Category Archives: Personal Finance

Personal Budget vs Reality

Budget Finance Cash Fund Saving Accounting Concept

All of us heard about financial responsibility starts with a budget. We need to look at our take home pay and plan ahead for any expenses. While it is a good idea because it allows us to plan how much we can save. However, in reality how may of us can actually stick to the budget?

Having working full time for almost 30 years, I can tell you that I could never stick to my budget because it never works. There are always the unexpected expenses that threw the budget out the window. Expenses such as the car needs repair, the washing machine needs replacement or buying presents for birthday parties tend to appear unexpectedly. Having a budget is definitely a plus but it should be treated it as a guide more than a bible.

I was a financial analyst helping with the budgeting for a large accounting firm (heard of Arthur Andersen?) 15 years ago. Having spent 2 years in planning and budgeting for the Assurance practice in New York, I came to the conclusion that budgeting is a waste of time. Not only the team I worked for constantly reforecast the financials every month because we missed the budget, the actuals that were recorded in the financial statements never came close to the approved budget. Personal finance is very similar. The actuals at the end of every month is usually off from what what we intend to spend. There are several reasons why budgeting never works.

Time Consuming

To prepare a proper budget we need to gather all the expenses from prior years and plan what we want to spend based on prior history. Once you have the budget, we need to start tracking actuals spending to minute details in order to have an accurate picture of true expenses. The question is how many of us actually have the time to log everything in? There are apps or online tools that could help with the budgeting. Unfortunately, all of them require a considerable amount of time to maintain.

Always Wrong

As noted earlier, the unexpected expenses tend to appear and invalidate the budget. Because of this we need to spend more time to reforecast our budget so we do not miss our monthly goals. As we progress throughout the year, we soon realize that the numbers are off again and we need to re-budget again. It becomes a never ending cycle.

Not Bound to Anything

The biggest problem with budgeting is that it is not bound to anything or no one is measuring the budget but ourselves. Having a budget is great but what happens when we exceed our budget every month? Who is going to penalize us for going over the budget? No one. At the end of every month no one will be held accountable. Hence, the value in budgeting diminishes quickly.

So that begs the next question. How do we become financially responsible and plan for our future? The best answers I can give are use your best guess and plan only several months ahead. Additionally, always consider saving for the future a priority and everything else secondary.

Investing and Saving

This is a priority and something that we must to do first. We need to put as much as possible (or to the best of our ability) in investment vehicle such as 401(k) and IRAs. If you participate in your employer’s 401(k) plan, the money is automatically withdrawn from your paycheck and you never see it. If you have extra disposable income, consider invest it in Roth IRA or traditional IRA. Finally, putting those money in stocks that pay dividends will also allow you to generate passive income.

Fixed Expenses

Every month we are required to pay for fixed expenses. Some of these expenses include mortgage or rent, utilities and education expenses. You should be able to figure out these expenses relatively easy. Personally, I only put my mortgage expense as the only expense in this category because the amount is always the same every month. Utilities such as gas, water and telephone tend to vary by month – so I place them under other expenses.

Food Expenses

The second type of expense that takes a large chunk of my monthly expense is food. Prior to the pandemic I had to have a separate category called “eating out”. Nowadays, I just have grocery. The amount I pay every month is different so instead of using a set amount, I use an estimated total. Notice that I do not set a number because this category is “fungible” and it does go up or down because it depends on what type of food my family wants to eat at any given day.

Gifts and Unexpected Expenses

Holidays such as Christmas and birthdays also have a big impact on my annual expenses. I usually try to limit how much I am willing to spend on gifts. Other unexpected expenses that can’t be planned ahead are things (such as cars or appliances) that need to be fixed or increase in utility bills due to the weather.


Finally, I put taxes as the last item because they should not be in our mind as they are paid automatically from our paycheck. If you file your W4 with your employer correctly, you should not have to worry about paying taxes when you file your annual income tax. However, do prepare for any eventualities particularly if you have capital gain from sale of your stocks. Other taxes that could appear unexpectedly are increase in property taxes or if you are required to pay certain taxes when you withdrew money from your 401(k).

I believe budgeting is a great tool if you have time to do it correctly. However, you should use it as a guide and allow some breathing room when it comes to actual expenses. The most important thing that you should always remember to do is grow your money by saving as much as possible in certain investments vehicles. Don’t aim to buy that shiny new cars which is usually a large expense; aim to expand your portfolio as it will pay you in the long run.

Passive Income – Top 5 Misconceptions

Photo by Gabby K on

I have been working professionally for over 20 years. And I have also been reading into how to generate extra income while working full-time. Naturally one of the things that we hear quite often is how to generate income passively. With the pandemic paralyzing the world in the second year, getting that extra income has become more important than ever. As we continue to hope for that chance of getting the extra money, sometimes I wonder if “passive income” is a myth. After a few years trying, I think there are 5 misconceptions that all of us should be aware of.

Before getting into the 5 misconceptions, let’s define what is Passive Income. Passive Income is defined as money or income that you are earning without you actually spending the time and effort. Active Income on the other hand requires us to spend time, effort and sometimes money to manage the activity. For example, I have been making money “actively” as a working professional in a bank for over 20 years by physically go to an office and sit in front of a computer.

There are a number of articles and several books touting the success of earning passive income. After reading some of these “success” stories, I’ve decided to dip my toes to test the water. I have tried my hands in several “passive income” ideas over the years. Unfortunately, I can tell that it is not as easy as it is sound. Many authors of these “successful” passive income toot the horns how colorful the rainbow is on the other side – however there are several misconceptions that none of the authors point out. Without further due, let’s address the misconceptions in the order from low to high.

