A lot of people doesn’t always aware that everything changes fast in hidden, as someone says the only one thing that never change is the changing itself. So, in this article I want to remind again four main occupations that unsafe for all of us.

Those occupations are:

1. Employee

Whether we are just an ordinary staff in small company or competent director of big company, our job is not secure for us. Someday, economic recession can hit our serviced small company and need to cut their budget or even bankrupt. If we just ordinary staff with average performance, we may get into the list of fired employees, and we will lost our job. Or maybe we are a very competent director and economy is getting well, then our company has a merge with other bigger company with other very competent and strong backup director candidate from other merged company, I guess that we must ready to quit our director position.

2. Self Employed

Let’s say about owning one small fast food outlet, with sufficient visitor every day, in the corner of busy road. Then one day, for instance, one 100 meters prohibited parking beacon is placed right in front of our outlet. People who used to visit our outlet are hard to get parked, and we lost our visitor that means lost our income. Another example is a professional doctor, some unintentionally malpractice can be happened, and for sure we lost our job and income.

3. Rich Entrepreneur

Don’t we remember Charles Schwab, Arthur Cotton, Leon Frazier, or other rich persons who got bankrupt because of a lot of reason? They have some golden period of glory, but have to die in poverty.

4. Investor

There are a lot of very smart investors in NYSE, but got stress and bankrupt during recent US stock market crisis. Nobody can expect such crisis, that’s a “Black Swan” (I use terminology popularized by Nassim Nicholas Taleb for unexpected big phenomenon with big effects), and none of investor is safe from this occurrence.

Wauw, in fact those four occupations have encompassed all occupation in the world! Means, there’s no really safe occupation in this world.

So why some rich people still rich after deep recession while others are bankrupt, or why one “nobody” is able to become a rich people just in several years.

The answer is simple:
1. They always prepare for the worst thing in their life, business, or career.
2. They always try to learn something new every day, make some innovation and leading.
3. They do good assets allocation.
4. They have multiple streams of income.

This receipt will make us survive in the heaviest situation, and growing pass through the continuous changing in our life.

Tags: occupation

Marshall Silver

1. 50% of world’s money supply is kept by 1% only of world’s population.
2. 90% of world’s money supply is kept by 5% only of world’s population.
3. 95% of all population only keeps 10% of money supply.

He also predicts that if all money supply is equally divided to all population, everyone in this world will be categorized as rich people. But, it will not take any longer time, since within 5 years the composition of money distribution will be back to current composition.

Refer to this fact, I should ask myself about my position, where am I? The sadly answer is, in fact I am categorized as one of 95% of world’s population who own small part of only 10% money supply. How about you?

There are several reasons behind this fact:

1. Weird thing but its real, that mostly people are feel comfortable to become a part of 95% “unlucky” population, trapped in our own comfort zone and lazy to think, except millions of very poor society among under developed countries who fight and struggle to keep them still alive. Almost of us always say that we don’t have enough money, but deep in our heart we are enjoying this financial game. Let’s take little deep reflections about this argument; don’t you have similar opinion with me?
2. When hold money, only 5% of population ask the question, “How can this money makes more money for me?” On the other hand, other 95% will ask, “What can I buy with this money?” This difference of financial insight makes Marshall Silver’s prediction seems going to be accurate.
3. Mostly people is always thinking “in the box”, but few people innovatively thinking “out of the box”.
4. Not for excuse purpose, current capitalism system has brought wide opportunity gap between rich people (5% of population) and average / poor people (95% of population). Superior people have wide opportunity, but vice versa for inferior people.

I am sure that almost all of you already known this fact. The purpose of this article is just to remind us again, to make self-analysis: where are our position?

And if we have 5 years future life from now on, at which position we want to be?

I already had my own answer. How about you?

Tags: Personal Finance Management

But, on the other hand, all financial advisor always ask us to think and make some personal finances planning for our retirement age. Why this topic is crucial as one of our financial mission ?

