns will approach zero and will dip into negative territory. Your pension is going to get smaller and you will outlive your savings. You, therefore, need to rebel now. Reason 2: The People Managing Your Pension are Dumb, Dishonest, and Conflicted Before 2008, I thought Wall Street was the "smartest" money in town. Then along came the financial crisis which showed me the stupid side of Wall Street. When Lehman Brothers collapsed, the global banking system almost froze. If an A-rated bank in the world's most regulated market could fail, what is the probability of smaller banks in less regulated markets going the same way? When banks do not function, bread companies cannot buy wheat, and farmers cannot buy silage to feed their cows. Payments are made through banks. No banks mean no payments and no food. Urban humanity ends. What will New Yorkers do – go to the Central Park Zoo, shoot a grizzly bear, skin it and then fire up the barbeque? I don't think so. This fragility of urban survival built on credit cards and Whole Foods is the reason why cryptocurrencies exist.  Satoshi Nakamoto – a person or group of people more camera-shy than the Loch-Ness monster - invented bitcoin and the blockchain. Satoshi was terrified by the prospect of living in a world in which life depended on dim-witted and greedy bankers who were not wired to make decisions for the greater good.  Satoshi, therefore, created a currency that could operate outside of the formal banking system. Here is the Reader’s Digest version of what the financial crisis taught us about the people who have their filthy hands all over your money. Lesson 1: Wall Street is Not the Smart Money Do not be fooled by the fancy Swiss watches, Italian sports cars, and Hermes ties. Most bankers are untalented. Most Wall Street banks were on the wrong side of the 2008 financial crisis. They lost trillions of dollars and required governmental CPR. Howard Hubler (Howie to his friends) was the biggest loser. Howie was a bond trader at Morgan Stanley. He racked up losses of $9 billion – that is 9 with 9 zeros.  That is a staggering amount of money for one individual. Given that finance is a zero-sum game (if Howie is losing 9 billion, somebody must be making 9 billion), where was the smart money amidst all this turmoil? The winners were eclectic hedge funds working under the radar in dark offices poring over CDO prospectuses, and Goldman Sachs – the one Wall Street bank that always comes out on top. Howie landed on his feet. After being fired from Morgan Stanley, he set up his advisory firm into which investors with short memories invested more than $1 billion. A track record of success is not required for a career of raping and pillaging on Wall Street. Lesson 2: Wall Street is Dishonest The planet's most important financial index is LIBOR – the London Interbank Offered Rate. This index has nothing to do with London. It is the interest rate at which high-quality banks lend to each other in U.S. dollars. In 2020, hundreds of trillions of dollars in bonds and swaps were linked to LIBOR. Every day they were valued based on the LIBOR fixing. Now, prepare for your minds to be blown. Market prices are set by market forces – supply and demand. Most interbank interest rates around the globe are set in this way, but not LIBOR. It is fixed daily based on a survey of 17 banks. Anyone with two fingers and a smartphone can set up a WhatsApp group chat with 17 people. Dishonest bankers got together on WhatsApp and conspired to manipulate this LIBOR fixing. When the survey arrived, each bank knew exactly what the other 16 banks were going to say.  This allowed them to set the fixings in their favor. Regulators reacted quicker than bolts of lightning to address the situation. In 2021, 14 years after these nuggets of truth were revealed, LIBOR will be assassinated and replaced with the Secured Overnight Financing Rate (SOFR). Having the word "Secured" upfront means it will be impossible for Wall Street to manipulate. Lesson 3: Wall Street is Infested with Conflicts of Interest Wall Street specifically, and the financial community in general, is rotten to the core with conflicts of interest. When I was a trader, we had an ongoing joke about how the interests of the bank were always put before the client.  If the client ever happened to get a good deal, it was purely coincidental and forgivable.  These conflicts of interest are particularly acute in the research that banks publish – the research on which many investors rely when making investment decisions.  When a bank analyst recommends you buy a stock, the objectivity of the recommendation is always in question. The bank may be doing corporate finance work for the company. This may cloud the judgment of the analyst. If a bank is underwriting the initial public offering of Uber, what are the chances of the analyst publishing a negative report on the company? There is a better chance of winning the lottery, having a threesome, and being struck by lightning in the same afternoon. Conflicts of interest also dwell happily in the financial advice banks give to their clients. I sold a derivative hedge charging a 100 percent markup on the premium. The hedge cost 250,000 and I charged 500,000. I did this after hearing the client could not value the true value of the hedge.  The client was the Catholic Church. There is a special place in hell for derivatives traders, next to Ted Bundy and Jeffrey Dahmer. A client once said to me: "Ralph, you are a nice guy, it is always good to meet up with you, but going forward, I have decided to change my trading strategy. Every time your bank recommends buy buying, I am going to sell". That client is now a multi-millionaire with a house in Monte Carlo. He recently got married to a Colombian supermodel and Beyoncé sang at their wedding. You might say your pension is not run by a private pension firm, but by the government who will always stand behind its obligations. The line between public and private pensions is sometimes vague. Generous employers contribute towards both a private pension and a public pension. Most public and many private pension funds are facing large unfunded liabilities because they are Ponzi schemes. In the world of Ponzi, new money is used to pay existing investors. Bernie Madoff was the emperor of Ponzi - and is now spooning with a 400-pound felon in a prison cell. This is how the Principle of Ponzi is applied to a public pension fund. Assume that there are 1,000 participants in a pension scheme. Of these 1,000, 700 are economically active (i.e. they are working) and are contributing to the scheme and 300 are retired in Florida wearing socks and sandals and playing poker next to the pool. Money enters the pot every month from the 700 workers.  Some of that money is used to pay the 300 to help them settle their gambling debts and guarantee a fresh supply of socks and sandals. The remaining cash is used to run the scheme - administration, rent, salaries, telephone, high-speed internet for their Netflix streaming, and sundries. The money not spent on these essentials is invested in stocks, bonds, hedge funds, and alternative investments and makes up the assets of the fund. For this scheme to keep working,  more money must come in than goes out. This is where the wheels start to wobble. As population growth declines - as young couples prefer to backpack around the world and hug the trees in Bali instead of procreating - fewer new people enter the scheme. Sometimes population growth slows down not because of tree-hugging but because of the government. The one-child policy in China comes to mind. The Chinese population will stop growing in 2024. In Japan, the undisputed leader in the inverted population pyramid, the market for adult diapers is larger than the market for infant diapers. After a decade, only 100 newbies have joined the 700 swelling the number of contributors to 800. However, shortly after, 350 retire and head down to Del Boca Vista in Florida. We now have 650 in Florida and 450 contributing to the scheme. More money is flowing out than flowing in. The fund administrators need to draw on those reserves and government support to cover their unfunded liabilities. And who is better than the government to fill the gaps?  Governments have access to limitless resources. They control the printing press – Johannes Gutenberg is the patron saint of all central banks. They can print money - a power made exponentially more potent by the Nixon Shock. From a financial perspective, the Nixon Shock makes Watergate look like a game of hiding hiding, and seek. In 1944, the Bretton Woods system of monetary management pegged the major world currencies to gold. In 1971, Nixon unilaterally decided to move the United States dollar off the gold standard in the face of mounting inflation. By 1973, the Bretton Woods system was replaced de facto by the current regime based on freely floating fiat currencies. Before 1971, you could take your paper money to the Federal Reserve and exchange it for gold. After 1971, you could take your money and replace it for the same money of the same value - just on cleaner paper.  This is the Nixon Shock and marked the end of financial coherence. Between 1971 to 2021, the United States M1 money supply (physical currency and coin, demand deposits, traveler's checks, and other checkable deposits) grew from $400 billion to $19 trillion – an increase of 4,650 percent according to data from Trading Economics. This ability to print money represents a substantial disincentive to save.  Savers are holding their wealth in pieces of paper that are continuously devaluing. Governments cannot keep printing money indefinitely to plug these pension gaps. A point of inflection will be reached, and this house of cards will come tumbling down. You do not want to entrust your retirement savings into this precarious paper system. You need to step up and take charge of your financial future now. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

When you were a kid, society taught you to go to school, get educated, and get a job. For many, this conventional advice has manifested itself in the following way: graduate from high school, go to university, and then throw yourself into the formal workplace as an employee in a large, medium, or small-sized organization. So let us understand the wisdom of this advice. The end goal is to get a job where you will become the beneficiary of a steady income with medical and dental, a retirement plan, and paid vacations. Today, in 2021, several reasons believe that this formula of High School + University = Secure Job has broken down. 1) Basic Education Does not Give You the Skills You Need to Survive in the Real World Education methods have not evolved in over a hundred years when schools were created as receptacles of information. Teachers stand in front of the class dressed in their tweed jackets and comfortable loafers. They orally transfer their knowledge into the heads of their devoted scribes. Standardized testing is then used to assess short-term knowledge retention of subjects that are useless in the real world. This education system is engineered to produce uncreative and loyal employees, not free-thinking human beings. As in most systems, however, imperfections exist. A minority fringe exit the system before graduating with their creative fire unextinguished. Some spend their lives checking in and out of rehab, while others set up multi-billion dollar companies. The latter list includes Steve Jobs of Apple, Bill Gates of Microsoft, and Mark Zuckerberg of Facebook. They succeed in business not because of formal education but despite it. The architects of the system need these drop-outs, the one percent world, to perpetuate a system in which a handful of crusading pioneers employ the institutionally educated masses. 2) Fewer Employers are Requiring a University Degree Corporations are not oblivious to the limitations of formal education. In 2018, job-search site Glassdoor compiled a list of top employers who no longer required applicants to have a college degree. The list included Google, Apple, and IBM. In 2017, IBM’s vice president of talent, Joanna Daley told CNBC that 15 percent of their U.S. company hires do not have a four-year degree. The message from these companies is that some traditional college degrees are emptier than eunuchs boxer shorts. They do not equip graduates with the requisite skills to operate in their world. Technology companies, however, were not the first to recognize the limitations of a university degree. In May of 2015, Ernst and Young, one of the big four accounting firms, announced something that surprised everyone. It would remove the degree classification from its entry criteria because it found 'no evidence of a positive correlation' between academic success and achievement at the company. This is crazy. Accounting is generally accepted as the most stayed and conservative of all professions. A charismatic accountant is defined as someone who looks at the other person's shoes instead of his own when engaged in a conversation. The market value of a university degree has declined while the cost of that education has increased. In the 1980s, a college degree almost guaranteed a job in a specific field of study. This is no longer the case given the higher number of degrees and the shrinking number of jobs on account of technology and automation. In the face of this, the cost of a university degree in the U.S. has more than doubled since the 1980s. Student debt in the U.S. in 2019 stood at $1.4 trillion. University education in the U.S. is now more expensive than marrying a Las Vegas showgirl. The problem is not the debt. The problem is that the skills acquired in accumulating this debt no longer correlate with what is required in the real world. 