5. Effort Free

To begin earning passively is not as effortless as many have advertised. It requires up front investments and a lot of time. Once you have the ball rolling, if you are lucky, you can have a snow ball effect and the income will keep generating. Notice that I underlined “if you are lucky”? Not everyone can be successful once they start generating the income. There are many factors that can have an impact how the the ball rolls.

Let’s take an author as an example. To be able to generate that income, the author needs to spend a lot of time to write a book, find a publisher and get the book published. Once it is published, the publisher needs to be able to advertise the book and sell it to the mass. Getting your book noticed is difficult because there are literally thousands of books being published everyday. Sure you can publish your book using ebook, but you are facing an uphill battle against other authors who have the same idea.

Let’s look at at an angle as a YouTuber. At any given minute, there are hundreds of videos being uploaded to the YouTube platform. How do you get noticed among seas of videos? If you are lucky your video could go viral and you may continue to generate views and possibly monetize your video. However, there is no guarantee that you will continue to be successful as a YouTuber.

4. Getting Rich

Unless you are one of the few YouTubers who have millions of views, it is unlikely you are going to get rich. We all read about who makes the most money being a YouTuber every year. The list is very short and very difficult to get into. If you believe that by publishing a video on YouTube you can begin monetize, then you are wrong. Google has several conditions that every YouTuber must satisfy before he or she can start monetizing the videos.

Even if you can begin monetize, it is unlikely you will get thousands of dollars from YouTube. It is believed that conservatively you could earn up to a thousand of dollars for every million views you generate. Plus if you make over $600 in a year, you have to pay over 40% as income tax to the IRS. Being an author is not as easy as it sound. You get paid a royalty (a set percentage) for every book you sell. The publisher usually gets a bigger cut and leave a small fraction that goes into your pocket.

3. Many Ways to Earn

This is the biggest BS I’ve read. Yes, there are many ways to make extra money but they are not for everyone. As I noted in my earlier paragraphs being an author is one. But how many of us can actually write as well as Tom Clancy? Being YouTuber is stressful and takes a lot of time, but none of us can be as successful as PewDiePie or Mr. Beast.

What about rental income? Sure if you have a lot capital lying around to invest in properties and time to manage each one. Then there is also developing apps for smartphones. Let’s be honest, when was the last time you check the app store? Even if you have, there are literally hundreds of thousands of similar apps on one subject.

2. Press and Forget

The major reason Passive Income is coined because it is supposed to generate income stress free. You are supposed to hit the send button and forget about it; and magically you will start making money. Unfortunately, this is wishful thinking. Any ventures that you invested in require constant maintenance. Let’s take investing as an example – you have to constantly monitor the market to ensure your investment strategy is sound.

Ever wonder why successful YouTubers have a team of people working for them? Because it is a full-time job. Not only they have to produce the videos, they have to constantly keep the quality of the video high to keep their subscribers happy. Additionally YouTubers must ensure the videos the create do not violate YouTube guidelines or risk being banned or censured.

  1. It Is EASY

If anyone tells you that it is easy to get into any activity and start generating passive income, turn around and walk away. None of the ideas are easy. Either they require a lot of investments or that you have to be extremely lucky. My major problem is the market is too crowded. The pandemic forces a lot of people to start thinking of generating income out of their regular full time jobs. Being a YouTuber is a shoot or miss because there are way too many YouTubers. Investing in stocks is perhaps the easiest but it is not without its risk.

Here is another advice that I’ve read a lot. Take stock photos and sell them in the available platform such as ShutterStock or StockPhoto. Unfortunately it is very difficult to get into because these websites usually have high requirements. Even if you could start selling your photos on these platforms, it is very difficult to get noticed and start generating income because there are just too many photos that are available now. Additionally, there are thousands of photos already available online for free; how many are willing to pay for photos? Not many unless if you are big corporations who are in need to have certain photos for their in house publishing. The point is there are too many hurdles before you can actually start making money from the photos you take.

I’m not here to discourage anyone to attempt generating passive income. We just need to be realistic of what you can earn. Passive income requires a lot of effort and time and it is not without is stress. If you able to earn handsomely from your ventures I salute you. Until then, I recommend that you invest in passive income as a side hustle.

Don’t Touch That Money!

The Covid-19 pandemic has caused a lot of destructions. Not only lives were lost, but a lot of businesses were closed. The consequence of that is many people lost their jobs. Ultimately, many people have to dig deep into their savings to have food on the table. The US Government has been trying to help the unfortunate by giving some reliefs through CARE Act and the relief fund. However, it is not enough.

I am one of the luckier population because I am able to work remotely and the company that I work continues to be in business by helping businesses in getting loans. While the bank that I work for is hurting because of the pandemic, it also does not bode well for the employees too. The employees will be seeing less pay increase and maybe no bonus payment at all; we are just grateful that we still have a job.

If you are one of the unlucky ones and lost your jobs, I wish there is something that I could say to make anything easier. Unfortunately, as everyone continues to be impacted by the Covid-19, we just could not see the light at the end of the tunnel. Because of the hardship many are thinking if they can even afford to put food on the table.

I consider our current generation “spend generation”, particularly the millennials. With so many temptations in the world saving for “rainy days” is just not a priority. ABC news ran an article that stats that 40% of Americans don’t have $400 for emergency funds. This was a very similar study undertaken by the Federal Reserves in 2017.

Because of this unprecedented depression, most of the “unfortunates” will try to look for any resources to supplement their lost income. One of the option is borrow from 401(k) plan. And this is a bad idea!

