MM : The 3 Buckets (Part 3)

How many rich people are there in this world?

According to a published statistics in 1996, which at that point in time, being a millionaire was the measurement yardstick, this group of well-off are only a mere 5% of the total population in US.  (sourced : The Millionaire Next Door : The Surprising Secrets of America's Wealthy). 

Whether its America or any other countries, be it the past of year 1996 or even at present, the above information doesn't really matter.  The real question is:

WHY ARE YOU NOT IN THIS WELL-OFF GROUP?

Most of us are groomed to the belief that as long as you have equip yourself with education, life will be good.  ITS TRUE!!  As long as you are equip with FINANCIAL education, YES!, life will not only be good, it will transform to be BETTER and ultimately BEST.  So:

1) Why stay at just good? 

2) Why being part of the 95% of the population? 

3) Are you not worthy to be among the financial elites?

95% of the population remains at buckets 1 & 2 i.e. the NEEDS and WANTS.  After toiling much and finally getting out of college/university, there is the tendency of assuming you've reach freedom and that you have obtain all the education required to survive.  How many of you have this thinking?.....  Only to find, the road ahead is much more difficult. 

Most people after satisfying their NEEDS bucket, would go for immediate gratification.  This is facilitated with the convenience of credits, loans, easy payments....... you name it.  If you are unable to get whatever you want in cash, these facilities are there waiting for you.  Is this good?  YES DEFINITELY!, you get whatever you want now, hence the WANTS bucket, but the consequences is it erodes your future earnings.  Every month comes in, the salary/earning goes out to service these facilities.  The pinch may not be as hurtful if you have limit yourself from these facilities, but the burden is greater when you are having big amount and long repayment period.  This situation is made worse when you are limited by your salary/earnings.  If you are selling your time, health and attention to your work/business for the salary/earning, and you can't simply walk away from it, then yes, you are categorise as the 95% of the population.

Did your education help you?  Yes, in getting a job with limited income.  Jumping from job to job will not solve your dilemma as you are still selling your time, health and attention.  Be it if you are being paid a handsome amount, but if you fail to grasp the meaning of financial education, you are just that, selling your time, health and attention.  Do not be surprise if the guy who is being paid/earning better than you is actually suffering from credit nightmares.  Do not be surprise your boss may be that guy!

Oh, how I miss the days of carefree life.  I can take a longer time for lunch with good meals, spend more time with my family instead of just quality time, having more fun and go anywhere and where ever I want at anytime, spending hours away doing things that I like and brings more meaning to my life.  I miss my HK TVB drama!! (Ahem, this applies to me).  Another thought provoking question:

WHY DO I NEED TO APPLY AND GET APPROVAL FOR MY FREEDOM?

The answer is, b'coz you have sold your time, health and attention, remember your job appointment letter?  B'coz you have a business to run, a day not attending your business is a day lost in income. You get stressed, you get tired, you burnt-out, facing uncooperative staff and the demand to perform/deliver all the time. And one more thing, you are not focusing on your own well-being.

Why can't I meet people that I like?  Why do I have to mind other people's business?

The 3rd bucket,  functions itself otherwise.  Just like the previous 2 buckets, there is no limitation to its size.  In fact the bigger the size of this bucket, the better you are.  When the bucket is so filled and overflows, just like your first faucet, it creates another faucet, a source of income.  When this faucet starts flowing, it brings new meaning to you.  The outcome from this bucket are CHOICE & FREEDOM.  And this is exactly what the rich focuses at.  This bucket consists of 2 modes to achieve freedom i.e savings and investment.  

You can put aside a large amount of money in preparation of your retirement.  Period!.  When I drew the 3 buckets drawing, I was thinking that savings provides interest which contributes to the faucet flowing.  That was about 5 months ago.  5 months later, although interest do help, but it is very insignificant seeing how inflation rises faster & eroding interest.  Nevertheless, this is one option.

The other option is investment.  There are all sorts of investment products available out there.  For the purpose of me explaining, I shall touch on unit trust/mutual funds 'coz Malaysians love unit trust, especially those from PNB/ASNB.   Some people see it as savings, but I beg to differ.  It gives out dividend.  By virtue of you investing, you are filling the 3rd bucket.  By virtue of receiving dividend, you are creating your 2nd income i.e the 2nd faucet.  The bigger the size of your bucket, the stronger the flow of your 2nd faucet.  If on top of unit trust, you are taking part in other vehicles of investment with handsome returns, imagine the flow of this faucet.  WOW! 