3) Fulfillment in Your Job is Harder to Find Confucius suggested that if you find a job that you love, you will never have to work a day in your life. What does it mean to be fulfilled in your job? In my opinion, fulfillment comes through ticking five interrelated boxes. Firstly, it fills you with drive and motivation. You jump out of bed on a Monday morning with a level of anticipation and excitement. Secondly, it challenges you and makes you grow. Thirdly, it calls upon your core strengths. Fourthly, you feel more like a partner and less like a servant to your boss. Finally, you feel that you are more than adequately compensated financially. A fulfilling job will empower you. It will not make you feel weak and compromised. A fulfilling job will not put you in a position where you feel you have no bargaining power and you always need to say yes. The biggest danger of an unfulfilling job is that it can institutionalize you. It locks you into an uncompromising position where the security of a monthly paycheck forces you into a corner where you have no other option but to continue in the same unfulfilling job. If that is the case, you need to start looking for a new job or consider the option of starting your own business. This leads me to the fourth point which may force you to start your own business. 4) Job Security is a Thing of the Past The futurist Yuval Noah Harari speaks about the future of irrelevance. In the past, people were concerned about employer exploitation - enter Karl Marx. Harari says the future challenge is not exploitation but relevance. We must now face the threat of irrelevance as automation, artificial intelligence, and big data displace traditional employment. In the same way that the opposite of love is not hate, it is indifference; exploitation has to be better than irrelevance. Instead of entrepreneurship being an option for future generations, it may become mandatory. Technology is forcing redundant workers and job market entrants into a corner where the only option is to start a business. Also, as technology revolutionizes the economy and cycles of change shorten, people need to continuously reinvent their skillsets. The days of studying a career and dedicating your professional life to this one career are over. You will need to acquire new skills and embark on a journey of continuous learning. In this world of constant flux, softer skills such as emotional intelligence, communication and negotiation skills, and the ability to sell will stand out. So too will skill of financial literacy and the ability to create opportunities outside the world of big business increase in importance. So how do we unpack this? If getting a job is the worst long-term financial strategy, why doesn't everyone just stomp into their boss's offices, plonk down their resignation letters and follow their passions? That would be foolish and irresponsible, especially if you have financial dependents. The journey to financial freedom is exactly that – a journey. It is a process that requires an immense amount of work, effort, and courage. It requires self-belief, determination, discipline, commitment, and a long-term road map. It does not require you to be a genius but it does require you to be curious and open-minded. Albert Einstein said, "I have no special talent. I am only passionately curious". The fact that young Albert boasted an IQ of 160 did not hurt, but winning the cerebral lottery is not a requirement for financial freedom. Life is not a game of poker where you either fold or go all-in. There are fifty shades of grey. You may love your job but hate your employer. You may be a financial adviser in a large brokerage house. Test the waters to see if some of your largest clients would move with you if you decided to jump ship. Set up a side gig as a prelude to making the jump. In 2017, CNN reported that 44 million Americans have a side gig they run in parallel with their full-time job. Perhaps you have a good nose for real estate. Instead of plowing your savings into a money market account, acquire a couple of high-quality apartments and rent them out. Start to develop a stream of income that is independent of your formal employment and see how it pans out. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

Click to see this Blog in Video Format Most people are in an abusive relationship with their money. It controls them, makes them miserable, and causes them to make irrational and stupid decisions. The first step in the journey to financial freedom is to transform your relationship with money. Follow these SIX easy steps today! Step 1: Define Your Relationship with Money You need to define whether you control your money or whether your money controls you. Is money your master or is money your servant? Does it control your moods? Do you use money as a measure of your self-worth? Do you define success in monetary terms? What is your happiest money memory? Step 2: Seek to Understand How Money Affects Your Moods The human brain does not react well to stress and money is the source of inordinate stress. Neuroscientists have discovered how chronic stress and cortisol can damage the brain and hamper the decision-making process. It has been discovered that the fear of losing $100 is far greater than the joy of winning $100. This curious asymmetrical relationship frequently manifests itself in stock market investing. Stock market investors tend to sell their winners and hold onto their losers. They buy a stock, it goes up 10 percent, they think they are geniuses, sell the stock, and bank their profits. When the stock goes down 10 percent, they hold onto it and pray that it recovers. It then goes down another 10 percent and they start going to mass, lighting candles, and sprinkling holy water on their computers. After another 10 percent decline, they hire a priest to do an exorcism but refuse to sell. The stress associated with market loss causes short circuits in parts of the brain dedicated to making rational decisions. Step 3: Understand that Money Should Not be Your Why Financial freedom requires changing your relationship with money. When you work for money, money becomes your master. It rules your mind, your actions, and your desires. When money works for you, you are flipping that relationship. You are now the master. You are in control. Money works for you and you in turn work for a higher purpose. You need to find that higher purpose. It could be to provide for your family or give back to your community or your country. The thirst for money is insatiable. If money is your why, you will never be satisfied. Step 4: Don’t Be Envious Envy is an illusion you have created in your imagination. The people you envy are not as successful as you think. Focus on everything you have in life as opposed to focusing on what you don’t. This recalibration will yield exceptional results. Envy and gratitude cannot coexist. Step 5: Give More than Your Take There was a severe drought in the Indian state of Kerala in the early 2000s. The drought brought suffering to local villagers and farmers. The Coca-Cola bottling plant near the village of Plachimada, however, was ramping up its output. The villagers would see the heavily laden trucks come out of the plant and so decided to stage a protest which continued over numerous years. Coca-Cola eventually pledged to put more water back into the local aquifer than it extracted. It is important to give more than you take. Studies in the United States show that entrepreneurs are twice as likely to donate to charities as salaried employees. In 1999, the Wall Street Journal coined the term "philantropreneur" to describe entrepreneurs that donate to charities regularly. Here are six reasons why you should donate: 1. Experience More Pleasure – the Bible says that it is more blessed to give than to receive. 2. Help Others in Need – there is no lack of people in need in this world. 3. Get a Tax Deduction if donating to a registered charity - pay less tax and help others in the process - this is a win-win. 4. Bring More Meaning to Your Life – there is more to life than working and paying bills. 5. Promote Generosity in Your Children - reinforcing positive traits in your kids is always good. 6. Improve Personal Money Management – anything that gets you to pay closer attention to your bank account is a good thing. Step 6: Get Educated According to a 2015 Standard & Poor's Global Financial Literacy Survey, only 33 percent of adults worldwide are financially literate. The bar on this survey was not set high. Respondents were not asked to build complex econometric models or use Markowitz to find the efficient frontier on an investment portfolio. Simple questions about inflation, compound interest, and diversification were asked. The notable laggard in the survey was a rising economic power. China's citizens recorded an abysmal financial literacy score of 28 percent. Moreover, literacy scores were not going up. The Financial Industry Regulatory Authority Inc.'s Investor Education Foundation's 2016 report found that 37 percent of individuals correctly answered four out of five financial questions. This was below the 42 percent reported in 2009. Humans are getting financially dumber, not smarter. Low levels of literacy are alarming as governments incentivize banks to make financial services available to a wider audience. Moreover, in the last 30 years, the retirement savings landscape has shifted. Decision-making responsibilities have been transferred to financially illiterate participants who previously relied on their employers or governments for financial security and guidance after retirement. One question that vexes me is why the formal education system has never focused on financial literacy? This education system is engineered to produce uncreative and loyal employees, not free-thinking entrepreneurs. As in most systems, however, imperfections exist. A minority fringe exit the system before graduating with their entrepreneurial fire unextinguished. Some spend their lives checking in and out of rehab, while others set up multi-billion dollar companies. You need to rebel against everything you think you know about finance because it has been "taught" to you for the benefit of large financial institutions. Education is at the heart of financial freedom. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

Paul Samuelson put it best when he said investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. The biggest mistake people make when it comes to investing is looking for sexy stocks. These are stocks that are always in the spotlight and always in the news. Sexy is great if you are looking for lingerie, a mail-order Russian bride, or an Italian sports car – but it has no place in investing. Here are three steps you can follow to avoid falling into the sexy trap. Step 1: Invest in a Business Any Idiot could Run The more simple the business the better. Warren Buffett, the great American investor, never invests in a business he does not understand. This wisdom, or lack thereof, helped him avoid the dot.com bubble. He avoided investing in technology companies because he did not understand them. Peter Lynch echoed this in "One Up On Wall Street" – a fantastic insight into the world of simple and common sense investing. Lynch said that you should invest in a company any idiot could run because pretty soon an idiot would be running it. He provides the example of undertaking business. What could be simpler than collecting dead people, slapping on a little rouge and eyeliner, presenting them to friends and family, and then tossing them into the ground or into an incinerator? The beauty of this business is that it is simple (any idiot with a black station wagon and a Mary Kay catalog could do it), it is not cyclical (people die regardless of whether the economy is booming or in recession), and business is always guaranteed (the only certainties in life are death and taxes). In addition to understanding the business, you also need to understand the financial statements and this is where normal humans lose their erections. The mention of balance sheets, income statements, and cash flow statements is used as a local anesthetic for minor surgical operations. In Rebel Finance, we try to explain boring concepts in simple and interesting language, so don't go nodding off. The balance sheet is a photo of the assets and liabilities (equity is the capital owed to the shareholders and therefore is seen as a liability in Ben Graham's eyes). Income statements are a record of revenue, income, and expenses. Cash flow statements show cash that was generated and used in operations, financing, and investing. Understanding accounting is important to value a company because it is a scorecard of how the company is performing. A few final points on what Buffett likes to look for. The biggest risk in value investing is that you misread the mood of Mr. Market. The company may, in reality, be a flea-infested swamp donkey. You, however, are off your game and believe it is an Arabian thoroughbred. You mistakenly believe Mr. Market is manic and offering the stock at a depressed price. In reality, Mr. Market is valuing the stock efficiently and the company is heading to hell in a handbasket. To avoid these errors, Buffett provides a handful of tips. Firstly, he looks at the debt to equity ratio. Bad companies go broke because they stink. Sometimes good companies also go broke because they are unable to manage their debt. Cemex is the largest cement and concrete producer in Mexico. It almost went to the wall in 2008 during the financial crisis, not because it was