Regardless of what you do, you should never borrow from 401(k) plan. Once you invested in 401(k) plan, you are only allowed to withdraw it when you retire. Withdraw it early comes with severe penalty what I would call “double-whammy”.

If you desperate in need of funds, you have 2 options with the 401(k) plan. You can either do an early withdrawal or you can borrow from it with the option to repay it later. Either way both options are just not ideal.

The CAREs Act changed the rules that allows you to withdraw without paying the 10% early withdraw fee. However, it does not prevent IRS from getting the taxes you owe them. You invest in 401(k) before taxes through the company you work for. If you take the money out, you are liable for paying the taxes. The tax rate may change due to the pandemic but at least 20% is withheld for tax purpose.

Similarly you can borrow from your 401(k) plan. The only difference is you need to pay yourself back within certain period of time. If you don’t have a job and unable to pay it back within the agreed time period, you are liable for the early withdraw penalty and heavy tax bill.

The double-whammy is lost of income. 401(k) is an investment vehicle that will grow over a period. Anytime you remove the funds, you loose the opportunity to grow your investment. Depends on the market, it could be a hefty amount. As an example, I observed my 401(k) balance and I noticed an increase of $20,000 in just less than a month based on a balance of half a million. Granted that this depends how well the market is doing. If the market continue to do well, removing the funds could amount to hundreds of thousands of dollars lost.

Understandably that the pandemic has forced a lot of people off the cliff. If you have an emergency fund or other personal savings to draw upon, you should use this before tapping your 401(k). Withdrawing from 401(k) should be the last straw.

Should Stock Speculation be Reigned In?

In the past week there were a few anomalies in the stock market. Beside the “normal” increase in stock prices for a number of stocks after the inauguration of President Biden, there were a number of stocks shot up in prices that are out of the norm and shouldn’t have happened.

The 2 stocks that particular interesting are GameStop (ticker: GME) and AMC Entertainment (ticker: AMC). GameStop stock price shot up by almost 700% in a week time while AMC Entertainment went up by 430%.

GameStop stock price in a week
AMC Entertainment stock price in a week

I’m not here to trying to understand or find out the cause of the price increase. If I have to guess, there is a lot of speculating of the stocks and through social media they are a lot more buyers jump on the band wagon and start trading these 2 stocks. There were a lot of short sellers that artificially increased the stock price beyond their value.

There is nothing wrong for any stock price to go up or down. However, if we dig further on GameStop, it is bleeding badly since the beginning of the pandemic. On top of closing 300 stores permanently it is impossible for the company to be valued at its current price. A year ago GME stock price dropped to $2.57. As of today, it went all the way to $380.

The stock price of AMC Entertainment is also the same. The lowest price of its stock dropped to less than $2 and it went all they way to $20. AMC is especially hit hard by the pandemic as more and more people skip the theater and stay at home. It is unlikely we will see AMC to increase its business anytime soon. The company even warns that it may run out of cash early this year.

The problem with these two anomalies is because of a lot of speculation of investors who are gaming the market. There is nothing wrong in making money off the market, but there should be a limit. That’s where the regulators come in. There are many controls in place set by the regulators to ensure the market is viable and not being abused. All the licensed brokers and companies have surveillance in place to prevent abuse. The trading apps such as RobinHood and Trading212 are uncharted territories for the regulators.

These anomalies will definitely raise a lot of red flags with the US regulators. I can assure you that there will be a lot of investigations in the upcoming weeks and there will be regulation in place by the end of the year to prevent this from happening again.

When I told my son that it is wrong to speculate. He asked me a good question. How are the GameStop and AMC different from Tesla? Tesla is trading at its highest and that made Elon Musk the richest person in the worth. If you dig further in the balance sheet of Tesla, it has yet to make money and consider its stock price compare to its valuation, Tesla stock is way overpriced.

I guess the question is should the regulators reigned in investors from speculating on stocks? If yes, at what threshold without stifling the market? I work in Internal Audit function of one of the largest bank in the world and this will be interesting to see in the few months. And how the market will react if the regulators start clamping down on such behavior.

All I can say now is as always the stock prices for these two stocks will right themselves up according to the market. In other words, their prices will drop according to their value. If you bought these 2 stocks, I recommend that you sell them before you start losing money.

It is unfortunate that a few bad apples take advantage of the market and hurt the rests of us who are honest investors. Let me know what you think?

Should You Take Risk?

A Wall Street sign is pictured outside the New York Stock Exchange in the Manhattan borough of New York City, New York, U.S., October 2, 2020. REUTERS/Carlo Allegri – RC2HAJ9BI6XP

The US economy, including the world’s are at a free fall because of the pandemic. Prior to the Covid-19, the US economy started to recover until we had an inept President. One of the results of all these is the interest rate, which is perhaps the lowest we have ever seen and will remain so for a long time. What this means is that it is cheaper to borrow money. On the downside, if you have money saved in any savings accounts, you are unlikely to get any interests from the banks.

What the pandemic has taught us is that we need to keep at least 3 months in a savings account for rainy days. However, the pandemic continues to go strong in every parts of the world. Some experts believe the old belief that having 3 months of cash to cover the cost of living is no longer enough. Now we need at least 6 to 9 months saved.

The question is where do we save the money. Saving the money under the carpet is a bad idea for obvious reason. Saving the money in the bank is the best choice. However, with the interest so low even the highest yield saving account could hardly pay any interest at all. How do we continue to generate passive income, in this case interest, that will help us to have a peace of mind in case we ever need that kind of money at times of need?

