An Epiphany From First Class

First Class

One of the best perks of my job is that I get to pretend to be a rich person.

Well, not all the time of course. Like I definitely did not feel rich these past 2 weeks: Staying late in the office, eating at my desk, slaving over Excel sheets till I started dreaming of VLOOKUP commands, and feeling absolutely miserable.

So I got really happy when I got to take a break from it all to fly First Class to Beijing for a work trip. I sipped a glass of champagne, slid down into the overly spacious fine-grained leather seat, and stared out into the setting sun. “I could get used to this life.” I thought, as the flight attendant poured me another glass of champagne.

Being Rich – Gangnam Style

Fast forward to two days later, I was back in Singapore and pretending to be rich again. This time, I was at the Turf Club, entertaining 20 clients who were rich enough to fly First and Business Class on a regular basis and splurge copious amounts of money betting on horses.

I got talking to one of our guests. She was elegant, Irish, and wore a lovely dress with a tasteful set of pearls. Her husband was a Managing Director in an MNC. I could tell she was actually rich (ie: not one of those executives who gain elite status on their company’s money), because she ordered a Coke instead of alcohol. Classy.

We were watching the horses being led out to the track, when she lamented, “I would love to be rich enough to own one of those horses and not have to work so I could train them every day!”

I stared at her as if Justin Bieber had just crawled out of her nostrils. I thought to myself, “Lady – You get to savor the champagne-filled heaven that is First Class every couple of weeks! And you think that you’re not rich enough???

The Law of Relativity

And then it struck me: Being rich is RELATIVE.

That is, relative to who you compare yourself to. When I was a penniless college student, I used to get jealous of alumni who had real jobs and were earning thousands of dollars a month. Now that I was one of them and wallowing in my Excel-induced state of misery, I found myself getting jealous of people who were earning tens of thousands of dollars a month and flying First Class on a regular basis. But they in turn were feeling jealous of other people whom they thought were richer than them. It was mind-boggling, but it made sense.

The truth is, being rich is just a state of mind.

It really doesn’t matter how much money you make or how big your bank account is. I’m not saying that we should all just be happy in poverty – everyone should strive towards a life where they’re not worrying about making ends meet. But it’s a waste of time and energy to feel jealous of someone else’s (perceived) material fortunes.

Instead, I challenge you to start feeling rich right now. Think about how lucky you are to have higher education when there are millions of people who don’t even make it to high school. Think about how great it feels to have the security of a regular job, three meals a day, and a bed to sleep in while others are struggling to make ends meet.

I know it sounds corny, but we often don’t notice how rich we really are.

First Class

Yesterday, I took my family out to lunch. The restaurant was half-empty, served cheap Chinese food, and there were no leather seats with mahogany trimmings or unlimited quantities of champagne.

But the food was tasty, the company was excellent, and my dad was gleeful as hell because the opposition party had just won the Punggol East by-election. I leaned back, patted my Chinese food-filled tummy, and savored how wonderful life was.

So who needs to pretend to be rich? I don’t. 🙂

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Help Me Pick My Title (And More)

So everyone I meet these days has been asking me how my book writing’s been going. So I’d just like to let everyone know right now that it’s been friggin’ awesome.

I blame peer pressure. It started out as a spur-of-the-moment declaration at an Awesome Anonymous meeting to write a small, simple ebook. It has since grown into plans for a full-fledged, analogy packed, complete guide that aims to change people’s lives (or at the very least, get their finances sorted out so they can focus on changing their own lives and the lives of others).

I’m so psyched that I’ve spent at least 3 nights a week working on the book for the past 3 months or so. I’ll blog more on my progress in the weeks/months to come, but first, I’ll need your help to help me decide on 3 things: The title, the subtitle, and the pitch.

I came up with these after going through the results from the recent survey, but I would love to hear your thoughts. Do they stand out for you and make you want to read more? Do they sound as scammy as “How to Get Rich By Becoming Wealthy Making Big Money in Real Estate”? If you saw the title in a bookstore, would you pick it up and/or buy it?

