Father Sez

From and to parents - parental advice to our children on personal financial management and life.
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Archive for May, 2008

Round up for week ending 30th May 08

Thursday, May 29th, 2008

Hello. The week is coming to an end…for me anyway. There is still the full reader box to clear. In the meantime:

Posts I found interesting from those I managed to read include: 

The Glbl guy reminds us that we should surround ourselves with constant reminders of our goals.  These reminders are a tool to help us stay focused and stay on the path to reaching our goals and dreams a little sooner. I am a total believer of this theory. I have reminders on my laptop screen and my handphone, not forgetting my daily lists.  

And Ririan from Romania gives his suggestions on how to create effective to-do lists. 

Feeling ripped off (even if the feeling is misplaced) in anyway is painful and not pleasant at all. I hate it even more when I feel that the vendor is devious.  I signed up to purchase an E book on goats, (goes to show how powerful sales letters can be, as I am sure most if not all of the material in the book probably came from the free pamphlets distributed by our Department of Veterinary Services.) Anyway, I felt pissed, when I was asked to submit too much personal particulars AFTER payment was made. 

It looks like I am not alone. Read about what made Naomi feeling pissed. 

I enjoyed this post about how to fly the national flag. Our politicians started a program a few years ago to instil some patriotism and everyone was encouraged to fly flags. We had cars, buses and lorries flying flags. Needless to say, after a while you could see quite a number of really dirty looking soot / smoke encrusted and even torn flags flying all over the place.

I used to feel ashamed and often wondered how a foreigner would have judged us. Our TV stations should have carried Brett and Kate’s post repeatedly.     

I also thoroughly enjoyed this post comparing bloggers with pawns on a chess board. I think these observations will work in a lot of other situations too.  

Who can resist not reading a post with a title that goes…..”The most important piece of career advice you probably never heard”? The title turned out to be true, I had never heard this piece of advice before. And you know what, it does make a lot of sense.   

I participated in the Carnival of Family Life which was hosted as a Memorial Day Carnival by one of my favourite family sites, Colloquium!. (I must learn to spell this word correctly, since I am going to use it often.) 

Well, that’s all for the week, people. Go on and have a great, productive and jolly happy weekend.  

Credit Cards Are Not Designed for Daily Living Expenses

Tuesday, May 27th, 2008

This is a guest post by Tisha Kulak who is a writer for Creditorweb.com, where she writes about credit card offers, personal finances and credit card matters.

Economically times are getting harder than ever. Nearly every aspect of a person’s basic needs have gone up in price and those living paycheck to paycheck may be considered lucky to make it from one paycheck to the next. Due to the increasing costs of so many things, consumers are being faced with tougher financial decisions.

Many families no longer have the cash needed to buy basic grocery items and necessities and ultimately turn to their credit cards to survive. Utilizing credit cards to maintain daily life is not a financially healthy situation.

However, many consumers have no other choice. They are using credit cards to keep the lights on and food in the refrigerator. The trend is becoming increasingly popular and equally dangerous. Credit card balances are going up but family income is staying the same. Many consumers are not able to even make the monthly minimum payments. By not paying more than the minimum each month, people are digging themselves in even more debt. Balances will take many years to pay off in full and average consumers typically have more than one credit card with an existing balance. Add into the mix a missed or late payment and the balance grows even more outrageous.  

The best thing for any consumer with credit card debt is to really understand how much they owe. When family budgets are stretched to the maximum and there is no good outlook for paying down the debt, turning to a professional financial counselor may be beneficial to avoid falling behind and ruining your credit score. Once you have fallen behind, it becomes all the harder to catch back up. It is also bad for the economy as a whole because consumer spending ultimately decreases as there just isn’t enough money to go around.  

For those who feel they can not survive without using credit cards to maintain daily life, there may be a need to seek financial support from the community or local welfare office. Check out programs to help with utilities, buying groceries, and other necessities in order to stay on track  Debt management companies may be able to help you pay down your credit card balances in a shorter period of time. They may also be able to work with you on a realistic budget to get your through the worse of your financial situation. Not seeking help when you need it will eventually make your debt even worse and it will stick with you for a long time.  

Credit cards were not designed to keep your family going each week. Responsible credit card use dictates that anything you can not pay off at the end of the billing period should not be charged on your credit card. Before you turn to credit to help you make ends meet, consider all other available resources first and only charge what you can afford.

