Monday, December 10, 2018

Networth update in 2018

2018 is a rather slack year for me. I don't think I work as hard as I do in previous years in terms of work, so the time that is otherwise spent working is channeled to my family, especially my growing child. This year is also a bad year for those who invested in equities. It seems like if you put money under your pillow, you'll end up being better. Will it affect my net-worth? Let's see.

The last I wrote on my net-worth was back in 1st Dec 2017, here. I'm going to do the same below.

There are so many ways to calculate networth, but I've always done mine this way. It's essentially assets minus liabilities but how you define assets and liabilities makes all the difference. Like in the past, I excluded the asset part of my stay-in property, but included the liabilities portion. This year I incurred new debts too, in the form of a car loan of 3 yrs. I'm also not going to include the value of my car in the assets part, but will include the liabilities part.

The assets part include:

1. Cash in my wallet
2. All the money in my various bank accounts
3. Cash holdings under mattress and milo tins at home
4. Money in my paypal account
5. All the money in the 3 accounts in my CPF
6. Money market fund account
7. Marked to market investment portfolios
8. Surrender cash value of whole life insurance plans

Again, I do not include the value of my 5 room flat that I'm currently staying in, and also the value of the family car that I own.

The liabilities part include:

1. Credit card bills
2. My portion of the HDB mortgage loan (total remaining loan amount divided by 2)
3. My portion of the car loan I took this year (total remaining loan amount divided by 2)

Here goes:

2014: Assets: $226k, Liabilities: $220k, Networth: $6k
2015: Assets: $295k, Liabilities: $207k, Networth: $87k
2016: Assets: $351k, Liabilities: $188k, Networth: $163k
2017: Assets: $449k, Liabilities: $182k, Networth: $267k
2018: Assets: $483k, Liabilities: $191k, Networth: $291k




There's a few things I should be glad and grateful for in 2018. Firstly, despite the downturn in the stock market, my networth is still up. Of course it didn't go up as much, like the crazy almost 100k increase from 2016 to 2017, but the fact that it is still positive is good enough for me. This year is also when I paid a hefty down payment for my new car, so that is also why the asset didn't go up as much. Secondly, overall I saved about 55k this year and that surprises me. These days, I no longer consciously check how much I saved. Just perhaps a brief look every half a year or so to make sure I'm generally on the right track. Not all the savings are in cash too, because I transferred a part of it into my CPF to fulfill my self-employed contribution, and also to shore up my OA for my reserves. My work income dropped a bit, but my dividends pushed it up, so net net I'm not that far off. That is exactly what the dividends are for, and I'm thankful for stabilizing my income.

Market can go up and down, but my net worth must go up all the time. That's the philosophy that I adhere to. If not, there's nothing to show for at the end of a year of hard work.

Financially, there's more things to look forward for year 2019. It looks like my work income is going to have a boost as I have a very robust order book for the coming year. If all things go according to plan, I should be running when Jan 2019 comes, instead of strolling. There's also more expenses to come, because I'm sending my child to a child-care center next year.

Till December 2019 then!

Saturday, December 08, 2018

Nuances of financial independence

When we talk about financial independence, it suggest that we are trying to stand alone and be self sufficient. It reminds me of those doomsday preppers, where they store their own preserved food, carefully canning them to hoard a stash of years to come. Self-sufficiency is the key. And for a while, I thought that model is what I aspire to become too.


After becoming a father, I saw from first principles how relationships are formed. My boy is the catalyst to forging new relationships. He is like the fire in the forge, melting hard cold steel together. I think my neighbor's place is like a second home to him. They are a couple with an adult child that had long since flew off the nest to start a new life. Hence, they welcomed my boy with open arms each time. It started from there, then my mum starts preparing some meals for them, and before I knew it, our relationship had elevated to just mere acquaintance. As my boy runs around in his whirlwind of activity, he spreads joy all around him. Strangers sometimes step in to help him when he falls while I stand there and just observe (I don't tend to help him unless it's serious; and it's seldom serious). The entire market near my home probably knows him, and because of my boy, I share with him the joy of having new found friends. This is not something I do very well, as I tend to keep to myself. Don't we all?