I’ve been blogging free financial advice for close to a year now, and I hope that I’ve helped you out at least a tiny bit in your personal finances. So I’d be super duper grateful if you could take 5 minutes to help me out too. 🙂

This is really important to me, so be brutally honest. Let me know if this is awesome, or if you have a totally different idea on how I should approach this. Leave a comment, or you can email me at cheerfulegg@gmail.com.

Ok, Let’s do this:

The Title

I’d like the title to be something eye-catching and different from the other sleazy investment books out there. I couldn’t really think of a better title other than the subcaption of my blog: Hatch a Rich Life. The word “hatch” is meant to speak to people who’re just starting out in their personal finances, while “rich life” is the eventual goal.

The Subtitle

I’ve got three options for the stuff that’s supposed to go with the main title. I.e:

Hatch a Rich Life: _____;________

Deciding on the subtitle might help if you take a look at the pitch first to get an idea of what the book is about (scroll down). And yes, I know that I use the word “sexy” and “awesome” a lot. I just wanted to convey that the book is targeted at an audience who’s a little cooler than crabby 50-year old men who spend all their time quibbling about “call options” and “stock warrants”. Not that I have anything against 50-year old men..

Subtitle 1. Build A Simple, Sexy, Self-Run Personal Finance System in 5 Weeks

Subtitle 2. A Personal Finance System For Young Sexy Singaporeans

Subtitle 3. A Simple, Sexy, Self-Run Personal Finance System for Young Singaporeans

Pitch

Think of this as what you’d read on the inside flap of the book. I’ll be using this to tell people what the book is about, and why it’ll be awesome for them.

Imagine waking up on a sunny Saturday morning to find that your robot slaves have been working hard for you while you slept. They’ve built up your savings account, paid off your credit card bills, saved you money in taxes, and invested your money into your early retirement portfolio, all without you lifting a finger. With your system taking care of all that boring “financey” stuff, you can now focus on taking over the world, cooking breakfast for mum and dad or… going back to sleep. Life is good.

Forget arbitrary financial advice and random stock tips. Hatch a Rich Life is a 5-week program to master your money and turn your financial life into a system – a simple, low-maintenance system that will put you way ahead of your friends on the path to a rich life.

I’ll cover the surprising truth on why most young Singaporeans are getting poorer every day. I’ll reveal exactly what you should save for and the most effective way to do it. You’ll discover the freedom of spending on the things you love without feeling guilty. You’ll learn how to dominate Wall Street professionals when it comes to investing. And finally, you’ll learn how to integrate everything into a set of autopilot systems that won’t take more than 15 minutes a year to maintain – leaving you time to focus on living an awesome, rich, life.

That’s It For Now!

Okay, that’s pretty much it for now. Again, please be brutally honest and let me know if this is something that speaks to you. Is this what you’d like to read about? Leave me a comment / email me. I’d love to hear from you 🙂

Why Whole-Life Insurance Is Like Picking Your Nose

There are some things that I would never pay someone to do for me. Like brushing my teeth. Or reading. Or organizing my iTunes library. Or picking my nose. Even if there was someone offering  these services on Craigslist, I wouldn’t pay him a dime because 1) he’s probably expensive as hell and 2) he would probably do a shitty job. Like I have serious doubts that a Professional Nose Picker would be able to offer as much nose picking satisfaction than what I would have been able to do myself.

Now think of an insurance company as a dentist offering additional professional nose picking services on the side. I’d pay him to protect my teeth – that’s his job. But hell to the no on the nose-picking services. He’d be expensive, and I could totally do it way better if I did it myself.

Whole-life insurance plans (also commonly known as “investment-linked plans”) is kind of like a professional nose-picking service. My insurance company’s job is to protect my family against the risk of a huge anvil plastered with the words “ACME” falling on my head. But it has no business poking its head in my investments, which should be growing as time goes by so that I can buy my own badass anvil protection.

