What Chinese New Year Blackjack Taught Me About Money

blackjackOkay, hypothetical scenario.

Imagine you’re on your honeymoon in Las Vegas, chilling in your swanky hotel room while your spouse is taking a shower. While checking out the minibar, you come across a $5 gaming chip in one of the drawers – the previous occupant must have mistakenly left it there.

You take the $5 chip and head downstairs to the roulette tables, where you bet it on your favorite number: 25. To your surprise, the ball lands on 25 and the dealer hands you $175. You decide to let your winnings ride by betting it on 25 again. Once again, the ball lands on 25 and your stash grows to $6,125. Taking this as a good sign, you bet it again and win, netting you $214,375.

You’re on a roll! You’re still in luck in the next round, which gives you $7.5 million dollars, more than what most people will ever earn in a lifetime. You bet it all on 25 again and amazingly, you now have $262 million, which makes you richer than Mitt Romney.

You decide to try your luck one last time. If it works, you’d be worth almost ten BILLION dollars. Sadly, this time the ball plops onto the number “00” with a sickening thud, and you lose all your winnings. You walk back to your hotel room and tell your spouse you were playing roulette downstairs. Your spouse asks how you did.

“Not bad,” you reply, “I only lost $5.”

The Great Chinese New Year Mystery

Sooooo…. What does a botched up roulette game have in common with Chinese New Year?

For most of us here in Singapore, Chinese New Year involves a helluva lot of eating, answering awkward questions about why you’re not married, and… gambling.

This year, I found myself wondering why Chinese New Year was such a popular time for gambling. Most of the time, I scoff at the hordes of people who frequent casinos and throw their hard-earned savings away. But whenever Chinese New Year rolls around, I find myself stumbling to blackjack games like a delirious addict on too much bak kwa.

After pondering over this curious dilemma for a couple of days, I had my conclusion: The culprit was the innocuous little ang bao.

(Side note: For my international friends who don’t know what “ang baos” are, they’re red envelopes filled with cash that your relatives give you during Chinese New Year while you’re still unmarried. #norushhere)

Mentally Accounting for Mental Accounting

Psychologically, receiving an ang bao has exactly the same effect as finding a $5 chip in your Las Vegas hotel room. Namely, they’re both “found” money, which inflicts this interesting psychological effect on you known as mental accounting.

Nope, mental accounting has absolutely nothing to do with your ability to multiply 17 x 32 in your head. Instead, it’s a psychological phenomenon that causes you to treat money differently depending on where it comes from, where it is kept, or how it is spent. So mental accounting posits that you’d treat $100 from an ang bao very differently from $100 you’ve worked hard to earn. Mental accounting causes you to spend $500 in your vacation allowance way more freely than you would for the same $500 in your savings account.

But mental accounting has a dark side too. It causes you to be flippant when you’re dealing with “surprise” or “additional” money, like your bonuses, or your gambling gains. Ever find yourself winning a hand at poker, and then aggressively calling or raising in subsequent rounds? That’s mental accounting at work, and it could easily work against you.

Two Systems to Prevent You From Getting Screwed

The strategy to prevent mental accounting from screwing with you is to set predefined systems, something I practice as much as possible. Go to all gambling games with two predefined rules: 1) a stop-loss and 2) a lock-in percentage.

Most people are familiar with a stop-loss, which is a predefined amount you’d be fine with losing. But few people implement a lock-in percentage, which kicks in once you start winning. For example, if I set a lock-in percentage of 20%, I pocket 20 cents for every dollar I win and don’t touch it for the remainder of the night. These rules have helped me to save hundreds of dollars over the past few years.

But the awesomeness of the lock-in percentage rule goes way beyond Chinese New Year blackjack games – Think about how you can apply it to your bonuses, allowances, inheritances, rewards, rebates, or any sort of “found” money you come across. For example, predefining a rule that states you’ll save 50% of your bonus will help you to save way more effectively than the average cubicle dweller who blows his entire bonus on dumb things to overcompensate for his sad, sad life.

When applied right, predefined rules could potentially save you tens of thousands of dollars throughout your lifetime.

Psychology > Tips

Ask most people how they handle their personal finances, and they’d give you all sorts of tips and tactics like choosing the right credit cards or investing in some obscure growth stock.

However, while we don’t think of it often, it’s interesting how psychology has such a disproportionate influence on our ability to hold on to and grow money. A mastery of a couple of psychological principles could be way more effective than hundreds of money tips and tactics.

