Month: December 2013

New Ways To Welcome The New Year

Every year, around this time, there is a mad rush to creating “new year’s resolution” which is only slightly behind the mad rush to go back to the shopping centers to return unwanted holiday gifts.

But isn’t new year’s resolution is kinda getting too ordinary?                                                      What about if we approach the new year with trailblazing enthusiasm?                                   And how do I propose to do that?

Here’s some of them:

  1. Diet – instead of going on another fad diet or taking the latest “weight loss pill” which could be good for a few months, how about a lifestyle change for the remaining years of our lives. Cutting back of meat, dairy, junk food and soda (which are the usual suspects for cancer and heart diseases) or eliminating it entirely is a start not only in better health but savings in grocery bills.
  2. Fitness – instead of buying a new expensive exercise equipment, join a gym first and commit to a few months of exercise program. After a few weeks of commitment, go buy that expensive equipment.
  3. Overall Health – how about combining the latest lifestyle stated in #1 with #2 and adding more rest, more stress fighting techniques (slow breathing in and out, quiet room, meditation), and an attitude change (less hurried lifestyle and less speed on the highway).
  4. Financial – finding ways to save more money, eliminating wasteful spending (do you really need that 20th pair of shoes?), and most importantly – finding a new source of passive income (this can be an entirely new blog post).
  5. Spiritual – this is the most significant. I’ll make it short. Let us all pray for a closer  relationship between us and our Creator. This one will make our lives more meaningful. Notice I didn’t say more comfortable, convenient or prosperous. It’s probably one of the best actions we can take – and believe me – it’s worth a lot more than just health, fitness or income (even though those things are nice too).

Have a Wonderful New Year!

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Self Control

We were eating in a restaurant the other day when the topic went to one of our friends going on a meatless diet for one month. He mentioned that he really went 30 days, without a day of exception – and that got me into thinking about my diet (again!).

A few years ago, under the watchful control of a vegan weightlifter nutritionist, my wife and I went on a three-week detox diet. Based on a blood test taken days prior, the nutritionist prepared a diet which is specially tailored to our needs. I remember eating an avocado in the morning, steamed vegetables for lunch and salad for dinner (with very light dressing). We had some nutritional supplements to go with it because our carbohydrate intake was way below normal.

After three weeks, I lost about 9 lbs. I could have lost more, but I had “cheat days” during the weekend where I generally eat just like anybody, and that included junk food. My justification was during the workweek, I was limited to millet for grains, and about only four types of vegetables daily. That means squash, bokchoy, eggplant and lettuce (and nothing else) get rotated every meal. That was harrowing.

Those diet cheat days menu slowly turned into the regular daily menu, so after a few weeks, I started gaining weight again, and even though I did not gain that much weight, my heart problems started to surface. Other than genetics and stress, one of the main reasons could be my “cheat” diets.

Aside from food, we get desire on a variety of things, people or activity. Sometimes the desire is minimal and it is generally harmless. Sometimes the desire conflicts with our values. Sometimes, strong desires turn into negative obsession. We try to fight it but give in to the short-term satisfaction even though we know we will suffer afterwards. At times, We have this strong feeling to fulfill that desire regardless of the cost (this is why consumer credit cards get exhausted to the max during the holidays).

During my time in the navy, the ones that go up in the ranks are people who are able to suppress their desire to react to frustrating situations. They exercise self-control even in the face of very stressful situations (one of the most dangerous jobs in the world is working on the flight deck of an aircraft carrier). Boot camp of course prepared everyone for a different lifestyle but boot camp can only teach much. It is up to the individual to adapt and be flexible to an arduous and regimented daily life. For 18 months, my job was to process documents to discharge about a dozen recruits per week with discipline issues. Their common denominator? Lack of self-control.

Among the virtues, self-control ranks as high – if not higher – than patience, moderation,  perseverance, etc. I think if we all could practice delayed gratification, there would be a lot more people who will have financial independence way before retirement age. We would be healthier, disease free, and save a lot on medical costs. We would have less trash. We would live longer, quality lives. We would be living in an ideal world we all dream of.

But we don’t have to convince everyone else. We can start with ourselves by making self-control part of our character.

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Real Estate Investing 101

This is the second part of the Building Wealth series. The following is a presentation that represents an investor’s life. Any similarities with actual person is purely coincidental.

So here’s Mr. (or Ms.) Investor , years after saving 50 to 80% of his annual income, he/she finally saved enough funds for investment. The problem is there are so many choices, and to make this post less than 1,000 words, let’s narrow down his choices of investment to the following: gold, silver, stocks, small business and real estate. And since I already did the title as “Real Estate Investing”, let’s stick with that one.

THe first thing our hero/heroine does is search for a lot of books, newspapers, magazines in the library relating to how to invest in real estate. Our hero went to attend a few seminars from real estate gurus all the while wondering “am I wasting my money doing this?” Having read somewhere that education is an investment – he was convinced he will learn something. Then H (for Hero or Heroine as it’s getting tiring to keep typing both genders) He spent about 3,000 hours and almost $1,500 over a few months learning everything about real estate. He even took a real estate agent course and passed it. To this day, H was still wondering how he passed it.