But the sad fact is, most insurance agents are incentivized to sell you whole-life investment-linked plans, or a similarly pricy product. The result? Most Singaporeans blindly listen to them, because we assume that they’re “professionals”.

But the professionals may not always have your best interests at heart (Think of all the doctors who prescribe unnecessary -and costly- treatments because it helps to line their pockets, but that’s another rant I have altogether). There’s a better way to do this: Buy Term and Invest the Rest (or BTITR for short, because Singaporeans love acronyms).

So why BTITR?

1. It’s simple

Term insurance is the simplest form of insurance that exists. You pay monthly/annual premiums for a period of time, and if you die/get injured/get killed by Loki’s Chitauri army before the Avengers save you, your insurance company pays you a helluva lot of money. It’s simple – you’re not mixing your savings, or investments, or speculation, or livelihood, into your protection needs. Contrast this with whole-life insurance, where you have to worry about where you’re gonna invest your premiums, how your funds are doing, and argue with your agent on the administrative fees. Way too complicated.

2. It’s cheap

The premiums for term insurance are often around 10x less than those for whole-life insurance. You’re paying for the simplest protection needs – so there really isn’t much administration that needs to go into servicing your plan, which translates into a cheaper premium.

Tan Kin Lian (presidential candidate that got an embarrassing number of votes at the last Singapore presidential election, but gives really good financial advice on his blog nonetheless) estimates that you would pay only $10,800 over 30 years for term insurance, compared to $180,000 over 30 years for a whole life insurance plan with the same coverage. This table also compares how much cheaper your premiums will be for term vs whole life.

3. You get way better returns by investing on your own

This is my favorite part. Instead of spending a bomb on whole life insurance, buy term insurance instead, take the amount you saved and invest it in a low-cost index fund.

Using conservative assumptions, Tan Kin Lian shows pretty decisively that you would end up with more money by investing on your own instead of relying on an insurance company to invest on your behalf. To give you an idea of the figures, you’d end up with around $390,000 if you’d invested on your own after 30 years, vs approximately $270,000 if you’d relied on the insurance company to invest for you. And the difference is even greater if you extend the coverage period.

Why the difference? The key is that 15-20% of your premiums go into administrative fees and commissions for servicing your account in a whole-life insurance plan. And for the remaining 80% that does get invested into unit trusts (or mutual funds, as they call ’em in the US), you’re charged an annual “management fee” of 1-2% of your funds. After all of these fees, your whole-life insurance plan should return approximately 2.5% per annum, if you’re lucky. Contrast this to the return of an index fund like the STI ETF, which should return at least 5% per annum even if you’re conservative. The difference between 2.5% and 5% may seem puny, but extend that outperformance to 30 years and that translates into a whopping $120 grand.

So don’t be a pansy. Buy term and invest the rest, and have fun picking your own nose.

Being A Sucker for Starbucks (and Insurance)

So I have this friend who only drinks Starbucks coffee. And I’m not talking about cuppacinos, or lattes, or espressos, or the other fancy-schmancy drinks Starbucks is famous for. I’m talking about plain, regular joe, the kind that doesn’t really take any effort to brew. My friend buys a tall “café Americano” every day on his way to work, and pays $4 to drink it out of a sexy Starbucks cup, with a cute little coffee cup sleeve, for a beverage that doesn’t materially taste any different from the home-style brew you’d get at your local coffee shop. Even Starbucks concedes on its website:

“While the Americano is similar in strength and taste to American-style brewed coffee, there are subtle differences achieved by pulling a fresh shot of espresso for the beverage base. The best way to discover these nuances, of course, is to try a cup yourself.” 

Translation: Starbucks can’t tell you what the difference is either.