I was reading the December 2020 Kiplinger issue and one of the article suggests that we should adjust our investment portfolio and put more in stocks. If you read my earlier posts we need to be aware of the risk tolerance that we are willing to take. We should be more conservative by spreading our risk between bonds, ETFs and stocks. However, with the interests so low bonds hardly pay any dividends. Should we take more risks by divesting bonds and put more in stocks?

If you follow the stock market today (as of January 2021) it is doing the opposite from what the economy is telling us. There are more and more Americans filing for unemployment and there are more and more companies shutting down because of the Covid-19. Why is the market still going up? The stock prices for many stocks are perhaps at their highest we seen in the past decade.

Investing more in stocks become more intriguing because for the past year they continue to shoot up at an unprecedented pace. After Apple stocks split, it’s price continue to go up at a steady pace. Elon Musk because the richest man in the world as Tesla stocks went up by 100% after it splits its stocks. Now experts are saying we are at the cusp of market bubble.

The Kiplinger magazine is one of the magazines that I read every month and I’m surprised that it would suggest its readers to invest more in stocks at the time like this. Is there any truth or rationale for taking such a drastic step? As I ponder this question, I totally agree given what we know of the stock market today. As an example, I helped my wife to invest in stocks using Robinhood. Since October 2019, her portfolio increased by 63%, which is crazy.

Regardless, I will continue to take careful step when it comes to investing. While I have enough cash to cover my living expenses for the next 8 month, I continue to take a conservative approach and leave my portfolio unchanged. My portfolio is made up of 40% bonds and ETFs, 30% on reputable stocks that pay dividends and the remaining 30% of “play” money where I use it to flip. My strategy has been successful in that I am able to increase my portfolio by about 70% since I started investing in 2017.

Let me know if you will subscribe to the thought that investing in stocks better today? Or are you willing to take the risks in hopes that the stock market will continue to go up?

Put Out the “FIRE” on Your Way Out

Last year I read several articles how several 30 years old saved a million dollar and decided to retire for the rest of the lives. These retirees follow the FIRE – “Financial independence, retire early’ movement that has proven to be popular among burnt-out millennials wanting to quit the corporate rat race. They want financial freedom to do what they want to do without following the norm.

The FIRE concept pique my interest. My initial reactions were that it was a good idea and I’m amazed how they are able to save a million dollar in such short time. Retiring early seems fun and I wouldn’t mind doing that. However, one of the articles has a photo of the retiree in simple attire wearing sandals relaxing on a lawn chair. And therein lies the problem, the “retiree” looks like a hobo.

As I research further and start thinking the “ifs” and “buts” I realized that FIRE lifestyle is unattainable and unsustainable. There are too many things could go wrong and there are too many potential pitfalls.

Let’s start with what we have today. Since the end of World War 2, there were numerous progress made to assist Americans when they reach their retirement age. Without going into details, essentially we need to work for 40 to 50 years after graduating from school until we reach retirement age (current retirement age is 66). From that point on we can start withdrawing from Social Security, pension plan and any retirement savings we have. I agree that the current model needs revisit as the market conditions today are not what they were 20 years ago and the Social Security is running out of funds to sustain the next generation of retirees. The question is will FIRE method be better position to replace the current retirement model?

My answer is very simply, NO. There are several reasons working against this method and I will list them with my arguments. Let me know your thoughts in the comments below if you agree or disagree.

We Are Materialistic

To be able to save a million dollar by the time you reach 30 years old, you need to save at least 70% of what you earn for the first 10 years. Once you reached the “retirement” age, you are supposed to retire by slowly withdrawing the money you saved. But in order to sustain your lifestyle, you MUST live frugally. There will be no big spending and no unnecessary spending. Essentially, you are living on the edge so you can stretch your savings. The problem is we are so used to the materials around us that for anyone of us to cut all these spending for the next 50 years is impossible. Of course there is the possibility to make passive income to supplement the expense, which I will touch upon below. There will be no more cars, no vacation and maybe reduce your reliance on smart phones. Personally, I would rather work 60 hours a week and then take 2 days vacation and spend time travelling.

Don’t Get Sick

The health care cost in the US skyrocketed several decades ago and it continues to go up as of today. Various administrations and politicians attempted to control the cost for decades but without any results. The likelihood of health care cost to come down will not likely to happen. So to be able to sustain a FIRE lifestyle, you better not get sick. Seeing a doctor is an expense and living frugally won’t allow you to spend that kind of money. We are not even talking about hospitalization! Seeing a doctor can easily cost $100 and above on one visit. Staying in a hospital for one day can cost up to $10,000 a night! You may wonder that the cost can be covered by health insurance. Unfortunately, that is no longer the case. Depends on the policy, insurance may cover up to 80% of the cost but first you need to pay an annual premium at least $8,000 a year. If you work for a company that offers health insurance coverage, you know you are covered. A FIRE retiree would not have that luxury.

Don’t Have Kids

Being FIRE, you need to be very selfish. You are living off your savings and having children will not help at all. The cost of raising a kid can easily cost up to $250,000 from birth up to 18 years old. On average, it costs $234,000. And this does not include college cost and inflation rate. I have 3 children and I can tell you that raising kids is not a cheap venture. To retire at 30 you are not allowed to have kids because they eat in your retirement really quick. Maybe this is not a problem for millennials because they tend to be more selfish than previous generation due to materialistic behavior.

