The chains of Habits

The chains of habit is too light to be felt, until it's too heavy to be broken.

Habits can be both good and bad. Here, let's focus on the good ones. If you want to start a new habit, research says you need at least xx days to form it. 'xx' can be anything from 21 days, or 49 days (7 weeks), to 66 days. I think it doesn't matter how many days, but the point is that you must do it consecutively, or regularly enough, until you can't pass the week (or the day) without doing it. Then you know the chains of habit is too heavy to be broken.


Recently I read an article about meditating for 100 days consecutively, and I wanted to try it myself too. I downloaded an app called Rewire (android). I think there are various such apps out there, so I just picked something that is free and easy on the eyes.

The app works like this: Each day I'm supposed to meditate. It doesn't matter how long I do it as long as I did it. Initially for the first few weeks, I don't dwell on anything other than the fact that I need to do it every day. To make it more regular, I always do it before I go to sleep. From my pushup habits (which I do immediately after I shower), I know that it's important to latch on a new habit to existing habit. You can't avoid not showering, or not sleeping, so these are sure bets. After each time, I'll click on the calendar you see above, and click done. If I do it consecutively, there'll be chains joining one day to the next and the app will tell you the longest chain you've formed.


I think it's cool to gamify the formation of habits this way. So far, I've done 49 out of 49 days consecutively already, without skipping any days. I'm not perfect too, there are some habits that I didn't do as well. Below is my habit for doing some form of exercise everyday for 100 days. For this particular habit, I left Sunday (in blue) as a break. Red means that I failed and didn't do it. It's either because I am too unmotivated to do so, or I'm not feeling too well. Usually both lol!

Back to meditation. From my experience, after about 7 to 8 weeks (2 months), I realised that there are days in which I'll forget to click on the app, but I would still remember to meditate. That's when I know that the habit had formed a strong and heavy chain.


Here's a few key takeaways from my experience in forming new habits:


1. When starting, focus on doing the action. Don't care about the quality or the quantity. If you do it, it's a deed done to strengthen the chain of the habits.


2. You'll need 2 months consecutively for the new habit to sink in, until you can't pass the day without forgetting about it. Even when I skipped certain days, I know I have to do it. It at least didn't slipped my mind.


3. I've not tried it before in kicking a bad habit, but I suspect the mechanism is the same. You just need to override the bad habits with new ones, and do it for 2 months consecutively. Perhaps you'll need more time since psychologically it'll be harder to break, I suspect.


4. Small, regular action reinforce big, macro habits. Don't belittle the little things you do everyday in forming long term habits. It works both ways for good and bad habits too. If you spend $1.80 every day eating a curry puff, it might slowly form a bad habit that will be very hard to break after some time. Don't belittle the small, regular things you do everyday.

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Circle of life

I noticed that with each Christmas that passes me by, it seems that my life gets simpler and simpler. I remember that in my younger days, I would go out to party with friends. Nothing wild, just going to Orchard for the countdown - you know, that sort of thing. Countdown parties seems like the craze for me back then. It's not that Christmas is particularly important for me, maybe it's just an excuse to let loose a while. 'Thon' - that's the word for staying overnight as we countdown to Christmas day itself.


After having a gf, it's about having a proper date. Something like a movie, followed by some restaurants meals, then counting down with her etc. As the relationship progresses where she starts knowing my friends and I know hers, we have parties again, but this time in pairs. It's all about the experience and creating moments together.


So what did I do on this particular Christmas day? Nothing spectacular. I know I don't like crowds and parties, so I didn't want to brave out to Orchard or even Marina area to avoid them. Instead, we went to our quiet neighborhood cafe, had a cup of tea and a slice of cake before going home. No special dinners, just the usual tze char fare at the coffeeshop, ordering the same dishes as usual. Very reflective and quiet.

I think when we have kids, it'll start to become rowdy and the feeling is that we'll be moving towards the days when we're younger again. In order to let your kids experience Christmas like you've not had it before, you might get a real Christmas tree complete with presents at the bottom of the tree. Then everyone can participate to decorate the tree and wrap the presents together. I'm sure there'll be trips to Orchard road and other crowded places to jostle with the rest so that we can feel the proper yuletide atmosphere. The whole experience also includes a complete Christmas dinner with roast chicken, ham and the like. In other words, nothing like what I've experienced yesterday.


And many many years later, when the children are all grown up and leaves the home to set up their own home, maybe it's back to the days now. Quiet, simple yet still a very great Christmas. Quiet and reflective versus Rowdy and experiential. Cycles of ups and downs.


That's the circle of life, I suppose.

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A little a day goes a long way; A lot goes a longer way

Savings more or earning more is the way forward? Some say it's savings more, some say it's earning more and some say both are important. To me, I think the sequence is more important.


 I think if you're having a fixed pay where your income is fixed, then there's nothing else you can do to increase it. If you want to save more, then you have to cut your spending. The savings equation is very simple; Savings = Income - Expenses. Cutting expenses is the least disruptive way towards saving more. Here's where the needs and wants are segregated, and you want to reduce frivolous expenses down to a minimum. But there's only so much you can cut once you've tried. Without going down the cheapskate route, being frugal still means having to eat food and having a shelter above your head when you sleep at night. There's also so much you can cut without sacrificing long term health too.


This is the point where you have to think about increasing your earnings. This is much more disruptive than cutting costs, because it will involve changing your entire assumptions about your earning power. At some point in time, you have to rack your brains to think what other streams of income can you get while still maintaining your expenses. This is hard, and there's a lot more reasons (or excuses) you can give not to do this and continue cutting your expenses to save more.


So, for salaried workers, save more by cutting expenses first, then go and try earning more.

For salesman and self employed, where there's no such thing as a fixed salary, you'll find that people tend to favour earning more as a way to save more. Once you think of yourself as a company, you'll want to increase your net profits by increasing revenue and not just reducing cost. Which is fine, until you realise that people who earn a lot more tend to spend a lot more too. If that's the case, then the next step is to learn how to stop your cost from rising proportionally to your earnings. If you earn much more than the rise of your expenses, net net you'll still save more.


So, I think for those without fixed pay, try to earn more and then try to reduce your expenses in order to save more.


What about me? I started saving more by cutting costs. Then when I realised that I've nothing more to cut because it is so painful for me to live such a miserable life like that, I started to change my assumptions to earn more. Ironically, that is also painful. I've to work a lot more hours and a lot more odd hours. Hence the first 50k that I saved is so much tougher than the last 50k that I saved. It's like that - if you want to create a new habit, you have to constantly remind yourself and basically live and immerse yourself in that environment. That's why you have to ask yourself why you even want to save this amount in the first place.


Motivation will make your journey more understandable. Desperation will make it possible. A little goes a long way, but for me, a lot goes a longer way. A lot of what? Effort!!

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The year 2015 in terms of books read

Year 2015 is like any other year in terms of my book challenge. I completed my 52 books challenge for 2015 with some more weeks to spare! I find that this year, the quality of the books I read are fantastic. There's a lot more breadth and also a lot more depth. I started reading up books on spiritual growth too, so I think that's a genre that I can always do more in depth. As usual, I'll put up a list of all the 53 books I've read this year, and then later I'll recommend a few which I think are superb reads.