In terms of taste and how well it keeps me awake, I’ll contend that the 50 cent cup of coffee from my office canteen offers just as much satisfaction as a $4 cup of Americano. Just ask my cubicle neighbors, who have to put up with my moans of satisfaction and I slurp my morning cuppa.

Paying more for something doesn’t necessarily mean that it’s better.

We talked a little bit about insurance and why it rocks, but the type of insurance you get matters too – something I learnt the hard way.

6 years ago, my insurance agent scammer financial planner sold me an investment-linked plan that cost me $100 a month for a coverage of $100K. Back then, it seemed like a good idea – I’d be able to invest in a sexy commodity fund, get coverage from death and disabilities and other Scary Things In Life, and when my units appreciated in value, I’d be able to cash out and buy a diving pool filled with crisp bank notes, bitches!!! Or so I thought.

A couple of years ago, I decided to pull back the hood on these ILPs (Investment Linked Plans) – Checking through the prospectus (something I should’ve done before I signed it, but I was 21 years old and clueless) I realized that a huge portion of the premiums paid – around 15% – went straight into paying off my agent’s administrative fees and commissions. On top of that, the funds I was invested in charged a management fee of around 1.5%, absolutely huge when you compare them to the management fees of passive index funds – around 0.1-0.5%.  After all the fees and charges, ILPs average a measly return of around 2.5% per annum, which isn’t even enough to beat inflation. Goodbye, superdamnawesome bank note-filled diving pool!

I didn’t know it back then, but I could’ve bought another type of insurance and increased my coverage while paying a lower premium. I could’ve then taken the difference and invested it in a low-cost index fund, and after 30 years would’ve been able to afford that diving pool I was talking about earlier.  Whtheck?! Yes indeed – it’s called term insurance, and I’ve officially joined the camp of “buy term and invest the rest”. But more on that later.

The thing is, most insurance agents scammers financial planners will probably try to push the more expensive, frills-laden product on you, simply because of the way their incentives are structured. Agents are paid commissions from whatever they sell you, and it’s a pretty good assumption that the higher your premiums, the more you pay out in commissions. So they’re incentivized to sell you the most expensive plan you can afford, not because it’s the best for you, but because they’re saving up for their own damn diving pool.

So just because your brother-in-law is trying to sell you that sexy investment-linked plan with the high premiums, doesn’t mean that he’s got your best interests at heart. I’d recommend treating all insurance agents like how you would treat financial sleazeballs: do your research, question everything and take all the time in the world to decide. If you live in Singapore, there are plenty of choices for you to choose from – don’t be afraid to shop around. This decision is potentially worth tens of thousands of dollars, so it’s worth taking it slow.

Don’t get me wrong. I’m not hating on all investment-linked life insurance plans. They can be suitable for certain types of people, such as older people who have to pay much higher premiums for term plans. But if you’re young and healthy and sexy like me, I really don’t see any reason why you would fork out more money for a shitty investment. It just doesn’t make any sense.

I’ll be blogging a little bit more about term insurance and why it beats life insurance hands down for young people. In the meantime, how many of you have insurance plans that you’re less than happy with? Do you think we should change the whole structure of incentives for insurance agents? Let me know 🙂

Death of A PC (And Why Insurance Rocks)

So yesterday, my work computer died. Like completely, irrevocably died. I tried to resurrect its poor heart by pushing “Please wake up” in Morse code on the power button, but to no avail. The damn machine remained as lively as a librarian’s toenails. It was 9.04am. May it rest it peace.

“DAMN YOU, TECHNOLOGY!!” I yelled, as lighting flashed across the sky. Okay, I exaggerate, but I was pretty damn frustrated. I really, really, really needed my computer to work this week because I’m moving departments (yay!) and needed to teach a colleague how to do my old job. If I didn’t, he wouldn’t be able to do his job well and I would just ruin things for everyone.

