The secret of being wealthy

I'VE been an independent financial advisor for more than a decade and one of the questions that I am periodically asked is, “What is the secret of being wealthy?” The answer, and you may be taken aback by what I am about to reveal, is not about getting richer.

Growing up in a typical middle-income family, I often wondered how wealthy people managed and grew their wealth. In particular, I wanted to know what separated the truly wealthy people from the rich. Both shared an undeniable ability to make money and could afford to lead comfortable and lavish lifestyles. Yet, those in one of these groups were clearly the front-runners because their wealth had the ability to last generations.

In 1998, I enrolled in a Chartered Financial Consultant (ChFC) course to study personal wealth management. In 2000, I started my own independent financial advisory business. In the process of growing the business, I was privileged to learn from some of the best wealth managers and professionals from the United States, Australia and Europe.

I also discovered a unique approach used by the likes of John Rockefeller, Andrew Carnegie, Li Ka-shing and Bill Gates to become not only rich but also tremendously wealthy. Armed with all this knowledge, until 2008, I focused my business on serving clients with a high net-worth, which included a niche group of multi-millionaires and owners of listed companies. In time, I identified a common pattern in the characteristics, behaviour and habits of all these wealthy people.

The wealthy know not to keep or hold on to too much cash in the bank. They are aware that interest rates offered by the banks will not be enough to offset actual inflation. Therefore, one of the most logical steps to take is to keep a minimum amount of cash in bank deposits while investing the rest.
The wealthy constantly review the performance of their investments. They have no reservations in getting rid of underperforming investments that do not meet their expectations. They will not hesitate to take on investments that will generate a handsome profit.

The wealthy are never lulled into a false sense of security over the assets they own. They demand to be made aware of any risks that might reduce or deplete the assets, and will explore methods to safeguard, protect and preserve their wealth.

The wealthy are also very conscious of unnecessary living expenses. For example, they don't like the idea of over-purchasing life insurance policies and paying expensive premiums. They regularly review all their insurance policies and will take action to cease or surrender irrelevant ones .

The wealthy demand more
The fact of the matter is that wealthy people demand more for their money. They are never satisfied with just having money sitting in the bank or having it invested in one or two investment vehicles. If anything, they want their money to work even harder for them. With such a high regard for their money, the wealthy place enormous emphasis on optimising their money. In fact, I'd say it's bordering on obsessive and rightly so!

By contrast, these characteristics and habits of wealthy people tend to be absent in the rich and middle-class. Certainly, the rich generate a high income. They may put their money into fixed deposits, buy one or two properties and invest in unit trusts or shares. However, they are too busy to spend more time optimising what they have. They hope that by earning more money, they will one day become wealthy. The same can be said of the middle class. When their income increases, they fail to optimise their hard-earned money.

Other than the lack of time and discipline, one of the main reasons they failed to optimise their money is that they feel lost and do not know where to place their investments. As a result, they assume that if they make more money, they will become wealthy.

In short, those who are not wealthy focus on one thing and one thing alone how to make even more money.

Moneymaking capability is the ability to generate an active income. Therefore, anyone who works as an employee or business owners has this capability. What most people underestimate or fail to appreciate is the power of money optimisation, defined as the activity of optimising the income and assets that you already have. Money optimisation is about making your accumulated assets work for you to support your lifestyle

Without money optimisation, your hard-earned income may not be translated into meaningful savings. Furthermore, your hard-earned assets will not be able to grow at an optimal rate or be properly preserved and protected against various risk factors. Without money optimisation, chances are you're probably not going to be in a position to support your various needs and wants in life, especially if you stop earning an active income. Most disastrous of all is that you will never be on the fast track to becoming wealthy or get out of the rat race.

Think of it this way: to succeed in any sport, one must not only focus on playing on the offensive all the time. Champions and their coaches will tell you that to win a championship, it is necessary to strike a balance between good offence and having a tactical defence.

So, to come back to the question: “What is the secret of being wealthy?” The secret of being wealthy is not about getting richer; it's about optimising what you have and striking the balance between focusing on both your moneymaking and money optimisation capabilities in equal measure.

Yap Ming Hui/Thestar

Can you retire with RM1mil?

A MILLION ringgit is a lot of money. In the past, it was always considered “the benchmark” in terms of a person's success. After all, having RM1mil officially makes you a millionaire.