 

If we are sellers, let’s do the right thing

Monday, May 26th, 2008

Perhaps a simple definition of business can be as the art of providing the buyer what he wants at a price that is acceptable to both parties.  Between the buyer and the seller come the dazzling array of weapons both parties use to get a “better deal” for themselves. Advertising, marketing, logistics, studying of product reviews, blah, blah…blah 

And when the going gets tough, some people from both ends resort to not so moral tactics. These are a couple of my recent experiences. 

a)  My attempt to sell my Timeshare 

I wrote about my Timeshare and my intention to get rid of it a little while ago. First I advertised on a free buy-sell internet portal and though there were some people who viewed, there was no interest. Then I advertised in a local paper’s classifieds. Two responses are memorable. One called up and told me that the price should be one sixth of what I had listed, as this was the price she had been offered earlier. I told her that that would be a good deal and she should take it.  

The second was a lady with 5 children. She had recently signed up for a holiday package and she had been “advised” to buy a Timeshare. So she called me and I told her (honestly and truthfully) about the reasons why I was selling the Timeshare. Clearly convincing her not to buy! 

b)  To pay down loans or invest 

I also wrote about this a little while ago. My daughter and my wife went to the bank to deposit her windfall into her savings account. (Next week, I’ll be going with my daughter to do what we planned with the money.) My daughter got a call from a bank staff, “advising” her not to pay down her loan at all. Rather she should use the whole amount to invest! 

I feel that this advice was tinged with quite a bit of “this approach will be better for the Bank.” Luckily for me, my daughter had made her decision after reading Mighty Bargain Hunter’s article. His graphic descriptions of piggy banks, made a powerful impression in my daughter’s mind. Something the bank officer could not even begin to match.

The point is that I try to ensure that all my earnings are “halal” or “kosher”. It should be earned from halal sources and I should have no fear in disclosing my sources of income. And I also want to leave behind people who would say good things about me. 

I am sure that had I tried harder, I may have convinced the nice lady to buy my Timeshare. She would then regret it and I am sure will spend a little time at cursing me.  

So if you are a seller, have the well being of your customer in mind. This principle may be lost somewhat in this age of mass production. However this principle thrived in the old days, when neighbourhood shops provided what we wanted and the shopkeepers had a genuine interest in what was good for us. 

I shall live by this principle when my goat farm is launched!

Mind Mapping my way to retirement – Part 2

Sunday, May 25th, 2008

Last week, I wrote about my present position vis-a vis my aims for retirement.  

Today, I shall show my idea of where I want to be when I retire and my intended action plan to get to where I want to go.

mind-map-2-as-picture-mger.jpg 

And the map above is the position I want to find myself in when I retire.    

With this, I sat down to think about where should I focus? The important areas are:- 

a)    The elder children’s personal finance education. My wife and I want to try and make sure that the elder two girls are financially literate and that they would not be a financial pain in anybody’s necks. They should be able to take care of themselves and be a sterling example to their younger siblings. As the formal education sector does little to prepare children for life, my wife and I have to do our part.

Thankfully, I have tons and tons of resources from the pf blogs on this.  

b)    The younger children’s education should be the biggest costs that we expect to face in the future. Their studies should be nurtured so that their grades are good enough to qualify for good scholarships.  

Not withstanding the support given by many commentators to Mighty Bargain Hunter’s “Worried about paying for college, then don’t”, my wife and I rate our kid’s education as our duty. 

We shall do what we can, in fact all we can, to ensure that the children get a better chance in life than we got.  

I also hear Flexo’s comments whilst debunking yet other retirement myth. That children cannot be 100% depended upon to support the parents in retirement. 

My wife and I just want to pay it forward. We are not expecting anything from the kids, anyway.  

c)     Health. This is an item that is “so, so important, but not urgent”. So it is usually left somewhere at the bottom of the pile. Exercise is one item that is left out when other so called more urgent things crop up. We shall focus on exercising and learning Chi Qong. This is an ancient Chinese art, geared towards guiding its users to gain tranquility, better health, fitness and also some self defense. 

d)    Take the businesses from the incubator level, nurture them and organize them such that my time involvement will be minimal. This has to be something like a 2 – 5 year plan, but should be started now.  The goat farm is in progress. The planned launch is in July 08, the critical outstanding issue being the bringing in of our farm workers.  

Another business is in the field of the leasing of telecommunication towers in Indonesia. This plan suffered a setback when the Indonesian Government issued a decree deeming this business to be closed to foreigners. However, we have come up with a workable alternative and are actively pursuing this now. 

e)    Clear my liabilities, leaving only the mortgage. Tackle the mortgage last. My family can achieve this by selling off one of our assets. This plan is currently in progress. 

f)     Nurture and grow this blog. I am not making any money from this blog. However blogging has made me really focus on the important areas of my life.

g)    Generating some passive income. I may have missed the boat in socking away some good dividend paying stocks in earlier years. It’s my loss that I did not run into people like Dividends 4 Life when I was much younger. 