And so I was pretty frustrated, partly because things like computer crashes were never supposed to happen to me. They happen to people who watch porn in the office, or download music into their work computer, or don’t click the “eject” button before removing their flash drives. I didn’t do any of those things – I treated my work computer like a baby, but the damn thing still crashed on me! (If my employers are reading this: Obviously, I’ve been working way too hard. Time for a salary review?)

But after crying over the remains of my poor computer, something struck me that totally made my day – Last Friday, my colleague decided that it was a good idea to save a copy of my files onto his flash drive so that he could go through them over the weekend. The flash drive was booted onto a spare desktop, files were copied, and lo and behold, I was up and running again. THANK YOU, USB!!!!

So this incident got me thinking – you never really know what the hell is going to happen to you, do you? You could run virus scans regularly and still crash your computer. You could sweat it out on the running track 3 times a week and still die from a heart attack. You could drive slower than a granny on a tricycle, and still get hit by a speeding maniac taxi driver (which is like, all of em). Life is unpredictable as hell, and no matter how careful you are, or how much preparation you make, there will be something that you didn’t anticipate, and Murphy’s Law states that that is the exact thing that will happen.

I’m not an insurance agent (or a ‘financial planner’ as they call themselves these days – gawd, what a misnomer), but I was talking about insurance with a friend over drinks some time last year. She felt that insurance was something that was probably good to have, and something that she should look into, but it’s like preparing for one of those far-off possibilities that you could get cancer, or crippled, or die. It just seems like almost an impossibility when you’re 27. Yeah, I know, I feel that way too.

But I’ve also read the work of Nassim Nicholas Taleb, who talks about his theory of “black swans”. (No, I’m not talking about the Natalie Portman movie here, though that was awesome). His contention: just because you’ve seen white swans all your life, doesn’t mean that you can conclude that black swans don’t exist. Because all it takes is for you to see just one black swan, and that causes your whole theory to come crashing down. And the nature of “black swans” (the fashionable term for “low probability, high impact events”) is that they can sometimes cause some serious damage.

So just because it’s never happened before, or just because you think you’ve taken all precautions, doesn’t mean that you are completely safe. Smart, savvy and financially independent people know that anything can happen that could destroy your savings in an instant: the death of a breadwinner, a hospitalization of a loved one, or your house burning down. So they take steps to mitigate that risk by getting insurance. To be honest, you may never actually use it, so lots of people see it as throwing money away. But I’d rather shell out a little bit of money every month, to be able to sleep soundly knowing that I’m insured against the risk of wiping out my savings and investments that I’ve worked so hard to build up!

Note: I think insurance is important, but don’t get me wrong here – I’m not saying that you should run out and buy like a ridiculously expensive plan and pay $20K a month in premiums. In fact, I think the insurance industry is structured in a way that incentivizes agents to sell certain plans that may not be in the best interest of the insured – More on that later! I’ll also blog about the types plans that are the most cost-effective, while providing the protection you need. Stay tuned 🙂

It’s Not Always What You See

Came across this picture on Facebook today and loved it. The first of the 19 things your suburban millionaire neighbor won’t tell youOver the long run, you’re better off if you strive to be anonymously rich rather than deceptively poor.

Think that fancyass dude with the flashy sports cars, the country club memberships, and the expensive clothes must be helluva rich? Maybe… or maybe not. Paradoxically, a dude with a multimillion dollar income could be way poorer than you. Just ask the 60% of all NBA players who go broke 5 years after retirement. The mansions, the cars, the private jets – the owners had them all, yet couldn’t avoid bankruptcy.

Your millionaire neighbor? Probably drives a 9-year old car, lives in a modest house, spends less than what he earns, and pays off his credit cards in full every month. Warren Buffett, the world’s greatest investor, drove a humble 2001 Lincoln Town car with a license plate that read “THRIFTY”. He auctioned it in 2006 on eBay for charity, and subsequently bought the most expensive car he ever owned: a $55,000 Cadillac – probably cheaper than most cars in Singapore.