a bad company, but because it had taken on too much debt in the years leading up to the crisis to acquire foreign businesses. If a company has 10 units of assets, and 1 of debt, it is not going to go bust anytime soon. If that 1 unit of debt, suddenly shoots up to 8, while the assets stay at 10, there is an exponentially higher probability that the company could go broke. The advice from Buffett is to pay close attention to the total debt versus total liabilities. Try and keep that relationship below 100 percent which means that there should be more equity than debt in the business. Buffett also has an affinity for monopolies and duopolies. He likes businesses that are like castles protected by moats that keep out the competition. He says owning a monopoly is like owning an unregulated toll bridge. You have the freedom to increase prices when you want and by as much as you want. Facebook and Google are both monopolies but fall outside Buffett's wheelhouse. But we should not take Buffett literally. He is not telling us to only buy monopolies and duopolies. The Oracle is angling us towards companies with healthy profit margins and returns on equity. This means that they are dominant players in their space and are executing on their strategy better than the competition. Step 2: No-One is Covering the Stocks Buffett is looking for diamonds in the dirt. Are you going to find them alongside the busiest highways or do you need to do some bushwhacking? For the city slickers who think that milk comes from a carton and wild animals roam freely through the streets of big African cities, let me regale you with the definition of bushwacking: to make one's way through the woods by cutting at the undergrowth, branches; to travel through woods; to pull a boat upstream from onboard by grasping bushes, or rocks. To find these gems, you need to sharpen that machete and get rid of some bushes. One way to find them is to focus on stocks that have little or no analyst coverage. In other words, very few people cover the stock which means that it is flying below the radar. Analysts prefer to cover sexy stocks because those are the stocks that the unwashed masses want to buy. This comes directly from the playbook of Peter Lynch in "One Up On Wall Street". According to data from Bloomberg as of November 2019, 50 stocks were covered by more than 40 analysts. They were mega large-cap stocks like Apple, Amazon, Google, Facebook, Alibaba, and Tencent. What diamonds are you going to find in these blue chips if they are being analyzed to death by an army of analysts who have collectively spent billions of dollars in Ivy League educations, personal tutoring, and psychoanalysis? We are interested in stocks that have two, one, or zero analysts. Of the 91,326 public stocks around the world, more than twenty percent are covered by two analysts or less. On this list, there are many penny stocks – rats and mice companies that are effectively worthless. Some companies are in far-flung regions where we do not understand the language. To weed out the rats and mice, we look at stocks with a minimum market capitalization of $500 million. To avoid the language barrier we limit the search to major English-speaking countries (United States, United Kingdom, Canada, South Africa, Australia, and New Zealand). The universe now filters down to 118 companies. One gem that stands out is Amerco. How about this for a boring business (the information is courtesy of Reuters): AMERCO is a do-it-yourself moving and storage operator through its subsidiary, U-Haul International, Inc. (U-Haul). The Company supplies its products and services to help people move and store their household and commercial goods through U-Haul. It sells U-Haul brand boxes, tape, and other moving and self-storage products and services to do-it-yourself moving and storage customers at its distribution outlets and through uhaul.com and eMove Websites. The Company operates through three segments: Moving and Storage; Property and Casualty Insurance, and Life Insurance. As of November 2019, two analysts were covering the stock: Ian Gilson from Zacks and George J Godfrey from CL King and Associates. For the 12 month period to date (27 May 2021), the stock has delivered a total return of 66.58 percent compared to 38 percent from the Standard and Poors 500. This is not an investment recommendation – I am simply singling this stock out as an example candidate. Note: as at the date of publishing this blog (June 4th, 2020), Amerco's stock was trading at $347. At the time of updating this blog (8 September 2021), it was trading at $655 - a gain of almost 90%! Step 3: Low Institutional Ownership This is another strategy from the Peter Lynch playbook and works in tandem with the analyst coverage metric. It is unlikely that institutions will own large slugs of stock in a company that has little or no coverage. In this case, we have the perfect example – Buffett's very own Berkshire Hathaway. As of 2020, Berkshire was the ninth biggest company in the world with a market capitalization of US$455 billion. Only four analysts were covering the stock and only 21 percent of the shares were held by institutions. This stands in stark contrast to the ownership and analyst profile of General Electric. As at the beginning of November 2019, 65 percent of the shares were held by institutions and 30 analysts were covering the stock. In terms of performance, Berkshire has destroyed GE delivering 460 percent more total return to shareholders over the 20 years ending 2019. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

COVID-19 is ripping through the global economy like an F5 tornado. With the coronavirus death rate sitting at 312,000, economists have started to ratchet down their estimates for global economic growth. The International Monetary Fund expects the global economy to contract by up to 5 percent in 2020. The global economy contracted by 0.1 percent in 2009 in the wake of the Lehman’s collapse and the Global Financial Crisis. This means that we are facing the biggest financial and economic crisis since the Great Depression of the 1930s. This financial uncertainty is causing money stress levels to spike off the Richter scale. According to the American Psychological Association (APA), money is the top cause of stress in the United States (https://www.apa.org/research/action/speaking-of-psychology/financial-stress). As we face this scenario of low visibility and high anxiety of the future, there are three things that you need to know and do NOW about your personal finances. Thing 1: Don't Hold Too Much Cash in the Bank Every financial crisis is different. COVID 19 is different from 2009, which was different from the dot.com crisis of 1999 etc. One thing that most crises have in common is the Pavlovian response of central banks to these crises. They cut interest rates in the hope they can electrocute the economy back into coherence. Cheaper money nudges consumers to borrow money to finance their buttocks augmentation surgery and the post-operation Louis Vuitton butt pillow. As interest rates move closer to zero in some countries and deeper into negative territory in other countries, the return on your bank cash savings starts to look uglier than your hairy aunt Mavis after a late night of poker and gin with the girls. How many times have you heard the advice that you need to save a portion of your salary every month? Let me outline 3 reasons why this is a losing strategy: 1) Cash is a paper asset that has no intrinsic value Ever since the world moved off the gold standard in 1971, cash stopped being an asset and turned into a liability. Before 1971, you could take your bills to the central bank and exchange them for the equivalent value in gold. Now, if you go to the central bank, they will just give you newer paper of the same value. This paper is nothing more than an IOU backed by the full faith and credit of that bank, and one thing we learned after the 2008 financial crisis is that high-quality banks can fail. 2) Interest rates are at record lows We are living in a world in which interest rates are at record lows. More than 1 trillion US dollars of bonds were paying NEGATIVE interest rates in 2020. A negative interest rate means that if you invest 101 today (for example), you will receive 100 when the bond matures. This is nuts – it means that you are paying the bond issuer to look after your money. 3) Missed opportunities When you lock your money into a savings account, earning record low returns, there is an opportunity cost (in addition to an inflation cost). So instead of saving money, look to invest the money and make that money work for you. Warren Buffett, possibly the greatest investor ever, became one of the world’s wealthiest people through investing – not through saving. Thing 2: Invest Today – but not in Government Bonds John Paul Getty is famous for three things – for once being the world’s richest man, for securing a $15 million discount on his grandson’s ransom in exchange for his ear, and for saying you should buy when everyone else is selling and hold until everyone is buying. So, in what should you invest? In times of crisis, investors typically look for safe-haven investments and there is nothing safer than sovereign (or government) bonds. After all, governments control the printing presses. When they run out of cash, they can print more cash but there is a small dilemma in investing in these bulletproof bonds – they don’t pay you diddly-squat. The safest of the safe are Swiss government bonds. There is nothing safer than a nation famous for Velcro, cellophane, the Swiss Army Knife, absinthe, the potato peeler, Helvetica font, LSD, muesli, edible chocolate gold, and milk chocolate. How much do you get paid if you lend money to the Swiss government for ten years? The answer is negative 0.32 percent. Is that a typo? If you bought a Swiss government bond in April 2021 and held it until maturity, you would have earned a negative yield. You were paying the Swiss government to look after your money. This is like going to the bank, asking for a loan, and the bank pays you the monthly installments. If you take on a little more risk and lend to the United States Treasury, that return bumps up to 1.71 percent which is as exciting as kissing your sister. Greece, not well known as the bedrock of financial stability, will pay you 0.83 percent on 10-year paper which is ludicrous. Lending money in the government bond market will get you nowhere fast (bond yields courtesy of Bloomberg: https://www.bloomberg.com/markets/rates-bonds) Thing 3: Invest in Real Businesses that are Recession Proof and will be Around in 10 Years Disruption is everywhere. Businesses and sectors are being disrupted like never before and COVID-19 will accelerate this disruption and the cream rises to the top. Technology, disintermediation, and the climate are making previously dominant companies vulnerable, while startup companies run by millennials in hoodies are becoming increasingly dominant. Failure to identify, understand, and exploit these changes will be fatal for any entrepreneur. Businesses fail principally due to their inability to anticipate changes. Charles Darwin said that it was not the strongest of the species that survives, nor the most intelligent. It is the species most adaptable to change. The twenty-first century has been fascinating from an investment and capital market perspective. We have witnessed two mega stock market crashes. The dot.com bubble burst in 2000 and the subprime mortgage crisis in 2007/2008 brought capitalism to the brink of collapse. Simultaneously, the meteoric rise of China has set up a battle for world domination. Major corporations and countries have gone bankrupt. Companies that did not exist twenty-five years ago are worth hundreds of billions of dollars. Facebook, founded in 2004, is worth half a trillion dollars, Alibaba in 1999 worth 450 billion, Tencent in 1998 worth 400 billion, Netflix and PayPal in 1998 worth over 100 billion dollars. Tesla which was founded in 2003 is now bigger than four automakers that have collectively been around for 400 years - Audi, Nissan, Ford, and Ferrari. Charles F. Kettering said that “people are very open-minded about new things, as long as they're exactly like the old ones.” People generally hate change, which is problematic, especially when it comes to business and investments. Here are ten trends that are changing the world in the long term. My advice is to embrace the change, find ways to exploit these trends, and avoid being on the wrong side of these changes. 1) China is challenging the US as the global economic superpower. I would not be surprised if, in 20 years, China is the largest economy and the US dollar is no longer the reserve currency of the world. 2) Wars of the future will not be fought over oil but over water. 3) Renewable energy will be the dominant source of energy in 2050 as fossil fuels fall below 20% of total consumption. 4) The banker of the future will be very different from the banker of the past. I will not be surprised if the bank accounts of the future will be with technology companies like Google, Facebook, and Amazon. 5) Even as the world’s population grows, car ownership is going to fall. Fewer people are going to own their own cars and instead, they are going to use ride-hailing services like Uber and Lyft. 6) Companies like Netflix are revolutionizing how we consume media. Expect cable TV companies and movie theatres to decline into extinction. 7) The current education system is broken and it is going to be disrupted. Teachers are teaching in the same way as 50 years ago – this is not sustainable. 8) Retail is changing. People are buying online and are not going to physical stores. In terms of clothing and apparel, Millennials and Generation Z are also buying second-hand out of concern for the environment. 9) Companies are being pressurized into being better social citizens. Companies that pollute fail to take care of their employees and do not apply solid corporate governance will be “punished” by their stakeholders. 10) Marijuana is not only for potheads. Expect medical marijuana to become more mainstream and socially acceptable. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