Humans are not meant to be isolated. And so when we talk about financial independence, we should steer away from the idea of being self-sufficient. There is value in being dependent on others, but the key is whether you have the strength to let others be dependent on you as well. That is how new relationships are formed. You treat me a meal, next time I treat me, ad infinitum. There is something to look forward to, and the relationship is sustained through such relational transactions. If you're self-sufficient, and I'm self-sufficient, and I don't want to owe favours to you because I want to maintain self-sufficiency, then the whole thing breaks down. I know I'm in a better relationship with someone if I'm getting fuzzy with money. I'm very sensitive to money and that's how my mind works, but I don't necessarily show it. If I want to strengthen a relationship from acquaintance to friends, I will get more and more fuzzy about money. On the other hand, if I just see someone as a hi-bye acquaintance, I'll pay the exact right down to the cents. I won't want to owe them any favours because I don't want to have to expend the energy and time to return it.


No relational transactions equals no relationship.


What has this got to do with financial independence? I want to be financially free so that I can have the freedom to build deeper relationships. With whom, with what? I want to build deeper relationships with my family, but more importantly, to expand my circle of what is commonly termed 'family' so that it grows bigger and bigger to encompass more people. It is NOT based on an ideology of self sufficiency, but that of mutual dependence, and hence as a result, creating deeper relationships with people. Family shouldn't be just related by blood; it should be defined by how much blood you are willing to shed for another being, and him to you.




And now I know why I dislike the idea of 'FU' money. It is so antagonistic. It implies the breaking down of relationship with a certain degree of arrogance and anger in it too. It suggest you want to flip the table and flip someone the bird.


No, that is not what I aspire to be. Someone is looking up to me as a model, and thus I must be exemplary in conduct and manner.

Friday, November 23, 2018

Children as great teachers

I used to hate putting my child to bed. It might take anything from 1 hour to 2.5 hours. You might want to have your child sleeping at 8pm sharp, but that will never happen. He'll toss and turn, he'll play around, he'll do anything except sleep. In the past, this used to vex me, because I was mentally counting the personal time that I had left. I love my kid, but hey, I've been looking after him for the good part of the day, and daddy needs some personal time alone to be 'myself' again. Out of 12 waking hours, surely having 2 hours alone is not an unreasonable request?

Apparently so. Just 5 mins ago, my son finally fell asleep. We tried putting him to bed at 9pm, so that was 1.5 hours of trying hard not to doze off while trying to make him doze off. It was only after a few months of dreading this nightly routine that I came to the realisation that it was not him who needed to sleep on time, but me who needed to let go of whatever is on my mind and live at the present with him. That thought freed me from the shackles of a regulated schedule and made me fully enjoy being with him. Yes, even those fussy moments when he just didn't want to sleep.

That's the essence of being a parent. It's not so much about the kid who needs to adjust to you, but more about you adjusting to the kid. If you see children as spiritual mentors who are here to educate you, then things are much easier. What have I changed to adjust to my child?

1. I started reading more physical books. I have a few e-book readers but in order to inculcate the habit of reading to him (or perhaps the culture of reading), I've been borrowing more physical books from the library. If we're not reading to him, we'll be reading in front of him. I seldom see a child that is a voracious reader and the parents are not. Not impossible, but it's just less likely.

2. I'm using an electric toothbrush for almost a year now. I wished I had it when I was much younger because it was such a great cleaning tool. But it seems I will now have to switch to analogue toothbrush now because I need to teach him how to use a toothbrush real soon. There are reports of children having very bad tooth decay at a very young age. As a compromise, perhaps in the morning when he's up I'll use the analogue one, and when at night after he fell asleep, I can use back the digital one. At least with that, I won't have to sacrifice my tooth for his!




There are many such incidents but I think I'll not bore readers with such mundane details. Suffice to say, before you want your child to change, perhaps you as the parent should begin and lead the way. Children are super sensitive towards double-standard. You smart, but they are not stupid too.



Sunday, October 07, 2018

Cars as memory markers

There was a time when I thought I will never get a new car. Why pay a premium for the smell of ‘newness’, I said. That was part of a conversation that I had with my wife many years ago. It goes something along the line that when we retire (without kids at that point in time), we should ‘heck care’ and get a 2 seater mini coupe to drive. That was when we had a debate on the merits of buying a new vs pre-owned car. You can see which side we are won over because we went on to have 2 pre-owned cars.