My grandmother asked me to tell you she's sorry - Fredrik Backman

Wouldn't Take Nothing for My Journey Now - Maya Angelou

All God's children need travelling shoes - Maya Angelou

Mom & Me & Mom - Maya Angelou

The Sun My heart - Thich Nhat Hanh

The little book of Safe Money - Jason Zweig

The buddha walks into the office - Lodro Rinzler

What we see when we read - Peter Mendelsund

Way more than Luck: Commencement speeches - various

Inspiration from Buddha - Lim SK/Fu Chunjiang

The terrible and wonderful reasons why I run long distance - Matthew Inman

Linchpin - Seth Godin                             

The little book of market myths - Ken Fisher

Little book of big idea on business - Dr John Lipczynski

The 5th wave - Rick Yancey

The synchronicity key - David Wilcock

A man called Ove - Fredrik Backman

The power of positive thinking - Norman Vincent Peale

Then we came to the End - Joshua Ferris

The Mystery of the Shemitah - Jonathan Cahn

Inedia Non Eating - Joachim M Werdin

Crazy rich asians - Kevin Kwan

Here's looking at Euclid - Alex Bellos

The new new thing - Michael Lewis

Dust - Hugh Howey

My mother's secret - J.L. Witterick

Surely you're joking, Mr. Feynman! - Richard P. Feynman

Kim Jong-Il production - Paul Fischer

The Rosie Effect - Graeme Simsion

Killing sacred cows - Garrett B. Gunderson

Shift (1 to 3) - Hugh Howey

Wool (1 to 5) - Hugh Howey

Mindfulness in plain English - Ven. Henepola Gunaratana

The man who mistook his wife for a hat - Oliver Sacks

To sell is human - Daniel H. Pink

Alex through the looking-glass - Alex Bellos

The Singapore Permanent Portfolio - Alvin Chow

William Shakespeare's Star Wars - Ian Doescher

Out of our minds - Ken Robinson

The next 100 years - George Friedman

All the light we cannot see - Anthony Doerr

Faraday, Maxwell and the Electromagnetic field - Nancy Forbes

Barbarians at the Gate - John Helyar & Bryan Burrough

Son of Hamas - Mosab Hassan Yousef & Ron Brackin

What if - Randall Munroe

Robogenesis - Daniel H. Wilson

Robopocalypse - Daniel H. Wilson

The birth of Korean Cool - Euny Hong

Everything I never told you - Celeste Ng

The education of millionaires - Michael Ellsberg

I am the messenger - Mark Zusak

If you want to write - Brenda Ueland

Hope for the flowers - Trina Paulus

Here's the list of my top 7 books that I recommend for 2015

My grandmother asked me to tell you she's sorry - Fredrik Backman
A man called Ove - Fredrik Backman
My mother's secret - J.L. Witterick
All the light we cannot see - Anthony Doerr
Everything I never told you - Celeste Ng
Alex through the looking-glass - Alex Bellos
The next 100 years - George Friedman


1. Fredrik Backman is my new favourite author. I like his books and they are all translated from his native Swedish. His style focuses on a lot of character building, and at the end of the book, you'll laugh, cry and be touched by them. After reading his books, I realise that everyone became who they are because of the things that had happened to them. Their baggage, so to speak. In the end, we have to be kind to others, because once we know their story, you just cannot help but to do that. Ultimately, being kind to others is also being kind to yourself, because we also have baggage that we carry on our back constantly, like snails. Both the books below are excellent reading, easily the best and most touching novels I've read for the year.

2) J.L. Witterick style in this book is very refreshing. I've seen it employed in different books that I've read, but it's not as effective as it is done here. The story is like watching 4 different persons weaving a single piece of tapestry. Each knit and weave by different person gives you their unique viewpoint of the same tapestry, then as the weave gets bigger and spreads out, the seemingly disparate parts comes together until you see one complete tapestry. Once the threads comes together, you cease to see the 4 different weaving pattern but instead you just see one complete piece of art. It's like that when you read this book. It's also based on a true story, set in the Nazi occupied Poland during world war 2.

3, Some books you just have to read it yourself to feel it. This is yet another book set in occupied France during world war 2. I always feel that history should not be just about the facts. You can't empathize and learn history by just looking at the factual information. An important part of history lies in the stories of the survivors and also those who died. What made them who they are? Why do they do this and that? Would you do the same thing if this happened to you? This is one of the few books that talks about the war from both sides, in the eyes of children. You can't find such viewpoints from movies, and I think it's because it's almost always portrayed as the victor or the victim. This books shows that there is no winner and everyone is poorer but also richer because of the shared experience of the war.

4. How I love this book! First time author Celeste Ng nails it down in her debut writing in this novel. She captures the tension of characters so well and you can't help but flip the pages over and over again just to see what will happen. And I especially like the way in which a character do or says something, which is what everyone can see but you won't know what he or she is thinking about when doing that action. So, the book will tell you what they are thinking about a few pages later. You can immediately compare and contrast the difference between what you see and what they are thinking. Misunderstanding stems from communicating and also from not communicating. I think the author spent several years writing and re-writing this book, and keeps changing it as she went through a full round of pregnancy. This is like the author of The Book Thief, Markus Zusak, who reportedly wrote and rewrote the entire manuscript from scratch until it is the perfect version we cannot forget now.

5. Recommended by a reader from bullythebear, this books took me to a journey involving numbers and their implications in life. This is a page turner for me and I'm sure it'll be if you love mathematics somewhat. You don't have to follow pages and pages of differential equation to like this book, but you do have to love the spirit of mathematics. Alex Bellos goes around the world looking for people who loves numbers too. Very approachable and friendly read. If you're worried about not knowing enough mathematics to enjoy this book, don't worry - it'll be fine.

6. Recommended book again, haha :) Fantastic read - part prophecy, part fiction and part novel. As the title implies, George Friedman tried to speculate what are the major moves happening around the world in the next 100 years. Given that this book is published back in 2009, you can see some of the major currents that he underlined already being played in the world stage today. It also establish the Russian conflict and explains their behavior through Russia's geographical landscape. This book is very interesting if you like to make some sense of the world's major events and love to link economic theories with geography and I enjoyed this thoroughly. Word of advice - don't be so quick to dismiss US and her highly indebted state.

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Digging deeper into ROE

Look at this company's ROE below:

FY 2011  -- ROE 72.6%
FY 2012 --  ROE 47.7%
FY 2013 --  ROE 33.7%
FY 2014 --  ROE 25.6%

The ROE (return over equities) keeps falling from the 70+% range towards the current 25% range, but it's still pretty high. Would you say something is wrong? If so, what went wrong? It's important at this stage to break up the ROE into parts. It's called Dupont analysis, where ROE is split up into three components, net margin, asset turnover and leverage. If you multiply all the three components together, you'll get ROE, as shown below:

Here we can see that the net margin is very very good. Considering that the company IPO in FY2013 (hence anything before is suspect to me), I'll just concentrate on the 2013 and 2014 era. Net profit of 30+% is incredibly high. Take note that the leverage is also dropping from year to year at the same time. This means that the ROE is sustained by the higher asset turnover and also lower leverage. So what if the ROE dropped? It's still okay!


ROE is net profits over equity, so let's check the net profits over the years.

Revenue is rising, and net profit is rising also, but not as fast, which means that the cost of producing the profit also increases. But cost increasing is not such a bad thing. In their case, it's because there's a bigger cost attributed to project and production cost. They set up the cost first and ask for progressive payments, somewhat like construction industry. If there's zero cost, I'm going to have to start worrying for their revenues the next financial year!


It's like free cash flow. If it's reducing, it's not the end of the world. You have to dig out to find what's happening? If the free cash flow reduces because they are investing in stuff that will improve their revenue next year, it's a good thing isn't it? If the free cash flow is stable over the years, it just means that they are sort of in an equilibrium stage. The middle age to golden age of a company, where things are stable, not breaking into new industry or into new markets.


But ROE is part net profit and part equities. Let's see their equities.

You notice that there's a huge rise in the equities in FY2014. How come? The assets increased a lot while the liabilities is reduced too. The equity doubled from FY2013 to FY2014. If the net profits remained the same during the same period, the ROE would have been halved! Since it didn't drop by 50% (from 33.7% to 25.6% in FY2014), the net profit must have risen proportionally higher.