For many people, the word "saving" has a negative connotation. It is associated with deprivation, austerity, and negativity. It suggests life on the back foot. But you need to switch this around and see saving as a positive action towards financial freedom. You need to see saving as one of three variables in the financial freedom equation. To become financially free, you need to make money work for you. You need to become an investor. You need to invest your money in strategic assets that can generate a reliable long-term stream of income. That is the goal. So how do you become an investor? You need to have surplus cash. How can you move into a situation where at the end of every month you have surplus (or extra) cash? You need to earn more than you spend! You need to earn more and you need to spend less. It might take you months, or even years, to get to this surplus, but you need to get there. Today we are going to look at the strategy of spending less or saving. It is a discipline that you need to acquire if you want to be financially free. Before we get started, you need to understand the cold and hard reality. Based on global statistics, humans are not great savers. It would appear that we are not wired to delay, postpone, or cancel gratification. This could be a function of living in a world of consumerism or a function that household income over the past few decades has not kept up with inflation making it more difficult to make ends meet. 1) The 60/20/20 Goal Saving money is like going on a diet, and we know that most diets fail. People can lose weight at the beginning but as time progresses, they cannot cope with the deprivation, abandon the diet, and gain all the weight they lost and then some. A savings plan does not mean that you need to live like a monk and this is born out in the 60/20/20 rule. You want to work forwards the following: spending 60% of your income on necessities. Necessities include the following: shelter, food, and toiletries (this includes pet needs), utilities (this includes water, lights, internet, etc.), transport expenses, debt payments, insurances, and medical needs. The remaining forty percent is then divided evenly between non-essential expenses (such as entertainment) and savings. If you can save more and spend less on non-essentials, you will be able to invest more. Regardless of how you mix up the weighting of the forty percent, you must not save less than 20 percent. 2) You Got to Keep it Separated The death knell to any savings plan is not having a separate savings account and mixing everything onto one single account. The second your income reaches your account; you need to transfer the savings portion into the savings account. This is not negotiable. If you leave the savings portion mingling with the rest of your spending money, there is a very high probability of it being spent on non-essentials. Humans are frail and are easily led to temptation. By removing the temptation immediately, it will be easier to stay on the path of savings righteousness. 3) Build an Emergency Fund Some experts recommend setting aside six months’ worth of living expenses in case of emergencies. This helps you avoid going into debt if you ever lose your job or have to pay unforeseen medical expenses. The problem with this emergency fund is that it is often held in an account that earns little or no return. These cash savings accounts are chosen because they provide you easy access to the money which makes sense. These accounts are also very low in risk. The problem is that this money is not working for you. Global interest rates are at record lows. I propose investing this cash into a low-cost well-diversified ETF (exchange traded fund). Although riskier than a savings account, you do have direct access to this money in the case you need it and the potential return is considerably higher. 4) Track Your Spending Most people get to the end of the month and they have only a vague idea as to where their money went. They look at their credit card statement and are completely blindsided. They spent a lot more than they expected and are sent into panic mode. Small purchases add up over time. Popping down to Starbucks for a sexagintuple vanilla bean mocha frappuccino will cost you a couple of bucks. Do that every day and in a month, you could easily have spent a large amount of money. The good news is that it is easier to track your spending today than it was 30 years ago when we lived in a predominantly cash economy. Given that the majority of modern-day spending is done electronically, you have records in the form of bank, credit card, and online payment statements. If you do pay cash for something, keep a slip or receipt. Every month you need to go into your accounts and understand how you spend. You also need to look for bad spending patterns and how they can be altered or completely removed. 5) Avoid Bad Debt Debt is a controversial one. Financial advisers have done a fantastic job in Satanizing debt. It has become a modern financial antichrist. I like to think of debt from a slightly different perspective. Not all debt is bad and what determines whether a debt is good or bad is not a function of the interest rate. It is a function of how the proceeds of the debt are used. Let’s unpack this. If you borrow money at 10 percent and invest it at a return of 20 percent, that is good debt. You are using other people's money to generate a net return of 10 percent and if you structure the dent properly, you may be able to deduct the 10 percent interest from your taxable income. Let's now look at the other side of the coin. Let’s say you own a credit card that charges interest at 40 percent. You go out and buy a Louis Vuitton bag and an all-inclusive trip to the Bahamas. When the time comes to pay your credit card, you pay the minimum. That is bad debt because you are financing luxury spending. It so happens that the interest rate is high, but the interest rate is not the damning factor. The damning factor is that the debt you have incurred is not being used to generate income. This does not mean that credit cards are evil per se. If every month you pay the balance to avoid interest charges, you are using the card as a source of free money. This concept is worth explaining in a little more detail. The first thing you learn in financial advisers’ schools is to cut up your credit card. The reasons offered: credit card companies make money out of you, you are setting a bad example for your kids, credit cards are like the apple in the Garden of Eden and you do not need a credit card. Firstly, credit card companies do not always make money from you. There are two payment options on your monthly statement. The first is the minimum payment. Credit card companies pray you to choose this. It allows them to charge usurious interest rates disclosed in small print on page 89 of your contract. There is another option which is the payment to avoid interest. This is a thing of beauty. It will settle the balance at the cutoff date of the card. The cutoff date is normally ten days before the payment date. If your cut of date is the 20th, your payment date will most likely be the 30th. If you buy that Louis Vuitton bag on the 21st, you will only need to pay for that necessity on the 30th of the following month. You are the recipient of 39 days of FREE MONEY. I don’t care where you from, but that is a great deal. The banks make no money out of you in terms of interest. They may charge an annual membership fee but this is all the blood they will be sucking from your veins. The second argument is you are setting a bad example for your kids. Teach them about the 39 days of free money and that bad example turns into a good example. It is your job as a parent to educate your kids financially because they will not get this at school. Buy them a copy of this book. Every member of every family should have their own copy – books are like swimming trunks; they should not be shared. The third point is one of temptation. Credit cards present too much of a temptation. Whatever happened to self-control? At what point did self-control stop differentiating us from the wild animals? If your credit card is your biggest source of temptation, then you may have bigger problems. The final point is that you do not need a credit card. This is just stark raving mad – you do not need two lungs, but you were born with two. You do not need wisdom teeth – they serve no real purpose – but most people are born with them and are a bloody nuisance to remove. I hate going to the shopping mall. My wife could spend an entire day there. After half an hour, I want to rip my eyes out of their sockets. Amazon, on the other hand, is god's gift to men like me and is best done with a credit card – add to this list Netflix, Spotify, and Uber. 6) Set Manageable Goals How often have you set a big goal – like run a marathon – only to find yourself falling short and then declining into a spiral of self-doubt and loathing. If you want to run a marathon, you need to establish a set of short-term goals that will enable you to reach the big goal. Aim to run a 10k race within the first month, then a half marathon within 3 months, then a 20 miler (32km) within 4 months, and then the marathon within 6 months. Let’s say you get injured after the 20 miler and you need to pull out halfway. How will you loom back at your running season? It was pretty successful. You ran a half marathon. Now you can work on your recovery and take another shot at the marathon goal. Savings is no different. Focus on your non-essential spending. You may set a 10-year goal of having a certain amount invested but you may be in a negative surplus situation. This means that you are spending more than you are earning and you are funding the gap with your credit card. For example, you earn 100, spend 120. To get through the month, you have to spend 20 on your credit card. Your first goal would be to balance your budget: income = spending. The second goal may be to have more income than spending and use the surplus to pay down your debt. Once you have paid down your debt, you will want to maintain the monthly surplus and now start to invest that surplus in the stock market. Set these smaller intermediate goals and do not forget to celebrate them. As you reach each goal, take time to celebrate and enjoy the achievement. The celebration does not need to be lavish, but it should be of such magnitude that it keeps you motivated. 7) Use the Cooling Off Rule In consumer rights legislation and practice, a cooling-off period is a period following purchase when the purchaser may choose to cancel a purchase, and return goods which have been supplied, for any reason, and obtain a full refund. I want to apply this rule to savings, but with a slight adjustment in that, it comes in to play BEFORE you make a purchase. Before making a large purchase, take some off to think it through. I suggest a period of a couple of days to a week. For example, your washing machine is starting to get temperamental and you are thinking of buying a new one. This represents a large capital purchase. Instead of rushing in to buy a new machine, you can do the following. How about changing your paradigms? Instinctively we have been taught that if your washing breaks down, you should buy a new one. But how about using a laundromat. Assume that around the corner to where you live, there is a laundromat with coin slot machines. Calculate how much it will cost every month to use this service. Factor in the cost of inputs like washing powder and softener, and what you will be saving in electricity and water. Compare those monthly costs to the cost of the monthly cost of buying the washing machine. Then factor in how you are contributing to the health of the planet by not bringing into the world another washing machine that will eventually find its way into the landfill. 8) Think Twice About Taking Out a Mortgage Homeownership enslaves people financially. According to Zillow, one-third of homes in the United States in 2018 were "free and clear" - they were not encumbered by a mortgage loan. Two-thirds were encumbered. There is nothing like a 30-year mortgage bond to tie you down financially. If you have a mortgage and a job, the pressure to stay in that job until that death pledge has been paid off is immense. Mortgages are the single biggest reason standing in the way of financial freedom. To make matters worse, most people believe their home is an asset. Robert Kiyosaki, in his book "Rich Dad, Poor Dad", says the asset/liability test is simple. Assets put money in your pocket. Liabilities take money out of your pocket. If you are living in a house, and it is mortgaged, you are paying rates, taxes, and interest on the loan. It is a liability. If it is "free and clear" it is still a liability. You are paying rates and taxes, not to mention lights, water, and general maintenance. But property prices always go up. That is a fallacy. Americans who bought houses before the financial crisis of 2008 will paint you a different picture. Real estate is like any asset – its price can rise or fall. If you are banking on your house price appreciating in value, then welcome to the world of speculation. Real estate is a very powerful income-generating asset, but it is only an asset when it puts money in your pocket. 