My Passive Income (Month of Jun 10)

Here is the summary for month of Jun 10:
CPF(OA): $190 (from interest and dividends)
Cash: $1800 (from dividends and other passive incomes)
Total: $1990
Target: $3000
Achievement: 66.3%

There are no changes in my passive income 1 and 2.

For passive income 3, there is an increase. I have sold all my 15 lots of SingPost shares for a profit and I have bought 7 lots of Starhub shares this month. I also have bought 2 lots of Singtel shares.

For passive income 4, there is increase of $15. However since it is still in the building stage, I will be expecting it to go up and down. In my post "Forget about achieving Financial Freedom if you do not have perseverance or refuse to learn.", I have mentioned that it will take time and effort to build up passive income.

The Monkey Experiment: The Habit Virus

Just to share what I have read from the internet which comes from a book titled "The NLP Pocketbook" by Gillian Burn.

Here is the story:
In a research study, five monkeys were placed in a cage with a ladder leading to a bunch of ripe bananas. One monkey headed towards the bananas, but hidden at the top of the ladder was a water spray which showered water over the monkey. So it abandoned the attempt. Another monkey tried; it too was sprayed with water. Each monkey in turn tried, but each was doused and eventually gave up. The researchers turned off the water spray and removed one monkey from the cage, replacing it with a new one. The new monkey saw the bananas and immediately tried to climb the ladder. However, to its horror, the other monkeys leapt up and stopped it.

Over time the researchers removed and replaced all the original monkeys. Every time a newcomer approached the ladder the other monkeys stopped it from climbing up. None of the remaining monkeys had ever been sprayed, but still no monkey approached the ladder to reach the bananas. As far as they knew that was the way it had always been done, and so the habit was formed.

What do we learnt from this story?
Sometimes we do not know the reason why we cannot do certain thing. Having feared by the unknown consequence for trying it, we have to blindly accept when people tell us not to do it.

Lifelong Asset Skills

Lifelong asset skills are skills that you have learnt and be able to benefit from it throughout your life even at old age. These skills seldom get obsolete and these include learning to play a piano and mastering a few foreign languages which are normally not taught in school.

These skills have to be trained at a very young age as they will get harder when you get older. In the past, when I was young, I am not able to be exposed to these skills and it is almost impossible for me to learn them now.

However as a father now, I would like to expose my toddler to these lifelong asset skills. So instead of buying expensive toys or clothes for my daughter, or buying expensive gadgets for myself (yes, no iPhone for me), I would rather spend more money to enrol my daughter to these courses. I am hoping that she is able to master one or two such skills, so that she will be benefitted from them in the future.

The Rule of 72

The Rule of 72 is a simple formula to out find the number of years required to double your money at a given compound interest rate. Here is the formula:

Years to double your money = 72 / Interest Rate

For example, if your bank is giving you 3% compound interest, you will divide 72 by 3, which means that you will take 24 years to double your money.


This formula is useful to understand the nature of compound interest. One thing to note that a percentage point difference in the interest rate will cause a big difference in the long run in the amount of time to double your money. For 1% interest, it will take 72 years to double your money, and for 2% interest, it will take 36 years to double your money. That is a big difference of 36 years!

Bought a book titled "The Black Swan" By Nassim Nicholas Taleb

I have just bought a book titled "The Black Swan" by Nassim Nicholas Taleb at Borders Parkway. The cost of the book is $32.90, but I only paid $22.90 as I have a $10 voucher card.

Taken from description at the back cover of the book, this book is all about Blacks Swans: the random events that underlie our lives, from bestsellers to world disasters. Their impact is huge; they're nearly impossible to predict; yet after they happen we always try to rationalize them. A rallying cry to ignore the 'experts', The Black Swan shows us how to stop trying to predict everything and take advantage of uncertainty.

I hope to finish the book in this month and if possible, I will write in this blog on what I have learnt from the book and see is there any linkage to my aim to achieve financial freedom.

Do I need an iPhone?

Presently I am carrying a simple nokia phone. As my contract is going to end soon, I will need to decide whether to get an iPhone now or just stick with another simple phone. I am considering three factors as shown below.

