Recently, i was talking to a friend who has quite a large amount of savings and good income from his various sources such as a website he manages professionally and also from Forex trading. Two years ago when he was at the age of 24, he already has over $300,000 savings and makes a consistent 5-6k income from his website and also 2-3k monthly from Forex trading. No doubt I was envious of him having such good income and this kind of savings at his young age.
When i chatted with him just this week, things don't seem that well for him any more. He told me he lost $200,000++ in his Forex trading due to greed and his website income has dwindled to only 2k per month. Yes, greed can affect a person even when he already has a substantial amount of money in the bank. Be careful if you're doing something for the money. He bought a car before he lost money and now he still drives it with a monthly expenses of about $600. He paid $30,000 cash for the second hand car. Even if he does not drive a car, he will still take taxi every single time as it has already become a habit for him which he has been doing for the past 4-5 years.
This brings me to the point that frugality is important even if you think you have a lot of money. You may have friends who also tell you that they make this amount through stocks trading or this amount through Forex trading and this makes you envious of them. You may even feel that maybe you can follow them and make that kind of money fast through trading. A person who knows how to make money may not know how to manage money. It is not how much money you can make but how much money you manage to keep at the end of the day. When increasing your expenses, do always remember that one day you may not be able to afford the luxuries you are having right now. Will you be able to change your lifestyle when the time comes?
As for my friend, I cannot advise him any further. Two years ago when he told me about his consistent profits through Forex trading, I told him that it is not easy and very hard to control greed which he agrees to it. I did not expect him to lose that much as he seems quite well controlled back then. Still, things can spiral out of control when you least expected it to happen. I trust that he has learnt his lessons and will not make the same mistakes again. As for his spendthrift lifestyle, it seems like he can't change much of it even though he has a lower income now. Eating at restaurants and having a car has already become a habit and part of his life which is hard to change.
Life can be enjoyed even when its simple. But however, don't get the wrong idea that we should save money to the point of stinginess. Spend money when you have to but keep it in check. Spend money on meaningful stuff that will add value to your life and build up relationships. The worst reason you want to spend money on is to impress somebody that don't matter anyway.
"Beware of little expenses; a small leak will sink a great ship"-- Benjamin Franklin
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hi may i know how he generates 2k from his website? is there any way which we can learn this to generate passive income?
ReplyDeleteHi,
DeleteHe has been working on his website for at least the past 5 years. The income is mainly from advertisers as he's able to attract quite a lot of traffic to his site. Its not exactly passive as he spend quite a lot of time just to maintain the site.
Real people. Real losses on Forex trading.
ReplyDeleteForex is game of negative sum. Read again NEGATIVE SUM.
One has to be market shark or wolf to win.
Hi Uncle CW,
DeleteThere are many other stories out there. Its a negative sum but people still believe in the hope that they can be one of the shark or wolf.
Read? The Story Of The Duck
DeleteHi Uncle CW,
DeleteGood story!!
i do agree that it is important not to upgrade your lifestyle beyond what you can afford. its very easy to upgrade but not easy to downgrade. now that i am staying in a condo, i really like the fact that i can just go downstairs for a swim instead of taking a half an hour bus ride to the public swimming pool. for some others, its not so much the upgrade in lifestyle but the image - they are afraid what others would think when they downgrade from a car to public transport, from a condo to a hdb. that is very sad.
ReplyDeleteHi,
DeleteI think staying in a condo is ok as long as you can afford it. What I mean by afford it is your income should be stable and its not from a sudden wealth increase.
Staying in a condo is a status upgrade to many. To downgrade from a condo to a hdb will invite gossips even among your relatives. That is why its hard to downgrade if you're already up there.
IMO, public housing is excellent in Singapore. Definitely my first choice if i qualify for it.
DeleteCondo as a status upgrade? Don't 85% of the population live in HDB?
JW
Hi JW,
ReplyDeleteSome people can qualify for HDB but they choose to stay in a condo. I guess for your case its no choice rather than showing off a higher status. I'm suppose there are less than 85% of people staying in HDB flats now. More and more people are buying condos.
hi do you have any idea what is the difference between deemed and direct interest vis-a-vis number of shares hold by a specific person in the company?
ReplyDeleteHi,
DeleteDirect interest means they hold those shares directly under their own name.
Deemed interest means that they hold those shares under nominees, and/or they have related interest in shares registered not under their name. Examples might be companies where they have a majority stake holding another company's shares, wife of the deemed interest shareholder etc.