Let's see its NAV (cents).

FY 2011  -- 3.31 cts
FY 2012 --  5.42 cts
FY 2013 --  10.35 cts
FY 2014 --  20.59 cts


Since the equity keeps increasing, of course the NAV also increases. Since the increment is the same as the rise in equity, the no of shares outstanding is not diluted too much. Indeed a check shows that it's the same since IPO (but it's only been a year since IPO, no big deal).


Here's the summary:

At last close, the PER is 5.3, P/B is 1.36 and yield of 4.3%.
Last year, it IPO at PER of 8.8, P/B of 3.0.

I want the readers to focus on the numbers alone without prejudice, hence I blacked out the name of the company below. If you highlight it, you'll see the company, haha! Also do take note that this set of financial results is not the latest. I just want to see the full year results to analyse the ROE - it's never my intention to recommend companies to buy.

The company name is: Starburst

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ARA rights are out

ARA right shares results are out. It might not be out officially, but I saw the amount of refund from my bank account and deduced the amount of rights shares that I got it. To double confirm, I will have to check my CDP account to see that the shares are physically transferred into the account. Either way, I'll receive a snail mail from them to inform me of the rights results.


ARA had been pretty good to me but I cashed out and subsequently left with 550 shares before the rights exercise. Many transactions in and out resulted in me having a very odd average share price of $1.39217 for my 550 shares. Don't ask, it's complicated, lol


Here's the details:

Shares before rights: 550 @ $1.39217
Entitled rights: 99
Excess rights applied: 901

Success rights acquired: 650 shares @ $1.00 per right shares
Total number of shares: 1200 shares (550 + 650 = 1200)
Total cost of shares: $1415.69 (550 x 1.39217 + 650 x 1)

Ave cost of shares after rights:  $1.17974

A few interesting take-away:

1. Rights are great if you are super minority shareholders. I'm talking about less than 1000 shares. I have 550 shares before the rights issue but ended up having 650 rights, which is more than the amount of original shares that I have. It's crazy that I get to reduce the average price of my shares so much because of the rights exercise.


2. If you have very little shares and the company started a rights issue, apply somewhere between 5 to 8 times of your entitled rights as your excess rights. Don't know what I'm talking about? In my case, I'm entitled to 99 right shares, so that means the minimum I will get is 99 shares. It's entitled, so I will get it no matter what. But I can also apply for more rights beyond what I am entitled, and that's called the excess rights. 5 to 8 times of my entitled rights of 99 shares means 495 to 792, so I should apply that amount as my excess rights.


However, if you have more like 10k to 20k shares, then this wouldn't work anymore. Usually you get an excess rights less than the amount of entitled rights. Maybe applying an excess rights equivalent to 1 to 2 times is more than sufficient. I don't know how many shares you need before the 'model' changes, but these are all based on actual experience and observations.


So in other words:

Small holdings: apply 5 to 8 times your entitled rights as excess
Large holdings: apply 1 to 2 times your entitled rights as excess


Nobody is going to stop your from applying 100 times your entitled rights of course, especially if you have spare cash sitting there doing nothing at all.


3. The share price of ARA had been dropping closing and closer to the rights price of $1.00. It is always like that, no matter how strong the company is. The only difference is that for stronger company (hopefully I can say, "like ARA"), the share price will go back up again. ARA has a lot of corporate actions, like bonus shares (I recalled they had it twice?) and now it's the rights. Very complicated company to keep track of your average share price if you don't keep records diligently. After a few bonuses and rights and what not, you won't know your entry price anymore!

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How to make CPF contributions as a self employed?

I seldom talk about CPF, because I'm a self employed. It's a little different for me. When I want to find out more about it, there's not a lot of information out there that curate and collate all the info that I want. Hence I put up this article about CPF especially for self employed. The details are still relevant, perhaps the figures need to be updated from time to time, but those are easy to find out once you know what you're looking out for.


Every year, I'm going to have to contribute to the mandatory medisave account . This is pegged to a percentage according to your income and also your age. There is not tax relief for this mandatory part. But if you contribute above and beyond this sum, then you will have tax relief, subjected to conditions and limits. I also do a voluntary contribution to my 3 accounts, and that is tax deductible, again given conditions and limits.


Here I want to explore the how part, not the why part. The why part had been covered in my earlier post. Every year I do this but every year I'll forget how to do it. Frankly it's quite frustrating to read again and again. Hence I'm going to do this post to remind myself how to do it (the execution part, not the why part). If other self employed people find it useful, that's a bonus.


How to pay for your mandatory medisave account:

1.The easiest way is to go to the CPF e-service to do it. The link is found here. They will ask you to log in using your Singpass also. You might want to first check out your medisave liabilities first to see how much you have to pay. If it's, say $1500, you need to pay off that amount because that is the mandatory amount that any self employed have to pay. Not an option, especially if you have renewal business license. Anything beyond $1500 will have tax reliefs, subjected to conditions and limits.

Once you've checked, you just click on the e-Cashier. You have to pay as a self employed, then contribute to my Medisave. The next screen will be to key in how much you want to put in. You can also check your allowable contribution, which is the limit you can contribute per year. That's all there is.

Oh, one last thing - you might be subjected to transaction limits by the banks. If so, then do in smaller amount and do it again the next day. It's convenient in that way.


2. You can also do it with SAM machine. The recent 2-3 weeks breakdown of all CPF services makes me resort to this. Try not to do it, because it's more inconvenient, and you can only pay using NETS, which is subjected to limits by banks per day. So you might even have to make a few trips just to do the same thing.


How to do voluntary contribution to 3 accounts:

1. Same thing, go to the same link as above, click on self employed by this time click on the "contribute to my three CPF accounts". You should be able to follow the instructions from there, which is largely the same as the above. For me, I've to do it in three tranches because of the limit imposed by the bank. You can change the limit lah, but it's kind of safer this way too. Anyway, just a few clicks away only.


2. Can this be done by SAM machine? I explored the whole options but it can't be done. Maybe I don't know how. But from what I see, voluntary contribution can be done using AXS machine. Must be machine and not the web version of it. I tried to do so but the whole CPF online system is down, so I can't test it out. Still, it's a good option to have in case the main CPF site goes down again.



Though the recent upgrade of the CPF system makes me so frustrated, the good thing is that the new upgrade is easier to navigate than the older one.

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The highlight meeting of the year

I do meet bloggers from time to time, and this is one of the perks of having a blog. No, it's not just about the ad dollars or the good comments you might receive on a post well written. Because if it is about that, then I would have long given up on blogging since there are times I have neither. It's about the little things. And on Monday, I happened to meet up with two bloggers at the same time.


In a good meet up, you never really feel that you've met the person for the first time, because it's like a continuation of a conversation you've had online. It's this kind of relationship that is first established online and then continued off line that I continued blogging. In the past 10 yrs or so of blogging, I've met up many people and some of my best friends that I ever had the fortune of meeting came from this avenue. Forget the ads, those are the cheap thrills. The real juicy part of having a blog is to meet up with more people from different age group and different walks of life.

We chatted over lunch, and continued over coffee, talking about this and that. Before we knew, 6 hours had passed. I think this broke all records of any meet up I ever had. 6 hours! My wife who joined us for lunch but had to leave after that, questioned me this: What can we possibly talk about for 6 hours? I've no idea too. But as we parted ways, I told one of them that this is like meditation. When you're in the flow, you don't even notice time had slipped you by. And for that period of time, you forgot your family, your work and your burdens for a while and just focus on enjoying the good company of each other. Meditation to me is like doing homework. You practice your breathing and your mindfulness so that you can apply it in real life. Meditation is not just sitting in a lotus position with your middle finger and thumb joined together in harmony.