Each of our pre-owned cars represents a certain epoch of our lives. Our very first Mazda 2 hatchback represents a very significant change in my career. I had been going around on public transport for 30 over years. My tuition career back then involves going around in Singapore to my student’s home. It was a very tough period because, in my peak season, I could be going around to 4 or 5 different homes over the span of one day. With the waiting time and travelling time, I could be spending another 2 hours just to get to the venue where I will work. My meal times are not included because I will eat on the go, or just spend like 10 mins eating at the nearby hawker centre or fast food. Or, I could be eating a very late dinner at 1130pm. It was crazy, and I knew it was unsustainable especially when I have a family in the future. The purchase of our first car changed all that. It practically erased the annoying waiting time and so I can go to and from work with a lot more reserve energy at the end of a super long day. To me, saving and protecting my reserve of energy is far more important than the monetary value of the car. During those times, I don't have much life after work and this is important for me.

Our very first Mazda 2 hatchback

The first car is also the car that we went around Singapore, going to different places that we normally wouldn’t go on public transport. We could be having lunch at Liang Court, then pop over to Suntec city for a coffee and then back to Bedok for grocery shopping. It was ideal for us as a couple as we had a lot of utility for the car and the travelling to different places created a lot of experiences and happy memories. When times are tough in taking care of our baby, this is always the epoch that we will reminiscence. We’ll say in our past life, we used to watch a movie without a care in the world. Or, in our past life, we used to spend the whole weekend outside just trying out different cafes.

So you can imagine how hard it was to let go of our first car. Understandably, my wife cried when we handed it over to the dealer. It was like letting a part of our memories go. That was the end of the first epoch.

Our second car is also a Mazda 2, but this time it’s a sedan and not a hatchback. We bought it over from a dear friend, who is also a financial blogger. While our first Mazzie, as we affectionately call it, was a little cranky with the air-conditioned sometimes spewing hot air, this new Mazzie was in a very good condition. Personally, I would never go for a bright red car, but we have to work with what we have. This brings about the second epoch in our lives. If the first epoch signifies my change in career and a focus on living together as a couple, then the second epoch represents the start of my journey as a father and for my wife, a mother.


Our second Mazzie 2, a rare sedan instead of the usual hatchback

It was during this epoch that I learnt for the first time I’ve become a father. With this new Mazzie, I will always remember driving my wife to the hospital for her checkups and also eventually for the delivery of the baby. It was in this car that two persons went but three persons came back. We sneaked out after the confinement period to breathe a little and came back with a bagful of groceries each time. We installed baby seats for our little one, and also had very memorable trips when we can still carry him around while he looks around the world he inherited with his big curious eyes. When he grew a little older, he even recognised the car among all the cars in the car park and will run-walk over to Mazzie, waiting to be carried into this throne in the car. I’ll remember this Mazda 2 as our baby car and it represents our transition into parenthood. Our previous identity as a couple is all but wiped out with the coming of this car.

And that brings us to the third epoch with our newest car. It is the very first car that we bought that is not pre-owned. It’s a Hyundai Elantra that was bought at a steal when the COE comes tumbling down from its zenith just one or two years ago. I know how silly this will sound when the COE plunges even lower, but let me have my fantasy. As mentioned earlier, I thought that I will never ever buy a new car in my lifetime, but I did. It was very exciting viewing the car, waiting for the car to drop to our price range and eventually buying it

Our 3rd car: Hyundai elantra. So, do we call it Trannie or Lannie? LOL

What new adventures and new experience will this new epoch represent? What new memories will we create together as a family of 3? I suspect it has a lot to do with bringing out son to the zoo, the bird parks, Sentosa, science centre and all the other ‘touristy’ attractions. It will also be about bringing him to enrichment classes, ferrying him to and from school and all the other admin runs. This car will witness our son growing from a babbling toddler to a talkative primary school kid taking PSLE.

I wait with bated breath to soak in all these experiences.

Saturday, September 29, 2018

My thoughts on the Mid-year exams removal

There are quite a few people in my circle asking me what I think of this news here. This news is regarding the planned removal of the mid-year exams for primary 3 and 5, as well as secondary 1 and 3. The intention is to withdraw from the narrow focus on grades so that students can discover the joy of learning. I can put on two hats to analyse this. One is that of a parent and the other is that of a tutor.