Living Easy or Living Aimlessly

Humans are curious animal and we thrive by learning. Not working for the rest of 30 years is like life sentence for us as human beings. The real reason our civilization continue to evolve because we continue to learn new things and continue to make our lives better. Retiring at 30 means no big spending, no working and no exploring. You basically have to live near your backyard aimlessly because you constantly keep thinking how to cut expenses and how to stretch your dollar. Since you are no longer working, you are not being challenge by daily challenges. You are no longer looking forward to what will bring in the future because you are “happy” with your currently easy living. If you are lucky enough to live until you are 80 years old, as a FIRE you need to live like this for 50 years. If you don’t think this is a life sentence, I don’t know what is. Personally I will not be retiring when I reach my retirement age. I will likely start a new venture to make extra income or I will be volunteering my time helping those in need. Working is one way to continue to keep our mind sharp and active.

The Math is All Wrong

A million dollar is not a lot, by any means. Assuming a 4% return in interest rate for 50 years, you are able to grow it to about 3 million dollar. But that is a big IF. That assumes that you won’t be spending that million dollar; that assumes the market continues to provide 4% return annually; and that assumes there won’t be an inflation. Unfortunately being a FIRE you are withdrawing the million dollar every month. Assuming you are spending only $2,000 a month your million dollar will lose $300,000 in 10 years, which will diminish the return of your original million dollar. That brings back to my first point, how many of us can live frugally only on $2,000 a month? That is like living almost at poverty. If we continue to work, we can continue to supplement our income while we continue to let our money grow.

Rely on Passive Income

There is another movement that is going strong. There are a number of successful people who are able to gain income passively. Active income is define as work and getting paid through employment. For example, I work full-time at a bank and I get paid on a bi-weekly basis. Passive income is defined as you grow your net worth without your active involvement. Example includes dividends you received from your stock or royalty you receive from your songs you published on iTunes. You may think generating income passively is easy but the truth is it does not always work. Not many of us can be a successful influencers on Instagram or YouTuber. Not many of us can gain a foothold in making music or gain an audience by selling ebooks. There are some who are extremely lucky but for the majority of us is like dropping a bomb in a barrel. Would you want to take that chance by being a FIRE hope you will have a steady stream of passive income?

Let’s be real, we are jealous beings. Sitting idly and looking at other around you driving the latest cars or living in a nice house would not sit well with our jealous selves. Or lounging in your cocoon while you hear the kids in your neighborhood having fun because you can’t afford it because you are planning on how to manage your expenses. We need to continue to keep our brain active by exercising it and continue to have objectives or goals that we can strive for. That’s what makes us human. Retiring aimlessly is just not the way to go.

Is the U.S. Education System Prepared for the Future?

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Recently I sat down with my teen daughter going over her math homework. She wanted me to check her homework. Sad to say that I was able to solve the basic algebra but anything more than that I was clueless. So my daughter asked me what I studied when I was in high school. I told her I learned the same math and I forgot most of them because I never have to use them in real life. Then she asked me why she has to learn something that she never have to use. Yes, indeed why?

I grew up in Malaysia and learned using the education system that is very different from the US. However, both of them have one thing in common, they tend to teach you subjects that you will never use again. Is this necessary or just a waste of time?

I’ve been working professionally for over 20 years and I can tell you my profession never have to use math above grade 6. I never have to use science because as a banker that is not required. I never have to recite history because none of them are prerequisites for employment. So why do we have to learn all these subjects in this age where majority of them are not applicable in real life. Plus we have everything at our finger tips? Why is the education system today so archaic that it fails to recognize that learning life subject will prepare the students better than learning these core subjects?

Yes, I realized that many of the subjects will prepare the students to learn and think logically, but there should be a balance between learning core principles and life subjects. My son is taking several Advance Placement (AP) classes because they are recommended when he applies for universities or colleges in 2 years. However, he has been putting late nights and spending every waking hours on weekends completing the homework and assignments. Needless to say that he hardly has time to get any exercise. Is this healthy?

After I graduated from high school, I applied to the college in the US and was accepted to Bernard M. Baruch College, CUNY and graduated with a Bachelor degree 4 years thereafter. As part of the requirements I had to learn English, algebra, civic, foreign language and even history. For business management degree, I had to take statistics. Statistic was perhaps one of the most difficult subject to master that the exam was an open book exam. After graduating from Baruch, I thought I had all the necessary skills to prepare me to get a job. I was wrong!

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When I interviewed for the several jobs I applied for, I found out that I was qualified at all. The interviewers were only interested if I graduated and if I had any work experiences. They never asked if I aced math or language arts. They never asked if I was good in science or civic. By the time I received the fourth rejection, I realized that college degree is not all that. I needed some real life experiences to allow me to find a job.

As I began to work full-time I realized that I’m lacking many skills and the higher education that I completed did not teach them at all. The course I took on Excel, as an example, was not advance enough to help me to do my job correctly. I had to create a template using macros by learning from my coworkers. Working with data was an eye-opening experience too. I never knew data can be altered, sliced and presented in trends to tell stories. None of them were in my college curriculum.

As I started to have a career, I began to explore what I wanted to do in my life. One subject that came up was if I am prepared when I retire. Then I realized that I do not have the knowledge in personal finance. Unless I am in the financial planning or work in the investments, I would not know what to do with my money. I had to learn everything using Google and read Kiplinger’s Personal Finance magazine.

Needless to say I was excited about the personal finance and the potential of earning more so I can retire comfortably. I shared what I learned with my kids and started to teach them how to be responsible individuals when it comes to finance. Then I realized that personal finance is not a subject that is being taught at schools – from primary to high school. The higher education such as universities and colleges do not even have this course as a prerequisite.