So remember this the next time you’re at a roulette table. Don’t say I didn’t do nothin’ for ya. 🙂

Footnote: Definition of mental accounting and casino example taken from “Why Smart People Make Dumb Money Decisions” (aff link) by Gary Belsky and Thomas Gilovich

Image credit: Images_of_Money

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. 🙂

The 2012 Cheerfulegg Review

Credit: http://www.flickr.com/photos/joka2000/80198350/sizes/m/in/photostream/All the blogs in the world are reviewing 2012 at the moment. In summary, the world didn’t end, Obama got re-elected, the Euro crisis didn’t blow up, and most importantly, Singapore saw a record number of sex scandals. And they said Singaporeans don’t have enough sex.

So I thought it’d be a good time to do a little personal review of my own. I got this idea off Chris Guillebeau’s framework on annual reviews, which he cites as probably the best decision he’s made in terms of working towards multiple goals simultaneously (He’s probably one of the most successful bloggers around, so there’s definitely something going on there).

So this post is the first of a 2-part series on annual reviews. In this post, I’ll review 2012 and what it meant for cheerfulegg.com and for parts of my own life. I’m basing it off Chris’ methodology, and if you haven’t done a 2012 review of your own yet, I highly recommend that you give it a try.

It involves answering 2 questions:

  1. What went well this year?
  2. What didn’t go so well this year?

Yeah, I know it sounds like one of those corny-ass “After-Action Reviews” that your company is so fond of doing – I thought it was pretty lame when I first read it too. But after spending an entire day reflecting on it, I got pretty surprised by the results.

So – enough preamble.  Let’s get started.

What went well this year?

(Please don’t take this section as a bragfest. I try to be as objective and transparent as possible in any reflection and including both the good and bad stuff)

*I grew and developed cheerfulegg.com to a level that I’m pretty happy with for its one-year existence. It’s probably one of my proudest accomplishments of 2012. An idea of what this blog has managed to achieve in the past year:

  1. 71 new posts, to grand total of 77 posts since it started in Dec 2011.
  2. A post that got featured on WordPress’s Freshly Pressed section, generating a record 16,000+ views for that month, and 220+ WordPress followers.
  3. A brand new “cheerfulegg.com” domain name
  4. A cheerfulegg VIP list, which grew to 85 subscribers within a couple of months
  5. Being accepted on blog aggregators theFinance.sg and PaperBlog.com

* I developed, followed, and refined a personal finance system. Writing a book about it really helped because it forced me to solidify the ideas. It isn’t perfect yet, but it’s at a point where I’m about 80-90% satisfied. Will be sharing more of it in some publications that I’m working on.

  1. I apologize if some of you were confused by my previous posts about multiple saving and spending accounts, sometimes with different names and purposes, etc.  It was all part of a process of trying it out and making improvements to make the final version simpler and more effective for everyone. Sometimes I just had to write about it here in order to crystalize the idea.

* I successfully achieved my saving and investing goals, entirely thanks to a system of automation I set up to take care of everything.

* I introduced fixed income and Singapore asset classes into my portfolio, adding a further level of diversification. Contemplating if I should add gold in the coming year (Its historical real returns aren’t the best, but it might be a good diversifier. Check out this blog for more details. I’m still thinking about it though).

*The markets have also been pretty kind to my portfolio this year, which was really encouraging for my first full calendar year in sticking with a passive, indexed-based investment style, which has worked out pretty well thus far.

 What didn’t go so well this year?

* I severely underestimated the effort required to write a book. After spending the best part of August – November writing for three nights a week, I had a 82-page first draft, which was about 60% of my planned book. And I hated it.

It’s not terrible, but it certainly fell short of the vision I had for it as something fresh, engaging and different from the other “how to get your personal finances in order” books.  I’m still going to finish writing it, but I’m now humbled by the effort and the dedication a project like this requires. In the meantime, I’m headed back to the drawing board and I’m only going to ship it to you once I’m satisfied with it.

* I attempted to start some freelancing projects, which pretty much fell through because I couldn’t find an idea that suited me, or that I had enough time for.

* I got fatter this year. Fareals. A combination a dropping metabolic rate, a new job rotation that required me to sit at my desk for longer hours, and my focus on cheerfulegg.com and the book resulted in some serious weight gain. An exercise plan for 2013 is definitely in order. I also definitely didn’t sleep as much as I would have liked.