All these comes at a price. The price is financial education.  Are you willing to learn more?  Are you spending more time on yourself or your job?  If your mindset is not prepared to accept the above, take time to condition your mind.  If you are not prepared, the various mechanism behind the 3rd bucket will look very very complicated. 

Do not shut your mind, as I have met many many people who simply push away opportunities without knowing what they are and how they work.  Tiredness and burnt-out kept them away from learning more.  Do you like learning? Are you learning for the benefit of your boss (your job) or for your ownself?

This has been a very long post.  I wonder whether this post helps?.  

BTW, have you guess the name I've labelled for the 3rd bucket yet?  I called it:

♥ ♥   the DREAM bucket.   ♥ ♥

• Click here to know more of the NEEDS bucket.
• Click here to know more of the WANTS bucket.

Every great dream begins with a dreamer.  Always remember, 

you have within you the strength, the patience, and the passion 

to reach for the stars to change the world ~ Harriet Tubman

Go confidently in the direction of your dreams.  

Live the life you have imagined ~ Henry David Thoreau 

MM : The 3 Buckets (Part 2)

Here's a recap on what I have covered earlier :

My 1st Post on Money Management

MM : The 3 Buckets (Part 1)

I'm moving forward and will now introduce to you the 2nd bucket i.e. the "WANTS" bucket.  What's the content of this bucket?  2 essential ingredients: Savings & Other Expenses.

This bucket, just like the 1st bucket i.e. the "NEEDS", do not conform to any standardize size.  Its size depends on your demand for gratification.  Gratification can be to satisfy oneself be it materialistically and/or emotionally.  I could not emphasize more on how important for you to understand the mighty-ness of this bucket.  This "WANTS" bucket could either MAKE you or BREAK you.  

MAKE because you choose to save the excess money your earn and build a coffer for future, seeking to secure a comfortable future.  AHA!! Secure = Protection!!  See where the insurance comes in?  Will emphasize more later. 

BREAK, it's like what most people says, its your hole on the ground.  You are digging your own grave when the hole gets deeper and deeper.  Immediate gratification often comes with satisfying materialistically.  Who would want to continue eating bread religiously everyday when you can now afford something more sumptuous?  With money, you now have a choice.  It is this choice that makes you to differ from your former self.  You may prefer branded as oppose to ordinaries.  You may eat better, live better and travel more from your previous daily routine.  You see, people evolve....... in hope for better life definitely.

So, as you can see, one is of the extreme of another, MAKE vs BREAK.  If you are asking the question why are you always short of money, well the answer is whether you have BALANCE these two elements.

(This is not the BN logo ya.  This is my balancing scale! Adopted from http://www.drlisawatson.com)  Allow me to tell you a story:

There was once this lady who lived a carefree life and she thought all things were perfect.  There were no financial worries at all nor the need to save for rainy days.  She saved though, for one day she was aiming in purchasing a vehicle.  That day finally came where she had save enough for the downpayment (deposit), and with it the commitment to repay the hire purchase of RM400 per month for 6 years. 

Not for long, with her lifestyle, she realised there was tightness on her love for spending.  She was sad 'coz she sacrificed her love and was burdened with the loan. With the loan was the unending expenses on gas and maintenance.  Then one unexpected day, miracle came to her and she was given a credit card.  That magic card allowed her to again go about with her rendezvous.  She spent even more because she was only required a commitment to repay 5% of the total outstanding.  But her spending was more than her repayment, and soon even that 5% she was unable to service.  She felt depress, weak on her knees, and was desperate for help. 

Every month after toiling hard and was rewarded with salary, she could not enjoy her pay as it no longer belongs to her.  On top of the car loan and all its attachment, she needed to service the credit card debt.  That credit card debt was eating her alive with its horrendous interest rates.  She was getting tired.  Tiring of this monthly non progressive routine in her life.  Soon more expenses and commitment were needed from her, which she had not anticipated at all.  She finally realised that she was in a deep rut.  She was working for money and not passion.  She longed for the days she lived a carefree life.  Energy was draining as age catches up.  Suddenly, news of the company she worked with was facing financial turbulence & was on the verge of winding up. 