Let’s switch subject and move to technology. My son is attending local high school and commented that the computer science class is not teaching anything. He learns programming that a 5 year old can do. The teacher was not even experience enough on the subject. That begs the question, is this how we want to prepare our future generation? With the advancement in Artificial Intelligence, robotics and even smart systems, the education system is not doing enough to prepare them at all.

There are various reasons why the education system fails the students. Resources could be one, but they are usually out of our control because funding for schools are entirely federal, state and local governments control.

If I have to point one major reason for the failure, it will be lack of experience teachers. Majority of the teachers are career educators who have been teaching children all their lives. They follow the program and teach what they were told to teach. I would say all of them do not have real life experiences in the world so they cannot relate what they teach.

Here is one good argument on language arts, or in other words good command of English language. I took English 101 during my freshman year where we have to follow the structure in writing essay. This has been passed on from elementary school all the way to higher education. Here is the shocker – not all of the concepts we learn are applicable to the business world! The executives of a multi-national companies do not have time to read an entire page of “essay”. In business writing, we have to “boil the ocean” to summarize the activities of the entire quarter and year to just a few sentences for the executives to read.

The education system today needs a full overhaul to prepare our children for the future. Is there a silver bullet that could solve the problem. Yes, but it will require collaboration between educators and parents.

Let me know your thoughts. How is your education system in your country? Or do you agree with my assessments?

How to Minimize Risks for New Investors

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Investing is exciting but at the same time very risky. If you do it right you are able to get good return. Alternatively if you takes too much risk you could lose a lot more than you can afford. Risk management is a subject that everyone should know but more often than not this is not a well known subject among the mass.

In the old days stock investment was reserved for the rich and well versed professionals. That was before the popularity of computers where trading stocks require the expertise of stockbrokers. When someone needs to buy a stock they have to call their personal stockbroker to place an order. During this time the stockbroker may provide advise on the transactions. Hence, trading stocks was a risk managed by stockbrokers.

The advancement in technology changed all that; today anyone with a smartphone can place trade by simply pressing a few buttons on a tiny screen. Stock trading become accessible that the regular “Joe” can jump in the bandwagon. Therein lies the problem – most of them are not familiar with stock trading and may have taken in more risks than what they can afford.

I am not a professional in this area but having work in the financial industry for over 20 years I’ve spent enough of my time in reviewing, recognizing and understanding what are risks and how to mitigate them as much as possible. Notice that I said mitigate as much as possible? Well not all risk can be fully mitigated. All we could do is to minimize them up to a level that are acceptable. In other words, what is our risk tolerance.

New investors should consider the following points before investing to minimize risk. There are plenty of news and articles around highlighting how investing guarantee a return that never been seen before in years. Or how investing in “hot” stocks has produced many millionaires. Unfortunately every investors should know this and it is not norm. New investors should never let greed takes over common sense.

Investing Only What You Could Lose

This is a no brainer. You should only invest only assets that you could afford to lose. Never borrow money or use credit card to pay for the investment. This is extremely important because if the market takes a negative turn and becomes a bear market, the value of your holdings can drop at a faster rate. If you only invested only a portion of your “extra” money you are not sacrificing your livelihood. However, if you borrowed money from a lending institution to pay for the investment you are liable to repay the loan regardless on how bad the stock market is performing. If the stock market drops any further you could lose all your investment including your livelihood.

Do Not Put Everything in One Basket

We all heard about the “hot” stock. What do we do when we hear something that is too good to be true. We would invest all on that one stock. If that hot stock continues to go up then the return will be positive. However, all stock has its limit price and sooner or later it will hit the ceiling and start dropping. When that happens, investors of the stock will start panic and begin to dump the stock. In an instant you could see your asset begin to lose value very quick.

Many experts in stock trading advise diversify the portfolio. What that means is instead of just buying stocks, one should invest in bonds or other less risky investments such as mutual bonds. If one of the stocks begin free falling, the likelihood of all investment vehicles to fall at the same time is extremely unlikely. Hence, the risk of losing all the value of your investment is minimized.

Don’t Follow the Trend

If it is too good to be true, then it isn’t. Experts have tried to study the stock market for years and no one can come up with clear explanation why stock market fluctuates so much. History suggests that when the economy is bad it doesn’t mean that the stock market will do bad. In fact trends suggest the opposite. One recent example is when the COVID-19 pandemic hit the entire world various experts warned that the stock market will collapse. Instead the opposite occurred.

Sometimes there are news on how well one company’s stock is doing and there are a plenty of investors. This will create a buy frenzy and the stock of that company will go up. However, when news come out pointing the fact that the stock price is unsustainable, the stock price will instantly drop. One good example is stock price for Nikola. When news came out that Nikola may strike a deal with GM to produce electric trucks, the stock price for Nikola spiked. Recent news reported that Nikola founder committed fraud in its filing brought the stock price to a screeching halt.

Invest in Reputable Companies that Pay Dividend

One of the best ways to minimize risk is by investing in reputable companies that pay dividends. Reputable means the company has been around for years and continue to be relevant in today’s market. Some of the companies that come to mind are IBM, Apple, Microsoft or even John Deere. These companies continue to pay dividends regardless of the state of the economy.

On the other hand, you may not want to invest in companies that have been around for years but failed to adjust to the changing world. Some of these companies failed to adjust their businesses strategically and ultimately cost the demise of their business. Examples include Kodak, which failed to capitalize on the digital photography and Sears/Kmart that failed to adjust to the online presence.