So screw jealousy. You can’t tell how rich people are just by looking at their flashy possessions.  Chances are, you just might be richer than them already. 🙂

Why Work Doesn’t Happen At Work (and What You Can Do About It)

It’s TED Thursday again! This week’s TED Talk is one of my favorites – it’s about how we all spend the majority of time at the office, but it’s paradoxically one of the least effective places to do your work in. In the office, we’re constantly bombarded with a flurry of emails, calls, meetings, and that one annoying colleague that seems to pop by your cubicle at the WORST times ever. Which leaves me wondering: how the hell does anyone get anything done in this place?

Jason Fried offers a couple of solutions: 1. No Talk Thursday, 2. Passive Communication & 3. Canceling Meetings. While I highly respect Jason and those are cool ideas to think about (I love his description of managers – that they were put on this earth to interrupt people), I think he needs to delve a little deeper and address the crux of the problem here: that we’re all in a system that encourages you not to do effective work in the office.

Damn Reports, Meetings and Managers – not (that) evil

Most people find it hard to do actual, tangible, meaningful work at the office because they’re tied up with a stupid report or a lame meeting. No, I don’t care what you say about reports and meetings – when was the last time your customers ever told you “Hey, good job on that meeting / TPS report you did!” Yet, we have to understand that it’s part of a system, and meetings and reports are actually surprisingly necessary especially if you work in a large corporation, like I do. As a company gets larger and larger, it needs to spend more and more resources on coordination, governance, pleasing shareholders, etc. Without meetings and reports, giants we’ve grown to love like Coca-Cola, Mircosoft, IBM and Proctor & Gamble wouldn’t exist. So yes, there is a reason to this necessary evil after all.

Another hard fact of working life in a large corporation: managers. It’s not that they WANT to interrupt you from doing meaningful work, it’s because they don’t have any other choice – it’s their job. Think about it: You and I get things done by setting aside half a day and focusing our energies on a particular project. We zoom in on a problem, define which areas need to be improved, craft some possible solutions, test them out, and put them into practice. Bam! Our customers’ lives are improved. Yet, for managers, they don’t have the time to go into all that detail. Their job is to manage a dozen or more of these projects – their job is to figure out what the hell is going on with them, then delegate tasks to people like you and I. THAT’S why they hold so many damn meetings and need us to submit so many reports. They practically spend all their time attending meetings and reading reports – because that’s how they get things done. They’re not evil (well, most of them anyway), they’re just doing their job.

So what the hell can we do to get stuff done around here?

We’re not going to be able to change those facts of corporate life. Managers, meetings and reports will always be there, whether we like them or not. If you can’t stand them, go become an artist. So I don’t think Jason Fried’s recommendation of canceling meetings really addresses the crux of the issue. Neither is designating half a day per week for total silence going to help out that much. Here’s my take on what you should do to get actual work done in the office (so much to say on all these tips, but I’ll talk more about them in subsequent posts!):

1. Do one thing, with no distractions. Literally close your email client, download everything so you can work offline, and go to somewhere private like a conference room to really work on something. This is an extension of No Talk Thursday, but I think we’ve gotta extend that to become a lifestyle. I try to do some sort of variation of this on a daily basis, from a couple of hours to almost the entire day.

2. Ruthlessly reject meetings you can’t add any value to. Here’s a good guideline: Every time you get invited for a meeting, ask yourself if you’ll be actively contributing to it (ie: speaking and giving your input throughout the meeting). If not, then you’re not needed there. Reject the invitation and read the minutes instead. Meetings have two purposes, and two purposes only: conflict, and coordination (I freakin HATE meetings that are called to inform everyone about stuff). And if you’re attending, you’d better damn well be actively contributing.

3. Don’t spend too much time on reports. Literally shave it to its bare minimum. You think anyone besides you is going to read anything more than 2 pages long? Your report is a necessary, but boring, fact of life. Do it if you have to, but don’t let it stop you from doing real, meaningful work.