As a parent:

1) My first thought is that there will be less feedback on how my child is performing in schools. As a result, I will get more anxious as the whole focus will now be on the final year exams.

2) I will have to spend more time and effort to check if my children really understand what is happening in school. There are no more mid-year exams to alert me to take actions or to remedy the situation.

3) With the removal of the mid-year, will there will more of the less formal assessment and grading? If that's the case, then the stress is not concentrated on 2 major exams, but throughout the school semester.




As a tutor:

1) There are usually more students signing up after major exams. One is in May (mid-year exams) and the other is around Oct (final year exams). With the removal of the mid-year exams, my first thought is that I might have fewer students signing up. Thinking about it a bit more, I think it'll work out to be the same. Now my intake of new students will probably come towards the end of the year.

2) I kind of like it that there are no mid-year exams now because currently, it is one major disruption to teaching. Every time there is a major exam coming, I will have to stop teaching and focus on revision and drilling. That's not teaching. It's super boring for me and super boring for the students as well. With the removal of the mid-year exams, I will probably have to test the student's understanding myself. That might be better and should have a better workflow.

3) Without a reason to study, some students might really slack throughout the year and study seriously only towards the end. With the removal of intermediate assessment, I hope I won't have to face more attitudinal problems when tutoring.

4) Those vendors selling mid-year exams packages either huat because these are now precious resources, or they will lose a lot of revenue because now nobody will be buying them. Somehow, I think it's more likely to be the former than the latter. Each package can cost up to $50, consisting of several top schools and worked solutions. It can be serious money for a one-time effort in compiling.

5) Those tutors who are not so good might end up having less 'grading', since there is no feedback mechanism for the parents to tell if their children had improved, and so neither can they tell if the tutors had helped in their children's grades or not. It might be harder to differentiate between the good tutors and the truly bad ones since it's now an annual assessment of the tutor's prowess in teaching vs semi-annual assessment.

Friday, September 21, 2018

The returns of OCBC 5.1% preference shares

I bought the OCBC preference shares, OCC 5.1% NCPS, a while ago for my parent's retirement funds. I didn't even know that OCBC had redeemed back the perp on their first call date until I saw the capital returned to my bank account. Another one bites the dust... So how had it performed? Let's take a look at the details:



1st tranche:

Buy date: 3rd-Feb-2014
A) Buy price: $106.10
B) Quantity: 100 shares
C) Comms paid for buying: $37.19
D) Dividend collected: $2551.40
E) Total profits: 100*B + D - 100*A - C = $1904.21
F) Recall date: 20th Sept 2018
G) Total duration: 4.63 yrs
H) Total % profit: E/(100*A + C)*100 = 17.88%
I) % returns/yr = H/G = 3.86% per annum

2nd tranche:

Buy date: 14-Jan-2015
A) Buy price: $106
B) Quantity: 100 shares
C) Comms paid for buying: $36.30
D) Dividend collected: $2041.39
E) Total profits: 100*B + D - 100*A - C = $1405.09
F) Recall date: 20th Sept 2018
G) Total duration: 3.68 yrs
H) Total % profit: E/(100*A + C)*100 = 13.21%
I) % returns/yr = H/G = 3.58% per annum


I think the returns per annum is pretty decent, especially at those times where the Singapore savings bond is not even available yet. Those are the times when the interest rate is super low. In fact, so low that I am compelled to help my parents because their default action is to put into fixed deposit.

I'm glad I didn't screw it up for them.

Tuesday, August 21, 2018

17 months of being a father

After nearly 17 months of being a father, I think I have that little bit of experience to talk about the changes that happened to me. The changes are significant enough that sometimes me and wife will say BC and AC, which stands for Before Child and After Child.

"Oh, we used to be able to watch movies in the cinema BC 2012...", laments the wife.

"This is AC 2018, I don't think we can afford to have a late lunch at Tim Ho Wan at 2pm anymore...", I complained.

Of course, mothers and fathers experienced the changes differently, but I think we seldom hear about the fathers' side to the story. I'm here to share.