However, realistically, is RM1mil big enough to survive on today, especially once you retire?
According to official statistics, the average Malaysian male has a life expectancy of up to 75 years, while for females its up to 77 years. This means that a retiree aged 55 has to support hinself or herself for another 20 years or more.

But let's be a little bit conservative for the purpose of this article, let's put the average life expectancy at 80 years old. With RM1mil at 55 years old, you would need to divide that money to last you another 25 years, which comes to an average of RM3,333 a month.

Dwindling value: With the high cost of living and rising inflation on an annual basis, RM1mil won’t be sufficient to retire for long.

 

Is that enough to sustain you?
“It really depends on your living standards,” says Whitman Independent Advisors Sdn Bhd managing director Yap Ming Hui. “With rising inflation on an annual basis, that monthly sum (of RM3,333) will be worth a lot less as the months and years go by, so it's definitely not enough to sustain you for 25 years,” he tells StarBizWeek.

Yap nevertheless believes that a person is able to “make do” with RM1mil once he or she retires.
“You would definitely need to readjust your lifestyle,” he says, adding that a person without financial obligations, such as a pending house or car loan can still survive on RM3,333 a month.
“Of course, if you have a posh lifestyle, especially when you're living in Kuala Lumpur, then that amount won't be enough. But if you live outside Kuala Lumpur and live within your means, then it's still possible.”

MyFP Services Sdn Bhd managing director Robert Foo says living for 25 years with RM1mil in today's environment “would be tough.”

“If you're married and have a few children and ongoing commitments such as a loan, it's tough. If you're not generating any more money after 55, it will definitely run out.

“By the time most people are 55, their children are probably working but some of them might still depend on their parents. They could be living under the same roof or might need financial help to buy their first car, for instance.”

CTLA Financial Planners Sdn Bhd managing director Mike Lee also feels that RM1mil would only sustain a person for a limited period of time.

“RM1mil might be enough for the first few years. However, with the high cost of living and rising inflation on an annual basis, that sum won't be sufficient.”

Foo maintains that it is ultimately up to how the individual manages his or her lifestyle.
“It truly depends. For some people, RM1mil might not be enough to even last them 10 years.”
He says RM1mil might not be sufficient for a bachelor with no commitments to retire on.
“As a bachelor, you're probably going to want to go out with your friends and see the world. You're unlikely to be cooking your own food, staying at home everyday and living hand-to-mouth every month.

“That's not considered living, that's existing!”

How to retire with RM1mil
While RM1mil might not be enough to retire with, it's still a lot of money, which can be used for investment purposes and to grow your wealth even further.

Foo believes the best thing to do is to continue working well into your retirement years if health permits,.

“Don't retire! We advise our clients that if it's possible, they should continue working. At 55, you're still young enough to generate more income for yourself. Even if it's just half of the amount that you used to earn, it's still money coming in,” he says.

Yap says readjusting your living standards would also help, adding that an individual could further invest his or her money in shares, unit trust or even property.

In terms of shares, Lee says a retiree should put some of his money in stocks that provide good dividend returns.

“Real estate investment trusts also give good dividends. Have a mixture of investments and don't just leave everything in your fixed deposit account.

“Leaving all your money in the bank is not a good idea, as it won't generate good interest rates. With the inflation rate growing at an even faster rate, you'll just end up losing out.”
Foo says it's also a good idea to start your own business.

“By the time you retire, you would have acquired valuable skills that still make you marketable,” he says, adding however that starting your own business can be either a rewarding or risky endeavour.
“Starting your own business can generate high returns. But you can either make it or lose everything.”

EUGENE MAHALINGAM/Thestar

慎防三大吸血鬼

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你有没有这样的痛苦经历：每个月挣的钱好像不少，可到月底还是所剩无几，辛苦挣来的钱不知都去哪里，交完房子的首付，看到每个月的高额还贷数，还来不及高兴，心就又凉到了谷底。

正如俗话说的那样：“人生本平衡，有得必有失。”
通过负债，虽然我们可以马上住大房子，开漂亮车子，无所顾忌地购物，享受着各种奢侈品带来的荣耀，但是，随之而来的却是难以承受的债务冲击。
负债，特别是恶性负债，超出我们实际偿还能力的负债，最终让我们陷入债务的困境中，失去了金钱，失去了自由，失去了欢笑，失去了时间，失去了信用，甚至失去感情，失去家庭的和睦。
负债，更让我们失去了更多赚钱和享受未来美好生活的机会。