For us who still enjoy your 20th years period of our life, we may think that retirement planning is something that can wait. So many thing to do and to think such as social life, romance, entertainment, and other ways of enjoy the life. Then, there’s a time when we get old and start to think about our retirement. At that time, may be the planning is too late and we have to work very hard to achieve our goal.

So, how important is retirement planning for all of us actually?

Let’s find the broad and simple answer. Assume that we started our career at our 25 years of age, then how many years time we have before retired? Up to 55 years old, there will be 30 years. Yes, we have 30 years to prepare. After that, if we can live up to 75 years old, how much time we have to spend without any significant income but just continuous monthly expenditure ? 20 years.

It means, we have 30 years to secure our next 20 years life (2/3 of productive life period). To be emphasized here, 20 years is not a short time, and at that time we will need something to spend for our daily life.

So, begin our retirement planning on 40 years of age is little bit too late unless at that time we have quite huge income to allocate. But, who can grant that our 40 years age will become our financial golden age ?

If we now 25 years old, and have 30 years to prepare our another 20 years life, I think such 20 years is quite important and fair to be included in our life planning. Otherwise, we will burden our children or family when we get retired without sufficient amount of money to spend.

So, just keep invest our money when we are young. If we are still under 20 – 30 years period of our life, we can learn all investment instrument and don’t be scared to take some investment risk. When we are under 40 – 50 years period, please calm down and save conservatively. Just bear in mind, that we will have long 20 years road to walk when our body is too weak to work, our brain is too tired to think, and the most appropriate thing to do just to enjoy our life.

Personal finances is sacrifice something in our current life for our better future life. Just make it as a natural process, enjoy our today’s life but also make a plan for our future life, so we will be able to enjoy our whole lifetime. That’s a dream of every human being, isn’t it ?

So, once again, retirement planning is important just because we all want our whole life become enjoyable and valuable for us.

Tags: Investment, Personal Finance Management, retirement, savings

Then, at the end of the month, some people will become headache because of incoming credit card bills, even bring them to personal bankruptcy. For those who still able to pay minimum payment amount, they can postpone life difficulties because of huge debts, but it’s just another time will come with bigger debt pressure, unless they can well manage utilization of credit card.

For sure, just thrown away our credit cards and not use them anymore is not a proper solution under current less-cash world. What we have to do is a good personal finance management of our credit cards.

Here are some tips that we can do for better utilization of our credit cards, to avoid getting mad because of their bills :

1. Bear in mind that credit card is not a debt facility

A lot of people forgot to use credit card as their main purpose for flexible payment method, but just swipe card for another debt which cannot be fully paid at the end of the month. One underlined mindset in using credit card is, please treat them as a tool of payment only, which has to be paid with your current routine income or future expected income. So, when we see any interesting things to buy or to pay using credit card, think over and over again whether our income can cover that purchasing or not. Implementing this rule effectively, then we will become credit card debt free.

2. Use several cards for different purposes

Lets say we have three credit cards on hand. Just allocate utilization of each credit card for different purposes. For example, credit card A is utilized for monthly household budget which is covered by monthly income. For this credit card, our payment shall be 100% of billing amount, so we don’t have any future obligation or interest paid. We may use credit card B for entertainment and traveling. For this credit card, we can choose whether to pay 100% of monthly billing by our allocated saving or pay a part of billing amount now and settle all obligation when we receive our future expected income (such as yearly bonus, project disbursement income, etc). Credit card C is utilized for purchasing household apparels or electronics, and we can order our bank to switch payment method to 6 months or 1 year installment type. Then, allocate some monthly budget to pay them. Please be careful to make sure our monthly income can cover all installment.

3. Pay more than minimum amount every month

For credit card B, please pay more than minimum amount every month. Since we don’t do traveling or unordinary entertainment every month, in the next month our bill amount will be reduced. If we continuously pay as much as we can more than minimum amount, at the end billing amount will be less significant compared to our budget. In accordance with personal finance management, the best way to do is make some saving for our planned traveling or entertainment, so we can pay 100% of billing amount with your saving.