"Boo Hoo!" She cried.  "Why didn't I save for this rainy day??"

What do you think?  Does this sound familiar?  Even without the credit card, there will bound to be hidden and future commitments which you did not expect today. When the scale tips towards the BREAK i.e when expenses exceed savings, the outcome has been expressed in the above mentioned story.

HOWEVER, if you have more MAKE i.e savings is greater than expenses, you are at a better position with choices & there are more opportunities abound.  (Psst, for those who think they are having mediocre income, TADAH!!, here's another chance for you to run faster than the rest.  Remember the tortoise and the rabbit race?)

When your savings is so great that it fills and overflows the WANTS bucket, the next bucket will be waiting.  Guess what did I name this bucket?

It comes down to this: Either you control money, or it controls you.  

To control money, you must manage it. - T. Harv Eker

To be continued.....

MM : The 3 Buckets (Part 1)

Celebrities / Sports Stars Gone Bankrupt or Deep in Debts :

Mike Tyson

Dennis Rodman

Allen Iverson 

Toni Braxton

Nicholas Cage

Stephen Baldwin 

Michael Jackson

Whitney Houston

Does this list surprise you?  They were once multi-millionaires.  All were professionals in the career of their choice.  They've made the right career move.  Their move brought to them loads of luxurious lifestyles.  Money seems to come easy for them.  But one day, BANG!!  Either insolvency comes or almost there knocking at their doors.  What happened?

The list of stars in financial grunt goes on and on.  Just do a simple google search, the list can be dumbfounded. 

Remember in my 1st MM post, I mentioned that money comes easy.  Whether its a RM1,000 monthly salary or RM1million business income, the truth is, everyone knows how to attain this part.  Its just the mode of attaining them that's different.  Some people prefer to work for others in exchange for a decent dough while the ambitious others do businesses.  THERE IS NOTHING WRONG with your career choice.  It is only a matter of time that everyone will get to their destination of choice.  YES, I SAID EVERYONE!!  Provided your actions correspond with your aims, of course!!

We can change our lives.

We can do, have, and be exactly what we wish.

~ Tony Robbins 

So, revealing fact no. 1 here.  You do not have to work madly racing for a high paying job in order to get a good life.  Yes, high pay accelerates in reaching your dream destination, but if you fail to juggle the 3 buckets, you may as well end up just as any one of the stars above.  

QUESTION: Have you met people who nag nonstop of their financial woes even when they just got a pay raise? (I'm asking a very ironic question here le, 'coz I think I am that person le :P).

Okay2 *self slap face*, gonna move on and teach this kitty and you all what the above superstars have failed to juggle, i.e. the 3 buckets.

Reintroducing the below image again.   

I must self praise myself again as I am very lousy at drawing.  But the image is simple and fetchingly good, right?  *vainmode.  Okay-lah, boleh tahan saja (marginally satisfactory only)  :PPP.  As long as it helps in our learning process, I am satisfied.

To recap , what you are seeing is the liquid that flows out of the left faucet is the "S" sign with 2 vertical bars running through it.  The liquid will be captured by the 1st bucket. 

Introducing the 1st bucket : Your "NEEDS" bucket. Anything that falls in the category of "surviving" will fill this bucket.  Food, drinks, clothes, clean air, shelter & etc etc.  The bucket does not conform to a standard size. You name your needs, and the bucket will accomodate accordingly.  Some people may even include cellphones, pc, spiritual comfort and etc etc.  Like said, everyone has their own individual needs bucket.  Only when you have satisfactorily fill this bucket, any $$$ excess will flow out into your next bucket.

AHA!! So, for those with non fancy-ful income, do not despair. There is opportunity for you to move faster than the rest.  Define your Needs bucket.

The bucket includes protection too, or in other words, "security".  Some people may argue that there is a need for job security.  But for the purpose of this learning curve, the job part has been covered by the faucet.  We are managing money after the job/business produces a return.  So you make sure your faucet is of strong and sturdy, of the hardest steel/material.  We are learning to be sustainable, manageable and hopefully future-able.