I'm an introvert. It's a funny personality trait especially for a tutor who had to meet many new people every year. My default mode is to reject meet up because it's not the most comfortable thing to do. People have no idea the personal mountain introverts have to climb just to overcome the anxiety of meeting strangers. But I'm very glad I met them up today and didn't switch to my default mode.


This is a great highlight to a great year 2015 - another experience chalked up to my core memory.

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Year 2015 is a Challenging year

The year 2015 is closing soon. This had been a rather 'challenging' year for me because I issued a lot of personal challenges to experience growth in as many areas as possible. I think for me, it's important to be a better person this year than the last, and I try hard to do that as well.

Here are 4 major challenges that I threw on myself:

1. Career challenge
2. Body challenge
3. Mind challenge
4. Spirit challenge


Career challenge

My career is linked to my savings challenge, which had been on going for years, way back in 2009. I chronicled the journey in a post here. This year had been rather exceptional in the sense that it's an outlier. I had never worked so hard in my life before and thus accumulated quite a fair bit of savings. The month had not ended yet so I still don't know my expenses, but I think my savings will be about 60k. I don't expect next year to do as well, so I'm aiming for just 50k. In terms of work load, the extra 10k savings from 50k to 60k can actually be more tiring. Diminishing returns, so to speak. Rationally, it's not worth it, but sometimes, we work not just for the money. I have problem saying no to students when I know I can help. Still working on that, haha

I'll give myself 5 out of 5 for this, for working beyond my normal work hours. I didn't know that I had it in me to work the crazy hours this year. I pushed my limit and emerged stronger.


Body challenge

Somewhere in the January this year, I decided that I wanted to do pull ups. I just went to a pull up bar station to do it. Then I bought a pull up bar at home and continued doing. Slowly, I progressed from doing pull ups to home weights, and then to push ups. So now, my weekly routine is 5 days of pushups from Mon to Fri, then Sat is my pull up day and Sun is my rest day. This newest routine had been on going for about 4 months, but for this year, I think I'm practically doing some form of exercise every day. This is so far the most active year that I ever had.

I want to progress into jogging, which I think will benefit me more than the arms training. People had been commenting that I've been putting on weight, which is generally a good thing for me.

The other aspect of taking care of my body includes my diet. Since my wife is on a low carb diet, I'm also doing it for solidarity. I'm taking about half a bowl of rice per day, compared to 2 to 2.5 bowls of rice in the past. Lunch and breakfast, I'm trying out just eating fruits.

For the sheer amount of positive habits I adopted this year, I give myself 5 out of 5.


Mind challenge

I think if the body needs good food to sustain itself, the mind also needs good books to nourish your thoughts. My perennial challenge since 2007 is to read 52 books a year. Some years I didn't do it, some years I tried to reduce the amount, but after a while, the correct dosage is still the slightly uncomfortable 52 books a year. It challenges me to always make some time each day to read a proper book, and not articles or essays online. I think it's important. You feed your mind with proper books, then good and creative thoughts will come naturally.

I'm down to my 52nd book (currently reading it) so I considered this challenge passed successfully. The last month I've been catching up on my readings because I've been slacking off, so I had to do 2 books per week to make up. 2 books a week means I've to finish about 33% of a book per day. That's about 2 to 3 hours a day. Once you set this up, you just enjoy the book. It's never a chore!

Since I hit the challenge with some more weeks to spare, it's a 5 out of 5 for me. The bonus is that this year I hit so many good books, it's fantastic. Look out for my book reflections and recommendations in the coming week.


Spirit challenge

Around March when our founding father passed away, I read several articles on newspaper and the internet about his life. One of the things he did to cope with the stress of life is to meditate. I always wanted to try it so I read more about it and started to do it seriously. From Mar to Nov I've been doing it on and off, and I don't like my lack of consistency. Hence, I wanted to try applying my discipline and system and started to challenge myself to see if I can meditate every day, continuously, for 100 days after reading this article. It had since been 34 days

Immediate effect is that I sleep easier, more aware of rising emotions (meaning I can catch myself feeling angry faster), calmer and generally happier. Recently added a time factor of 15 to 20 mins per sitting to push myself deeper.

Meditation is interesting. I can discipline myself to do better on almost every field but I can't do it for meditation. It requires another approach - that of letting go. I think a prolonged period of practising will provide a good balance to my more orderly side.

On a side note, my 'fruit-bat' diet also helps in keeping myself focused. Less sleepy, more energetic also. I'm reducing my food intake not because of cost or even health, but more for spiritual growth, though it does bring with it many health benefits too. I heard monks in monastery eat 2 meals a day only (breakfast and lunch). Well, if they can do it, I can do it also, and so I thought.

How do I rate myself? 5 out of 5 for trying out new ways to be cleaner spiritually. Also extremely pleased with my meditation practise and secretly happy that my wife is following me to do it every now and then.


Conclusion

Wah, so good ah? All 5 out of 5? I happened to know some of the annual review that the other financial bloggers are asked to do at work. Some are chastised for giving themselves too high rating and asked to redo again. I guess this kind of review affects performance bonus, hence it can't be too low nor too high. It's silly being asked to grade yourself and you can't grade it honestly, lol! Well, I'm honest and I think I did a freaking good job this year, so I deserved a good praise by myself!

Well done! Attack of Takeshi castle - SUCCESS!

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Short term goals for my long term plans (Update:2015)

Exactly last year, I posted this article titled "Short term goals for my long term plan". I think it's great that facebook memories reminded me of it - it's a great feature. It's time to update that goal and see what I've done and what I still need to do.


This is for last year 12th Dec 2014:

Invested in market: $75,000
Investible cash: $70,000
Total capital so far: $145,000

Capital shortfall: $240k - $145k = $95k or approximately $100k


This is for this year 12th Dec 2015:

Invested in market: $115,000
Investible cash: $81,000
Total capital so far: $196,000

Capital shortfall: $240k - $196k = $44 or approximately $50k


I should be able to hit 240k by 2016, if all things remain the same. I had put in some money into cpf to boost up my mortgage loan emergency fund and also did a partial capital redemption to reduce my debt. I think last year when I did the post, I haven't included the amount set aside for these two purposes. Going forward, the investible cash will be as such - investible and ready to be deployed after taking into account all the commitments.


Going by that figure, I'm about 40% cash. It should be a little higher because I'm having a few open positions that I intended to close in the near future.


Aiming for another 50 to 60k savings next year! Cheong ah!

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Putting all your eggs in one basket

There are employment benefits like discounted share options for people working in listed companies. I think it's a great option to buy such discounted shares since they do add up to a substantively, especially when there's not a lot of restrictions on selling. The point is that if you offer employee shares of the company they are working in, they will be more aligned to perform better since they are all stakeholders and shareholders.

But that's the problem. I think it's a case of putting all your eggs in one basket. When all goes well, everyone benefits. But if things go bad, you might end up with a really bad case of rotten eggs.

All companies are safe and good - until they aren't. Enron is a classic textbook example. Enron employees lose both their job as well as their financial assets in the form of pension when Enron crashed and burnt. All their employees are encouraged to subscribe to their shares as it's a good form of bonus for them, and everything is good while the stock goes up and Enron stays afloat - until it didn't.

The question is, which company is going to be the next Enron? Will it be the company that you're working with?

I think we need to reach a middle point here. Of course they give a good discount to encourage employees to buy their shares. And you'll be an idiot if you don't buy it at a discount from other retail investors. But the problem comes when you're betting too much for the continuation of one single company to provide both your active income as well as your passive income (in the form of share dividends). If we talk about Nicholas Nassim Taleb's framework of antifragility, then I'm afraid you're in a precarious situation. You're setting yourself up for fragility, not antifragility.