He attended a real estate investment club, talked to a few people that he met during seminars, and spent hours in a favorite hardware stores studying how materials work and how much they cost. To H, Home Depot is Disneyland.

Then he looked at the internet and got familiar with homes being sold at market price, avoiding the ones without photos. Then he talked to a few sales agents that deals with homes sold below market price. He advertised himself on Craigslist and other free ads stating that he buys homes.

After several weeks of looking, he finds a home that looks good (at least on paper). How did he know that it is good enough for investment? He doesn’t until after he crunches the numbers. There’s no emotional involvement here, just logical approach to buying. If he buys this house and rents it out, will he get enough cash to pay for the mortgage, insurance, property taxes, maintenance and other expenses? Yes? Then he looked at the neighborhood. Will there be a lot of prospective tenants? Enough jobs around? Is the neighborhood safe enough and pleasant enough to live in? Are there good schools around? Where’s the closest grocery store, church, park,etc?

Our hero finds out that after expenses, he will net around 10% a year on the investment.  Should he go for it? Of course, he reasons – especially with banks paying less than 1% on any investment. So he closes the deal, got financing, put down 20% of his own funds and got ready for some home repairs. He could have paid off the house but he decided he will keep some of the cash just in case he finds a couple more deals. Yes, the reason why he got the house way below market price was because there are some repairs to be done. It doesn’t matter if it’s a buyer’s market or seller’s market, H knows that he has to buy at around 20-40% of the market value to make money.

Armed with encyclopedic knowledge on home materials, he proceeded to call a reliable carpenter and together, they started mapping out the necessary repairs. His plan is to rebuild the inner workings of the house with inexpensive yet durable materials. No need for much bling, just the basic reliable stuff.

He also decided to replace the appliances with inexpensive reliable ones as pointed out by several consumer research web sites. He sold the old appliances in the house to help with cash flow.

He painted the inside and outside of the house. He had a professional house inspector to check for further damage and hired a pest control to take care of any potential pest problems. Using magazines (from the library again so it’s free) as a resource for aesthetic design for the home, he proceeded to make the design contemporary at minimal cost.

Finally, a few months after buying the home, it is ready for a renter. He already advertised it two weeks ago telling the potential renter it will be ready in two weeks. Now he is ready to screen the renters. He looks at credit rating (which provides an emotionless screening) and picks only the ones with high credit standing. Then he interviews them and checks all the references. Yes, all the references, even if the prospect was a single, good-looking, hip, young professional.  H used a standard lease contract available in most real estate agencies for the contract.

Then he found the ideal candidate, and the house is leased. Welcome to a new source of income!

Sounds easy? On paper, it is. But it always boil down to action and execution. But you’ll be glad to know that thousands of people are doing this year in and year out.

That means you can, too!

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Anger And Your Health

Have you ever experienced intense anger? I have. The kind of anger that ups your adrenaline output causing your hands and limbs to start shaking and your body feeling invincible for a few minutes? That too! Did you know that if that kind of anger is repeatedly experienced in your life, it could be fatal for you?

Why do we get angry anyway?

There are dozens of reason, but to simplify things, I’ll boil it down to two:

The perception of pain to ourselves or our loved ones brought about by people, creatures or inanimate objects, etc.

The perception that our pleasure is denied to us by people, other creatures or inanimate objects.

Did you notice that I used the word perception twice in both definitions? It’s because our perception may be either a true or false representation of reality. What I mean is we could be right or wrong in our perception which led us to the emotion of anger.

Anger is a necessary emotion for survival. Imagine if a mountain lion attacks your young child while you are out hiking. Feeling anger will give you the impetus to be very aggressive in protecting your child. Feeling shy or very fearful will cause you to be tentative which could be fatal to you and your child at that critical time.

What makes you really angry? In my past anger-filled life, it was the drivers who behave irresponsibly in highways. They cut in front of you without thinking that their action might actually cause an accident, injury or death. I love order and discipline, I spent many years in military formation and this is before I joined the navy. I had parents who demanded order at our house. So whenever I drive, I expect people to drive responsibly. Back then – I didn’t realize that not all people had my life experience but I wanted them to behave like how I behave, and it caused me much unnecessary anger. How about you? Have you experienced intense anger often?

What happens to us physically while we are angry? Adrenaline surges through our body, the nervous system starts working to overcapacity. Adrenaline is what enables people to lift cars by themselves to save an accident victim pinned by a vehicle. However, if we constantly experience this in our daily lives, it could lead to a higher blood pressure, weaker heart and may damage the liver and kidneys. If you experience high levels of anger constantly, it could trigger depression and anxiety.  This could also double your chances of getting a heart attack or a coronary artery disease. Being constantly angry may even be worse than being drunk constantly or smoking a pack of cigarettes a day.

So how do we control anger? We have a built-in anger control system which prevents us from doing destructive actions – it is the frontal lobe of the brain. Our anger goes wild for two seconds and then the front lobe of the brain produces another hormone to counteract the effects of the adrenaline. That’s why it’s good to take those slow breaths or count to ten before doing or saying anything (on non survival situations).