9) Rethink Retirement Savings If financial freedom is obtained through making money work for you, does it make sense to differentiate between normal savings and retirement savings? I do not think so because when you do that, this is the big mistake that people make with retirement savings. They believe that it needs to be down through a retirement institution such as a pension fund, insurance company, or institutional asset manager. The most common retirement vehicle is the retirement annuity – quite possibly the worst investment known to man. Retirement annuity salesmen will tell you that there are five benefits of a retirement annuity. Firstly, the tax benefits. They will tell you that you deduct the contributions, but they will fail to tell you that when you retire and start to receive the benefits of the annuity, that flow of income is fully taxable. Secondly, they will tell you about the power of compound growth – returns on returns. What they fail to tell you is that ALL investments offer compound growth. Thirdly, they will talk about disciplined savings. All investments are discipline savings! Fourthly, they will talk about supporting your dependents. Once again, the reason why you invest is to look after you and your dependents. Finally, they talk about long term stability. The stock market offers long term stability but with far better returns. Retirement annuities are horrible investments. The only beneficiary is the annuities salesman. According to billionaire investor Ken Fischer, if you invest $1 million in an annuity you will put a kid through private college. The problem is that it is not your kid. It is the kid of the annuity’s salesman. Fisher says you would be better off cutting a check directly to the salesperson and then investing the balance directly in stocks and bonds. Do not be fooled by the sales rhetoric. If you are financially educated and disciplined, you can do better with direct investments. Annuities are black-box investments – there is no transparency and accountability of results. The fees are bordering on criminal. Moreover, when you retire with that annuity, you will get a stream of income akin to a quaint Scottish brook. You deserve the whitewater rapids on the Zambezi River. 10) Do Not Buy a Car For most people, their two biggest monthly expenses are their mortgage and car payment. I am not a fan of homeownership and I am even less of a fan of car ownership. Automakers are living in a state of denial. They are holding onto the antiquated belief that there is still exists a love of owning a car. There is no love in owning a car – there is love in driving a car. Car ownership opens your life to a world of complications – pushy car salespeople, rapid devaluation, hidden fees, and costs, insurance, taxes, gasoline, maintenance, repairs, fines, and parking. In a world where there is a plethora of renting and sharing options, who in their right mind would you want to buy? I am not saying that you avoid all these complications when you rent or share. You only pay for the time you use the car and not when it is gathering dust in the garage. 11) Is University Compulsory? Financial advisers will tell you that you need to start saving for university early. Let’s challenge this paradigm of having to go to university at all costs. About 43 million adult Americans—roughly one-sixth of the U.S. population older than age 18—currently carry a federal student loan and owe $1.5 trillion in federal student loan debt, plus an estimated $119 billion in student loans from private sources that are not backed by the government. Thirty years ago, if you said that you had decided not to go to university, your audience would have sucked all the oxygen out of the air in the room. It was unthinkable. Such an action was seen to be a death sentence. In the last three decades, this attitude has changed. Kids are graduating from university, saddled with debt and without the skills to meet the challenges of the modern workforce. Modern corporations have started to understand the limitations of formal education. In 2018, job-search site Glassdoor compiled a list of top employers who no longer require applicants to have a college degree. Companies like Google, Apple, and IBM are all in this group. In 2017, IBM's vice president of talent Joanna Daley told CNBC that 15 percent of her company's U.S. hires do not have a four-year degree. The message from these companies is that a traditional college degree does not necessarily equip graduates with the requisite skills to operate in their world. Technology companies, however, were not the first to recognize the limitations of a university degree. In May of 2015, Ernst and Young, one of the big four accounting firms, announced something that surprised everyone. It would remove the degree classification from its entry criteria because it found 'no evidence of a positive correlation' between academic success and achievement at the company. This is crazy. Accounting is generally accepted as the most stayed and conservative of all professions. A charismatic accountant is defined as someone who looks at the other person's shoes instead of his own when engaged in a conversation. The market value of a university degree has declined while the cost of that education has increased. In the 1980s, a college degree almost guaranteed a job in the specific field of study. This is no longer the case given the higher number of degrees and the shrinking number of jobs on account of technology and automation. Maybe we need to rethink the paradigm that a university degree is compulsory and embrace the concept of continuous learning through alternative channels. Learning should become a way of life and not limited to a location. Gone are the days when you study a profession and that is your profession for life. The job market is in flux and workers will need to reinvent themselves multiple times. 12) Fully Utilize Your Employer’s Retirement Match If your job matches the contributions to your retirement savings up to a certain percentage of your salary, you should consider contributing enough to max out your employer’s matching benefit. Otherwise, you’re just turning down free money. This is not a retirement annuity – this is a retirement fund. I am not a huge fan of formal retirement funds because of their fee structures, but if your employer is matching your contributions, you would be a fool not to fully utilize this benefit. 13) Embrace the Stock Market The stock market is one of the greatest generators of wealth on the face of the earth and the more you know about it, the better. Having said this, you do not need to be an expert in stocks to become financially free – a basic understanding will suffice. An exchange-traded fund is a fund of shares that trade on the stock market like a single share. So instead of buying a share in Amazon, you can buy a share in an ETF that invests in technology companies. In this way, you will be investing in Amazon, but also in companies like Microsoft, Apple, Tesla, Google, Facebook, Tesla, and Nvidia. I am talking about the Invesco QQQ ETF. In this way, you can participate in the fortunes of a large number of public companies and avoid the slow death of having your money in a savings account. Also, you do not have a specific risk of investing in one specific stock. Over the long term, the stock market delivers solid predictable returns that are far superior to a traditional savings account. 14) Switch to a Cheaper Cell-Phone Plan With the prevalence of WIFI hotspots, the standard smartphone owner today only uses on average 1.6 gigabytes of data per month. Interestingly, most service providers’ cheapest data plan provides more than that. Track how much data you’re actually using and stop paying for more than you need. 15) Lower Your Utility Bills Evaluate whether or not you’re being as conservative as you can with your utilities. Some quick tips to save money on your bills include: Insulating your windows with a simple sheet of bubble wrap, unplugging appliances you’re not using, and turning the faucet off when you brush your teeth. Another more extreme saving which may not appeal to everyone is turning off the boiler that heats up your water. It has been well documented that cold showers boosting your immune system, increasing circulation, reducing muscle soreness post-workout, potentially boosting weight loss, and glowing hair and skin. You start this off gradually. Turn the boiler off for one day, and on one day, then two on and two off, etc. until you are more accustomed to the cold. Watch how your utility bills start to decline. This is good for your health and your bank balance. 16) Time Major Purchases Around Sale Periods Because demand fluctuates by the season for certain items, you can time your big buys to rake in the savings. Black Monday, post-Christmas sales, and general clearance sales. Retail is for suckers! 17) Cancel Your Gym Membership Consider the following US stats: About 18% of members actually go to the gym consistently. Out of those who actively use their gym membership, 49.9% get to the gym at least twice a week. Another 24.2% make it to the gym at least once a week. Although about half of Americans have a gym membership, 53.2% of people with gym memberships also own some sort of home exercise equipment. Many of the exercises you do at the gym can be done at home with a bit of creativity. You can watch YouTube tutorials for ideas about home workouts, go for a run in your neighborhood, or swim laps at your community pool. If the great lockdown of 2020 taught us one thing, it is that you do not need a gym to exercise. 18) Use Coupons Not just in newspapers and junk ads anymore, coupons are available on company websites, apps like SnipSnap, and online. Before you go out shopping, check your phone or computer and increase your savings. Another option is subscribing to Groupon, although it is only available in 15 countries. 19) Share Entertainment Share the payments for a joint streaming account. Netflix is not exactly expensive, although you may also have Hulu, Amazon Prime, and HBO. If you can share these costs with your friends, over time you could be setting yourself up for some decent savings. 20) Plan Your Groceries Make a list of what food you’ll need for the week, keeping in mind what meals can be made from the ingredients, and don’t buy anything that isn’t on your list. It helps not to go to the grocery store hungry or with a picky eater. Meal planning is another great option that can help you save time and money while making it easier for you to eat healthily. Most people go so far as to make a grocery list, but this is not enough. You need to only buy what you need and plan ahead to minimize waste and unnecessary expense. 21) Understand Food Spoilage Do not be fooled by the expiration date on food items. While it may not be a wise idea to drink from the carton of milk that has been in your fridge since the Nixon impeachment, that bag of lettuce that expired 2 days ago may very well still be good for consumption. Inspect the food to make sure that it has not grown a beard or given birth to offspring. The world throws away far too much food that is still edible. You can also look to a more plant-based diet. According to the website money.com, out skipping animal protein doesn’t just add years to your life: New research suggests vegetarians can save at least $750 more than meat-eaters per year. 22) Carpool to Work or School Ask around or organize a carpool spreadsheet at work to see if anyone lives near you with who you can swap rides with. For your kids, enlist nearby parents or friends' parents to help lighten the burden of the school drop-off lines. This also leads to less traffic, less pollution, and a healthier planet. Fewer cars on the roads can never be a bad thing. 23) Replace Your Incandescent Light Bulbs I did this a few years ago and I cut my utility expense by more than 80 percent. I went from hating paying my utility bill to extract a small amount of satisfaction from paying it – comforted also for the fact that I was helping repair some of the damage for all the years using aerosol cans to perfume my smelling armpits. 24) Buck the Trend – Move to Cash In 2018, only 13 percent of Swedes reported using cash for a recent purchase, according to a nationwide survey, down from around 40 percent in 2010. In the capital, Stockholm, most people can't even remember the last time they had coins jingling in their pockets. Studies have shown that one of the problems with credit cards is that they reduce the pain of purchase. Whipping out a credit card for a pair of Gucci loafers is relatively painless. Having to fork over a wad of bills is considerably more painful. If you move from plastic to paper, be aware of the inherent risks. If you lose your credit card, the company will replace it in a jiffy. Cash on the other hand is harder to replace. The financial coach Dave Ramsey endorses the envelope approach: Every time you purchase “groceries” it must be with money from that envelope and only that envelope. If you go to the grocery store and realize you don't have your envelope, you don't whip out the credit card or debit card for payment. ... Remember, you can ONLY buy groceries with the cash in that envelope. 25) Calculate by Hours When trying to decide if something is worth buying, try thinking of the cost in terms of how long it takes you to make that money. This can help you get a sense of the true value of your money. For this to work, you need to calculate how much you make per hour. The formula is simple: Net monthly salary divided by (number of workdays in the month (work on 22) x hours worked per day). 