I have to use all the skills I have acquired in my corporate life and put them into effect to systemize the operations of the businesses I am incubating. Much like what Michael Gerber has written in his book, E-Myth. The operations should be “engineered” in such a way that my time involvement would be minimal.  

Then I came back to the other rule of thumb that I read from Plonkee’s comment to Flexo’s post that started off all this thinking. The need for us to have about 25 years of spending money during retirement. 

The options are quite clear. Either  

-    Increase my income and get the 25 years nest egg, or 

-    Decrease my expenses. 

I shall keep working on these two very sensible things to do.  Nevertheless, the focus would be on the second option.  

Now I have a nest egg of $X. This should grow to say, $Y, by the time I retire. This should have to last me say, 25 years. So per year I can spend $Y/25. 

Where can I have a life that I want with this amount? Aha! More options fall on the table.  

I can move to the country side in my own country. We already live well away from the Federal Capital. I can still go further rural. Or I can check out other countries.

Countries, where culture, food, transportation, housing, health facilities, education for the younger children and other normal barometers of living are acceptable to my family and me. This I can do now, the checking out I mean. India (where I have worked for 3 years and still have family there), Vietnam, Cambodia and the Philippines are countries that come to mind. 

Suddenly the prospect of retiring as a semi derelict is no more seen as a possibility. 

Life seems to be so much rosier, the sun so much brighter, the birds singing so much sweeter and I do feel a bouncier step as I walk. 

Why not try a mind map yourself?

Mind Mapping my way to retirement – Part 1

Thursday, May 22nd, 2008

A while ago, Flexo wrote in his blog a story titled, “Retirement Income Rule of Thumb Debunked.” In it, he quoted a mysterious Mole of Money Magazine, who came up with the assertion that we should estimate our full current expenses now and add 10% to that. Then we have to come up with that amount for each of our retirement years. 

This effectively debunked the previously held wisdom of needing 80% of our pre-retirement income per year of retirement.

This post was actively debated in the comments. And in her comment, Plonkee added in another rule of thumb that she was aware of. We should have about 25 times our estimated yearly expenses. (This rule was not debunked by anyone, not in the thread anyway).  

Man, is this depressing or what? 

We have rules of thumb that say, the maximum house we should go for is 1.5 - 5 times our yearly income, and another rule of thumb that says the biggest purchase of our lives would usually be the house. 

How on earth do we get 25 times of our yearly income, sorry, 25 times of 110% of our yearly income as our retirement nest egg? This is 5 – 17 times our biggest purchase.

I can hear people telling me…..Yeah! That’s why we asked you to start saving early and let the power of compunding work for you. 

Well, unfortunately, I did not hear clearly enough these wise words earlier.  

I sat back and asked myself exactly where would I stand, given all these rules of thumb. I have the fear that I may not achieve this retirement rule of thumb.

So what would be my downside, and if I were to plan to do my best and start now, where should I direct most of my energies.  

A post I read in Problogger gave me an idea of how to do this evaluation. Giving ideas on how to excite the minds of new bloggers to come up with ideas on posts, he suggested the using of mind maps.

So I drew a simple mind map of my current position.   

mind-map-as-picture-mger.jpg

So, this is where I stand now.  For the next post, I shall look at where I want to be and how and what are my thoughts on what should I do to best bridge the gaps.

We have launched our Square Foot Garden Project

Wednesday, May 21st, 2008

gardening-items.jpg

 Picture Credit: Azah. The stuff we bought. We have a few more packs of the garden soil.

I first read about square foot gardening in Lynnae’s post on Building a square foot garden. It seemed to be a cool way to grow some greens in not too big a space and without too much heavy activity. 

Lynnae also gave links to Frugal Dad’s take on square foot gardening. And he has written his journey into this in no small detail. 

We have some land around the house and this approach looked very doable. And besides, this looked great as a family project, something that cannot but have positive returns. 

I bounced this idea off my second girl and she agreed to read Lynnae’s and Frugal Dad’s posts. Which she did. And the project was officially launched last Saturday. 

We had some reservations on the issue of the boxes. The recommended or suggested manner seemed to be too much of a major engineering issue.  I discussed with my daughter about using baskets. After all they were about the same size and could be moved around easily. They had small holes at the bottom so drainage would not be a problem. They were so easily available, and besides we had a couple lying around at home. And secretly I was wondering as to why we could not use pots. And we had a number of available pots. 

