Going from working middle class to rich with a simple tweak

Ever wondered how much an average family in Singapore spends on a monthly basis? Just last month, the Department of Statistics Singapore released a report on the Household Expenditure Survey 2012/13. It was reported that Singapore resident households spent an average of $4,720 a month. When we look down deeper, the 41st to 60th Quintile of the population spent an average of $5066.80 (inclusive of housing cost).

Image Credit: https://www.flickr.com/photos/franganillo/3678747186/

$5066.80 sounds quite excessive to me. It is no wonder many people remain as middle class instead of becoming rich. We have to understand and know that the rich don't spend their money like what we see on movies and television, buying Lamborghinis and snapping up luxurious suites along the beaches. They are more frugal than what we imagined them to be. Here's an important note: The rich are good at keeping their money, they spend base on their current financial situation and their goals.There are even more appealing reasons to live a frugal lifestyle. Overconsumption results in wastage. It cause the desires to always want more which makes us unhappy creatures on Earth.

With a little tweak, we can actually go from middle class to rich in a shorter time. To know how that happens, we'll need to look at each individual expense item for an average household in Singapore.


Expenditure for an average household

The department of Statistics has broken down the expenses into individual items. I would use the broad items to illustrate this example.

Type of good and services	Current $	Tweaked $	Remarks
Food and Non-Alcoholic Beverages	$444.90	$444.90
Alcoholic Beverages and Tobacco	$60.10	$20.00	Can cut down on excessive alcohol and tobacco which is bad for health
Clothing and Footwear	$126.60	$70.00	$840 per year on clothes is more than enough
Housing and Utilities	$328.50	$200.00	Save some electricity and water
Furnishings, Household Equipment and Routine Household Maintenance	$219.60	$100.00	Fix/Do it yourself to save some money
Health	$222.80	$222.80	Can't really save on health cost. But stay healthy
Transport	$663.40	$500.00	A fuel efficient car or take the public transport
Communication	$225.20	$180.00	Get the best bundle plans for mobile and broadband
Recreation and Culture	$307.70	$200.00	Learn how to plan well when travelling to get the best deals
Educational Services	$254.90	$254.90
Food Serving Services (Eating out, restaurants etc)	$734.20	$500.00	Occasionally eating out is enough. Make delicious home cook meals at lower prices
Accommodation Services	$22.90	$22.90
Miscellaneous Goods and Services (hairdressing, insurance etc)	$476.00	$250.00	Your hair doesn't need frequent expensive treatement. Buy cheaper term insurance plans
Non-Assignable Expenditure	$23.50	$23.50
Imputed rentals for owner-occupied accommodation	$956.50	$956.50	Can't really save on housing cost unless you buy a smaller flat. *Housing loans paid by CPF
Total monthly expenditure	$5,066.80	$3,945.50
Total monthly expenditure (exclude housing loans paid by CPF)	$4,110.30	$2,989.00
Monthly household income	$6,000	$6,000
Savings rate	31.50%	50.18%
Years to retirement	28 Years	17 years

Source (Current $): Housing expenditure survey 2012/2013

With a simple tweak, we manage to save more than a $1000 dollars per month. This shortens the years to retirement by 11 years. If you're not sure how I derive my retirement years, you may want to read my previous post on "Save 75% of your income to retire in 7 years". Basically, the assumption is that we invest the savings to earn a 5% yield after inflation. If you save 50% of your income, you'll be able to retire in 17 years where at that time you will have a 4% safe withdrawal rate in the form of passive income. This passive income can come from dividends from stocks, rental from properties which will pay for your daily expenses for as long as you live.

Now back to the table above. From there, we can see if we just tweak our expenditure a little, we could retire like a rich man 11 years earlier. A monthly expenditure of about $3000 equates to about $36,000 per year. I think this is still quite a decent amount to live on. At least you don't have to live on bread and instant noodles for your daily meals. In fact, you could still eat out at restaurants occasionally, own a fuel efficient car and even go on annual overseas trips.

Now you may think why is spending only $3000 per month considered rich? This looks like a poor middle class to me. However, the difference is it lies in the ability to keep your money forever. You may have a Million dollars but if you do not know how to generate cash flow with it, it'll be gone sooner or later. This difference is explained further below.


