Wealth Management Skill - Man of the Match

'会赚钱是好事，会理财是大事' 

Knowing how to earn money is a good thing, knowing how to manage wealth is a big thing.

quotes translated from the book written by Tim Maurer on 'Simple Money'.

Basically, it is not hard to earn money. Whether big or small, as long as you have the right skills or qualifications. But when it comes to manage your wealth, it is a big difference.   

I am sure many people had heard of the story about a man who strike a huge lottery, quit his job and enjoy his new wealth, but within years he is looking for job again. He had spend all his lottery wins money. What went wrong with his life? Luck has nothing to do with it, he did get lucky in winning the lottery, but he did not know how to manage his wealth and lost it all in the end.

Many people had a wrong perception about investing and wealth management. These two are totally two different things. Investing your wealth to make more money is merely just a small part of your wealth management. Wealth management involved a change in mindset and lifestyles. 

Words alone cannot really bring out the actual impact of a person's lifestyles on his financial status. Simple concept like this:

Spending < Income or Spending > Income

It is easy to understand the equation. But if we are to look deeper, there are many components influencing both the spending and income. If an individual's lifestyle involved a lot of spending more than what he is earning, naturally he ended up in this equation:

Spending > Income

Common traits of a Spendthrift

They spend like no tomorrow       - I want to enjoy life

They spend without thinking        - The most expensive is the best!

They spend on unnecessaries       - I don't care! It is beautiful! I want it!

They spend on pride                    - I want a LV handbag

They spend with a habit               - It feel strange when I did not buy anything.

And the Man of the Match is:

'Oh no! Installment, bills and loans! Payday still 3 weeks away! Bank account near zero! I am doom!'

Sound familiar?    

This just sound like a man trying to stop a leaking boat from sinking by bailing out the water every moment. They tend to become rather emotional, especially after the payday. Money comes, within 3 days......boom! Near bottom again. The only time I can see a happier face was the bonus month. I wonder how they could live this kind of lifestyle.

 We are living in a world fill with the lure of material attractions and good food. The convenient platforms of spending through NETS and credit cards lead to the common lifestyle spending habits of 'Pay now, Worry later'. When the payment comes knocking at the door, one wonder where did all the money gone. 

Compare to another individual's lifestyle which involved less spending, one who do not chase after luxuries of life, keep a nice records of his expenses and save the remains of his income into a nice solid bank which pay........xxx interest. He probably would have some in Fixed Deposit or bonds, or an annuity since these require little attention from him and someone else in a form of financial planner will take care of it. He would have met this equation.

Spending < Income

Common traits of a Saver

They save like no tomorrow       - Every penny count!

They save without thinking        - Oh i don't know. One day those money might help.

They save on unnecessaries       - Why need a watch when a hand phone can read time.

They save on pride                     -Pride is hollow

They save with a habit                - NTUC selling at $4.50. Cold Storage at $4.20! Can save 30c!                                         

And the Man of the Match is:

Ah! I save money so that one day when I finally retire, I will have enough money to cover my living expenses.'

Well, financially, he would be in stronger position than the spendthrift. His wealth grows slow, and enjoy lesser quality of life, so he would need to continue working to prepare his eventual retirement. When company pay some bonus, he can enjoy a bit more luxury on himself. Generally, he do not have to chase money waiting for paycheck, and could sleep with a bit better peace of mind. Assuming the inflation do not erode too much of his wealth, he should be able to live off his saving when he retire.     

So, we have our Man of the Match, but wait. Does that make them Champion of the Match? After 90 min of roaring and fighting across the gigantic big green field called the 'rat race', the champion finally emerged:

'I save money and make those money work for me so that I retire anytime I want and still live the life I want'

Well done. So, when will the champion go for World Cup competition? 

'Are you crazy? I'm not Bill Gates, I'm not Warren Buffet, and most certainly not Donald Trump! I am quite content with the local Tiger Cup champion.'

Well, I do not know about others, but personally I think being a Tiger Cup Champion for a humble Mr Average is good enough.

So which category do you think you are in? :)