Separate a Portion of Holdings as Play Money

All the points I raised above ultimately resulted in what I called “Play Money”. Stock investing is akin to gambling but legally. That’s why I separate my holdings in “safe” investment and “play” investment. Safe investment refers to less risky investment such as bonds and ETFs. Other safe investments include stocks that are more reliable and unlikely to fluctuate as much.

Play investments are those that are likely to fluctuate and rarely pay dividends. These are usually stocks that I use to flip. However, to be able to flip successfully you will still need to do some research to find out if you are going to make money or lose money. As an example, in the past 6 months I was able to double the holdings on Fastly by buying and selling the stock 3 separate times. Two other stocks that I was able to flip successfully were Snapchat and Pinterest. By separating my holdings I was able to minimize my risk knowing that at least 60% of my asset is safe.

Investing in stock market is exciting and at the same time nerve wrecking. There is no science that explain how the market performs. And there is no rhyme or reason why some company stocks are doing well while others are on the verge of collapse. The only we can do is minimize our exposure to the fluctuations as much as possible. Hopefully what I illustrate above provide an investment strategy that you can follow without worrying about losing it all.

What the Coronavirus Pandemic has Taught Us about Financially Responsible

The world is under the grasp of a murderous virus that is beyond any of our imagination. It has disrupted everyone’s life, destroyed numerous businesses and took hundreds thousands of lives. The virus not only cause massive disruptions in everyone’s life, it also reveals an unfortunate truth of majority of citizens around the world – a lot of people are not able to face the virus financially.

I remember reading an article from Time magazine several years ago that we were about to fight a losing war against superbug. While I can’t recall the exact date when I read the magazine, but it clearly stated several reasons why we were on the brink of disaster. Fast forward several years the Walking Dead TV series became one of the most watched drama on cable. The show’s premise is that there was a super virus that would kill the humans but left the cadaver intact; the virus would take over the hosts and make them into killing machines. I remember thinking to myself that this would never happen in this world because we have the technology and medical know how to prevent such disaster. And I was wrong.

Obviously the world did not fill with zombies but the virus did bring the world down to its knees. Medical institutions are overwhelmed and all medical staff are overworked. Economies around the world stopped functioning and all citizens are fearful of the infection. What people did not realize was how deep the virus has impact on their finances. A lot of people lost their jobs and many are not able to sustain their basic needs such as food and shelter. The question is why did this happen and is this preventable?

I have no intention to help solve this world problem but to make an argument that some of this could be prevented if people are more aware of their financial standings. Additionally, a good strong background in education is a must if someone wants to have a sustainable income. I am very sure this argument will invite a lot of criticism – however based on what I have observed and personal experience having a good education is extremely important. Let’s discuss the flaws and what are some of the solutions.

Lack of Savings

The savings I am referring to refers to availability of fluid assets that can be converted to cash quickly. I am not referring to the money saved in a saving account or any assets that can be used when there is a need for them. For example, this could be asset in any bank accounts and in equity such as stocks can be sold and obtain cash. Credit cards and line of equity are not considered as asset as they are liabilities.

When the pandemic hit a lot of people believed that the lock down was only temporary. However, as time dragged on the infection rate did not let up and more and more countries were impacted. Businesses began to shut down and a lot of local stores lost a lot of businesses. The immediate impact was many people lost their jobs. There were multiple articles with alarming concerns that many Americans do not save enough to be able to meet such dire consequences. New York post recently published and article that states one in four Americans do not have savings account at all. A CNBC article pointed out that one in three raids their retirement savings or stopped contributing to the retirement savings.

This has considerable long term impact on one finances. Not only it forces everyone to think of short term needs, the pandemic totally destroyed any long term outlook such as retirement savings. Some Americans still rely on Social Security to provide retirement income when they retire. However, the Social Security coffer is expected to run out of funds in 2035. There is even talks that it may run out in 3 years. Majority of Americans will not expect to see any retirement funds when they retire. Thus it is extremely important for all of us to invest in other retirement savings such as 401K or IRA.

What is the possible solution to such a predicament? There is no silver bullet answer. The best possible solution is everyone should plan their finances accordingly. For decades we are the “spend” culture. With availability of credit cards or plastic money, they have exacerbate the problem. More and more Americans are in debt and some have even file for personal bankruptcies. It is important that everyone examine their finances thoroughly and determine if any purchases can be put off. Financial planning involves placing saving in retirement and savings as priority and place purchasing big-ticket items as secondary (i.e. the new iPhones and new car can wait). This subject is an important but remain elusive for a lot of Americans. I touched on this subject in my posts earlier.

Education is Important

When the pandemic hit most hourly wage workers were impacted the most than salaried workers. Companies are less likely to stop employing hourly workers when the economy is bad to reduce cost. This is particularly true for blue collar workers where they tend to be let go. Examples such as restaurant workers or part time workers. The least impacted are white collar workers where their expertise remain in high demand.

Another example that I can provide is more close to heart. My wife is a Zumba instructor and she gets paid by the hour at my town’s fitness center. She was immediately placed on leave and lost all the hours as all fitness centers were shut down. Another great example is my brother-in-law who live in another country. All of them are in their 60s and suffered considerable damage as their businesses evaporated. Now they have to look for other sources of income such as direct sales to make end meets. In discussing this with my wife about her brothers, I discovered that most of them never graduated from high school and no one had advance degree.

As I observed the unfortunate events of people losing their jobs, I realized that some of them do not have proper education or they never had the opportunity to obtain a higher degree. Having an education will allow better opportunities when it comes to securing a stable job. Education not only open more doors it also allow better career advancement. As an example, a college educated person is more likely to secure a six figure job in an accounting firm than a high school drop out. Having worked professionally in the financial industry for over 20 years, I also noticed that employees are more driven to pursue advancement and increase their financial standings. Hourly wage employees only care about completing the task at hand and getting paid.