The difference between retirement for the middle class and the rich

Most of us when we plan for retirement, we would think we just save a certain amount and then draw down that savings when we retire. The problem with that kind of planning is your money will certainly run out one day which means your savings may deplete when you're still alive. I was having a small chat with my colleagues on retirement just last week and we did a small calculation. We were shock that with $1 Million dollars, it would only last about 27 years for $3000 monthly expenses. The $1 Million dollars you saved so hard throughout your working years will be gone in 27 years.

On the other hand, the rich will have money that last them for a lifetime. They could retire at 40 and their money will last them forever and even for the next few generations. The key is in creating cash flow. Cash flow is passive income. The strategy is simple. Let's say we still use $3000 as our monthly expenses. We just need to save up $900,000 then invest this amount for a 4% annual yield. That would give us $36,000 annually which equates to $3000 monthly. Keep investing and this money would continue to generate income for you every month and it could even grow to more than a million dollars as years go by.

So which is better?

1. The $1 Million dollars that can only last for 27 years?
2. The $900,000 which can last for a lifetime?

Both still give you a monthly expense of $3000. One will deplete and the other will continue forever.

Going from middle class to rich works in both ways:

• Living a frugal lifestyle base on current financial situation to accumulate capital (it is very hard to become rich with an expensive lifestyle)
• Investing the money to create cash flow 

Herein lies the key point in the path to riches. When the cash flow is created and you do not have to work for money anymore, money at this instance multiplies over and over again. This is the amazing thing about money. When put into the right place, it grows and multiplies for the rest of your life. When money is no longer a problem, you can indulge in some dose of luxuries as time goes by. Spending on luxuries does not kill you anymore like how it did to the middle class population.

Learn the right strategy and you could well be the next rich person. Start managing your money like a rich person.

For the full report of household expenditure survey 2012/13, click here.

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Practising Frugality to Achieve Happiness in a High Cost of Living Environment

To be rich, one has to spend less than he earns. He should probably save more than 50% of his income too. It is common sense that whoever spends more than he earns will never ever ever become rich. I live in a small city called Singapore. Over the years, Singapore has evolved from a third world nation into what we call a first world nation today. It has one of the best airports in the world along with towering skyscrapers, luxurious condominiums with private yachts and luxurious cars can be seen frequently on the roads of Singapore as well. In fact, i've seen BMWs and Mercedes as a common sighting everyday. Even luxurious cars like Ferrari and Porsche can be seen almost everyday.

The skyline of Singapore at night

Rising prices in Singapore

Of course with all these, prices have risen exorbitantly over the years as well. Property prices which were once $50,000 has risen to almost $400,000 today. A meal which cost less than $2 in the past can cost as much as $20 today. Not to mention even more luxurious Michelin starred restaurants which sprung up lifting food prices to more than a hundred dollars. Furthermore, shopping malls can be seen everywhere with branded goods at your neighbourhood malls. Then there's the killer of online shopping which makes buying of stuffs even easier at the click of a mouse since almost every household has access to an internet connection at home and with smart phones, all of us have internet access wherever we go.


The plain porridge and chicken story

With all the convenience and luxuries all around us, it is not surprising that most young people would think that this is the lifestyle that they should have. Eating at restaurants becomes a common hang out place for young working adults. Chilling with their friends at Starbucks becomes common for students. Owning a car and living in a condominium seems to be the average middle class lifestyle. It is vastly different from what our ancestors experienced in Singapore back then. They had to survive on eating bread and plain porridge for most of their meals. They had to scrimp and save just to live another day. They had to work long hours and in harsh environments just to earn that meagre salary. They were forced to be frugal but they were still poor in many ways. They could only save less than 10% of their salary.

Fast forward to now, there are still many people who are poor. Poor in a sense that they can only save 10% of their salary or even lesser. They still feel that they are just scraping by even with higher incomes. It seems like the hardship of saving money was passed on from generations to generations even though we earn a much higher salary now. The interesting thing is even though we own much more stuffs and earn a much higher salary, most Singaporeans are still not happy as compared to the generations of the past. Why is this so?