Hi when valuing reits, would it be a better indicator to use CNAV or NAV? may I know what is the difference?
ReplyDeleteHi,
DeleteIt depends on yourself. CNAV is the conservative one which of course will be safer. CNAV does not include assets such as development properties.
Okay thanks. For you personally, which one would you use? Also, what are the other rely indicators you would use to judge a REIT business ?
DeleteHi,
DeleteCNAV would be preferred. For REITs, since they are primarily in the property business, we have to look at the property market as well so that we can roughly know whether the dividends paid would be stable. It's all about the business. Indicators are just a small part in valuing Reits.
There are many books written on REITs and one book particular on S-REITs.
DeleteGo and read them.
The issue is not about frugality because being frugal will not solve the problem. The issue is how your friend should improve his forex trading techniques
ReplyDeleteTo be frank, I have no doubt your friend is going to be very rich in future. What he went through now is typical of every seasoned trader. I mean I have never know any successful trader who don't lose big time in trading.
The key is to win small consistently and set exit targets. Discipline and the ability to recover are the ingredients to success for traders.
By the way, I am also very impressed your friend's ability to generate so much passive income from his website!
Regards,
SG Wealth Builder
www.sgwealthbuilder.com
Hi Gerald,
DeleteI think to be successful in trading, you have to be numb to money. Meaning, earning money is not your purpose for trading anymore. My friend has good forex trading techniques which enabled him to earn consistently 2-3k every month for the past 1-2 years. It was because of greed that got him in trouble. Prior to being consistent in his Forex trading, he has already gone through a round of big losses which strengthened his techniques. Its the psychology in the end which got him into trouble.
He is quite obsessed with earning back the money now where he turns to gambling for the fast money. Its because of his lifestyle which he needs to keep up which caused him to be obsessed with money.
Hi Gerard,
DeleteThough it is quite some time since your comment, I saw your it and thought that it was quite misleading. The issue without SHYI's friend here isn't about improving forex techniques, it's about his mindset with regards to wealth.
As a matter of fact, he ended up rich in monetary terms, but was very poor in terms of true wisdom.
I think you are quite mistaken with your logic on seasoned traders as well. Well, perhaps 9/10 successful traders (could be defined loosely by "super rich types beyond net worth of a few million" I suppose) would have lost big in the market. But, does it mean 9/10 of those who lost big in the market would become successful traders?
If you could use that as an example, it suggest a large degree of confirmation bias in regards to 1.) successful traders, 2.) a definitive idea of 'success' in forex trading. With regard to the latter, I would pose you a question. If you made 2 million in the forex market now, lasted two years at that, but from the third year onwards lost all of it (or even more), are you a 'successful trader'? This type of cognitive bias might prove to be a bane to trading itself, and most certainly forex trading.
I've seen many cases of 'successful' forex traders (yes i do trade forex myself) who were initially successful, but lost so badly in the game in the end that they never touched forex again. Some don't even recover to ever invest again. All of this, due to a wrong mindset in the first place.
Of course, it is easy to look at the riches of others are start thinking about the 'ways' and 'techniques' you can get there. And well, it is likely that one might even get rich because of that. But I think it gets very dangerous for a person who gets rich this way. The allegorical tale in Greek mythology would be Icarus and his fall with artificial wings.
Don't get me wrong, I'm not advocating that people don't go into forex trading. If you have the capital, the technique and the right mindset, by all means go trade. But if you trade expecting to earn big, earn fast, earn everything, you should avoid it in the first place. This is just a word of caution to everyone who's reading the blog here and the comments written.
Thanks for the writing SHYI! Really appreciate you educating the folks out there through this blog!
Hi,
DeleteThank you for your comment even though the post was quite some time back. To me, trading is not easy. Most of us are better off investing our money for the long term.
Hi they say always to stay invested in the market. Since investing is not about speculating a market crash,(you never know when) would you remain invested in your shareholdings even if their prices plunge or would you withdraw when tell tale signs appear?
ReplyDeleteAlso what would you do with your current shareholdings during a plunge?
ReplyDeleteHi,
DeleteOnly sell when fundamentals have gone wrong. Business is not stable, management is poor or when the stock price is overvalued are signs to plan an exit. Anyway, please email me next them when you want to ask questions instead of posting comments here unless its related to the post. Thanks for your understanding.