Last night I read Jim’s post on his version of the square foot garden, the Blueprint for Financial Prosperity Garden Project. And he used garden pots!  

For now, my daughter has planted some seeds. They have been planted in polybags. (The leftover polybags bought for the incubation of the petai belalang and the geti trees for the goat farm.)  The idea is to transplant the plants into pots (for tomatoes, lime and chillies) and baskets for the vegetables.  

So far the money spent on the project is negligible. A total of about Ringgit 25 which is about USD 7.80 or so, which was spent on buying seeds, some garden soil and a couple of gardening implements.    

Our rubber smallholding – considering growing some Gaharu trees

Tuesday, May 20th, 2008

as-picture-manager.jpg

Picture Credit: My son. The tall scrawny looking trees are the 1.5 year old rubber saplings. 

Yesterday, my son and I visited our rubber smallholding. 

The rubber saplings are growing well. They still have about 3.5 years or so, before they can be tapped for their latex. I have mentioned earlier that the land is hilly and we have cut terraces on which the rubber seedlings were planted. We originally planted about 2,100 trees. About 200 trees have died and new ones have been planted in their place.

The latest “census” indicates that another 300 trees can be planted in the spaces available. The walk around the smallholding was quite a tiring one, but the spectacular view from the top made the whole thing worthwhile. I had a deep feeling of satisfaction when I reflected back on the work that has been done on the land since mid 2006 (when my wife and I sighted the land for the first time.) 

And though this was not the first time, my son has climbed up this hill, somehow I felt a stronger sense of belonging and responsibility from him. 

Recently some friends of mine have talked about planting gaharu or agarwood trees. These trees are prized for their resin which is used in the manufacture of perfume. 

Some additional information on the tree is shown here.

Our Forest Research Institute of Malaysia (FRIM) sells these seedlings. I talked with one of the research scientists at FRIM and he mentioned that they had a waiting list for the seedlings till 2010!!! 

He also mentioned that the trees should be inoculated (wow!….I’ll find out about this later) when they are 5 years old, and they can be harvested when they are 7 years and later. And he also mentioned that the later the better. 

It seems that commercial planting of gaharu trees is a big business in Malaysia. So there are also a number of private planters from whom we can buy the seedlings.  

I’ll discuss this with my wife and then craft out a plan to buy and to plant the trees. And then I’ll follow up with an investment appraisal. For now, we’ll just plant for fun.

Invest or pay down loans?

Monday, May 19th, 2008

This issue has been argued and debated to death in the pf blogs.

Nevertheless it’s an important topic and I am sure sooner or later every one of us will have to make a similar choice. 

Well, my second daughter was recently at this cross road. 

My elder two girls both have, what we call in Malaysia as investments in Amanah Saham Bumiputra (ASB). This is a type of unit trust managed by a Government owned body and the principal and annual returns are guaranteed by the Government.  

It’s hence not surprising that banks freely give out loans to people to buy these investments. After all, these unit trusts are sovereign rated. So since they turned 18, my two elder girls have loans and investments in ASB.  (The yearly returns are sufficient for the yearly repayment and I do a small top up yearly. My wife and I hope that this will help them to continue and maintain the savings habit only they start their working lives.)  

Recently my second girl received some money and the issue of using the money for investment or paying down loans came up. 

For me, it was simple.  

I showed her the great article written by Mighty Bargain Hunter under the heading of “How strong is your piggy bank?” 

Azah went through the story and decided she wanted to keep 50% of the money in a titanium-reinforced Kevlar® piggy bank inside a force field. That is to pay down the ASB loan. 

The balance will be kept in a steel piggy bank by buying additional ASB units. 

I am happy with the choices she has made. What do you think?

Meet the newest members of the Fathersez family

Sunday, May 18th, 2008

rabbits-004.jpg

Our family has never been all that great with pets. 

Like many other families with young children, for years my wife and I have had to fend off requests from the children for cats, hamsters, rabbits and the like. We have succeeded all these while. 

Last year, a hen (yes, a hen) wandered into our house and stayed on for about a year. We never found out who the real owner was. We bought a small pen for her and she was quite happy. One day, she disappeared for about 3 days and then came back as if nothing had happened. We never found out where she went, but apparently her female instincts had called. She then laid eight eggs in quick succession and valiantly tried to hatch them. But none hatched.

We have been told that for this type of hen, another should be the one that hatches the eggs, not the mother! I have no idea whether this is true.  Sadly, this hen was bitten and killed by a dog. 