But you know the investment greats advice you to invest within your own circle of competence. You can't get closer without actually being the relative of the CEO. As a supposed insider of the company because of your status as an employee, you do have the advantage of information that other retailers do not yet possess. I'm not talking about illegal stuff here. Just a feel of how the morale of the employees there, whether there are good bonuses or hiring freeze and the general buzz of the work can give you a grounded sense of what is happening in the company. This is something an armchair investor couldn't sense from the financial reports. Even a hardworking one who goes to AGM can only get a vague sense of it from the tone and manner of the management's replies.

So how?

1. Don't invest a large percentage of your networth into one company. If the bet goes wrong, you'll be screwed both ways - your active and passive stream will dry up. How much is too much is for you to decide.

2. Make use of your privilege status as both an employee and an investor to really dig deep into the innards of the company. Since you have informational advantage, make use of that advantage to plan ahead. Legally, of course.

3. Hedge your returns. Not always do-able, but try lah. Get something that will do well if your industry didn't do well, lol

Okay, let's have full disclosure. My wife and I also works in the same industry, but here I am talking about putting all my eggs into one basket. But my case is different, and I'm sure you will say that for your case too. Our cases are all different, yet we're all the same hahaha

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Networth updated!

Okay, it's time to do an update on my networth position. Seems like my click bait-ish post last year titled I've Zero networth is picked up in fb and started a few posts by other bloggers like BIGfatpurse and The Turtle Investor. They said it's controversial, haha and I agree that it is so. I think it's because of the way I calculate networth seems like I'm self flagellating myself and deriving pleasure from my own self inflicted pain. Kinky stuff, grrr.


Recap: Here's how I calculate my networth. It's assets minus liabilities yes? So my assets part include:

1. Wallet
2. All the bank account, including fixed deposit and savings
3. Cash holdings under mattress and milo tins
4. Paypal account
5. CPF
6. Money market fund account
7. Marked to market investment
8. Surrender cash value of insurance plans

Again, take note that I did not include the value of my 5 room flat.


Under liabilities, they include:

1. Existing car loan
2. Credit card bills
3. My portion of the HDB mortgage (total loan amount divided by 2)

Last year, my assets is $226k. This year, my assets went up to $295k.
Last year, my liabilities is $220k. This year, my liabilities went down to $207k.
Hence, last year my networth is 6k, while this year my networth is $87k.


Realistically, I can continue to expect higher asset value. Disregarding any contributions CPF interest (I don't have much to begin with, though I'm building it up) and any capital gains from stocks, I'm looking at a minimum of $50k addition to my assets every year. This comes mainly from work, with a little portion of it contributed by passive income from my investment portfolio. It's not significant as yet, but I hope it should be in the future. I also look forward to reducing the liabilities portion. Every month, my part of the mortgage loan is $1k, so for a year it'll be $12k. I also do partial capital redemption for my loan, to a tune of at least 6k every year. So it's about 13k plus minus. All in all, I should expect to increase my networth by about 50k + 13k = 63k every year, if nothing significant changes in my life.


Can I be a millionaire, defined as having $1000k networth excluding residential property? Of course I can. It's a slow scenic route but I'll reach there. I just need about 15 years to do so. But I suspect that it's not so important to be a millionaire when I finally reach there lol

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The New Bees and The Veteran

The new bees sat in the auditorium, eagerly awaiting the arrival of the trainer. They had been waiting for weeks for this combat course conducted by The Veteran. This is among a series of training seminars organised by The Queen for the orientation of new bees in the hive. The Veteran is an ex soldier bee and her reputation far precedes her. During the 2008 great bear attack, where an opportunistic bear tried to steal the golden honey in the hive, it is reported that she single handedly turned the tide of battle and defeated the bear. However, it was a victory with high cost. A full section of the hive is entirely destroyed when the vicious claws of the bear came pawing down. All the bees that fought with the bear perished to protect The Queen. All? Nay, all except for The Veteran. And she had lived not only to tell the tale of how she fought off the bear but also earn herself a new role to teach new bees how to fight off one. All the new bees are honoured to be in the presence of The Veteran.

When The Veteran stepped onto the stage, the whole crowd goes silent. Not a single buzz from any wings can be heard. The Veteran acknowledged everyone's presence, and proceeded to give her presentation on combat skills for new bees.


Great lengths of time is spent teaching the new bees her proprietary technique of fighting. She demonstrated the technique live on stage. First, she flew around the target 5 times clockwise, then 5 times anticlockwise ("To daze the enemy", she explained) before proceeding to sting the enemy 5 times at 5 different locations using a formula that she had derived from her vast combat experience. After the live demo, all the new bees practised in their battle groups and rehearsed the formula thoroughly. All the new bees were very excited to learn this technique and were eager to use it on any enemies that come near their hive. Woe be to the bears who dare steal our honey, they chanted! The Queen will be so proud of them!


In a little corner, a bee called The Skeptic wriggled in her seat. Something doesn't sound right. The Skeptic had heard rumors in the nursery from her nursing bee that any bee that uses her sting will die immediately. You can't even sting more than once, because you can't possibly die more than once! Puzzled by this, The Skeptic buzzed her wings to catch the attention of The Veteran. The whole auditorium quietened down and she asked her question.


Oh The Veteran was furious. Have you ever seen an angry bee? That's how furious she was. The Veteran went all sarcastic in her replies. "What do you know about fighting? You are not even born when I first killed the great bear of 2008 with my 5 sting technique!", she exclaimed. The crowd went crazy and started to buzz their wings in approval. The Veteran 'requested' that The Skeptic never ever fight for the Hive, for nobody will want to be in her battle group and fight beside her.


And thus it is to be so. The Skeptic, shamed in public by The Veteran, became a nurse to take care of the baby bees. The Skeptic was still mocked every now and then when her sisters flew past her, but she kept her buzz. "No point fluttering her wings over this", she thought. She kept to herself, and over time, she also came to love her job of nursing the baby bees.


The Hive went through a period of peace, until the summer of 2016. The peaceful idyllic hive life was disturbed by a strange smell in the air. It gets everyone agitated and short tempered without knowing why. Deep in all the hearts of the bees, they knew that their sisters were getting slaughtered outside. After instructing the other nursing bees on the emergency evacuation route with the baby bees, she went out to the section with the heaviest scent to take a look at what's causing the commotion. A huge black furry thing was tearing the hive and squashing her fellow sisters. It's so huge that she don't even know how many bee lengths it is! Is that what a bear looks like? She truly had no idea.


The Skeptic saw the soldier bees gathering in their battle groups and prepared to attack this intruder. Over to the side, a battle group commander shouted at her section over the cacophony of buzzing wings and the screams of the injured. She reminded them that they will hold steady and carry out the what they had been training their whole lives for. "5 times clockwise, 5 times anticlockwise to daze the enemy", they chanted. "5 stings in 5 locations", they repeated after their commander. "And all according to the formula!" And with that, the battle group went straight towards the intruder. 5 rounds they went clockwise, and 5 rounds they went clockwise, and then they prepared for the 5 stings in 5 locations.


The battle group commander mentally worked out the first location of the first sting and flew straight towards it. As she pulled out her sting to prepare for the second sting, her entire abdomen got torn off from her body. She died immediately, but not before releasing that strange smell that so agitated her fellow sisters. The Skeptic was horrified! One by one, all her soldier sisters fell dead after the first sting, exactly like what she asked The Veteran so many years ago. She looked around to see if The Veteran was leading the soldiers to coordinate the attack, but she couldn't find her in the scene at all.


It was with a sudden sadness and resignation that she realized the truth of the matter.