To know the answer, we have to return to the past and have a glimpse of what happiness is all about 40 years ago. In those days, both kids and adults had to eat plain porridge everyday. On special occasions, they would have an additional dish such as a chicken to spice up their meal. Of course if you eat plain porridge every day and suddenly you see a chicken, you would become happy. For those people in the past, seeing a chicken on their dining table would bring happiness to them. Fast forward to the year 2014, a chicken doesn't have the same happiness effect for us today as we see the same chicken everyday. The more you have of something, the less happiness effect it will have on you.


Practising frugality in Vietnam

Let me explain further by illustrating the effect of happiness on my own personal experience. 7 years ago, I was sent to Vietnam without even knowing what country it was back then. I was just a young 19 year old student on a mission to teach English at an International school there. There was supposed to be some form of remuneration or allowance to be paid but it didn't happen so me and my few other friends were left with nothing except for the little money we brought from home. It turned out that Vietnam was a great difference from the life I had in Singapore. The traffic condition was bad, the air pollution was bad. It's as if I went back to the 1960s in Singapore. How could someone who has lived in a city for the past 19 years survive in such an environment for the next few months?

Sunset at the Mekong river in Vietnam when I was there in 2007

As I settled down, life turned out to be good. We had basic meals of 2 dishes that cost less than $1 per meal. We even saved on soft drinks that cost 50cents there all because 2 soft drinks could easily buy us another meal. Occasionally, we would eat out at restaurants that cost $5 per meal. This brought us a lot of happiness even though life was simple. Interestingly, chicken was expensive there. A simple plate of chicken rice would cost more than $2 which is double of the simple meals we had. There was once we bought a packet of chicken rice for a small girl who appeared to be hungry and looking for food on the streets. She displayed the biggest smile I've ever seen and was beaming with happiness throughout her innocent face. I thought to myself: "This must have been true happiness." It is when we are grateful for whatever we have now that we experience true happiness.


Practising frugality in Singapore

Living a frugal lifestyle in a high cost of living environment would bring happiness to you and me. The equivalent of a plain porridge in today's term may be a meal at the hawker centre or a simple home cooked meal while the equivalent of a chicken would be a meal at the restaurant. If you eat at hawker centres everyday and go to restaurants once in awhile, the restaurant will still bring some amount of happiness to you. However, if you eat at restaurants everyday, the happiness effect wears out overtime. People who eat at restaurants everyday would need to find happiness from higher luxury meals which may cost up to a hundred dollars. It is a constant insatiable desire to always want more. It seems like the more expensive life we lead, the more ungrateful we become for the little things. This cause us unhappiness.

Practising frugality in a high cost of living environment such as Singapore is possible. There are alternatives to the high cost lifestyle which we can choose from. Instead of taking the taxi everyday, we can take the bus or MRT. Instead of eating out at restaurants everyday, we can eat out at simple cafes or hawker centres. If you need to drive, you can get a cheaper fuel efficient car instead of a luxury car that burns a hold in your pocket. When you make frugality as part of your lifestyle, you can then indulge in luxury once in awhile to fully enjoy the effects of happiness that it provides. You will be more grateful for it then. Pursuing luxury as part of your daily lifestyle is not as good as what most of us think.

So, if you're looking at that rich person who drives a fanciful car and set yourself a target to achieve that one day, STOP doing that. People who feel that they can only achieve happiness by living a luxury lifestyle in the future will find themselves disappointed when they do reach that stage. When you eat at restaurants and find that it does not bring you happiness any more, take a step back and live a simpler lifestyle. Think about the poor and less fortunate people who are struggling to put food on the table.

The truly rich live a frugal lifestyle and they find much more happiness in it. They also help and give in whatever ways they can. Step back from consumerism and your life will be more meaningful. It helps you to reach financial freedom earlier so you can truly give back to society for the rest of your life. Are you up for the challenge to live a more frugal and simple lifestyle for the better good of the world?

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Getting Rich And Spending Money Without Looking At Price Tags

Finally, the ability to spend money without looking at the price tag. You see the clothes you like, buy! You see that pair of shoes, buy! You see that air ticket, buy! Does this sound like financial freedom? I once heard someone said that you will know you have reached financial freedom when you can buy things without looking at the price tag. However, there's just one problem. You will never get rich or achieve financial freedom if you're living your life like this now.