Experts recommend talking to the person that offended you. Not cursing or yelling at the person but rather talking to them in a way that they will be able to understand why you got angry and how can it be resolved.

This may be impractical of course, because sometimes the offending person is an irresponsible driver, and he already sped away. There are other ways: by praying to ask for a feeling of peace. Taking long slow breaths (four seconds inhale, three seconds exhale – or something to that effect).

Another way is to exercise, but not too strenuous, as it may aggravate the high blood pressure you may be still experiencing due to the intense rage. You may also try to divert your attention thru humor or looking at a cute baby or a young toddler, or by watching a soothing view of nature. Then take more long breaths, take a shower or splash cold water on your head. Anything to take you away from your present condition of rage.

Once the anger has subsided, aren’t you happy that you didn’t act irresponsibly or say something irrationally because you were able to control yourself?

On a grander scale, try living a less hurried life. By being deliberate in your actions, you learn to be more patient with the day-to-day irritations.

Have a pleasant evening!

 

 

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Do You Need Insurance?

This is probably a controversial subject. However, I personally think that we are all here at this website because we are contrarian thinkers, or should I say, we don’t just do things because massive marketing has conditioned us to think their way.

This is not anti insurance in any way (OK, maybe a little). I have a sister who is an award-winning insurance agent so I support her source of income. I don’t think this post will affect her income at all, but if I have any doubt that it will… I will write it anyway. Laughing

There are a few myths and misconceptions about insurance. I will discuss it briefly then put in a subtle suggestion on how we can avoid paying too much for insurance.

Life Insurance for your children (below 18 years old). Are you kidding me? That’s a guaranteed income for the insurance company because the vast majority of children will outlive their parents. But it is being marketed out there. Solution? Don’t get one.

You need renter’s insurance. No, you don’t. If you have very expensive furnitures and electronic equipments, that means you were able to afford buying them anyway right? Instead of paying the insurance premium, save that money. In a few years, you already have money to pay for any lost or destroyed furniture or electronic equipment. How many times does that happen anyway? Maybe next to zero? Most people get tired of their furnitures or electronics and upgrade every few years. They don’t lose it.

You need earthquake and flood insurance. We live in California which has the reputation for earthquakes. I don’t buy earthquake insurance because the amount of coverage is only $10,000. Again, I’m better off saving the money for the premium so I can cover any losses. Most insurance companies will not cover you for flood insurance if you are in a “flood-prone” area.

The less deductible the better? I have a personal experience in this. For my health insurance, I selected the policy with a higher deductible and higher co-pay from me. The pros: I get to pick the best doctors and best hospitals and medical facilities in the area. The cons: I had to pay 20% of each doctor’s visit and sometimes more instead of a minimal $12 per visit (which limits me to a list of doctors). I get top-notch care every time I go to any doctor of my choosing, because I have access to hundreds of them.

For auto insurance, the higher your coverage – the better? If you lower coverage of $50,000 for property damage, an agent will try scare tactics like “You know there’s a lot of cars over $100,000 out there now, you may need a higher coverage”. But how many of you go out driving with a purpose of bumping a $100,000 Tesla? Maybe .000001%?  Yes, most of us drive very carefully and there’s really no need for a very high coverage.

How about “vehicle replacement policy”? If you have a car over 5 years old, it’s value is probably at 40% or less when it was brand new. At that point, you probably have savings that will enable you to buy a new car (brand new or pre owned) so why have give the insurance money when you can save that money to pay cash for a replacement car?

Towing coverage? Join AAA (it’s an auto club) and for about $50/year you can have free towing up to 6 miles (I think). Towing within 10 miles will cost you less than $150. In the past ten years, how many times have you had your car towed? Maybe once?

Lower coverage means less premium equals more money left in your pocket.

Did you notice that there’s hardly any insurance companies that go bankrupt? That’s because they really make good profits from premium. Sometimes they insure the coverages that they give you so there’s no loss of income on their part.

I may have a better solution to the U.S. health care insurance, instead of the one we are currently trying to implement. Here it is: Eliminate all health care insurance companies (I can fantasize, can’t I?). From our taxes (and without increasing it), have health coverage for every citizen or working immigrant. Have us pay a higher deductible – let’s say we pay the first $2,000 minimum depending on our  net worth or income (whichever is higher :)) Then we pay doctors, nurses and medical staff higher by eliminating the middleman called “insurance”.  By paying a higher deductible, people will have a better incentive to stay healthy and avoid getting sick. Yes, a few countries are already doing this – why not the U.S.?

Did I tell you I am not an insurance expert? What you read here is still subject to your research and your choices. If you want to buy life insurance for your older relative so you can get millions of dollars income without any tax burden, then go for it. Also, each insurance policy is different in every state, and every country – so you may wonder what I am talking about. That’s perfectly normal – just find ways to save on your insurance premiums so you can increase your savings.

This is the first part of “Building Wealth” series.

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