1. I am much more expressive now. I didn't know I can smile so much. This little boy of mine is like a second ray of sunlight. The first is, of course, my wife. I think my life will be so much blander without them.

2. I didn't know I can survive so long without proper sleep for so long. After a few days of less than 5 hours of sleep, every day starts to feel the same. Everything is like the copy of a copy of a copy. In my line of work as a tutor, I sometimes feel the merging of weekdays and weekends. I might be eating lunch and I'll suddenly pop a question, asking which day it is today. This effect seems to be exacerbated by lack of sleep. On the flip side, I think my insomnia is cured temporarily.

3. Before having a kid, I thought my life was very good already. I don't think how having a child can make my life any better; I seriously thought so. After having a kid, I didn't know how I could live my life without one. Every little thing seems to take in more meaning. I think my life before having a kid seems too indulgent. Too much time wasted on frivolous things. Of course, back then, it didn't feel like that.

4. I never stopped worrying for my kid. Before he was born, I'm worried he might have genetic flaws. After he was born, I'm worried that his hearing might have some issues. After a few months, I'm worried about his jaundice. When he still hasn't started crawling, I worried maybe there are some issues with this mobility. Up till now, he is a little slower than the median month where kids are already speaking, so I'm worried if there is anything wrong.

So you can't imagine how relieved (and proud) when he started calling very clearly, papa and mama, just a day ago. I think I'll never stop worrying about him. That's parenthood.

5. I don't know how to fly a kite, but I think it's similar to parenting. There are times you must let go and times you must rein the kite in. Hold too tightly, the kite won't fly high. Held too loosely, the kite will drop too quickly.


Is it all worth it? I guess that question depends on how quickly you shed your role as an individual or as a couple living together. The sooner you accept that your life will never be the same again, the faster you can adapt to the new one that is thrust straight to you. I think it'll be a very long time until I can sleep for 8 hours, or I can just go out on a whim around midnight to Mustafa to go grocery shopping. Those times are fun and memorable, but they are over.

A new season dawns on me, and I think it will also have its own beautiful scenery to admire.

Saturday, August 04, 2018

On why we do anything

There are 3 reasons why we have to do anything:

1) We want to do it
2) We have to do it
3) We do it so others don't have to do it

Reason (1) is more ego-centric, where we focus on the needs of ourselves. Reason (3) is more focused on the needs of a larger community of which we are a part of. 

This concept came to me when I observed my 17-month-old child transition from (1) to (2). Initially, all the things he does is just because he wants to do it. As he slowly understands our household rules, and later, the rules of the society of which he is a part of, he starts doing things because he has to. He might not like it and it might not be what he wants to do, but he will have to do it. I have not seen him doing things because of reason (3) and hopefully, that will come when he gets older.

I have an example that illustrates these 3 reasons - that of clearing trays in hawker centres. Usually, nobody wants to do the dirty work of clearing trays. In Tampines, at the site of the old Tampines stadium, there is a food court when there is an automated tray clearing thing that looks somewhat like those conveyor belt system carrying plates of sushi around. I thought that was pretty cool, so I really wanted to clear my trays just to see how it works. I guess the novelty wears off after a while. But when do we really have to clear trays? Maybe when they start charging a fine? Or giving an incentive? In another perspective, the cleaner is the one who has to clear the trays, because he/she is employed for that purpose.

The really interesting part comes when we talk about clearing our own trays so that others don't have to do it for us. Or we clear trays left by others that are not even on our table so that a person carrying a tray of hot food does not have to clear it. I thought that idea really gels with the philosophy of leaving the place better than when we came in. I think the Japanese are really great at this. We always read reports of Japanese football fans picking up rubbish and clearing the place after the event ended.

I also realised that after having a kid, I tend to do things based on reason (3) more often. My wife and I are the primary care-takers and we have no domestic helpers. After work, I'm usually tired and what I really wanted to do is to have my own me-time to recuperate. But I have to do some baby stuff so that my wife doesn't have to do it. I mean there's only me and her. If not me, then who? Perhaps I can also extend this idea to the larger society, treating them like my family. If I don't do things, then who shall do it? If I see a piece of rubbish on the streets, and I didn't throw it there, so while I don't want to pick it up, neither is it my responsibility to pick it up, I should pick it up so that others don't have to do it.