* I made a conscious decision to give up dance, at least for now, even though it was my entire life just 2 years back. I’ve been pursuing it as a passion for 12 years now, but I really  want to pursue new adventures with this blog and the book. With a full-time day job, it’s pretty much impossible to commit to writing AND dance at the same time after office hours. Still though, I get that twinge of longing whenever I watch YouTube videos.

 Possible goals for next year

I’ll talk more about these after I’ve finalized my plans for 2013, but 2 things that are definitely in the works are:

* Going back to the drawing board to redefine the book, interviewing people to really understand them and coming up with fresh, new ideas. Check out my room wall at the moment:

Ideation

* I now know that this is going be an ongoing process, and it might take several months or more than a year before I see some results. However, this isn’t going to stop me from shipping some stuff out for everyone who’s been waiting patiently for it.

* In the interim, I’m working on pushing out 2 mini-products in 2013 – which are a lot less complex, but still pretty damn awesome. Stay tuned for those 🙂

Happy 2013 everyone!

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 🙂

The Great Sit-Up Challenge

I like to do many things on a whim. So when I saw this picture on my Facebook newsfeed, I decided to re-post it on my wall, with the text:

“I’ll do 5x worth of sit-ups on however many likes I get in 24 hours. Deadline is Tuesday 8:43am. Bring it on, bitches ;)”

Essentially, it was a challenge: For every Facebook “Like” I got in 24 hours, I’d do 5 sit-ups. I figured the most I’d do was like 200-ish – It was such a lame challenge that I figured no one would give a damn anyway.

But I completely underestimated my friends’ propensity to sabotage: I got 111 Likes, which meant that I had to do a grand total of 555 sit-ups.

Now, you must understand that for all my talk of being sexy, I do not actually have a six-pack of steel abs (even though I like to occasionally delude myself sometimes). In fact, 2 years of sitting my ass on an office chair have consolidated whatever stomach muscles I used to have (fyi for my international friends – all Singaporeans have to serve almost 2 years in the military) into a solid, and slightly wobbly, one-pack on my belly.

But hey, what the heck – I figured this would be a helluva opportunity to get started on getting those muscles back. So I approached it like how I would approach any big project, which was to:

1. Set a goal

The goal had to be tangible, quantifiable, and specific. Some corporate programs would ask you to do it SMART (specific, measurable, attainable, relevant, and time-bound) – I’m allergic to corporate jargon, but you can totally adopt it if that floats your boat.

So this was perfect – I had to do 555 sit-ups, and I knew that I wouldn’t be able to finish it in a day, (like I said, my one wobbly pack isn’t the most optimized for such punishment) – so I set my target for the end of the week – Sunday, which gave me 6 days to complete it.

2. Be accountable

I posted my deadline on Facebook status for all the world to see: 555 sit-ups by the end of the week. A friend commented: YOUR HONOR IS AT STAKE, YOUR INTEGRITY. DON’T LET YOURSELF DOWN. DO IT.

Talk about pressure.

The most common reason for failure is not following through, which is why accountability is critical. Tell your boss that your performance this year should depend on the success of this project. Pay your friends $5 everytime you don’t meet a deadline. Stake your integrity and honor on something. And be serious about it. Don’t be a pussy.

Yesterday, I attended a gathering of awesome people (termed “Awesome Anonymous” – which is a freakin awesome name btw). We each had our own individual projects we wanted to complete, and we all agreed to hold each other accountable by meeting every month and reporting on how we were doing. Miss your deadline, and risk being ridiculed and buying everyone coffee. Helluva motivation.

3. Break it up into smaller chunks

Any big task can be broken up into smaller, less scary, bite-sized chunks. For mine, it was a matter of 93 sit-ups a day. Even better, when I was up to it, I did more than 93 a day and it totally motivated me to finish ’em even earlier than expected. Focusing on a smaller chunk also makes you less likely to procrastinate or get distracted.

So what does this have to do with hatching a rich life? Well, do you remember a time when you just graduated from college, wanting to change the world, to fulfill your potential, or just to do something superdamnawesome? Yet, somehow along the way, we might have gotten lost, spending most of our time living workday to workday, bar to bar, movie to movie, in a zombie-like state of existence that isn’t very dangerous… or exciting. I suspect most of the awesome things in your change-the-world / be awesome list are probably a little bigger and a little tougher than your average to-do list at your day job. Tackling them could seem a little daunting right now.

But hey, if a lazy ass like me can do 555 sit-ups in a week, I’m pretty sure you can do something awesome too 🙂