4. Control our lifestyle

The last but not least, as general rule of thumb in personal finances, please just life with suitable lifestyle which can be fulfilled by our income. Sometimes we forget it and do a mad entertainment, mad shopping, or other mad things. When we have interest to buy clothes, just buy clothes which are match to our income. A lot of entertainment type out there, simply choose one or two type which suitable with our income. So many house apparels and electronic tools with wide range of price, just buy one which is suitable for us. If we want higher lifestyle, then just try to enlarge our income. But, if we cannot enlarge our income yet, then be satisfied with our current lifestyle.

By implementing utilization of our credit cards as mentioned above, we can well manage our expenditure and still on our track of personal finance management.

Tags: Household budget, Personal Finance Management, savings

Borrowing the term introduced by well known person Stephen F. Covey, I call it “8^th habit on implementing Personal Finances in Daily Life”.

Good personal finances shall consist of following actions :

1. MUST set up definite personal finances goals, but DON’T be unrealistic

Freely defined, personal finances is the way to create well organized financial actions, and to implement such actions, we need some blue print or map. The first thing to do is determining financial goals as a grand platform of all action. Budgeting deals with regular income and expenses, meanwhile wealth management deals with creating assets to financially secure ourselves. We must set our own realistic goals anyway, otherwise the platform will be useless just because too far to be reached out.

2. MUST establish certain timelines, but DON’T be too rigid

Once some future goals already set, for example: having standard house, plan some amount of cash / savings, do some investment, retirement planning, and so on, next step is determine certain timeline of each goal. The sentences may become: having $ 30,000 standard house within 5 years, save for extra fund every month with certain target amount $ 5,000 within 3 years, will make some initial investment in bond / stock amounted $ 4,000 starting from next 8 years, calculate expected fund on hand at pension age (55 years old). With this timelines, we will exactly know what action to do. But, as the future is uncertain including our financial situation, we cannot too rigid stick on that timelines. Periodic review is necessary to re-setting those goals related to future real financial situation.

3. MUST arrange positive monthly household budget, but DON’T be self-imposed

Positive result of monthly household budget is a must condition, means our monthly revenue should exceed our monthly expenses. Its important to list up all current revenues and expenses as a part of personal finances, to have clear financial picture. Once the figure is negative, try to arrange less planned spending. If after arrangement the figure still negative, means we have to create additional revenue, from whatever reasonable way. However, we have to wisely arrange our monthly budget. For instance, too much stressing for unreasonable target of saving amount will lead us to unhappy life to do, and at the worst bring us to stressful life. Be reasonable, life is not only for money.

4. MUST be serious, but DON’T be ambitious

Yes, we have to plan and do it seriously, but use our passion, not our ambition. Make personal finances become some enjoyable process, instead of focusing to ambition. Once again, life is not merely money, don’t be getting trapped.

5. MUST have some investment, but DON’T become a speculator

Investment is important. Please allocate the highest portion in liquid cash/savings which has the lowest risk, after that we can think about investment in house, gold, bonds, mutual funds, stocks, forex. Don’t become a speculator, just put the smallest portion in assets with the highest risk.

6. MUST have a credit card, but DON’T lost control

Credit card is important as a tool of payment, but don’t consider it as loan facility, otherwise we will suffer in debt trap. Make sure we can allocate some significant amount to pay our credit card bill at the end of the month.

7. MUST take some loan facility, but DON’T create bad credit record

If we are worker, quite impossible to buy house by cash, so take loan facility to buy it. Take other loan to buy vehicle. In case we have established certain prospective business, get loan to make it grow faster. But before we take some loan, carefully calculate our capability, since we have to avoid bad credit record. Reputation is important to maintain trust from our society.

8. MUST have life and health insurance, but DON’T forget to keep us fit

Health insurance is important to protect our wealth from elimination caused by unexpected occurrence (hospitalization, medical surgery, etc), and life insurance is quite important for person with dependence (wife, children). We cannot expect our destiny, so we have to secure ourselves and the ones who we love. Anyway, don’t forget to maintain our fitness with regular enjoyable sport.