All around her, soldier bees were going round in circles around this furry intruder, but The Skeptic flew straight up. She flew up higher and higher and saw the carnage that this bear had caused. "It must be a bear, what else can it be?", she thought. She found three black spots that looked soft and vulnerable, located above a gaping hole where the intruder is pushing all the golden honey in. And she went straight in with her sting forward. A great unearthly roar shattered the air.

As her digestive tract gets torn off her torso and she fell to the ground, she saw that the bear had ran off with a huge swollen nose.  The Skeptic, of all the bees in the Hive, had saved the day. The only regret was that she didn't live to tell the tale. As she lay dying on the ground, the light from her compound eyes fading away, she wondered who will step up to become the next Veteran.


There will always be a new Veteran to teach new bees how to fight the next bears. But will there be a new Skeptic to ask and question?

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To be carefree with money

These days I'm more carefree with money. To others, it might not be a good thing, but for me, I think it's good progression towards the kind of person I want to be.


When I was younger, I'm a lot tighter with money. I guess the circumstances necessarily force one to become like that, so as to survive. Hence, to be able to become financially free, that is, to be free from thinking about money, I need to be able to spend money without worrying so much. It's not as if I'm being irresponsible and start spending more than what I earned. I don't think I will ever become like that. It's just that I started off in one extreme, and now I'm going in baby steps towards the other extreme, and then settling somewhere in between the two. It's about walking the middle path.


I think that's a good direction to be in.


I can imagine there will be other people who are spendthrift. Their direction is therefore not to spend more, but to walk the other path of spending lesser. I wonder which is the easier path to way: thrifty then slowly learn to spend more, or spendthrift then slowly learn to save more? I'm biased, so I think the former is the one which is easier. I might be wrong.


I remembered an incident recently. I bought a moleskine organizer for my work. I'm old school this way and prefer to write down my many appointments on paper. I've tried different sort of organizers, usually those hard cover ones where you can change the insides year after year. These are really more efficient and cost effective. But choosing a moleskine organiser is a want, definitely not a need. Any non-branded organizer will do the same job. I bought one, got addicted to the feeling of such organizers (it makes you want to write on it!), and got another. I remembered my first two purchases I've to check out different foreign websites to save a dollar or two, because they are so pretty but so costly! The second purchase is a limited edition "Little Prince" version, and I also have to think a few days over it, checking and rechecking the item.

The third purchase (above), which is for year 2016, is done very differently though. I looked at it, I liked it, and I bought it. That's it. Not a lot of thinking is involved, not a lot of comparison is done and definitely not a lot of unnecessary waiting. I see that non-hesitancy as a sort of progression for myself, where I stop worrying that I won't have enough money to last me the week or the month. Again, I stress that this isn't good for everyone but it's good for me. I need to learn to spend without worrying and that had always been a little problem for me.


Besides learning to let go of my mind regarding spending, I guess it's also about valuing my time more than money also. All of us had been poor students once and we had periods of our life where we really have more time than we have money. We all have gone to great lengths to save a few dollars or two. I had queued for guitar overnight to save about $600 bucks or so, but these are things I won't do again. Sleep is more important. Time is more important and I've blogged again and again regarding this theme of money and time.


But back to spending in a carefree manner again, I think this is also about growing bigger than your problem. When you grow sufficiently bigger than your problem, there is really no reason not to indulge in your wants responsibly. Maybe a little? If you did not do that, at least that's what I think, you're still bounded by money and hence, by my definition, you're still not financially free. Deep in your psyche, you're still a little poor student thinking that you don't have enough to spend, even though in reality, you have more than enough.


That, I think, only ranks slightly higher than thinking you have a lot when in fact you have very little. Why? Because in both cases, reality and mind are decoupled.

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Free lance tutoring as a business - Part 3

Cash flow. This business is all about cash flow. In fact, shall I say all business is about cash flow? You can boost about how high your revenue growth is, but without actual cash flowing into your coffers, the revenue you noted down might not be translated to actual money. And we have to pay our bills with money, not with revenue.


Here's a few key issues to think about:

1. Variability of cash flow
2. Recognition of income
3. Cash flow management


Unlike employed people, my salary as a tutor is not fixed. Nobody will magically give you a sum of money at the end of the month, every month for a year. You will have to secure your own students, carry out your services, and then receive money. Hence, there's a certain variability in the income that flows in. How much I earn really depends on the month in which you are asking. Generally, there is a seasonality to your income which is based on the exam cycles, and hence there is also seasonality to the cash flow you receive. It can really vary a lot from month to month.


Below is a picture of my income over 7 yrs, written in this blog article here.

On a quick glance, you can see that the off peak season income can be quite negligible. The debt you owe is to be paid monthly, but if your income (and hence cash flow) is seasonable, that might pose a serious issue, especially if you do not have savings. I'll talk more about it under cash flow management later.


But I do get paid weekly, in various sums. It's just that during the off peak periods, the cash flow tap runs a little dry. That could get some people jittery, especially when your family sees you sitting at home, watching tv or reading a book and not working. I realised this can be quite stressful for people used to getting a fixed pay at the end/start of each month.


The only way to mitigate this is to have different levels of students. You cannot do this if you have all sec school students or all JC students.  A mix of different levels will ensure that the exam cycles of each level overlap. It's important to set a predetermined level of graduating and non graduating students, something like 7:3 ratio or 6:4 will ensure good continuous flow of cash throughout all months.


Here's a question: Do you recognise your income the moment you carry out the service or do you recognise your income only when you receive your fees? In my personal accounting, I do the latter. Fees are paid either in advance (usually 1 month ahead) or paid on the last lesson of each month, or on a per lesson basis. I do all three, depending on the preference of the parent. But for new students (defined as those who are not recommended by my usual network and are 'cold'), I usually collect the fees ahead. I've a few bad debt cases in the first few years of my job, so I do not want to repeat that again. It's emotionally draining and it eats up your soul. These days, there's strict cut loss practice when collecting the fees, rather than to carry on the service and hope that the payment will come through eventually. So far, I do not have to bring anyone to the small court tribunal to claim my fees, but I'll not hesitate to do so should the circumstances arise. If I do my fees management properly, I won't even have to be anywhere near the small court tribunal.


I believe in fair practices too. There's risk to parents if they pay their fees in advance. There's also risk to tutors who can't claim back their rightful fees. So if I'm going over to the student's place (tutor-moving model), I'm okay to collect my fees at the end of a set of 4 lessons. The credit given to the parents is to assure them that I'll not run away with the prepayment of fees. On the other hand, if the student is coming over to my place (student-moving model), then my usual practice is to collect fees in advance since I'm the party holding the higher risk. I'm afraid the student will run away before the fees can be collected. Most people are forgetful and not malicious, but again, I've my own bad cases so I'll rather be safe than sorry.


Regarding the management of the cash received, I think it's important to have a buffer of savings against the drier months. I know that my work will dry up in around end Oct until Feb (nothing serious gets done until after Chinese new year). Hence I'll have to save up during the peak period to offset the lack of income in the off peak period. Savings to me is not a luxury, it's the way to survive. I guess the same can be said for farmers who have a harvest period too. You can't spend all the money you have during the good months, only to starve in the drier months. For this year, I've saved up enough money to last from Nov to Dec without doing any work, so I know I'm covered. The next thing to do is to do some work during the drier months. I mean I'm prepared not to work for the next 2 months, but it doesn't mean I'll just sit at home and use up that reserve.


So there you go, hopefully people will open their eyes wide before jumping into this line!

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The Lesson from the Death of an Ant

Recently, I made acquaintance with a long time student of mine that I taught way back in 2006. He had since become a private tutor like me. Back then he was a chubby kid who is bright and always very inquisitive. I met him up this year for lunch and we kept in contact ever since. He’ll sometimes text me to ask for my feedback and advice on stuff related to students and work in general. All in all, a nice feeling to this because I see that I did help him in some meaningful ways or another.