Obviously well educated population did not avoid the damage from the pandemic unscathed. There were quite a number of workers were laid off as some of the companies were not able to sustain the businesses. As the economy starts to pick up again, these workers are likely to land on their feet faster than hourly workers.


Personally I considered myself lucky and blessed as my family is safe during the pandemic. Additionally, I never resorted to go through my savings as I am quite discipline in ensuring there is a safety net in case if I am out of job. Finally, I continue to improve myself through continuous training at work and ensuring I am adding value to the company that I work for. That continues to prove useful as my company values my contribution (what’s better way to be paid to work remotely?). The pandemic thought me one important lesson – having a financial plan is extremely important. My children is experiencing the pandemic first hand and it also showed them they need to have financial resiliency as they are going into the adulthood. To begin, they understand the importance of having good education.

Right Mix of Investments

The app Robinhood has helped many new investors to monetize stocks. Previously stock investment was only for the rich and the wealthy because most brokerage firms required a minimum assets to open an account. Additionally, there is a fee for each transaction. Unless the transaction would generate a positive spread there is no reason for anyone to buy and sell stocks.

Recently Robinhood was put on the spotlight because there were a number of news how some investors took too much risk and lost a lot of money. The worst news was a 20 year old committed suicide because he thought he lost $730 thousands from betting on options. Investing in stocks are risky. Anyone who want to invest in stock needs to understand the risk and each investor needs to know his/her risk tolerance.

There are a number of experts who continue to point out that to minimize losses in stock market is to diverse their holdings. For new investors, they need to at least have a basic understanding how stock market works and what are some of the investment vehicles that are available to them in the open market. The question is what is the right mix of investments for a new investor?

How Much Risk

There is no clear answer on what is the right mix of investments because everyone is different. There are some who has a lot of liquid assets and willing to bet all. On the other hand, there are some investors who want to dip their toes in the water and would not take any risks. I have been investing in the open stock markets for over 3 years and majority of my assets are in the traditional retirement income of which I have no control over what to invest in. I learned to understand how much risk I am willing to take and that in turn helps me to understand what mix of investments that works for me. Below are some guidelines that I hope you find helpful.

Understand Your Financial Standing Before Investing

Although investing in stock has become easier for the mass, it is still not for everyone. The type of people who should be discouraged from investing are those who are having difficulties in earning enough to make ends meet and those who have high debt. Investing involves taking a large sum of funds and put it in a basket that could lose value.

Before an investor start investing, the person should take stock of his financial status and determine if he has the means to invest the money otherwise meant for sustenance. In 2018, the Federal Reserve Board did a study and found that 40% of Americans do not have $400 in the bank for emergency. The rate today could be higher due to the pandemic. A lot of Americans borrow from their credit cards to meet daily needs, including investing in stocks. There was an article in July 2020 of how an investor started investing by borrowing from credit card and with devastating results. Investing in stocks is risky and there is a likelihood that you could lose value. No only you could not recoup your investment you are now liable for the money that you borrow.

Separate Asset into Categories

Investing in stock market is similar to gambling, but legally. Like all gambling, you could win all and you could lose all. To minimize the risk of losing all, it is advisable not to put everything in one bucket; experts call it diversification. As noted earlier, majority of my assets are in retirement account. I only have 10% of my asset invested in open market. Additionally I further diversify my investment to further minimize the risk and maximize the return. To achieve this I categorize my holdings into 3 categories and I also put in how much percentage I own.

  1. Long Term Investment (15%) – These are the bonds and index funds that are stable. While the returns are minimal, the likelihood of them losing value is reduced due to the fact that they are consolidation of multiple stocks.
  2. Capital Generates Passive Income (60%) – These are stocks of companies that are reputable and in good financial conditions. These companies remain to be profitable and are not likely to be at risk of default. The stock prices continue to be in the upward trend. Additionally, these stocks pay dividends, which is a type of passive income.
  3. Play Money (25%) – I consider these stocks that are volatile and likely to lose value easily. However, volatility is also positive because to generate the spread is by buying low and sell high. These are the stocks that I will trade. These stocks to not pay dividend.

How Much Are You Willing to Lose

In an ideal world, we want to make money from stocks. However, stock markets go up and down. Hence, there are chances that one could lose money from stocks. Before anyone starts investing, he should set a limit of how much money he is willing to lose. Knowing the limit will minimize the risk of losing it all. The important question to ask is what sacrifice will you be making if you lose the money you invested.

Learn When to Quit

One of the important things I learned for the past year is know when to “sell” the stock. A profit is only realized when the stock is sold. On the other hand when the stock price falls below at a certain level, it makes sens to sell it before it goes any further. I learned the hard way when the Luckin Coffee stock that I owned continued in a downward spiral that there was no way for it to recover. I was holding to the hope that it would go up. Unfortunately that did not happen and the stock was subsequently delisted from Nasdaq. I lost over $900 when I finally sold the stock before its value dropped to $0.

One of the biggest challenge that I face is what happens when the stock prices of the company continues to go up? The premise in a stock market is buy low and sell high. However, I tend to hold on to these stocks especially if they are from reputable companies and they pay dividend.

Is there a right mix when it comes to investing in stocks? Yes, and it depends on one’s preference and how much risk is he willing to take. Before taking a big step in investing, it is also really important for the investor to understand his current financial status.