26) Used is the New Black By 2028, 13 percent of the clothes in women's closets are likely to be secondhand, up from 6 percent in 2018 according to ThredUp. The secondhand market, which includes resale, thrift, and donations, has grown 21 times faster than the retail apparel market between 2016 and 2018, to a $28 billion industry in 2018. It is projected to be $51 billion by 2023. The main growth driver is the resale market, which is expected to quadruple between 2018 and 2023. Sales in the apparel rental market have also surged, becoming a $1 billion industry in 2018 that could reach $4.4 billion by 2028, according to GlobalData. By 2028, 4 percent of a women's closet will consist of subscription and rental products. You can get slightly used high-quality items at a fraction of the cost of their newer counterparts. Not only is buying used good for your finances, but it is also good for the planet. Clothes companies are massive polluters and any activity from your part to reduce demand for their polluting products is one step towards healing the planet. 27) “We will be in the library” Some people don’t realize that their local library is a great resource for free entertainment, especially for kids. Many offer movies and games in addition to books, as well as free events and readings for kids every week. So fire up the SUV, pack it full of kids, and hit the library. 28) Buy Generic This is a bit of a no brainer to buy generic drugs – although many people believe they are inferior and will not do the job. Generic drugs are not cheaper because they are of inferior quality. They are only cheaper because the manufacturers have not had the expenses of developing and marketing a new drug. When a company brings a new drug onto the market, the firm has already spent substantial money on research, development, marketing, and promotion of the drug. The major reason why doctors may not prescribe unbranded generic medicine is the lack of confidence of physicians and patients in their quality. Aggressive promotion of branded generic medicines by the pharmaceutical companies further aggravates the problem. The bottom line is that there is no difference in quality and you can rest assured that you will not suddenly grow a third nipple if you take them! 29) Eat In It can be tempting to eat out every night, but this can be a major drain on the finances – especially when you include beverages and the gratuity/tip, parking/taxi, etc. But you can make eating at home more appetizing by making eating at home delicious, fun, and easy. Try to cooking new recipes, setting up a picnic, or simply meal-prepping. Celebrity chefs like Jaime Oliver have over 5 million subscribers on YouTube which means you can find plenty of great video recipes if your kitchen repertoire is limited to scrambled eggs. 30) Use the 24-Hour Rule We spoke about the cooling-off period on major purchases. It is also a good idea to apply this to minor purchases. Let's set the minimum amount on the local currency equivalent of $100 (US dollars). To avoid the guilt associated with buying yet another leopard skin leotard, how about delaying gratification for 24 hours. Put yourself in the spending cooler and sleep on it. If you wake up and the desire for those pants has not petered out, go for. If not, get back to the task of cutting coupons out of the newspaper! 31) Designate No-Spend on Non-Essentials Days It should come as no surprise that we tend to overspend over the weekend. To help withstand the pangs of guilt associated with this overindulgence, how about calling a moratorium on non-essential spending on Monday, Tuesday, and Wednesday? If this is a little extreme, cut it down to only Monday and Tuesday, or only Monday. This also takes the pressure a little of the weekend spending knowing that your early week self-flagellation will help in the healing of your finances. 32) Go Outside I live in one of the most spectacular cities in the world – Cape Town. When you arrive here, you want to spend all your time outside – driving along its impressive coastline, exploring the vineyards, hiking up Table Mountain, surfing, biking, and penguin watching. Most of these activities are free – they require no entrance fee. I know that not everyone is fortunate enough to live in a natural paradise, but many modern cities are promoting outdoor activities. I lived for almost 2 decades in Mexico City and that too has many outdoor activities – although, at 2,500m above sea level, you need to be a little more retrained with your physical effort. 33) Take Public Transportation In December 2019, I conducted a mobility experiment. In the interest of highlighting the plight of that delicious holiday fowl, I went cold turkey. I parked my car in the garage and committed to only use public transportation. These were the rules of the experiment – Monday to Friday in the commute to and from work, in addition to any business of social meetings from 6 am to 8 pm, I was only allowed to use publically available transport. For Mexico City, that includes the following: metro, buses, bike shares, electric scooters, and public rideshares like Uber/Didi/Cabify. I was unable to mooch off friends or colleagues. I felt free and unfettered. There was no need to worry about psychotic drivers cutting into my lane, no need to stress about parking. 34) Drink Less Bottled Water If you live in a city with great tap water (like Cape Town), the buying of bottled water is a heinous crime against humanity. Even if you do not have great tap water, buy a filter. Not only will the filter soon pay for itself in not spending on bottled water, but you will do your part in not allowing the plastic islands in the middle of the ocean from increasing in size. In the US, bottled water is almost 300 times the cost of the same amount of tap water and the average American spends about $100 a year on it. 35) Sell Your Extra Stuff It is a known fact that people generally have too much stuff – the majority of which they do not use. The Pareto principle of 80-20 applies – you use 20 percent of your stuff 80 percent of the time. I would recommend doing the following domestic exercise – go through your closest and notice how you tend to wear some shirts, pants, socks, ties, suits, and shoes far more often than others. You will also notice that there are some items of clothing that you never wear. Use this revelation to sell the stuff you do not use and do not limit this to clothing. The same applies to equipment, appliances, and other household assets. If you really want to feel good about this exercise, GIVE THIS STUFF AWAY! 36) Rent Out Equipment Why pay for your tools or equipment when they can pay for themselves? Apps like ToolRent or PeerRenters let you get paid for sharing items like drills, whiskers, and cameras with the community. Consider listing anything you have that has a specialty use. 37) Rent Out an Extra Room Robert Kiyosaki, in his book "Rich Dad, Poor Dad", says the asset/liability test is simple.  Assets put money in your pocket. Liabilities take money out of your pocket.  If you are living in a house, and it is mortgaged, you are paying rates, taxes, and interest on the loan. It is a liability. If it is "free and clear" it is still a liability. You are paying rates and taxes, not to mention lights, water, and general maintenance. One way to make your home more of an asset is to rent out a room on Airbnb and start getting some money into your pocket to help fund some of the outflows. 38) Rent Your Parking Spot A stranger walks into a bank in New York and asks the bank manager for a $10,000 loan. The bank manager asks the stranger what he can give him a guarantee for the loan. The stranger says he has a brand-new Rolls Royce parked on the street worth $300,000. He would leave the car in the bank’s underground parking until the loan was repaid. The bank manager happily grants the loan. A month later, the same man walks into the bank and offers to repay the loan. The bank manager calculates the interest at $80 (interest rates in the US are close to zero). The bank manager then tells the stranger that after their first meeting, he had done a background check on him and discovered that he was a billionaire – why was it necessary to borrow $10,000? The stranger replied: “where in New York can you get parking for a month for $80”. Parking is expensive – if you live in a city where there is a high demand for parking, and you have a free spot, rent it out. Be sure to get more than $80 per month! 39) Consider Becoming a Minimalist Minimalism is a movement that focuses on reducing the clutter in your life both in physical objects and in other distractions. People who embrace it find ways to eliminate the distractions from their lives and it opens up more opportunities for them in other ways and areas. Embracing minimalism does not mean that you stop spending money, but it can mean that you spend it on other things and your focus may change from making money to enjoying life. This may be a little extreme for some people, but if you have an addictive and extreme personality and are not a psychopath, this could be your new religion. 40) Pet-Sit I came across this article on www.millennial.com entitled: Pets vs. Parenthood: Why Millennials Are Owning Pets Instead of Having Kids. Young Americans may be less likely to be homeowners or parents of human children, but they are leading in their rate of pet ownership. The $69 billion pet industry has already grown three times larger than its size in 1996, and Millennials are fueling the increase. With 44 percent of Millennials remaining unsure if they want to start their own family, it makes sense that their Instagram feeds may be more full of fur babies than tiny humans. Make the most of this trend by charging these people to look after their precious pets! #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

To err is human. To err financially is not only human, it happens to even the most astute. Here is a list of the biggest financial mistakes. 6) Retirement Annuities I hate annuities. Ken Fisher Retirement annuities are horrible investments. The only beneficiary is the annuities salesman. According to billionaire investor Ken Fischer, if you invest $1 million in an annuity you will put a kid through private college. The problem is that it is not your kid. It is the kid of the annuity’s salesman. Fisher says you would be better off cutting a check directly to the salesperson and then investing the balance directly in stocks and bonds. Do not be fooled by the sales rhetoric. Annuity salespeople will regale you with the tax benefits, the power of compounded growth, the discipline of saving (a lie that we have debunked), supporting your dependents, and long-term stability. If you are financially educated and disciplined, you can do better with direct investments. Annuities are black-box investments – there is no transparency and accountability of results. The fees are bordering on criminal. Moreover, when you retire with that annuity, you will get a stream of income akin to a quaint Scottish brook. You deserve the whitewater rapids on the Zambezi River. 7) Being Afraid of Risk Risk is an interesting animal. You can take her out, buy her flowers, and even marry her. The only thing you cannot do is eliminate her. Risk, like Keith Richards' liver, cannot be eliminated. It can only be transferred and managed. Insurance policies do not eliminate risk. They transfer it to professionals who embrace it, manage it, and monetize it. Warren Buffett built his fortune on risk. Take a look at the Berkshire Hathaway website (www.berkshirehathaway.com). The company spared no expense in the design of this eighth wonder of the modern world. Click on "Links to Berkshire Subsidiary Companies". Numerous Berkshire subsidiaries are insurance or reinsurance companies. They retail and wholesale risk. Risk is their most important commodity. Without risk, there can be no return. The eternal pursuit of risk avoidance will lead to "a life of quiet desperation and death with your song inside you" (Thoreau). In 2016, David Rubenstein interviewed the Chief Executive Officer of Goldman Sachs, Lloyd Blankfein. Rubenstein asked Blankfein a question that, at first, seemed dumb. It turned out to be brilliant. He asked: “Lloyd, what is your job?” One would expect the following answer: “Well, Dave, my job is to make strategic decisions about the bank's products, customers, employees, stockholders, and goals”. Instead, he said his job was risk management. That reply blew me away. The job of the CEO of the world's most powerful and influential investment bank was risk management – not risk transfer or elimination, but management. Risk and return go hand in hand. If you want more return, you need more risk. Jeff Bezos of Amazon became the world's wealthiest person in 2018 by taking risks. He put all his eggs in one basket. He went all-in on a little company that sold books over the internet. He grew it to a $1 trillion valuation. On Sept 4th, 2018, Amazon became the second company after Apple to reach a $1 trillion market capitalization. Risk is good as long as it is managed. Bezos made a calculated bet. He knew he could convert Amazon into the world's leading e-commerce site and the world's leader in cloud computing. Now he is working on making Amazon the world's leading online grocery store (through the purchase of Whole Foods) and the world's leading streaming service (competing with Netflix). Client satisfaction is his obsession. Amazon’s mission is to optimize the customer experience. Bezos suggests you "should start with the customer