The other structure of security is Insurances, which forms the core for protection.   Personally, I have been battling this mentality thinking that insurances are important.  In financial planning, the hierarchy to practice is PROTECTION, SAVING, then INVEST.  I am at times pro while other times against it.  I am especially against it when sales agents kept pushing for a sale, but not able to help in visualizing I have a need for more protection *raging mad.  Nevertheless, I am angelic enough to be patient while he/she finishes her stuff *batting eyelashes. 

I find myself not appreciating insurances, not until when I start managing my 2nd bucket, which then I learn to understand its priority.  There's so much more to understand about Insurances.  Maybe a future post will be done on this.  But for now, we need to move on on what lies ahead when the Needs bucket is filled. 

What will you do with the excess money in hand?  Remember, the bucket's size is dependent on you.  Once that's filled, the excess amount will most likely be saved or you starting on venturing for some luxury.  And that, ladies & gentlemen, will bring us to the next bucket, WANTS.

To be continued.....

My 1st Post on Money Management

I once attended a MLM evening talk and they were explaining the power of generating an enviable income. In fact, I think if you are to attend most MLM talks, they will be showing you the faucet as the income source.

To me, whether MLM or not, the generating of a decent income is the easier part as compared to what lies after that.  As long as you have the experience, patience, and/or qualification to initiate a business or job, this is not that difficult at all.  Of course, this needs to come with the backup of a healthy economy and positive attitude.  Some of you may argue of the above statement, especially youngsters or the unemployed seeking for jobs, but just bear with me as I am not dwelling on that department.  I am looking more on what happens after earning your 1st pay cheque.

So what happens after kissing your 1st pay cheque from toiling your sweat & blood for one whole month?   Let me tell you what I did:

In my early 20s : Woohoo!!  Party like there's no tomorrow.  Spending is a must.  There's a need to look cool and uptrend.  Minimum savings.  I'm still young what!!  I've got a job!!  I have earnings.  No sweat la!!

My mid 20s :  Starting to wonder why people are better off than me?  I have a job, not a bad pay, but y people of my age are driving their Mercedez while I was still faithfully riding my Proton?  Keen to find out and started participating in various talks.  Yes, I attended many many many talks and yes, I read many many books.

What I found out was, I wasn't earning a high flying salary.  It was just as average as any other people on the street.  And I toiled myself, forcing myself to wake up everyday in time to witness the sun rising, selling my time and energy to others when I was supposed to enjoy the best age of my life, in return for a pay cheque every month end.  Apparently the 20s' age is also the most productive age with lots of energy.

And so, my best years were spent stuck in offices.  If I was given a choice, I would have chosen freedom anytime.  How about you?  Yet, reality check do not agree with my desire. Sigh!  And so, after attending so many talks, I've selected the below image as my post today: 

This image was seen from one of those MLM talks.  Sooo many talks, I couldn't recall which one la.  But I'll give all credits to them if only I remember. 

So like I said, the faucet is your job/business.  By the motion of turning the tap (energy), the end result is water running out from the faucet.  The water is your dough.  Get me? Easy to start earning money right?   Yet the trap of life is on how you manage the $$$, and that is reflected in the 3 buckets (yes, they looked more like glasses, 'coz that's be best I can find la.  I designed it myself, searching for a long long time for images, you should give credit to me for my genius-ness!! Somemore not competent in using pc le!!)

A closer look at those buckets, they mimic sharply to the Maslow's Hierarchy of Needs.  Just ask yourself what is it that you need?  What is it that you want?  And pretty soon you will fill up all those buckets.  With the income that you have, can you fill up all 3 buckets?  Or just 1?  Maybe you are able to extend to 2 buckets, but how to achieve the 3rd?

Okay-la, I will mention about it some other time.  Some smartasses are already having all the answers and so I congratulate them, but I am helping to shed some light to those still searching.  Study the image.  It will appear again in my next MM post ;-).

** This was supposed to be a long ass post.  But by kept delaying to complete it, it will take an even longer time to get this post out.  Hence, I decided to break them.  

** Please also take note of my disclaimer ya. 

** BTW, if the above sounded nothing but nonsense, give me a tinkle and I will end here.  Tks.

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