Not looking at price tags sounds a bit too exaggerating. Most of us do look at price tags before we buy anything. Most of us even compare prices and try to buy at a discount. However, doing all these and you'll realise you're still poor. The problem lies in looking for stuffs to buy. But, its not just that. There's an even deeper secret to being rich.

Delayed gratification is one of the defining advantages in our human life. Somehow, some of us will be able to put off spending now for a better future. Ask a dog or a cat to save money for their future and you'll have to wait a thousand years for it to happen. The signs of delayed gratification shows up early in life. From the way kids behave, we can see if he or she has the patience or the willpower to persevere in times of trials. When given sweats or chocolates, some kids will keep them for later consumption while some kids will take the opportunity to consume everything when their parents are not looking. Kids who are able to hold off gratifying their desires instantly will do much better in life in the future with fewer money and debt problems. What goes on in the kids' brain when they think of keeping or eating the sweats?

Kids have good imaginations. They are also creative at that young age. They can imagine themselves to be super heroes or prince and princesses living in their own imaginary planet and castles. As we grow older, these imaginations start to fade away as we're caught up with the reality of this world. So what separates the instant gratification crowd from the people who can delay gratification? Why some kids keep the sweats while some pop it into their mouths instantly?

A research by the University of Pennsylvania shows that the key to saving money for the future might not be self-discipline, but rather the ability to imagine that tomorrow, indeed, is coming. It was written in an article I read here. Those who could imagine a better future with the money saved now will find that saving money is easier. It is the aspiration of living a financially free life later in the future that prompted many people, including me, to start saving.

A couple of years ago, I found some compelling edvidence that saving and investing money now will indeed reap many benefits in the near future. Yes its near and not when you're too old to walk or travel around. I found out that most people reach financial freedom in their early 40s and some even in their 30s when they delay some of the gratifications when they were younger in their 20s.

Putting off spending will be hard for people who only think of the now. It is always the thought that if I don't spend now, then I won't have the chance to spend again in the future which kills the discipline to save. The future seems far for these people. However, the future does arrive faster than what we thought. Putting off that impulse purchase might not seem much at first but it is the lifestyle that is being built which is important. If you earn $2000 and can survive with just $500 per month, you're saving $1500 a month. When your income increases to $3000 and you still maintain the $500 lifestyle, you now save $2500. Money in your bank account will multiply faster than what you thought and you'll reach the financially free stage much faster than imagined.

So, the next time you have the impulse to spend, think of what your future will be like if you continue living your current lifestyle. Will you retire at a young age or will you work to an old age? Kids have good imagination. Adults or young adults like us can have some imagination too.

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Get rich quick - Real or myth?

Channel news Asia reported 2 days ago that the number of rich in Singapore is on the rise. It was reported that "The number of millionaires here rose by 4.5 per cent last year to about 105,000, according to the latest World Wealth Report from Capgemini and RBC Wealth Management." This means if we take a population of 5.5 Million in Singapore, there is one millionaire in approximately every 52 people. These millionaires are defined as having US$1 Million or more in investable assets.

Young people in Singapore are influenced by the prosperity of the nation and want to be part of the rich and successful bunch of people. However, many get themselves into trouble by venturing into the unknown. This can be dabbling in stocks, starting an unfamiliar business or lured by high returns investment schemes. The question is: what is real and what is myth?

Real or myth?

We've heard of traders who can make tens of thousands a day just by trading in the stock market. We've heard people who made a fortune through starting a business. All these influence young people to want to go into trading and starting a business. From what I see, these two are the most common ventures young people in their 20s would get into.

However, what most of us read on the internet or through advertisements from the newspaper is often not suitable for most of us. If you dig deeper, there are more cases of losers than winners in trading and business. It is an illusion that one can be successful in a very short time.


The Reality

Most people get rich by having a frugal lifestyle and slowly growing their money. You mean I have to sacrifice and control my spending then still need to have patience to wait to get rich? Yes, this is the real way to get rich which most people do not want to hear. That is why no matter how the number of millionaires are increasing, it's always a small portion of the population. In this case for Singapore, its only about 2% of the 5.5 Million population.


