Millionaire Teacher

I won this book last year from a Channel News Asia (CNA) MoneyMind quiz, and the author Andrew Hallam autographed 'Live long, prosper and pass on what you learn!' on the inside, and I would like to 'pass on' what I was fortunate enough to learn.

We normally do not associate great wealth with the teaching profession, unless one is familiar with the recent article that claimed that our (Singapore) teachers are amongst the world highest paid. However, Andrew Hallam was not a well-paid teacher and yet he was able to amass great wealth.

According to Andrew Hallam, there are 9 simple rules of wealth that schools ought to teach us. Unfortunately, many of us enter and leave the education system without learning much about personal financial management, unless you belong to the group of fortunate students at the Canadian International School who have Andrew to educate them on these finer matters. 

So let us begin.

Rule #1: Spend like you want to grow rich

Many of us fail to recognise that the rich do not splurge. A very good example would be Warren Buffett. He is a simple man with very little paraphernalia of the rich. He owns a private jet company and yet does not own a private jet. And he still stays in his old humble house despite the amount of wealth he now has. 

Remember that you do not need a $5000 watch, it will tell the same time just like a $200 or $2 watch. 

Why appear rich when you are truly not? Be like the big carrot with little leaves. 

Source: http://life-lenses.com/

Limit your spending and invest. Warren Buffett advices that one should set aside what one wants to save and then spend. Most people simply spend first then save the remainder. 

Rule #2: Use the greatest investment ally you have

Leverage on compound interest and audit your spending habits. 

Compound interest is a powerful financial concept and we ought to use it wisely. Start saving early to reap the benefits. 

Most people fail to identify the wealth leaks in their habits and lifestyle. Maybe it could be the upsize of your meal, or the electricity bill (not switching off lights). Draft a budget for your expenses and do a personal financial audit. Identify the variance and fix your wealth leaks. 

Rule #3: Small percentages pack big punches

Most people want to win fast and win big but this is not possible. Unless you rig the game. Index fund supersedes stock market as no one can beat the stock market time after time. An indexed policy is one that earns small but is more consistent. 

Rule #4: Conquer the enemy in the mirror

We often think that we act rationally but the truth is far from it. It is typical human nature to give in to the immediate thought. People become greedy in a bullish market and fearful in a bearish market. They fail to remember the aged old trading mantra, buy low sell high. One ought to be greedy in a bearish market and be aware in a bullish market. Buy when everyone is selling cheap and sell when everyone is greedy. 

Rule #5: Build mountains of money with a responsible portfolio

Know the differences between shares and bonds, and invest in both. Go for a portfolio with more shares if one is young and has the appetite for some, and one with more bonds if one is old and wants to secure retirement. 

Rule #6: Sample a "Round-the-world" ticker to indexing

Invest in index funds from different countries. If you are a Singaporean, invest in Singapore, and also in other countries like United States of America. An example would be 35% Singapore stock market index, 30% International stock market index and 35% total bond market index. Do not be greed, average out your earnings by taking out earnings from your high yielding and investing into your poorer yielding. This will average out your earnings and maintain a more consistent growth. Go and open a Vanguard account. This is the ONLY WAY you can invest without getting ripped off. 

Rule #7: Peek inside a pilferer's playbook

Financial agents are making a business out of your ignorance. No one can beat the stock market time and time again. So why trust that your agent can? They can convince you using historical data but that does not secure the future performance. 

Rule #8: Avoid seduction

If it sounds too good to be true, it probably is. Many of us get tempted by the quick rich "opportunities" and they come in many shapes and sizes. Wake up from your fantasy and think critically. 

Rule #9: The 10% stock-picking solution...if you really can't help yourself.

If indexed funds are too boring for you and you can't stand the slow consistent growth. You can go with a 10% "gamble". But do it rationally; commit to the stocks you buy and understand their businesses. 

The book is a beacon of financial knowledge and it is impossible to cover all 9 rules in depth in a short post. However, I hope I have inspired you to read this book as I truly believe that it will change your life as it has with mine.

You may drop by Kinokuniya for a copy of this book. Also, visit Andrew's website for more on personal financial management.