Sunday, 29 January 2017
7 Cures of A Lean Purse
Book Title : The Richest Man in Babylon
Author : George S Clanson
The First Cure
Start Thy Purse to Fattening
Always put aside 10% of what you earn. Imaging every 10 dollar you earn put aside 1 dollar and place into your other purse, eventually the purse will start to be fatten.
The Second Cure
Control Thy Expenditure
People start to ask how can a man save 10% of what he earns when the money he earns is not enough for his necessary expenses. Now let me ask you, everyone one of us earns different amount of money and some have much larger family to support. However most of us have one thing in common which is a lean purse.
This is happening because most of us confuse the necessary expenses with our desires. Study thoughtfully the living habits; there will be some expenses that can live without. Start budget every expense and make sure put aside 10% of what we earn (net income after tax and pension fund contribution) every month.
The Third Cure
Make Thy Gold Multiply
What to do with the extra money, make the money works for you even when you are sleeping. This is what we called passive income. The money can invest in some instruments that able to make a return such as dividend paying stocks, fixed deposits and etc. Use the money that the money earned to make more money.
For example if we place 2400 dollar a year (200 per month) into an investment of 3% per annual (Malaysia current bank fixed deposit rate) from age of 25. When reach the retirement age of 60 (35 years) the amount in the bank will be 145,109. The total amount of money that invested is only 84,000 dollar which is 72.75% return.
What if the investment earning 5% per annual, when retirement the money in the bank account is 216,769 dollar which is 2.58 times the total investment cost.
The Fourth Cure
Guard Thy Treasure from Loss
We must always protect our money we earn. Warrant Buffet, the world best value investor have only two rules, rule no 1 “never loss money” and his rule no 2 “never forget rule no 1”.
Don’t go and ask real property agent for stock market advice and vice versa don’t go ask stock broker for real property advice. Place the money into the right person hand. Besides that, always be realistic, there are some investments out there claim able to have 50% return per annual think twice, Warrant Buffet, the best investor in the world only able to make 25% annually for the past 50 years.
The Fifth Cure
Make of Thy Dwelling a Profitable Investment
Many people out there pay landlord rental to stay in a house where they got no right for the capital gain in of the house. If we able to use the rental we pay to the landlord to pay installments of a house. After 30 years (all the installments had paid out), we owned the house and all its capital gain. Hence the fifth cure is owned a house.
The Sixth Cure
Insure a Future Income
Income come every month to cover our expense when we are able to work for its (active income). What if one day we lost the ability of works due to old age or accidents? We shall find a plan to insure our future income for our self and our family. We can make these by buying a insurances. There are many insurances out there, life insurances, medical insurances, car insurances, investment linked insurances and etc. We shall at least have life insurance to cover our family expenses if we lost our ability to work and medical insurance to cover our medical fee. We shall not save money on the insurances premium.
The Seventh Cure
Increase Thy Ability to Earn
Ability to earn can be increase by learning new skills. Besides that, we shall always look for challenges in our jobs because through challenges only we grow.
“The Richest Man in Babylon” is a good book to be read by all ages. Its descripted financial planning and personal wealth in a very simple languages. If you found yourself struggling to pay off your debt every month, this book is the book you shall read.
This book can be purchase from:
MPH online (Malaysia) :-
Amazon (Others) :-