Secrets of the rich revealed 

In my course of work for the past 4 years, i've got the chance to interact with a few of the rich because they are the VIPs I had to handle. They are CEO of big mega corporations and also influential business persons.
My observations are mostly similar for most of them. More often than not, they have common traits which separates them from the poor and middle class. I will share some of the traits which I observed but will not reveal who they are for obvious reasons.

1) They are nice and humble people

Every time when I meet these successful people, they will always provide the best hospitality that they can. Most of the time I'll be there at their house to solve their problems which they complained about. Rather than being nasty since they have the right to complain, they prefer to talk nicely and be reasonable to listen to possible resolutions. Many of us think that rich people look down on average people but in actual fact, they respect each person regardless of the background you come from.

2) They have good living environments

Yes, they are rich and they spend on creating a good environment in their house. There will always be a small corner with books and music players where they can relax and spend some time reading. There will also be a balcony with a dining table and some plants or even a garden for them to have their meals. Their house is always neat and tidy. Well, this is because they have a maid or even 2 maids in one house.

3) They love to read

That's why they have a reading corner. But the shocking fact is the amount of books they have. I reckon its more than 500 books seen in each house. Most books are on personal development, business development and management.They also have a huge biography of books of other successful people.

4) They are confident in the way they act and speak

They talk very well. This is the one trait that I noticed. Because of their experience and the time they spent reading and interacting with people, they have a lot of knowledge which enables them to talk intellectually.

5) They have a good network

I have heard from them personally that they know this CEO and that CEO. They also have networks with politicians and even ministers. Whether they developed their network before they are successful or after they became successful is not known to me.

6) Their children have the best education

Most of their children are either studying in an overseas university or studying in a private International baccalaureate program in Singapore. I saw a few of their test papers and they had quite good results too. Must have been really hard working to study.


These are the few things which I observed so far. It seems like knowledge and a good network are two important factors to be successful. To achieve either one, it will take hard work and a lot of time to build up. Trading requires hard work and an extremely strong psychology state of mind which most people are not able to achieve. Starting a business requires knowledge and a good network to be sustainable. If you have no knowledge of how a business is run internally or have not even started working at all, then starting a business is extremely risky for you. Wanting to be a successful businessman without any working experience may be just a dream for many. Get rich quick is certainly a myth for most except for a few lucky ones. However, the luck will fade away one day and its back to square one in the end.

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Being rich the easier way

Many of us like things to be easy. How about being rich the easy way? Can it be easy? Your parents most probably told you that there's a price to pay to be rich. You need to work hard, sacrifice and have lots of stress to earn a lot of money. That's a lot of hard work. If you want to climb up the corporate ladder, most likely your workload will increase as your pay increases. The amount of responsibility and stress increases as well. But do you know there is a hard way of being rich and there is also an easy way to being rich? Here i'm talking about being rich and not getting rich. You can be rich but not have time or you can be rich but have all the time in the world. The easier way is of course the latter.

The harder way of being rich

In my company, the senior management is always busy. They have meetings scheduled back to back, phone calls to answer consistently, emails to reply even at midnight and a lot to answer for if things doesn't work out well. Sometimes me and my colleagues wondered if its worth it to work so hard just to earn that amount of money? They have the money but do not seem to have the time to enjoy it. This is the hard way of being rich.


The easier way of being rich

What if I tell you there's an easy way to become rich? Now, before i go on further, I have to say I'm in no way implying that getting rich is easy. However, we can make the process get easier and easier towards the end. The key is in making your money work for you. Once money is successfully working for you, your life gets easier and you do not even have to worry about getting retrenched or about not having enough money.


Work for money or money work for you?

Here's the difference between someone working for money and another person letting money to work for him:

A person who works for money can only work to a certain age. The older he gets, the higher chance he would get retrenched. If this person gets retrenched, he has no income and may find it hard to find another job. At retirement age, his income goes to zero and he will have to rely on his savings to survive.

A person who lets money work for him does not worry about losing his job. When he reaches retirement age, he still has income even though he's not working and does not even need to use his savings to survive. This person can retire as long as he wants. On the other hand, the person who works for money can only retire up to the day his savings is depleted. Once that happens, he may have to go out to work again.

This does not mean that we do not have to work for money at all. Yes, in our younger days, we'll have to work for money. But, learn to use the money you work for and slowly let it work for you. Passive income is the money generated when money works for you.