Just yesterday, he texted me and told me an incident with a student that left him very distraught. The student killed an ant and he told me that he was so upset with the whole incident that he didn’t talk for 5 mins. I guess it’s his way of mourning over the passing of a life so carelessly and needlessly taken away.


And then he told me it was me who taught him to value the life of an ant back way when I taught him as a student.


Frankly, I couldn’t remember that incident. I have a habit of asking students not to kill ants when I see them crawling over their textbooks or notebooks. For my student, he reminded me that he was going to kill it with liquid paper but I told him not to do it. I vaguely recalled that he was toying with the life of a sentient being and I was disgusted with that attitude, so I had this huge  argument with him over it.  However, he told me recently that it took him nearly 10 years to learn the lesson.


I’m both proud and humbled by this incident. As teachers or tutors, we have to be careful of what we say and how we treat others. Eventually the integration and trigonometry that we teach the students will be long forgotten, but the values and the life lessons will remain. Well, at least some of it,  and to some people. Ultimately, we need to show more love at the end of the day.


I’ll continue doing what I do – changing the world one student at a time.

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This post is first published from my tuition website Kungfu Cats Academy link located here.

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Free lance tutoring as a business - Part 2

Revenue is not the main thing we should be looking at. Afterall, not all the revenue you earned is going all into your pockets because there is cost involved. Revenue, after all the costs had been deducted, becomes the profit. And that's what we're looking at in this post.

I like to see myself as a company. What I earned for a living is my revenue, while all that I spend are the cost of earning that revenue. So what's left after all the costs are subtracted will be my profits. Some people operate like a heavy capex company, with huge capital expenditures that keeps increasing so as to generate more revenue and high profits. Imagine someone who earns 10k a month and spends 8k a month in order to continue earning 10k a month. This is an example of a high capex individual. Quite tough, I'll say, because you have to keep on running on the treadmill just to stay at the same place. There are others who are like the service industry, light on costs and generally have much higher profit margins. I think I'm more of this type of company.

When we look at profits, we have to look at the cost. Here's a few things worth mentioning with regards to free lance tutoring:

1. Cost of rental + utilities

2. Cost of transport

3, Cost of raw materials

I've analysed quite a few companies listed in sgx. The three main cost are typically rental of premise, wages of labour, and cost of raw materials. For a free lancer tutor, the cost consists of rental + utilities, cost of transportation and cost of raw materials. There are different models of doing this and it depends on who is moving - the student or the tutor. In the student-moving model, the tutor stays put and the student travels over to a place where the tutor rented. The rental premise can also be at the residential property of the tutor, though some of my tutor friends die die refuse to do that. Invasion of privacy they say. The other tutor-moving model means that the student stays put in their own home, while the tutor moves around. I used to operate under this model for nearly 6 to 7 years until I have my own property. Now, I'm mainly adopting the student-moving model, although I still have to travel to some students place for work. 

That's my actual classroom, by the way

Now if you're the tutor who is moving around, then you'll incur transportation cost. If you don't take cabs all the time, the cost will be about $100 to $120 per month if you work 7 days a week. This will of course increase substantially if you take cabs every now and then. This model will have transportation cost incurred but there's no rental or utilities cost. But trust me, if you have to take 3 students a day, you'll end up about 2 hours on the road waiting and travelling. It's low cost but it comes at a heavy price of taxing your time and energy. Hence, I'll typically charge a higher rate to off set this cost, but it's still not fully recoverable. Some tutors might also buy a non-weekend car for the purpose of work too. I'll say it's a great investment, especially if you buy 2nd hand ones with about 3-5 yrs left. Some of the hardest places to go are also the ones that pays the greatest in tuition fees, but you have to work out the sum yourself.

On the other hand, adopting the student-moving model, you'll incur rental cost plus the cost of air-conditioning etc. Those who are using a room in their property will have to put in some renovation costs, and have to add in some teaching aids and a printer, but that's just one off. I always switch on the aircon in my classroom, though I can't be sure if that's a common practice for other tutors. I've been to student's place drenched in sweat from the walking and with no fan for 2 hours. It's not a nice feeling and it affects your concentration level as it's not conducive enough for learning. The good advantage is that you don't have to move about, and can typically save tremendous amount of time that can be better spent on other things, including adding one more extra class per day, if you're so inclined. 

Cost of raw materials is near minimal. There's printing cost of in-house worksheets and past year papers, but that's not usually a lot. Sometimes there's cost incurred in buying books for self reference or for the student, but again, this are far and few. Perhaps with the exception of the first few years when you are still learning your craft, the cost of raw materials for teaching is not especially high.

These 3 are the cost of doing the business but we should look at the non accounting cost of the business too. As an individual, we have to spend on food, entertainment, material goods etc. I count this as the cost of doing business too, though I'm fully aware the standard accounting practice do not count that. Generally, if you're in a high stress job, you will need to spend more to de-stress. A low stress job will require less retail therapy. Some bankers, typically a high stress job with quotas to meet, have to spend tremendous amount of their 'revenue' (i.e. salary) in order to continue working to earn that salary. The end result is that the profit of such people might not necessary be higher than someone earning an average pay in a low-stress job with little or no retail therapy needed. 

If I may be so bold to change the lyrics of that popular song, it's all about the profit, 'bout the profit, not revenue, it's all about the profit, 'bout the profit, not revenue...

Hence, profit is actually the savings you have at the end of your month. Profit margins of a company is your savings rate. If you save 30% of your salary, you're like a company with 30% profit margins. The truly great people-company are the ones with 70 to 90% profit margin, spending only 10 to 30 cts to every dollar they earned. They will have so much cash flow that the happy problem is what to do with it. Pay an interim dividend to themselves or their shareholders? Invest in another stream of revenue? Acquire and merge with another company? Spin off another subsidiary or two with the merger company? LOL

Going to talk about cash flow in the next part. Stay tuned.

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Free lance tutoring as a business - Part 1

The more I understand how to valuate a business as an investor, the more clearly I can see what makes a good company from a bad. I think some of these skills can be applied to myself since you can say I'm also doing a business as a self employed, being a full time tutor for about 10 years. I'm not a business owner in the sense that there is a system where I can hire people without me having to teach, but more like a sole proprietorship. Think of it as a one man business where you're both the boss and the employee. Think of me as a sweat soaked hawker in a wet market stall, holding a wok with a dirty towel slung over my neck, selling education in a paper plate. Want chilli or not?


The top line of a business, or revenue, is the first thing that people will have to look at when they peruse the income statement. In my case, it's the fees that I get paid for doing a service, which is to tutor the students. The things that are worth taking note are listed below:


1. Percentage revenue growth
2. Seasonality effect
3. Concentration risk
4. Multiple streams of revenue


Percentage revenue growth is obvious - it measures how much revenue is increasing as a percentage of the revenue earned last year. Higher is not necessary better, as I realised from experience. The main contributor of earnings comes from the graduating students (JC2, IB yr 6, Sec 4, N lvl) because as the national exams spreads way after school ended, there'll be more lessons needed for extra revision and preparation of exams. If I want to increase the revenue earned this year by multiple times, I will take in more of such graduating students, so I will see a huge increase in percentage revenue. But I know the following year will be worse off, because when the graduating students leave, I'll have to build up my student base again to match my income for the year. It might not always be that smooth sailing. Hence, it's better to smoothen out the difficulty of finding new students by having a mix of graduating and non-graduating students. More is not necessary better.


