Fundamentals II

This is the 2nd part of my first post, Fundamental I.

Third - Wealth Accumulation
After being able to maintain a positive cash flow, one would be able to accumulate wealth. How do one accumulate wealth effectively? Many would immediately think of "Save First, Spent Later" approach. One need to be disciplined and should have a systematic plan in place as a guide.

Well, in most part of the world, the two most common needs are Retirement Funding and Children Education Funding. These two funding needs you to be persistant in a realistic and achievable accumulation program you've planned and developed. One must always remember, these two funding is a long term commitment.

Lets look at a senario.

Alex is well aware that he needs to set aside a portion of his salary every montt in order to accumulate money. Over ten years, he managed to save a five figure balance in his savings account. He is proud of his 'achievement'. He felt that he needs to enjoy the fruit of his labour. Alex then went off to Europe for a two week holiday, bought himself a new set of home theater system and paid a down payment for his dream car. As a result, his bank balance has reduced significantly. After consulting his financial planner and working out his plan, he realized that he had lost several years of opportunity to make his wealth work for him. His savings should have go hand-in-hand with careful investment and the early withdrawal of his savings actually had tremendous opportunity costs.

As mentioned earlier post, there just too many temptations to spend away our hard earned money.

Remember Save First and Spend Later. Persist in the plans that you've laid out in meeting your long term wealth accumulation objective.


Fourth - Wealth Enchancement
This is the fourth guideline for the Fundamentals of Wealth.

What are you going to next with the wealth that you've accummulate? Put it in savings account and earn the super low interest on your savings? Or put it in Fixed Deposit for year for a slightly better rate? (Please refer to DBS Bank rates and OCBC Bank, the two largest bank in Singapore - You can check your country's bank interest rates).

Either way, it's not going to bring you far enough to meet your Retirement Funding needs, for example. You need to develop an investment program that is appropiate and suitable to your unique situation, yet will grow at the desirable rate. In the market, there are tools and investment vehicles which could better enchance your investment returns, thereby fulfilling your long term financial goals.

Before you go about investing in any investment, always remember to accessing your investment risks appetite. In other words, how much loss you are able to take and how much profit you want to make. Do take some time to understand various investment principles which help manage investment risks properly such as asset allocation and rebalancing. Never leave it to chance because you never want to risk losing your accumulated savings.

By enhancing your accummulated wealth's value, the time needed to meet any long term financial goals will be shorten. Nevertheless, design your own investment plan carefully and take into consideration your situation and needs.

*the last part will be on posted soon...*