4 ways how money can work for you

By now, you should be wondering how money can work for you. How do you create passive income? Imagine money still coming in when you're travelling overseas or even when you're sleeping? This may be a bit exaggerated but that is the gist of what passive income is all about: Money working for you.

Here are 4 simple ways how money can work for you:

1) Invest in properties
The easiest to understand way to generate passive income is by buying a property and renting it out. The rent you collect every month ensures a constant flow of income for you. The tough part is saving up your money for the first property. It does require a substantial amount of capital.

2) Invest in Stocks
By far this the most common way anyone can generate passive income for themselves. Passive income comes in the form of dividends from stocks. You can start with little money but to build up a strong portfolio, you still need a strategy plus more capital. This investment may seem easy at first but it actually requires knowledge and experience to do well in it. Lifelong learning and patience is the key.

3) Start an Online website or business
The internet is the new age of technology for at least the past 10 years. Many people have created websites which generates income in thousands of dollars monthly. Income can be generated through affiliates program, pay per click advertisement, direct advertisers etc. If you're able to attract traffic to your site, money will surely flow in and advertisers will look you up.

4) Using your talents to create your own intellectual properties
If you have the talent and passion for music, you can consider producing your own music albums. I had a friend who did just that. Or if you have a passion for writing, you can consider writing and publishing a book. I've seen many other bloggers who published their own book. I think its quite an achievement to write a book numbering 200 plus pages. I heard it takes years just to write a good book so its not easy at all but it'll be well worth it once its completed.



There you go. 4 simple ways on how you can create passive income. Well, it doesn't look that simple now but if you work at this direction, then you'll surely be able to generate that passive income which you desire. Most people choose to strive and work hard in their careers but don't know that earned income may be a risk in itself. You may lose your career in just a matter of days especially in our challenging and competitive world now. Don't get me wrong. You still need your career now and yes, do work hard at it. But along the way, learn to use the money you earn and save, to let it work for you. The knowledge of generating passive income will stay with you for the rest of your life. The passive income, generated successfully after years of hard work, will pay off eventually.

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7 factors that differentiate rich people from normal people

The media is filled with images of how a wealthy or rich person lives his or her life. Big houses, big cars, branded goods are what we commonly see. Often, luxurious items are associated with rich people. To the extent, many people pursue all these luxurious items thinking that the more they own all these, the richer they are. Nothing could be further from the truth.

In Singapore, we've heard of the 5Cs. They are Cars, Condominium, Credit Cards, Cash and Country Club. This is again associated with the rich and people believe that owning all these will categorize them as rich people also. However, pursuing all the luxuries of life can instead make a person poorer. A person can be living in a condominium, drive a big car and still be poor. It appears that they are rich on the outside but on the inside, they are actually mounted with huge amounts of debts. This in my opinion is not how a wealthy person is like.

In this post, i'll be listing down 7 factors that differentiate rich people from normal people. What is the true meaning of being rich and how you can be happy being rich? Have you heard from your parents that rich people have many troubles and that being rich is not a good thing after all? This is true only for the "fake" rich. The "real" rich are happy and contented with what they have.

There's a book titled: "The millionaire next door". In this book, the authors had done extensive research on the majority of rich people in America. In this case, the rich people are defined as having a net worth of more than US$1 Million. What they found out was a surprise to many. Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume.  This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, suits, and other luxury products/services. How these people manage to accumulate so much wealth is discussed in this book also. Here, i'll discuss 7 factors that made these people rich.

So here are the 7 factors:


1) They live below their means

This is what we've heard before. You might have heard it many times and know what it means. However, it is important to practice it. Rich people are frugal and live below their means. They save a huge part of their income and live a simple life. This is true for Americans and also true for Singaporeans.

Simply said, living below your means is spending less than you earn. 3 questions that were asked to these millionaires in the book were

1. Are your parents frugal?
The answer is yes.

2. Are you frugal?
The answer is yes.

3. Is your spouse frugal?
The answer is also yes.

It seems like the whole family is frugal. Frugality runs in the household and this is one of the factors that made them rich. However, being frugal alone will not make you rich. That's when the next factor comes in.