You can increase your revenue by either increasing your students, increasing the fees charged, or teaching more students together over the same time slot. That's in order of ascending preference. Why? Each day you only have 24 hours. Each student you take will take 2 hours (usually), which means your income is capped, hence you can't keep increasing the number of students you can take. It just couldn't scale up. Increasing fees is okay, but as all economist knows, it'll possibly result in lowering the demand. If you price yourself too far out of the market, you might end up with much lesser students than is worth it. It also depends on your area of operation too, because you just can't sell atas organic chocolate mille crepes priced at $9 per piece in a neighborhood wet market stall. That's more for Bukit Timah, Orchard Road-ish type of area of operations. Mine is in humble Bedok where the world's most delicious carrot cake can be had at $2.50 per plate.

Black or white? I say black, from Song Zhou Lou Bo Gao near Bedok interchange hawker centre (pic taken from ieatandeat)

What's the third option of increasing revenue? It's to have lessons in a group. Charge a cheaper rate but group them together, effectively increasing your income per hour multi-fold. I limit my class size to 4 because there's diminishing returns in students learning from huge class size, and all the students in the group comes from the same class/school. It's not always easy to find such groups, but it's always more fun because of the group dynamics.


Seasonality effect of the revenue comes from the nature of the business itself. Some people think that as a tutor, I'll be very free during June and December period because there's where the school holiday lies. That's not true. Usually these period is the busiest. Think of me as a bus captain. When you're going home from work, I'll be working. During public holidays, I'll be working. During weekends, I'll be working. The general rule of thumb is this: The more free you are, the more busy I am. Vice versa. Understanding the seasonality of my revenue stream allows me to act in a manner that will smoothen my income. The way to do this is to take have multiple streams of income. I'll discuss about this in detail later.


Concentration risk refers to whether you have a huge percentage of your revenue coming from a single subject, or a single student, or a single group of students, or from one tuition centre. For example, if I'm only teaching chemistry as the sole subject and one very unfortunate day, MOE decided to adopt a campaign "Teach nothing and learn something", so they scrapped off chemistry as a subject. If that unlikely event is to happen, my revenue stream will go to straight to zero. Don't say it won't happen. I know of a tuition centre that specialises only in Chinese. In the past 10 yrs, MOE had major changes in the structure and content for Chinese. I can't remember exactly what the announcement was about, but I remembered within a fortnight, the student intake of the student dropped to single digit and they had to close down by the end of the year. That's subject concentration risk.


There's also concentration risk arising from having a single big group of students. It's really good revenue since you spend the same amount of time but earn a lot more per hour, even though each student pays less. Think of it as a leverage on time. If this group of student forms 80% of your income stream and they graduate this year, the following year you'll have to find students to replace them. It's just something that you have to think about. Always the next year and the next year. Nobody will hand you a salary for free, but hey, that's what you signed up for as a free lance tutor.


Multiple streams of revenue is always better than a single stream. I'm not even talking about passive streams like dividends or from book sales, blog advertising etc. Different levels of student have their own unique peculiarity and seasonality. For example, for lower sec 1 students, they will usually not have lessons during the holidays because they had just finished a major exam (PSLE). Parents will be more lax while they concentrated on their primary school siblings, or they just want their kid to have a break before the more 'important' years. Sec 2 you'll see a lot more help during June and Sept holidays because that's the streaming year where students bid for their subjects combination for upper sec. Sec 3 you'll see a lot of activities even during the end of year holidays as they try to gear up for the all important O'lvl years. The different seasonality will help to even out drier non-peak months so that your revenue stream will have lower volatility. This will make sure you don't have to pluck grass from the roadside to eat during the winter months and freeze to death like a ill-prepared grasshopper.


I'll talk more about the profit part in future posts. Look out for it.

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The bite into the forbidden fruit

Today marks a significant milestone in my life. It marks the first week since my transition from digital wasteland, to digital wonderland. It’s been 7 years since I last bought a brand new mobile phone, and my last phone attest to the suspension of time. The Nokia E71 was the vanguard during its times, but is now a vagabond that is relegated to a relic. It witnesses the rise of the smartphones, and the fall of the very company that birthed it. Its strength lies in its tenacity, but now even tenacity is tenuous. In the era where endearing is more important than endurance and where form and function triumph over durability, I have decided to take the leap of faith and foray into the foreign land. Nestled precariously in the palm is the portable device that opens the portal to the virtual universe, and welcomes the wanted and the unwanted.


What are the wanted? Ah – the wanted are aplenty. Firstly, I was granted both anonymity and acknowledgement at the same breathe. Anonymity because my device is merely one among the countless ones carried and cradled by strangers on the trains. For once, I failed to feel the momentarily sense of awkwardness that comes with the realisation that there is none other phone like mine. However, that sense of awkwardness was replaced by an equally uncomfortable sense of acute awareness – when I realised that people recognised my phone as the one plastered on walls.


Iphone 6s Plus. Rose Gold.


It blends in, yet it stood out.

Another wanted feature was its ability to anticipate me. It could read my thoughts before I formed them. The screen was filled with tiny boxes that showcase more ideas than I could even think of – the camera app jostle with the communication app for my attention, while others wait patiently in line to be noticed. Yes – I do notice all and try them out – eventually.


The last wanted feature is how it change the way I communicate and experience the world. In the old paradigm where there were emoticons instead of emojis, and emotions are expressed through a limited permutations of : ; ) ( p in only single shade of black – one cannot possibly capture the spectrum of feelings and convey them to others. In the world where symbols, words, pictures and sounds are weaved together for a holistic experience, Whatsapping becomes an intensely engaging exchange. Moreover, this device had the ability to expand and encourage positive habits. I was embarking on the journey to track my expenditure, and magically there were apps appropriate for that activity.


Such wondrous experiences! Is there anything that one possibly not want? Yes. The ambivalence of whether you possess the possession or the possession possesses you. I never had to be so keenly aware of my phone – till the day I got the new one. The past week was a harrowing game of hide and seeks. Where is it? Is it there? Check. Check. Check. The material constraints were immaterial when compared to the nagging issue of materialism. Did I make a wise decision in purchasing it? Were it meant to fill genuine needs, or to fulfil the crass desire of having materialism materialised? Although it allows the proliferation of positive habits, I can envision how it exacerbates the evils of negative habits – to use it excessively, compulsively, addictively. The dilemma is, do I control the device, or is the device conditioning my responses? The numerous functions forced my mind to adapt to its high expectations. Gone were the days when I could safely single-task – protected and secured from the surge of activity due to the limited functions of my old phone. Now the entire universe is laid out before my eyes, and when I try to see all, I see none.


Perhaps that’s what Alice saw in Wonderland. Illusion and disillusion. Enchantment and disenchantment.


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That was what my wife wrote when she recently got into the iphone craze. Asked her why she wanted to get an iphone when she isn't even interested in IT and gadgets, she said she wanted to experience it. It's interesting that while I am trying to unwind myself from being too attached to expensive phones (I'm using mi 4i, btw), she's upgrading to high end phones. It's about $800+ with the plan. Much how is $800? Well, she'll experience it now. I also told her to write about her experiences in switching from a  '2G' phone to a '4G' phone.

There's an interesting thing which I had observed. When one uses an iphone, it's not just the cost of the plan and the initial cost of the phone that we had to pay. The cost of all those paraphernalia are usually not counted in. As an example, a tempered glass screen protector can cost up to $50. A hard 'armor' hand phone casing can cost another $50. You can buy an insurance plan for the phone as well, for another $8/mth. All these are the hidden cost of owning one of the most coveted phones in the world.

I guess you don't just buy a phone. You buy a lifestyle of paranoia in owning a piece of expensive gadget too.

It's not all that bad. She bought a personal finance app to track her expenses daily now, and she's more up to date with opinion articles from news agency, which in turn generated lots of interesting focal points when we discussed what went on in our day. So the bite into the apple isn't all that sinful, since it also brings with it a byteful of knowledge. Life's full of irony, LOL

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