Price Plan:
Currently I am paying about $16 per month for my mobile plan which does not include data usage. At the moment, the cheapest mobile plan for iPhone is around $36. That will be an extra $20 per month of what I am paying now.

Cost of Phone:
Currently the price of an iPhone is around $500 to $600 plus under the cheapest mobile plan. If I don’t choose to buy an iPhone, I might be getting a simple phone for free by recontracting my current mobile plan.

Expectation of Phone:
Basically I need a phone that can call, sms and take good pictures. I do not need internet connection so iPhone is quite useless to me. And furthermore there are other phones that can take better photographs than iPhone.

Conclusion:
Based on the three factors, I will not be getting an iPhone as it is not cost effective and does not add any value to me.

The Pros and Cons of Using a Credit Card

In this fast growing world, using credit cards have been popular to people as an alternate form of payment to using cash. However it is like a double-edged sword which could make your life easier if you are using it wisely or disastrous if you have no control to it. So what are the Pros and Cons for using credit cards?

Pros:
1) Credit cards are easier to carry than cash. Instead of carrying a whole stack of dollar notes in your wallet, you can always replaced it by credit card when you are going to buy big tickets items like jewellery, travelling packages, laptop etc.

2) Credit cards can give you discount when you are purchasing items from certain shops. Some people carry many different credit cards with them to see which one can be used to get the discount from the shop.

3) Credit cards allow you to buy first and pay later. Sometimes you need to pay a bill or buy something but you do not have enough cash at that point of time. In this case, credit cards are like someone who lends you the money to do your payment.

4) Credit cards allow you to buy thing online at an ease. Basically you have to key in your credit number and other details if you have confirmed your purchase.

5) Credit cards can be used in many countries. In this case you do not need to exchange a large amount of foreign currency for the country that you are going to. Most credit cards will do auto conversion based on the updated exchange rate when you do the payment in other countries.

Cons:
1) Losing your credit cards can be a headache. You have to call the credit card company immediately to block the usage of the card. It is to prevent any people who have picked your card from using it.

2) Though credit cards allow you to buy first and pay later, it may trigger people to buy more than the amount that they could afford. If you do not pay up promptly for the credit cards bill, high interests will be charged. Some people have become bankrupt as they cannot pay up for the credit card bills.

3) Security is a major concern if you are buying thing online using credit card. If the online website is not secured, important details like your credit card number, account number and your personal particular can be captured by hackers. They may just use these details for their own purchase.

Personally I do not have a credit card even though I am qualified for it. In my opinion, I feel that the Cons outweighed the Pros of using it. For big tickets item, I will normally use cheque or debit card to do the payment.

How much is your hourly worth?

I have a friend who teaches me how to calculate one’s hourly worth. The formula is simple, just divide the total amount of money you earned from your job by the total time spent in your job. By using this formula, he mentioned to me that if you are working overtime (OT) without any type of compensations like OT pay or day off, your hourly worth will drop.

I have improvised his formula by adding more details to reflect a more accurate calculation for the hourly worth. My formula is simply using “Net total Incomes per month” divided by “Total time spent on all the incomes sources per month”.

Net total incomes per month = your normal job income per month including all the bonuses (just total up all bonuses per year and divide it by 12 months) + your passive incomes per month - amount of money spent in order to generate for all incomes per month (this includes transportation, working clothing, shoes etc).

Total time spent on all the incomes sources = Normal working hours including travelling time, overtime + time spent on building up your passive incomes per month.

For example, let’ say a man has an income of $3000 and bonuses of $6000 per year. He has a passive income of $700. He spent $200 to generate all the incomes per month. He has to spend 160 hrs during his normal working schedule and 40 hours of overtime work per month. He will need to spend 40hrs on transportation per month.

Based on the above example:
His net total incomes per month = $3000 + $6000/12 + 700 – $200 = $4000
His total time spent on all incomes per month = 160hrs + 40hrs + 40hrs = 240hrs
His hourly worth = $4000/240hrs = $16.67

So how much is your hourly worth based on the formula?