Life is valuable thing, and personal finances is important pillar to make it enjoy. So, just enjoy our valuable life with good personal finances planning.

Tags: Household budget, Personal Finance Management

As a common basic sense, the most preferable thing for all people is a freedom, including freedom to spend our money for anything we like.

Yes, I really agree with this insight!

Just to summarize my basic idea of personal finances, let me back to several previous posts which already published.

First post Basic Personal Finances – Initial Road to be Rich ! emphasizes that definition of financial freedom or getting rich is different between one to another person, because any individual has unique perception about life and how to achieve our happiness, basic purpose of the life. It will take effect to someone’s perception about money and financial related matter.

Second post Start Your Step to Implement Personal Finances repeat the message once again, and then emphasizes to make financial goals based on needs, not desires. In this step, we try to keep ourselves in well-organized financial track rather than let ourselves out of control. Simply say, this way can make our money and assets becoming positive tool to achieve our  personal basic purpose.

In other two posts Personal Finances – Let’s Determine Priority ! and Financial Advice – Systematic Personal Finance Budgeting, I tried to explain more about implementation of the first and second posts, and we were dealing with basic idea of household budgeting.

Before continuing with other future postings, I would like to well explain my basic idea about personal finances. In my point of view, personal finances including budgeting, saving, and all of the planning we make is supposed to be one of the way to make us happy, not the one which will hurt our life. Simple lesson of life, the final ultimate goal in our life is to enjoy the life itself. So – for example, too strict budgeting will bring us into suffering and eliminate our freedom to enjoy our meaningful life. The right thing to do is just make personal finance as a game to play, not a rigid guidance to follow.

But, on the other hand we cannot stick our steps on opposite side, spend our money without any planning and controlling. It seems valuable for short term, but in fact we go to another direction of life instead of long term happiness.

Actual fact, we need some personal finance management in our life, as a benchmark to pursue our main goal, but not as a rule which monitor our whole life. So that, personal finances is theoretically rigid, but should be implemented in flexible way to bring best result for our life.

So, how to make personal finances as a game ?

One simple example is about monthly household budgeting. Under some amount of current income, we can generate some amount of saving for short term or long term purposes. The rigid one is, we shall treat very strict saving for our short term, urgent, and important upcoming needs, since neglecting them will make us very suffer. If we cannot do that thing, means hard effort is needed to increase our monthly revenue.

On the other hand, we also have long term goals or purposes. We can be flexible enough with this kind of purpose. For some persons who love to do strict household budgeting, then strict budgeting is the choice. But other persons may be have another opinion regarding the way to enjoy life, so flexibility will make them enjoy.

If strict household budgeting seems hurts our life, we may think to implement flexible budgeting, by putting some month to month budget range. For example, we can averagely save 50 for our long term purpose, so just make a range between 40 to 60 or 35 to 65. May be this month we have some interesting things to do which needs extra budget, and we can allocate 10 or 15 more extra fund for our short term purpose. Next month, when we have less things to do, we can allocate more 60 or 65 budget into saving.

Implementing this way, we will feel personal finances as another interesting game to play, instead of tons of disgusting rule which burden our life.

Finally, just have a nice game !

Tags: Household budget, Personal Finance Management, Saving Money

As explained in previous article Basic Personal Finances – Initial Road to be Rich, determination of our goals have to be set based on the needs inspite of desire. Thus, when we determine our financial goals, there are some basic principles should be noticed. The principles consist of two major priorities – level of significance and level of urgency.

1. Goals setting based on the level of significance

Let’s divide our needs into three major groups, namely primary needs, secondary needs, and tertiary needs. In preparing personal finance management, we must start from the primary needs first.

Primary needs are:

• The needs of monthly basic necessity

It’s important for us to review again the types of our regular monthly household expenses, whether the money are spent for primary needs, or we used to spend money without any controlling on the level of significance. So that, just make a list of quite specific spending items from all of our current regular monthly household expenses, and temporarily remove all routine spending which is not a primary needs from the list. We shall move this kind of expenses to some lower priority list.