and work backward". Most companies do the opposite – they start with the product or service and then work towards the customer. In every Amazon internal meeting, there is the rule of one empty chair. If there are five Amazonians in the meeting, there needs to be six chairs. Whom/who does this chair represent? It represents the customer. Bezos does not want decisions to be made without taking the customer into account. If you start a business, and you believe in the business with all your heart, mind, and soul, go all in. Commit to it and believe you will succeed. This belief, commitment, and drive will act as a risk management tool. 8) Avoiding the Stock Market The stock market is one of the greatest generators of wealth on the face of the earth. Having said this, many people avoid the stock market for two reasons. Firstly, they think it is too dangerous. Most people are terrified of the stock market because it exhibits wild and volatile swings and this is true – in the short term. The stock market, over the longer term, tends to be more predictable and benign. Your first step is to recalibrate your opinion of the stock market and take a long-term view. Secondly, they are under the misconception that you need to very super smart and dedicated to investing. In reality, you do not need to be an expert in stocks to become financially free – a basic understanding will suffice. This is what you need to know. A stock market is a place where you can invest in thousands of public companies. Sure, it helps if you are prepared to spend the time to analyze individual companies, but the majority of people do not have the time, interest, or inclination to do so. For these investors, their investment vehicle of choice is known as an ETF or exchange-traded fund. An exchange-traded fund is a fund of shares that trade on the stock market like a single share. So instead of buying a share in Amazon, you can buy a share in an ETF that invests in technology companies. In this way, you will be investing in Amazon, but also in companies like Microsoft, Apple, Tesla, Google, Facebook, Tesla, and Nvidia. I am talking about the Invesco QQQ ETF. So, this is what you do – you apply a common-sense approach to investing. I walk you through the mechanics. I will profile three different types of investors based on their level of interest in the stock market. Investor 1: No Interest Let us assume you have no interest in finance, business, or investing. This is not a death blow to financial freedom. You will want to invest in a broad country or global ETF. The most globally diversified ETF is iShares MSCI World ETF and trades under the ticker symbol URTH (Jargon buster: A ticker symbol or stock symbol is an abbreviation used to uniquely identify publicly traded shares of a particular stock on a particular stock market. A stock symbol may consist of letters, numbers, or a combination of both. "Ticker symbol" refers to the symbols that were printed on the ticker tape of a ticker tape machine). URTH will exposure you to a broad range of developed market companies around the world. It provides access to the developed world in a single fund. If you had invested $100 every month into this ETF when it was first launched in 2012, your investment would be worth a little under $15,000 today (June 2020). Investor 2: A Little Interest Here I assume that you have a marginal interest in finance and the stock market. You know that CNBC is a business news channel and not a recreational drug, you have heard of the Dow Jones Industrial Average and you know that the FTSE 100 is the benchmark index of the London Stock Exchange and not a pesticide. You would invest in a more specific ETF. Instead of buying the whole world, you would refine your investment in a specific region or country. For example, you may be a fan of Taiwan. You traveled there a couple of years ago and was impressed by their bustling economy and you want to participate in the fortunes of Taiwanese companies. You could invest in the iShares MSCI Taiwan ETF (ticker symbol EWT) that trades on the New York Stock Exchange. Another great feature of ETFs is that most of them trade on US stock markets. In the case of Taiwan, there is no need for you to open a brokerage account in Taiwan – you can participate in the fortunes of Taiwanese business from the comfort of your own home (provided you have a US brokerage account). Over the past 10 years, $100 invested every month in this ETF would now (June 2020) be worth almost $19,000. Investor 3: Above Average Interest You have a real interest in investing as a hobby. You are curious about financial trends that are shaping the world. You are an avid reader of financial blogs and if you were waiting for your dentist appointment, you would rather thumb through a copy of The Economist than Men’s Health. Your interest does not go so far as to take you into analyzing specific shares, but you are interested in trends – such as clean and renewable energy, the rise of China as a global economic power, the sharing economy, fintech and cryptocurrencies, the future of health and wellness, robotics and artificial intelligence, driverless cars, cybersecurity, etc. ETF issuers such as iShares are aware of the rising interest in global trend investing and have started to launch ETFs to tap into this market. Take for example the iShares Exponential Technologies ETF (ticker symbol XT). This ETF seeks to track the investment results of an index composed of developed and emerging market companies that create or use exponential technologies. The ETF wants to access global companies with significant exposure to exponential technologies, which displace older technologies, create new markets, and have the potential to create significant positive economic benefits. As of June 2020, the ETFs biggest holdings were in the following companies: TESLA, ADYEN, SQUARE, ADVANCED MICRO DEVICES MERCADOLIBRE, NVIDIA CORP, PAYPAL HOLDINGS, WUXI BIOLOGICS, AMAZON, and MEDIATEK. A monthly investment of $100 in this ETF would currently (to June 2020) be worth almost $8,500. 9) Making Your House Your Most Important Asset The American dream is built on homeownership. The 2008 financial crisis was rooted in the 1990s. In 1995, Bill Clinton took time off from using Monica Lewinsky as a human humidor. He rewrote the Community Reinvestment Act. This pressurized banks to lend to low-income neighborhoods and facilitated the rapid increase in subprime lending. Clinton did this to strengthen his political base in those lower-income households. He made it easier for these families to attain the American dream and thereby increased the probability of reelection in 1996. Bill is a cunning fox. Homeownership enslaves people financially. According to Zillow, one-third of homes in the United States in 2018 were "free and clear" - they were not encumbered by a mortgage loan. Two-thirds were encumbered. There is nothing like a 30-year mortgage bond to tie you down financially. If you have a mortgage and a job, the pressure to stay in that job until that death pledge has been paid off is immense. Mortgages are the single biggest reason standing in the way of financial freedom. To make matters worse, most people believe their home is an asset. Robert Kiyosaki, in his book "Rich Dad, Poor Dad", says the asset/liability test is simple. Assets put money in your pocket. Liabilities take money out of your pocket. If you are living in a house, and it is mortgaged, you are paying rates, taxes, and interest on the loan. It is a liability. If it is "free and clear" it is still a liability. You are paying rates and taxes, not to mention lights, water, and general maintenance. But property prices always go up. That is a fallacy. Americans who bought houses before the financial crisis of 2008 will paint you a different picture. Real estate is like any asset – its price can rise or fall. If you are banking on your house price appreciating in value, then welcome to the world of speculation. Real estate is a very powerful income-generating asset, but it is only an asset when it puts money in your pocket. 10) Lack of Patience Impatience (noun) - the tendency to be impatient; irritability or restlessness. What causes impatience? Impatience is triggered when we have a goal and realize it's going to cost us more than we thought to reach it. Impatience is the single biggest obstacle to financial freedom. We are living in an age of instant gratification, same-day delivery, and super high-speed internet. We complain about being forced to wait for 40 minutes for takeoff on a transatlantic flight. We have lost sight of the fact that modern-day air technology allows us to travel from New York to London in 6 hours. In the old days, it took weeks by boat and there was always the chance that if you did not die of scurvy, you were attacked by pirates or crashed into icebergs. I Googled “long term stock investing” and came up with 269 million results. I then Googled “stock trading” and came up with 4 billion results. Why is it that trading yields 1,400 percent more results than investing? This is no surprise because trading is sexier than investing. The objective is the extraction of short-term profits. Day trading or scalping has taken off over the past ten years. To answer this question, you need to answer the following: when it comes to money management, do you want sexy or do you want boring? Do you want Marilyn Monroe in the Seven Year Itch or Fred the accountant? In a perfect world, you want your chef to be French, your sports car to be Italian, the driver in the lane next to be non-Italian, your watch to be Swiss and your policeman to be British. What about money management? There is a great quote from Paul Samuelson. Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas. This is not to say that you should invest in the money market, but I would suggest that there is greater merit in investing in long term, stable, and boring companies that are growing predictably than looking for short term wild swings. Mark Twain had the following to say about speculation: “OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February. There are two times in a man's life when he should not speculate: when he can't afford it and when he can.” Now for the facts. Two of the greatest long-term investors are Warren Buffett and the Swiss-Brazilian, Jorge Paulo Lemann. Both men made their fortunes making long-term bets on companies like Coca-Cola, American Express, Kraft Heinz, Bank of America, and Anheuser Busch. As at the beginning of November 2019, according to the Bloomberg billionaire’s index, Buffett was the 4th wealthiest man in the world with a net worth of $86 billion, and Lemann was 43rd with a net worth of $22.5 billion. We now move across to the hedge fund billionaires. Hedge funds are unconstrained funds that tend to have shorter time frames and therefore are more often associated with trading. According to Bloomberg, the richest hedge fund manager as of November 2019 was James Simons, the founder of Renaissance Technologies that has $61 billion in assets under management. The fund has delivered annual returns of 40 percent since 1988 and has paid him more than $9.5 billion in cash distributions since 2006. Second on the list is Ray Dalio, the founder, and co-chief investment officer of Bridgewater Associates, a hedge fund firm that manages $160 billion in assets. Simons was worth $20.7 billion and Dali $16.6 billion and were ranked a lowly 49th and 75th respectively. So, let's do some averaging. The average wealth of the top two investors is $54 billion while the average wealth of the top two traders is $18.6 billion. The universe is clearly saying to us that long term investing is more profitable. This is a random exercise but let me tell you one thing for sure – it is easier to replicate the strategies of Buffett and Lemann than the strategies of Simons and Dalio. Financial freedom is achieved by making small incremental changes. If you set the goal of doubling your income in six months, I think there is a high probability that you will fail – unless you become a drug dealer or a YouTube influencer. Your objective should be to make small, incremental, and consistent changes to your spending patterns. Dramatic and radical changes seldom work over a long time when it comes to financing. It is the same as crash diets – you may succeed it dropping a bunch of pounds in the first few weeks, but after a couple of months, you have added those pounds and then some. You should compare your finances today with how they were yesterday and focus on small incremental changes. Set numerous small achievable goals. A fraction of a percent changed every day, compounded over many months and years will yield outstanding results. Compounding is the key to financial freedom. If you are still not convinced, let me close off with a quote from the great Warren Buffett: “The stock market is a device for transferring money from the impatient to the patient." #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals

To err is human. To err financially is not only human, it happens to even the most astute. Here is a list of the ten biggest financial mistakes. 1) Spending Excessively and Accumulating Unnecessary Debt We live in a consumerist world. Social media projects the image that happiness can be found at the bottom of a new pair of shoes or a Louis Vuitton handbag. Human beings are also suckers for creative advertising. Combine this with the easy availability of credit cards and you have a toxic cocktail that will lead many mortals into temptation. This has led to the narrative from financial advisers that credit cards are evil. Credit cards, themselves, can be powerful sources of cheap funding if used correctly. The problem is that most people use their credit cards irresponsibly and get in over their heads. They then spend the next 5-10 years trying desperately to dig themselves out of their debt holes at a time when they should be saving, investing, and building a foundation for financial freedom. 2) Making Poor Investments Paul Samuelson put it best when he said investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. The biggest mistake people make when it comes to investing is looking for sexy investments. These are companies that are always in the spotlight and always in the news. Sexy is great if you are looking for lingerie, a mail-order Russian bride, or an Italian sports car – but it has no place in investing. Peter Lynch, in his book "One Up on Wall Street", provides a fantastic insight into the world of simple and common-sense investing. Lynch said that you should invest in a company any idiot could run because pretty soon an idiot would be running it. He provides the example of an undertaking business. What could be simpler than collecting dead people, slapping on a little rouge and eyeliner, presenting them to friends and family, and then tossing them into the ground or into an incinerator? The beauty of this business is that it is simple (any idiot with a black station wagon and a Mary Kay catalog could do it), it is not cyclical (people die regardless of whether the economy is booming or in a recession), and business is always guaranteed (the only certainties in life are death and taxes). In addition to understanding the business, you also need to understand the financial statements and this is where normal humans lose their erections. The mention of balance sheets, income statements, and cash flow statements is used as a local anesthetic for minor surgical operations. In Rebel Finance, we try to explain boring concepts in simple and interesting language, so don't go nodding off. The balance sheet is a photo of the assets and liabilities (equity is the capital owed to the shareholders and therefore is seen as a liability in Ben Graham's eyes). Income statements are a record of the revenue, income, and expenses. Cash flow statements show cash that was generated and used in operations, financing, and investing. Understanding accounting is important to value a company because it is a scorecard of how the company is performing. A few final points on what Buffett likes to look for. The biggest risk in value investing is that you misread the mood of Mr. Market. The company may, in reality, be a flea-infested swamp donkey. You, however, are off your game and believe it is an Arabian thoroughbred. You mistakenly believe Mr. Market is manic and offering the stock at a depressed price. In reality, Mr. Market is valuing the stock efficiently and the company is heading to hell in a handbasket. To avoid these errors, Buffett provides a handful of tips. Firstly, he looks at the debt to equity ratio. Bad companies go broke because they stink. Sometimes good companies also go broke because they are unable to manage their debt. Cemex is the largest cement and concrete producer in Mexico. It almost went to the wall in 2008 during the financial crisis, not because it was a bad company, but because it had taken on too much debt in the years leading up to the crisis to acquire foreign businesses. If a company has 10 units of assets, and 1 of debt, it is not going to go bust anytime soon. If that 1 unit of debt, suddenly shoots up to 8, while the assets stay at 10, there is an exponentially higher probability that the company could go broke. The advice from Buffett is to pay close attention to the total debt versus total liabilities. Try and keep that relationship below 100 percent which means that there should be more equity than debt in the business. Buffett also has an affinity for monopolies and duopolies. He likes businesses that are like castles protected by moats that keep out the competition. He says owning a monopoly is like owning an unregulated toll bridge. You have the freedom to increase prices when you want and by as much as you want. Facebook and Google are both monopolies but fall outside Buffett's wheelhouse. But we should not take Buffett literally. He is not telling us to only buy monopolies and duopolies. The Oracle is angling us towards companies with healthy profit margins and returns on equity. This means that they are dominant players in their space and are executing their strategy better than the competition. 3) Taking Bad Advice Generally speaking, the financial industry as being dishonest and obsessed with self-interest. Many financial advisors make their money off their relationships with financial institutions. These conflicts of interest are particularly acute in the research that banks publish – the research on which many investors rely when making investment decisions. When a bank analyst recommends you buy a stock, the objectivity of the recommendation is always in question. The bank may be doing corporate finance work for the company. This may cloud the judgment of the analyst. If a bank is underwriting the initial public offering of Uber, what are the chances of the analyst publishing a negative report on the company? There is a better chance of winning the lottery, having a threesome, and being struck by lightning in the same afternoon. Conflicts of interest also live in the financial advice banks give to their clients. I sold a derivative hedge charging a 100 percent markup on the premium. The hedge cost 250,000 and I charged 500,000. I did this after hearing the client had no ability to value the true value of the hedge. The client was the Catholic Church. There is a special place in hell for derivatives traders, next to Ted Bundy and Jeffrey Dahmer. A client once said to me: "Ralph, you are a nice guy, it is always good to meet up with you, but going forward, I have decided to change my trading strategy. Every time your bank recommends to buy, I am going to sell". That client is now a multi-millionaire with a house in Monte Carlo. He recently got married to a Colombian supermodel and Beyoncé sang at their wedding. 4) Failed Relationships that Damage your Credit Rating – and Personal Guarantees Love is blind, dumb, and stupid. When you get into a new relationship, common sense flies out the window, and close behind it flies sound financial discipline. Joint bank accounts and personal guarantees are a two headed monster that can come back and bite you on the rear. Sharing a bank account may breed conflict. Whether it’s the roommate, spouse, or business partner, disagreements can arise, and having a shared account may create future issues. As all account holders can equally access the account, they can withdraw, deposit, change details, or transfer funds at any time without the consent or knowledge of the partner. In addition, if an account holder has a poor credit history, it can negatively impact the partner as well. Then there is the issue of personal guarantees. Rule one is that you NEVER sign personal guarantees and rule two is NEVER forget rule one. The moment you sign personal guarantees is the moment you compromise your asset protection. However, avoiding personal guarantees is easier said than done. If you are starting a business, you have no credit track record. For the banks, you are a rookie at business although you may have a strong personal credit record. Bankers, therefore, require that you pledge your house or other assets to guarantee your business credit. The strategy you need to pursue is the following. You need to build a solid credit record of accomplishment in your company. You then need to start fighting with the banks to release those personal guarantees. I know businesspersons who have signed personal guarantees when they start their businesses and then forget about them. Do not forget about them – this is not like your wedding anniversary. You need to fight with the banks to release them as soon as the company's credit can stand on its own two feet. 5) Neglecting Insurance Cover The selling of insurance is the biggest scam since snake oil during the California gold rush. The product is awesome but the way it is sold is the capital of Dodge. There are good reasons for this.No one likes to buy insurance. It is not an impulse buy. No one is filled with joy and satisfaction when the policy on their car needs to be renewed. We don't want insurance but we know that we need it. It is prudent to transfer specific risks to a third party, but prudent does not sell. Insurance companies know their product is unsexy. They, therefore, need to inject it full of collagen and silicone and dress it up in an underwire bra and leather mini skirt. The job of selling insurance is as attractive as sitting in a toll booth in the middle of a dark tunnel surrounded by incontinent bats. To sweeten the deal, insurance companies need to incentivize these salespeople. I have friends who sell insurance. They spend half their time traveling to exotic locations to attend insurance "conventions". All expenses are paid by the insurance companies. We are talking about three to four trips a year to ski in the Swiss Alps, desert camps in Dubai, island hopping in the Mediterranean on private yachts, and private game reserves in the Serengeti. Now that I have had my little insurance tantrum about how insurance is sold, let me reiterate that insurance is awesome and you should have lots of it. In the previous tip, I said that risk is good and you should embrace it and give it a big wet open-mouthed kiss. However, let me clarify this. I am talking specifically about investment risk. Also, I am not saying that you should take risks just for the sake of taking risks. You take risks when the odds are in your favor and the way you know that the odds are in your favor is through education and research. You also need to think of risk in terms of potential return. If an investment opportunity presents 3 points of risk and 10 points of return, then you want to go all-in – you want to sell the house, the wife, the kids, and the pets and fill your boots. If an investment presents 3 points of risk and 2 points of return, you want to run for the hills. Let’s now bring this back to insurance. Let's say that you buy a $50,000 car. Let's assume that insurance on that car costs $1,000 per annum. At this point, you can do one of two things – you can decide to insure the car or your car decide not to insure the car. Let’s now look at the risk-return relationship. Your risk is that some scumbags will take a shining to your new automobile and decide to steal it. That event would result in the realization of a $50,000 loss. You can eliminate this risk by spending $1,000 on insurance. By spending $1,000, you can avoid a $50,000 loss. This is an absolute no brainer. You need to have car, medical, life and as many other insurances as possible. Having said this, do your homework when you buy insurance. Let me give you a quick crash course in insurance. An insurance policy pays a determinable amount of money in the event of a certain event taking place such as wrapping your brand-new Ferrari around a telephone pole. The premium of this policy will depend on several factors. One will be the probability of wrapping the aforesaid motor vehicle around that pole.The more volatile the underlying asset, the higher the probability of that insurable event taking place. Insurance companies do not want men with small phalluses to claim the damages for wrapping Italian sports cars around telecommunication equipment. You may have noticed that I change the wording on the Ferrari. I did not say that insurance companies do not want drivers to crash. I said that they do not want drivers to CLAIM. There is a subtle difference. In 2010, in Mexico, a car insurance company released a marketing campaign with the following message. The byline of the campaign was that the client could tell the insurance company how much they wanted to pay in premium. The insurance company would then design a policy for them.I thought this was marvelous. I gave them a call and said that I was prepared to pay 1 peso in premium. They asked me how much my car was worth, I said 300,000 pesos. They offered me a policy with a deductible of 299,000 – the value of the car minus the 1 peso I was prepared to pay. The higher the deductible on the policy, the lower the probability I will submit a claim. For example, my deductible would have been 299,000.Back to my Ferrari example, assume the deductible is 50,000 pesos.I bump the car against a concrete wall after one too many beers down at the pub with the boys. The damage is 20,000 pesos. That loss is for my account because it is below the deductible. You need to pay very special attention to the amount of the deductible. In many policies, this deductible is either expressed in monetary terms or as a percentage of the insured asset. For example, let us go back to the $50,000 car. Assume the excess is 5% which is $2,500.Assume now you ram the car into a tree and the damage is $3,000. The first $2,500 worth of damage (the excess or deductible) is for your account and the insurance company will pay the rest ($500). The rule of insurance is quite straightforward – the higher the excess or deductible the lower the insurance premium and vice versa. When you buy insurance, you are well-advised to take the time to read the small print. #finance #money #business #investing #investment #entrepreneur #financialfreedom #success #stocks #wealth #trading #realestate #stockmarket #invest #motivation #forex #bitcoin #investor #accounting #cryptocurrency #marketing #wallstreet #startup #trader #personalfinance #entrepreneurship #credit #smallbusiness #goals