你对自己或家庭的资产状况做过全面评估吗？
你或家庭的负债有多少？房贷、车贷、信用卡三大“吸血鬼”是如何“榨干”你家的钱财？
同世间所有的事物一样，债务也有好坏之分。

从刚才负债后果的分析来看，可以将负债分为好负债和坏负债，也就是我们常说的良性负债和不良负债。这两类负债给我们未来生活带来的影响完全不同。

不良负债是纯粹的消费型负债，这类负债的存在原因，是为了享受生活，哪怕都是些大大超出自己承受范围的高档奢侈享受。除了表面上的一些享受和荣誉，这类负债并不会给负债者带来任何实际上的金钱收益，可能带给我们沉重的经济负担和心理压力。

而良性负债就是不影响你现在目前生活水准这种情况下的负债，可能给我们带来更加富裕幸福的生活。我们在选择负债时，应该予以区分，划分良性负债的依据是如果你的负债不超过30%就是良性负债。

房贷越久越好
房贷是家庭负债的主要一项，但是属于良性的负债。对于很多年轻人而言，房贷压力太大，是不是由于自己的还款期限太短，能否把期限延长？房贷要能贷多久就贷多久。如果还款期限从20年变成30年，那每月月供就会少。对于年轻人而言，如果你贷款买房，一定是使用最大期限的还款额。

使用最大期限还款额的目的，是让自己的财务链绷得松一点，然后一旦手里有了钱以后就开始偿还本金，只有偿还本金才能消减债务。刚贷款时，不让债务链条绷得很紧，让它有一定弹性。财务上一定要有弹性，所以说能多长就多长，然后利用钱去还本金。

使用最大期限的还款额，可以缓解家庭财务压力，这样有剩余的钱还可以做其他的投资理财。
只要利率超过贷款利率的话，其实你的资产就会逐渐增加的。比如熊市的时候，你就多还点贷款，少弄点理财，牛市的时候，你就可以少放点贷款，多弄点理财，灵活来处置自己资产状况。

买名车财务恶化
有些人把车作为代步工具，满足基本出行需求就好，也有些人把车作为个人身分的象征，要买就买尽可能高档豪华的最新款的轿车。

车子不同于其他众多的产品，并不是一次性消费，后续还有持续消耗，一旦购车，接下去就是每个月的汽油费、停车费、修车费、保险费、过路费……还有难免的违章罚款，这些都是一笔笔不小的后续支出。

另外，汽车的贬值速度非常快，一转身就立刻贬值20%，之后每年的贬值速度均20%，还得还那车贷。所以，如果经济实力允许买车也无可厚非，但如果超出了自身的承受能力，完全为了面子和一时的荣耀通过负债来支持自己的这种高档消费，就非常可能最终落入“面子有了，日子难了”的困境中，使原本就紧张的财务状况更加恶化。这个是一种很不负责任的做法。

在有需要的时候，如果你想贷款买辆车，务必要注意一点：三年之内确定能把贷款赶紧还上，然后不要买太超过自己承受能力的好车。

卡债如高利贷
在现代社会中，信用卡逐渐取代货币，成为非常便捷的创新支付工具，越来越受到人们的欢迎。
人们刷信用卡消费购物，在享受到便利的同时，也非常容易给自己造成并未花钱的假象。
信用卡并非不用支付，只是延期支付。

过分依赖信用卡，累加账单，可能会让自己陷入更深的困扰中。
信用卡在免息还款期内按时还款没有任何问题，但是一旦过期，信用卡就立即变成了高利贷，银行按照每日万分之五的罚息收取利息，相当于年息18%，远远高于目前银行的商业贷款利率，最终使我们在不知不觉间损失惨重。

适度消费
在信用卡的使用上，一定要把握好分寸，不能过度刷卡消费，更不能逾期还款，因为这样不仅会造成高额罚息，甚至还会因涉嫌恶意透支而影响自己的诚信。

信用卡的使用始终控制在合理的范围中就是良性负债，但是如果出现过度刷卡，多次逾期罚息，每月忙于应付到期的卡债，良性债务就成了不良债务，并使我们的生活陷入难以自拔的困境。

用信用卡套现买房买车，“卡付卡”现象是属于财务上的自杀行为。最终自食其果。我建议信用卡办一张应急就可以了。现实生活本身就充满变数，随着岁月的推移，很多情况都可能发生变化，负债同样如此。从今天开始，牢记最正确的做法：排除不良负债，控制良性负债。通过负债理财，成就美好的未来。

罗凤琴/南洋商报