• Housing installment (for those who already had a house), or house ownership planning (for those who don’t have a home yet)

Ownership of one “standard house” is included in primary needs we must to achieve. Ideally, standard house is a medium-sized house with 2 or 3 bedrooms, but it could be only small flat in some countries where land price is very high. If currently we don’t have a house yet, we have to expect standard house price within 2 – 3 years to come. From the benchmark price, we can set household budget in term of amount of required deposit and repayment amount should be paid every month.

• Education needs of children, for those who already have children

In term of time to spend, needs of education consists regular monthly needs (children’s school tuition, tutor, etc.) and a one-time pay (registration fee of our child’s school, annual fees, etc.). Both of them are primary needs, but have different pattern of personal finance management.

Next, followed by a secondary needs:

• Car/motorcycle installment (if any), or the planning of car/motorcycle ownership (for those who don’t have them yet)

The cheapest reasonable transportation tool is motorcycle, followed by a car. If our income is quite limited, just start from motorcycle as a standard, don’t start from car.

• Home equipment needs, such as furniture, standard electronic equipment, etc

We can make a list of standard equipment such as home television, standard furniture, computers, and others, then sorting them from the most important ones to less important things.

• Entertainment needs

I include entertainment needs as secondary needs, not tertiary, because under current high level of life’s stress, everybody needs entertainment to maintain our mental balance. Specify one or two of our main hobby under reasonable budgets, and make monthly household budget for those hobbies.

• The need of emergency funds

I recommend for having special savings for emergency fund, because the future is uncertain. Once upon a time, we may need it.

• Other secondary needs based on our own preference

Let’s define needs based on necessity, not desire.

The later is a tertiary needs:

• Pension funds reserve

We can create some expectation of our retirement budget using retirement planning software or financial calculator.

• Other tertiary needs based on our own preference

Some of luxury things can be included in this list. It’s normal to dream about something which doesn’t significant but give us some enjoyable life.

2. Set goals based on the level of urgency

We can make a list of needs by making and filling the columns of urgency. Make some columns with title “Need by Time” from left to right respectively, starting from this month, next month, a half more years, one year longer, until the distance of our retirement age, then fill each column with our needs, starting from the most important (primary) to tertiary needs from up to bottom in the column. From this worksheet, we will get a comprehensive picture of all of our needs.

For example, let say somebody with 30 years old of age, has one child with 2 years of age, with current $ 3,000 monthly income. He has calculated his household expenses, and got $ 1,500 monthly primary needs, $ 700 repayment of home installment, and $ 200 installment of motorcycle. Let’s add another assumption, saving interest net rate is 3% per year, then he can sort the list as below:

1. Monthly primary needs $ 1500; remaining income = $ 1500 ($ 3000 – $ 1500)
2. Home Installment $ 700; remaining income $ 800
3. Motorcycle Installment $ 200; remaining $ 600 of income
4. Next year his child will enter pre-school, with $ 1,000 expected registration fee, so he must save as much as $ 82 a month from now; the remaining income will be $ 518
5. Monthly purchasing of home equipment is allocated $ 200 per month; remaining income $ 318
6. His hobbies are go to the cinema and soccer sport, and he allocates $ 100 per month for those hobbies; remaining income will be $ 218
7. $ 118 for other secondary needs; remaining income $ 100
8. At this time, he still not able to set aside the money for his retirement, then he allocates the remaining $ 100 as emergency savings fund. Two years to come, his emergency reserve fund will be $ 2,476

We can freely make this kind of budgeting simulation depend on our financial situation and preference. The point is, by organizing our spending based on priority needs as mentioned above, we will be habitual with self-control, can create personal finance management, and control our household expenses effectively. As a result, we will not be burdened by urgent needs that must be fulfilled when we don’t have even any money in our wallet / savings.