2) They invest their time, effort and money

Rich people like to learn. They invest a lot of their time reading, learning from others, upgrading their skills etc. It is stated that the wealthy people spend on average 8.4 hours a month on wealth accumulation and their investment strategies. On the other hand, normal people spend only 4.6 hours a month on wealth accumulation.

There's an interesting fact that was mentioned in the book. It was said that wealthy people go out and earn income early and fast. This means they start working early and do not spend too much time in school. In fact, the authors shared why they were not rich. They said they had spend too much time in school with an average of 10 years in University. For a person who has started working 10 years earlier than you, it is impossible to catch up with his earning capacity unless of course they are able to earn an extraordinary high income from being an entrepreneur.

Wealthy people use at least 15% of their income for investment. They are also interested in the value that they get when they spend their money. They will know where their money is spent on and keep track of their expenses. In the case of a car, wealthy people know that if money is spent on a car, the value of the car depreciates in the first 3 years.

Lastly, the book mentioned they asked 3 questions to the wealthy as well as normal people:

1. I spend a lot of time to plan for my financial future
2. Usually i have sufficient time to handle my investments properly
3. When it comes to the allocation of my time, i place the management of my assets before my other activities.

The interesting thing is this:
Wealthy people agree to all three statements while normal people disagree to all the three statements.



3) They value financial independence more than social status

Cars are often associated with social status. The more luxurious car you drive, the higher your social status. Wealthy people in general are not concern with having high social status. They drive the normal family cars only.

Most of the rich invest in properties or stocks of good companies. These investment generate cash flows for them and they get even richer and richer. When the extra cash comes to them, they don't go and spend on all those luxurious items. They instead invest back the money and let it accumulate more.

Another important point is the rich enjoy what they are doing. They love their job, their work and their business. They often do not work for money any more. Whereas for the normal people, they work for money to support their spending habits. They may have high income but all their income is spent on keeping up their social status. They buy branded goods, drive luxurious, wear branded watches, live in high end apartments etc. Do you know someone like that? I bet you do.

So decide do you want to look rich? Or do you want to be rich?



4) They do not have parental financial support

Most millionaires are self made. This means they made their first million by themselves without any financial support. On the other hand, those who appear to be rich have a lot of finances from their parents. These young people who have all the luxuries in life have money from their parents. Their parents thought that by giving their children all these, they could get a financial head start in life and be successful later on. However, they are wrong. These kids will become financially dependant instead of independent. They always want to rely on someone else and think that their parents wealth are their wealth. The more money adult children receives, the less money they accumulate. The less money adult children receives, the more they accumulate.

You can strike a million dollars or you can make a million dollars. Which would you want? The wealthy people want to make their millions instead of strike it. Making their first million let's them value the money more and also experience the process of making it. They can go on to make their second and third million if they want. It becomes easy for them. Those who strike it either squander it away or mismanage it. It can become disastrous for them.



5) Their children are financially independent

Children from rich families are spoilt brats. That's what we often heard. During my secondary school days, i had a friend in my class who was really rich. His dad bought him a condominium at the age of 13. His allowance was $50 a day which makes out to $350 a week. His parents gave him everything including all the latest gadgets which he would bring to school to show off.

I was really envious of him that time. I was only getting $40 a week in allowance and thought how good it would be if i had his money. However, this friend of my had a very sad ending. He was really bad in his studies and failed almost every subject. He was frequently into gang fights and stole things from shops as a challenge with his friends. In the end, he was expelled from school and was caught for involving in gang fights and stealing. I have no idea where is he now.


My rich friend's parents might have a high income but they are not the truly rich people. These are the so called look rich people. The real rich people will have children who are financially independent. They are not given everything they want when they are young and are taught the importance of living a frugal life. They grow up to be sensible and independent adults.



6) They are proficient in identifying market opportunities

Rich people are constantly looking for opportunities. Opportunities to do business, opportunities to invest etc. When they invest, they make good investment decisions and manage to grow their money consistently. This has to be tied to the time and effort they spend on managing their finances and researching on investment strategies.



7) They choose the right occupation or business

This is very important. Rich people know what they want in life. They know their passion, their strengths and weaknesses. They know what they are good at and excel in that area. Choosing a career can be the most important choice of our lives. While many normal people live through life motionlessly from pay-check to pay-check, rich people excel in what they do and they love what they do.