That should make Singapore a much better place to live it for everyone, yes?

As such, I strive to teach that to my kid. I want him to take care of himself first, then take care of others. He cannot be doing things mainly because of reasons (1) and (2) alone. He exists in a larger community of which he is a part of, and he ought to do more things out of reason (3). For him to do so, I must also show him that I am doing so. I need to be a good role model for him to follow.

Thanks, son, for making me better than I am now.

Monday, July 30, 2018

The problem with grit

Grit is defined as the ability to keep persisting in something, regardless of personal discomfort, until you succeed or die trying. Grit is said to be a good predictor of future success, meaning that grittier kids have something in them that makes them able to take the necessary beatings in life to make it work out in the end. This concept is popularised by Angela Duckworth's TED talk, which I think many of you had seen before.

Let's deconstruct grit.

VALUE JUDGEMENT

Grit involves value judgement. When someone didn't do homework all the time, that is grit. When someone plays truant in school despite knowing all the possible punishment that may come, that is also grit. When a gamer sits at home all day to work on his Xbox, that too is grit. But somehow these activities are perceived unfavourably by society, hence it is not considered as examples of grit. Usually, when we talk about grit, we see them through a lens of what we think is the idealised version of a successful person. Working through the night to do homework, or sucking it up and working OT to do a project, or working over the weekend...these are activities that are judged favourably by society. Hence, when we say someone has grit, it also means that society has judged whether it is worthy or not.

Look at the picture below. 


The person below doesn't have grit because he didn't persist. And he is inches short of hitting pay dirt and would have realised his rewards if he just persists for a little longer. That is a value judgement. Why? Economic work and earning more money is seen as a good thing by society. Nobody talks about the sacrifices these people have to give in order to do these work.

Perhaps the person below gives up digging because he realised that having more diamonds isn't what he wanted in the first place. He already had diamonds, in the form of living, warm-blooded people sitting at the dining table waiting for his return. There's no need for more. But somehow he is defined as a failure in the eyes of society, for having given up early before hitting pay dirt. He doesn't have the grit in him to succeed.

Did we also impose our values onto others when we use the word grit?


WHO BENEFITS?

Who actually benefits from people having grit? To persist in doing something despite it being boring and still continue doing so seems a little psychotic to me. It depends on who says that, isn't it? If it's the employers complaining that workers are not gritty these days, then we need to think why they want employees to do that. Perhaps the conditions are really bad and the salary really low, and since there is nothing material to be hopeful of, they use ideology as a self-control mechanism to exert influence on behaviour. Employers do need employees to have grit if they are going to exploit them by squeezing more of their labour output for the salary given to them.

If it's by teachers, we also need to think hard on who benefits. Maybe grittier students are less troublesome to teach and it's much less work compared to a student who is less gritty. When we frame it like this, the conversation shifts away from asking ourselves why the students are subjected to learning uninteresting things, rather than something that interests them. I've not seen people describing doing something that they are passionate about as grit. The usage of the word implies doing something distasteful in the hope of getting something good in the future.

Usually, grit is determined by people with positions of power and authority. We just need to trace the path to see who benefits to understand why they complain people are not gritty enough. 


MARSHMELLOW TEST

In the 1960s, Mischel did an experiment regarding children and different treats, including the infamous marshmallow. Basically, the children are given a treat, which they can choose to eat right away or wait until the researcher comes back with two. This becomes known as the marshmallow test that is designed to determine self-control and delayed gratification and how it leads to success, better health, happiness and so on. Though it's not specifically used to test for grit, it's related. Grit is how much you can endure shitty situations while waiting for the payload at the end, and that requires a lot of self-control plus the ability to delay gratification. It's commonly concluded that those children who pass the marshmallow test, meaning that they get two treats by waiting instead of satisfying their gratification of one treat right away, are predicted to be more successful in the future.

But there are many reasons for this. It could be a sign of class differences. If you are a child who has access to different kinds of treats all day long, (including marshmallows), you can delay your gratification longer than someone who only eats it once every blue moon. The different access to treats, because of the child's background, could play a part.