Tags: Household budget, household expenses, Personal Finance Management

For example, may be our main purpose is to get happiness by helping each other, having a harmonious family, having many friends, and the other noble purposes. We can do those things in our daily life, either with or without money. But just try to imagine, how you can do it in convenience way if you are still heavily burdened to fulfill daily basic necessity, hardly thinking about how to pay your child’s school, or other urgent needs. On the other side, situation will be different if today you’ve been able to regularly allocate some sufficient amount of money to cover your daily lives, make saving for your future lives, or even if you have passive income which can cover all of your needs. I think your life will be seems easier and comfortable to do other important things, don’t you ?

As different person has different perception about word rich, I try to categorize the people into three types in accordance with their concern to financial freedom ;

First, people who already known what’s their own financial purposes, have enough knowledge to implement personal finance management in their life, and do implement their knowledge in daily life. This kind of people is used to become successful in their financial and social life.

Second, people who don’t care enough about financial freedom. For them, financial freedom is just another slogan, and doesn’t so important as well. They tend to entertain their today’s life with almost of their earnings. This kind of people are usually stuck in their lifestyle and as a consequence they must work hard just to pay their current lifestyle.

Third, people who care with the goals of their financial future, have the desire to achieve the goals, but don’t know how to get started. I present this post for these people.

Well, for those of you who are starting to define your financial goals, below are some tips which might be useful for you:

1. Start your step by making goals that suit to your needs, not your desires

Set goals depend on desire will lead you to unrealistic goals, which have no accurate measurement tools, and make you becoming mad in the process to achieve those goals. One simple example is the goal of your saving amount for your pension stage of life. You can freely set any amount as you want, but if you define it based on estimated monthly expenditure at the time of your pension ages, the goal will be more realistic for you.

2.Set some main priorities quantitatively, starting from the most important and urgent things

Suppose you are a 30 years of age male, with $ 4000 monthly income, have been married, and has one 2 years old child, then you can sort your goals as follows:
- Routine monthly expenditure = $ 2,000
- House and car loan repayments = $ 1,000 monthly
- Next year your child shall enter a pre-school, with an estimated $ 1,000 registration fee
- Set aside an emergency fund, with $ 10,000 savings target in next two years
- Plan your family vacation each year, with $ 1,000 budget
- Estimated monthly expenditure of your pension life time, let say $ 10,000 per month

3. Personal Finance Budgeting: Count the needs of your monthly budget based on those goals, and then compare it with your current monthly income

Refer to the example mentioned above:
- Routine expenditures + loan repayments = $ 3,000
- Using financial calculator or Microsoft Excel, you can calculate the money you need to save starting from this month for having $ 1000 registration fee of your child’s school funding by next year (assuming net return of investment is 7% p.a), which is $ 80.23
- For $ 10,000 savings amount in next two more years, you have to set aside $ 387.13 per month starting from now on
- For family holidays, $ 80.23 per month
- For $ 10,000 estimated monthly expenditure at starting point of your pension age (next 30 years), you must have $ 1,714,286 savings 30 years later. To produce this amount, you must start to save $ 1,397 a month from now on

By adding all monthly expenditure, the amount of your monthly budget will be $ 4,944.59, which is $ 944.59 exceeds $ 4,000 monthly earnings.

4. Based on the results,

since your current monthly income doesn’t sufficient to accommodate such budget, you will have something to do, for example to temporarily eliminate your pension fund’s goal, while looking for solutions to increase your earnings by $ 1,000 (to $ 5,000) in the near future.

You can perform different simulation and make your own goals based on your preferences. Hopefully, by setting financial goals since the beginning, you will be able to well organize your personal finances and give you a motivation to search additional revenue in line with your goals.

I have to emphasize once little more, when you set your goals, please set the goals that you thought realistic enough to achieve based on the needs. By doing that, you will not get any stress in the process of achieving those goals, and personal finances will become an interesting game in your life.

Have a nice try !

