Money beliefs and habits

When students come to me for help, the solution is not as simple as telling them to study. They are obviously not doing well, and the reason for them for not studying can come from a variety of reasons. It could be low self esteem, seeking attention from parents or peers, trying to fit in with his close group of friends and so on. Unless the root cause of the problem is dealt with, any methods of improving the grades is just symptomatic treatment and will seldom work for long, if it works at all. Hence, being a tutor is sort of like a doctor because you see the symptoms of bad results, and you try your best to decipher the symptoms and finding out the root causes.


It's the same for financial advice. If someone is not doing well in his personal finance, it's never as simple as save more and spend less. The symptoms show that the person is not good in his finances, but the root cause springs from his money beliefs. So unless the money beliefs are changed, any symptomatic treatment like budgeting, or separating wants from needs, or just spending less is not going to help much.


That is why Kyith's article here is such a fantastic write up. It's hard enough for people to talk openly about money, and it will be even harder for people to tell you their money beliefs enough for you to know what's wrong. Hence, to change a person's mindset about personal finance is going to be such a up hill journey. I guess the first part is at least to remove the barrier about money being a taboo subject. Once we share our own journey, it might open up the hearts of readers to talk about their own situation and how they handle their money problems, and things will fall into place from there. As a personal finance blogger, I think I have a part to play in this. I will share my journey, and how I navigate the various pitfalls and challenges of life, and hopefully readers will share theirs and we will grow as a community.

If you're interested in such money beliefs, you can try reading Secrets of the millionaire mind by T. Harv Eker. He will scold you and beat you up in his book (and I heard in his seminars too), but the job will get done. You will learn about money beliefs and how it's all linked to our money memory and most importantly, how to delink it and change within yourself. If you're sick, you eat medications to feel better. If you're sick financially, you should start by reading books to change your mindset and hopefully it'll translate to the right actions for the right change.

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My retirement comes annually

As my work winds down for the seasonal lull, I suddenly have a lot more free time. To the point that I don't know what to do with my time. I'm very used to working 6 to 8 hours of class time on weekdays (not inclusive of preparatory/marking time), so suddenly having only 2 hrs of work or even none takes a little getting used to. Again.


Every year end, I'll face the same situation of getting 'retrenched'. Every year end, I'll get my little experience of having retired and/or having reached financial freedom. It's the same feeling, that I've did what I had done and now I can finally have my life again. It's also invariably mixed in with the fear and worry that my money might run out, and that next year perhaps my earnings might not be better than this year or the last.


But not yet. For the next 2 to 4 weeks, I'll be having my honeymoon period. It's the period where the stress and worry haven't hit me yet and that all I can think of is the free extra time that I will have. I had dim sum lunch with my wife at 2pm and that stretched on with some shopping and tea to about 430 pm. After that, I read and took a nap until 7pm before I went out to have dinner together. At least for the next couple of months, I don't have to worry about rushing. In fact, I can stop looking at the time and let it pass while I enjoy these quiet moments. Try it. It's a different feeling when you have an agenda for the day versus one where you just get to do what you like when you feel like it. It's the same difference between a free and easy holiday versus a scheduled travel agency kind of holiday. It's the honeymoon period, of course.


I've worked pretty hard for this year - in fact, the hardest I've ever worked in my life! I've saved up with more than enough buffer for the winter months and I don't have to worry so much. But I still do. I guess even when I've reached financial freedom and truly have the option not to work, chances are that I'll still work a little. I don't have the climbing down mountain mentality yet, so perhaps this will change as I grow older. We'll see.


Next year is going to be a life changing year. Let's see how I'm going to navigate through this.

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The danger of holding too much cash

Today I made a mistake. I was queuing for a counter for about 2 weeks at 1.47. But when the stock started showing surges in its bid and sell volume, I started interpreting it as a sign that the counter will move. Against all reasons, I abandoned my queue and bought at the then sell price of 1.50.


It's only 0.03 cts, yes, and I didn't buy a lot (4,000 shares only), but it was still a mistake. The mistake was not sticking to my plan, which was to queue at 1.47 until it expires or it hits. On reflection, I think there's a few reasons why I did that:


1. I did not do my homework scans on Sunday, which I usually do because I was sick. If I had stuck to my routine, I would have realised that maybe today's funny volume movements are not that funny.

2. I had too much cash lying around. Nearly 50% and was climbing until I bought two counters in the last 2 weeks or so. The danger of having too much money lying around is that you tend to fire more eagerly, sometimes seeing what you mind tells you to see.

I want to take the chance to talk about the 2nd point. This is a relatively new problem for me. I never had the opportunity to handle such a record investment portfolio and a bonanza of cash waiting to be deployed, hence this problem might be more and more frequent ahead. We will all reach there one day. It's best to recognise it and stem it as soon as necessary, which is the real reason for this post. It's to remind the future me to wake up and stop doing adjustments when I should be doing nothing.


If we're doing things right, our portfolio will get bigger and bigger in size. Our money management and our psychology when handling money must also change gear from handling small amount to handling big amount. If your portfolio is 20k, you have a different set of worry from handling a portfolio of 200k. With a bigger portfolio, you also can't do the same thing that you did when you're having a smaller set. You can lose a few 20k, painful yes, but not catastrophically so. Nobody can casually say they can lose 200k portfolio, well, unless you are handling 2 million perhaps.


Some of the things I think we should be careful when handling bigger portfolio size is:

1. Diversification - I'm can't do a concentrated portfolio of 8 stocks. I'm not good enough to know if something will trip up in the companies I invested, so it's better for me to spread the risk to more companies. If one fails, it will not rot and bring down the entire ship. This is very important.

2. Finding a place to store that excess cash that is around. I admit I can't invest 100% at all times, so I will always have some cash lying around. I will always have to find some good place to park that cash and when all my current facilities to max the returns for the cash is used up, I'll have to find new ways to do so. I need to set up a system. I think if the cash is not rotting too much, the problem of wanting to invest eagerly may be reduced or eliminated.

3. How to average in your positions. Now with bigger backing, we can enter in 2 or 3 shots. There's a lot of science on how we can enter with 3 rounds. We can double down, enter at fixed time, enter at fixed interval, enter at subsequent support level and so on. This is vastly different when starting small since we only have 1 good shot if we don't want to over allocate our resources into one single company. The same goes for selling too. We don't have to sell all in one shot. We can sell out in 2 or 3 rounds. I need to experiment and come up with a good system to deal with these, so it's less discretionary also.


Anyway, I've a feeling I'll be blogging more and more about other stuff in the future. However, making silly mistakes is one area that I will never blog less about. If I want to be successful, I should have more and more new mistakes, less repeated ones and more reflections following that haha!

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