Conclusion
This sums up the the 7 factors that differentiate rich people from normal people. As stated earlier, rich people have accumulated a net worth of more than US$1 Million dollars. The next time you look at a "rich" person who lives a luxurious life, see carefully if he or she is really rich? Is he or she deeply in debt? Can this person sustain his or her lifestyle if he or she stops working?

The path to true richness is the path of financial independence. When you reach financial freedom, you can choose to stop working and still can sustain your current lifestyle. When the time comes, you are not a slave to money any more. That is when you can live a free life not bonded by the worries of finances. It is possible for everyone to achieve that. Learn from the "real" rich people today!


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How to get rich? - The dreamer's way

Many people want to be rich. However, it is only a dream for many people. What is a dreamers' way of getting rich?

1) Buy 4D/Toto and hope to strike it rich. 

Remember the 8 million chinese new year ang bao draw? Didn't you hear your friends or colleagues say if they strike it then they can resign from the company and don't need to work anymore? Maybe you can be lucky and strike it rich. Is it just a dream or will it turn into reality?


2) Speculate in penny stocks and hope it goes up 10 fold in a very short time. 

Have you ever thought that you could make a lot of money in stocks in a very short time? There are advertisements on the newspaper and internet of people making $1000 in stocks in a day? That is $30k in a month. Maybe once you sign up for the seminar and pay thousands of dollars, you can learn and be like that guy too? Maybe this is your hope to get out of your poverty life? Maybe, just maybe.

Don't get me wrong, Some of the seminars out there are really good and they teach you proper ways to invest. I have attended good ones before. However, there are many scams too. If there's someone who promise you guaranteed investment returns or say that you can get rich quick, most likely its a scam.


3) Go to the casino.

The casinos are finally here in Singapore. You don't have to travel to Genting taking the long coach rides and the treacherous mountain roads. You don't have to board a cruise ship and get sea sick. But there is a $100 entrance fee for the Singapore casino. $100? Small fee maybe? You think you can make back the $100 and even much more money. Maybe its just a dream. A dream and a hope you can't get out of.

4) Start a business
You read on books that many people make a lot of money through business. There's bill gates, donald trump, Steve jobs etc. In Singapore there's the famous bread talk owned by George Quek. You are inspired by their success stories and think that you can be like them. No money to start? No experience or knowledge? But well, i'm young and just want to strike it rich for myself. Working and having a job is for timid people. How will it turn out? Nobody knows and maybe you just could be the lucky one to succeed.

The Reality

So what is my point of listing down the ways to get rich which is supposedly a dreamers' way? I suppose many of us have thought of either one of the ways before. It is frustrating when you don't have enough money and humans will just think of any ways to get rich. However, the probability of the 4 ways above working out is very very low. I hope you realised it when you were reading it. Even if someone did strike it rich through the lottery, gambling or speculating in stocks, it will also be gone very quickly. It seems like money that comes quickly goes away quickly also.

Comparing the 4 ways above, I would think the most legitimate way of getting rich is starting a business. However, do note that on average, 6 out of 10 businesses close down within the first 5 years of operations. Starting a business is hard work and it does requires lots of knowledge and experiences. If you think that doing business is easy to make money, you may be one of the dreamers too. It is certainly harder than the full time job you have now.

My point in writing this post is to awaken people who are still in dreamland. I may have sounded sarcastic but what i have said is the truth. There is no point in hoping to strike it rich or counting on luck to strike it rich. It is ok to buy lottery or go to the casino just for some fun or entertainment. But do not let it become an addiction to the point when it becomes damaging to your life and your family.

How do the rich get rich? It is through proper financial planning, risk management, hard work, patience and lifelong learning.

There are 2 basic ways to have more money. Firstly, increase your income. Secondly, reduce your expenses. However, doing the above 2 steps will NOT make you financially free. You still need to invest and create passive income. Learn how to invest and multiply your money. Have patience to wait for the results. Sooner or later you'll realise that you have achieved financial freedom and don't have to worry much about money any more. This is the reality of getting rich. The sooner we get out of dreamland and go back to reality, the faster we are on our way to financial freedom. Choose to be in the right zone today!


Success is One percent inspiration, 99 percent perspiration - Thomas Edison

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