Tags: financial freedom, Personal Finance Budgeting, Personal Finance Management

Well, for the one who said YES to the first question mentioned above, I just want to emphasize here that there’s no instant and easy way to get rich very quick, through natural ways to pursuit it. Yes, several persons got lucky by getting $ 10,000,000 grand prize amount and directly come into the rich. Other persons tried to do some criminal actions such as robbery, corruption, which has huge risk to bring them into the jail. But that’s different issue I think, because mostly people will think how to get rich with their natural efforts and try to live their life in comfortable way instead of doing such extreme actions.

For my own, I classify myself as a person who doesn’t so sure about the question itself. In my view, no one will be able to become rich quick through natural way, except they was born from old rich family. Each person should strive to become rich, times and efforts also required during the struggle. For that reason, I more interested in second and third questions of personal finances, namely how to become rich and how long our expectation to achieve it.

Robert T. Kiyosaki in some parts of his financial advice of famous book The Cashflow quadrant suggests people to move from employee and self-employed quadrant to investor and businessman quadrant in order to achieve financial freedom more quickly. To some extent, I agree with the opinion, but the fact is mostly people don’t have the same perception one to another about the meaning of the word “rich”. One quite extreme figured example, there are people who have felt rich when they have enough $ 10 thousands money in their savings, but there are also those who don’t feel rich still even though have time deposits of $ 10 millions. Other aspect is different people have different interests, and this interest is guiding people to enter the most possible quadrant for themselves. For example, people who used to (and enjoy) a hard day-to-day activities, will be more inclined to be a self-employed or employee than to be a businessman who usually do more lobbying and controlling activities. So that I think everyone can become rich and achieve their financial freedom regardless of the quadrant where he is.

As a soul of basic personal finances, there are some steps that I would like to recommend as a financial advice to become rich;

• First step and the basic of all, just find the meaning of word “rich” for our own, and set the time target how long time we need to reach it!

Everything must be described quantitatively, at least compared to the needs of our lives with a certain lifestyle. For example, the meaning of rich for me is to have monthly income (active income plus passive income) equal to twice of my monthly needs, having liquid assets in the form of savings, security deposit, or marketable securities that guarantee the monthly needs for two years, and I determine the target within 5 years to achieve it. In addition, I may also have another target for certain amount of savings to secure my pension stage period, and I expect to achieve that amount at my pension year-age. The goals will be widely vary depending on our personal preferences.

• Second step, regardless of the quadrant where we are, just ask ourselves whether our current routine income enables us to achieve our goals ?

If the answer is NO, this means we must try to make it into YES. There are various ways to do it, ranging from thinking about some additional revenues, to find a job with a larger income, or move to other quadrant either directly or gradually. The important thing is, make sure we have the revenue that allows us to reach the target.

• Third step, which should be done simultaneously with the second step,

is to create monthly personal finance budgeting, well quantitatively describe our monthly income and monthly expenses, with a target amount of money that we can save each month. This step will lead us to be focused on the main goal, and allows us to make the short-term targets (says the annual target) as an “anchor target” without losing our focus to achieve our main goal.

• The most important fourth step,

is to periodically review the first step towards the third : our main long term target, efforts made during the process towards achieving the target, and monthly personal finance management. This will help us to be very focused in the efforts to develop our routine revenue, analyze achievement of “anchor target”, and allows us to revise / make adjustments of the final target in accordance with development of our monthly income, changing or addition of preference, and the time remaining to reach the final target. This adjustment will be very important because above of all, we must have quite realistic target to achieve in the end. Don’t let ourselves to be stressful because of having a not realistic goals !

Those four steps mentioned above is a basic foundation of personal finances, to make our life financially well arranged, and finally become one tool to achieve our life’s ultimate target, ie happiness with enjoyable daily life.

Shortly noted that high-discipline and sufficient efforts are required to consistently run the four mentioned steps. If the steps are done correctly, I hope that this financial advice can assist all of us to become rich, one word that we dream about.

“The rich-talented persons always asking how to make more money out of time and money they had; on contrary the persons who always ask about some places to spend their money, will be stuck in a circle of hard work to pay their lifestyle”

Tags: financial advice, Personal Finance Budgeting, Personal Finance Management