Then it was a pregnant cat that sauntered in. We took her in and she gave birth to 3 kittens. We took them to the vet and he gave us some instructions on how to look after the family. Unfortunately, the mother and one of the kittens died. They died the same day my mother passed away. The two remaining kittens were given away to the Government animal centre where they give them away to animal lovers. 

And that’s the closest we have come to keeping pets. 

Yesterday, my second daughter managed to cajole her mother into buying a couple of rabbits. You can see them in the picture. The white one has been christened as Snow whilst the other is Bobo.  The kids are all excited. And it is difficult for parents not to be infected with their excitement.  

As expected the kids have sworn to look after the rabbits. Time will tell.  

For now, the rabbits are welcome as the latest additions to our family. 

Round Up for week ending 15th May 08

Thursday, May 15th, 2008

I have taken a short break from blogging this week. Other than the first post for the week on the progress of our family’s goat farm, I have just taken it easy. 

For my round up this week, I’ll just focus on the two Carnivals I participated in.  

First the Carnival of Family Life.

It was ably hosted by Karen at WritefromKaren, a technical writer and a mother of two teenage sons. More than 70 articles were presented at this Carnival.

I particularly enjoyed the following messages.  

Slow Down Fast’s “What can your kids teach you about technology?”  This appears to be the first time/generation in human history where parents have to learn from their kids. I know that my wife and I do.     

BeThisWay asks “Do I have to pay to appreciate them?” Referring to a problem faced by many parents with young school going children - notes from the school asking parents to pay for Teacher’s Appreciation Day or Week or whatever function the school comes up with. I also think this is being carried a little too far, placing subtle pressure on the kids to cajole their parents to contribute cash.  I think all of us parents should just put their foot down and go back to the days of a children prepared card or poem or something along these lines. This would reflect far better appreciation from the children.   

And this card should qualify for one of the best Mother’s Day gifts ever!  

We are reminded that what we, as parents, say to our kids are a very big influence into what our children will become later in life. During the formative years, children’s primary source of information, knowledge and everything that they can learn are their parents. Hence we should pick our words and phrases carefully. Seven common phrases that most parents use and their corresponding alternatives are presented. Check out the post yourself.  

Meanwhile the Carnival of Personal Finance was hosted by Money Under Thirty.   

As usual there were lots and lots of articles presented and MU30 must have had a hard time choosing his Editor Picks. I think he did a great job. 

Posts which I found interesting include:  

Paid Twice, the mom with a Ph.D and a black belt to boot tells us how to fight the bad habit of buying on impulse. By doing so, she has done all of us a great favour. (I suspect, the supermarket chains would probably want her locked away.)    

ShuChong talks about the financial lessons learnt from her mother. Though her mom never talked about money, her running of their household made for great lessons in financial management.  

Feminist Finance writes about her utter shock when she found out that the love of her life had debt levels that almost made her faint. And this was when they were planning to set dates for their marriage and as she says, grow old and doddering together. 

Well, she laid down the law and it worked out well for them.

I think she did the absolutely right thing. Her reaction and the plan of action she took should be mandatory for anyone of us who are in the same boat and contemplating even engagement.  

Pinyo gives an excellent overview of getting ourselves into better financial health. This roadmap will work only after recognizing and accepting that we need to better ourselves. As he says, self awareness is the first and most important first step.  

The Glbl guy offers his suggestions on how to survive a recession. I think this topic is one of the more popular google search phrases and for very good reason. Government statisticians are not rated No:1 in telling it as it is, and it may do all of us a lot of good to bone up and start putting into practice the steps as suggested in this informative post. 

Deepali says that wealth is a state of mind, a concept that I am beginning to understand and appreciate. I quote her here:

“Wealth is not just about my financial assets, but it’s also about my quality of life… and that of those in my global community. It’s also about my state of mind. A man with little means can be wealthy if he believes himself to be - if he’s happy with his lot in life instead of being resentful of those things he doesn’t have.

But wealth is also about opportunity. A man who has cut himself off from growth is not wealthy. But a man who can dream of other possibilities has infinite room to expand and explore. He can enrich his life and the lives of those around him. Wealth is not just in the current, it’s also in the potential.”

Well said, don’t you think!

This is it for the week, folks. Have a great, happy and productive weekend.

Whilst we pray that the birds will sing, the flowers bloom and the sun shine for all of us, let’s take a couple of minutes to reflect upon the suffering of the people of Myanmar and now China due to the devastating recent natural disasters. And where we can, let’s do our part to help! 

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