And there is a value judgment again when we deem that the child who eats two later is somewhat stronger in willpower than a child who chooses to eat it right now. In an environment where food is scarce, it is irrational to delay satisfying your food craving and hold on for a bigger reward in the future. Due to the difference in the child's background, forgoing present rewards and gunning for a bigger one in the future might not be rational because trusting that the future is going to be better is highly dependent on past experiences by the child. A promise of a better future is going to be harder to fulfil to a child in a lower class than a higher one.


HOW THIS CHANGED ME

In light of these reflections, I want to be less judgemental. I'm a tutor and I face students who don't want to study all the time. Not too long ago, I have a tendency to judge students who are less gritty as having less motivation to do well and thus, a predictor of future failure. I mean it's so easy to blame it on grit and wash my responsibility off because I don't have to do more work for students who are gritty. The truth is a lot more complicated than this. Judge less.

I think being a parent made me a much more empathetic person. I can imagine all the good and bad students as being an innocent baby once. No matter what I do, at the end of the day, show compassion and show love. Long after the incident, that might be all that they remember of your interaction with them.

I also want to stop using grit, because it's so cringe-worthy. It's like the word 'passive income'- everytime someone uses that, my soul dies a little. There's a lot of negative connotation in using the word 'grit', so I'll stop using it.

Wednesday, July 18, 2018

Analyzing an Aphorism

Have you seen this quote before?




On my social media feeds, I've been fed this quote a couple of times this week. The first time I read it, it seems pretty logical. In fact that's the thing I told my wife too when she goes on some bulk purchase to save a couple of dollars. The second time I've seen it, I had a nagging feeling that something isn't quite right. So I went to think and analyse deeper into this statement.

Firstly, what is savings? Savings is what's left of your income after spending. Mathematically, the formula is:

Savings = Income - Expenses

Let's just put a number to these items in order to illustrate the situation better. Let's assume the following:

A) Income = $3000
B) Expenses = $2000
C) Savings = $3000 - $2000 = $1000

The above illustrates the base situation where we did not make the purchases. In our base scenario, our savings is $1000.

Let's analyse 3 possible cases:

1) Discretionary purchases (things you can do without)

For frivolous and discretionary purchases, we usually compare against the case of not buying it vs buying it. Why? Because we can well do without it. If you spend $750, your expenses increases by $2750, so your savings becomes $3000 - $2750 = $250. Between not buying and having a savings of $1000, vs buying and having a savings of $250, you save lesser by $750.



2) Non-discretionary purchases (things you can't do without)

For non discretionary purchases, we usually compare against the case of buying the item at non-discounted price vs buying at discounted price. If u buy at a non-discounted price of $1000, your expenses increases to $3000. Hence your savings becomes $3000 - $3000 = 0. If you buy at a discounted price of $750, your savings becomes $250. Since it's an item that you have to buy anyway, you save $250 if you buy at this discounted price. Notice that we do not compare against the case of not buying it and having a savings of $1000, because it is a purchase that we must make.



3) Investments (things you buy that increases your income)

For purchases that increases your income, the spending of $750 may result in a rise in future income. If your future income increases by more than the amount spent, you save more even after the purchase. If future income increases less than the amount spent, then net net there will be less savings. So, it depends on the investment returns to see if we save more or we save less or we don't save at all.




It's not so simple now, isn't it? As with all aphorism, the simple statement works as a good soundbite - catchy, memorable and impressive. But it simplifies the truth of the matter too much. There's a lot of details that need to be mentioned.


We can put this analysis to the test by analysing the purchase of a car. If a car is a discretionary purchase, the fall in COE has nothing to do with you. Having the cost of the car dropping from 100k to 80k still means that you have to spend 80k. However, if a car is a decision you are going to make anyway, a drop in the cost of the car is great for you. Now you can make the car purchase at a cheaper price, resulting in a net savings of 20k. Finally, if your car can make you earn more income because it extends your range and reach and allows you to save time and energy, it doesn't mean you should commit to the purchase immediately. The next step is to see if the potential increase in income is worth more than the purchase. Frankly, it need not even be just the increase in income, because we could be looking at other intangible stuff that we cannot put a money value to it. If after weighing all the good against the total cost of the car, and you think it's worth it, then we can go on and make the purchase.


Next time when someone says buying something is not a good purchase, you'll have to ask yourself first : out of the 3 scenarios, which one fits your situation the best?