Is Financial Planning Guide From Newspaper BULLSHIT? How To Screw Up In Your Retirement
Mar 31st, 2010 by AhYap
Every Sunday on Sin Chew paper we have FREE consultation on financial planning by “experts”. The Ah Beng and Ah Lian will ask questions like “I am working as XX and making YY and I am saving ZZ … I have 3 wives and 23 kids … can I retire at age 40?” And the “expert” will try to answer his question.
Almost all the time, these are not good advices. Sorry to hantam you again, Mr Newspaper.
These so-called “financial planner” always use one and only one solution in financial planning. They approach is for you to save X amount of money while you are working and then after you retire, you will start to consume your savings until you die!
This is a very dangerous approach because even Sultan or Mahathir don’t know when they are going to die! It can be 1 day after you retire, or it can be 50 years!!!
So how do you predict and plan for that? If you assume you die at 90 and save enough money to be spent until 90. What if you are still alive after 90?
There is no flexibility. 2 outcomes always happen.
Outcome #1 – The retiree finish his savings long before his planned “dying” age. Most people finish their EPF within the first 3 years! So they either need to work again or expect their children to feed them.
Outcome #2 – The retiree is too afraid to spend and save too much, living in a very frugal way trying to keep as much money as possible in the bank for the future. Future for them is very uncertain and they always need to “save for the rainy days”. But isn’t it the reason you work so hard in your life is to enjoy life after you retire? How do you enjoy life when you are afraid to spend, when you are still worry about the “future”?
Both outcomes are undesirable. Unfortunately, this is what the financial planner “plans” for you. Or should I say, “set you up!”
No matter which group you are in, both are very suffering outcomes. The reason you will fall into group is because of your life-long habits.
Habit #1 – If a guy makes a lot of money and contributes to EPF, his EPF will be very fat at the end of his retirement. And since he knows he is “fat” by then, he usually spend a lot of his money on his Tag Heur and Armani. A person who has a habit of spending a lot of money in his life won’t change in 1 day. He is expected to finish his EPF in a short few years even they are meant to be used for 30 years!
Habit #2 – If a guy live frugally for his working life to save a lot of money, it becomes a habit too and when you give him a lot of money to use, he is still fearful to use and spend them. It has been a habit trained for a few decades.
So what is the solution?!
That’s why, if you really plan to retire. Everyone must read the book “Rich Dad Poor Dad” and “Cashflow Quadrant”, both by Robert Kiyosaki. Don’t read newspaper! How much can you learn from short articles that was taken somewhere here and somewhere there by the reporter? All they want to do is to fill up the newspaper with contents and they have to do it every fucking day. How do you have so much great contents every day? Contents that are great retain their value everyday. But in the newspaper business, you can’t publish the same content everyday or else who wants to buy your paper?
So read more good books, not newspaper. People are reading Bible and Al-Quran for more than 1 thousand years. Do bible and Al-Quran need to change everyday?
“Rich Dad Poor Dad” and “Cashflow Quadrant” are the 2 books that you must must must must must must must must read if you want to have a good retirement. If you find it very hard to read 2 books, God bless you. I have seen many of my Uni friends that can study so hard and read so many boring college books for exam but can’t find the energy and interest to read 2 simple books that read like story books. What a shame!
Don’t borrow the book, BUY IT! Only when you buy it, you will really consider reading it. And try to be very excited about it. I suggest you to drive to MidValley or KLCC and do nothing else but just to buy the book and immediately go home to read it. With that effort invested, your mind know you are really serious and you will be able to get great results from it. [Don’t buy 2 books together, read “Rich Dad Poor Dad” first. Then drive again to buy the other book after you finish. So your mind know you are really serious]
“But you haven’t tell me the answer!”. Yes, I heard you.
The correct way for normal working people on retirement is, you don’t try to save a chunk of money that you plan for consumption when you retire. That means you don’t calculate stuff like I need 3k a month after I retire and that means I need 3k x 12 months x 30 years =~ RM1 million sitting in my bank account when I retire. So after that I can take out 3k every month from the bank account to use.
I am not saying that you can’t save that much of money. Actually you easily do so! But the problem is not on “you can’t save that amount of money”. The problem is that the plan won’t work easily after you have that 1 million sitting in the bank on the day you retire.
Why? Because as I have said earlier, people either overspent and finish them in a few years. Or they simply are too afraid to spend over worry about the future.
The problem is people get very confused when they retire. For their whole life when they are working, they are receiving salary from their job every month. They know even they finish their money this month, they will still have the money next month. So this allows them to live for a few decades without any problem.
But once they retire and is given a large chunk of money, the whole concept of financial and money changed! Now they no longer need to work. But that also means now they no longer have salary coming each month. Now what they have is RM1 million in the bank account. Do they know how to go forward from here?
If you are in this situation, do you know? If you wants to travel, how much you are willing to spend on travel? If you want a lot of Louis Vuitton, how much LV you can buy? If you need another wife from China, do you know if you can afford it? If you want to donate money, how much money you can donate before you need donation from someone else?
The consequences of all these is either – you overspend or your under-spend.
All of these happens because you (and the newspaper “expert”) focus on the wrong thing.
Newspaper way of financial planning is BULLSHIT.
To retire, you don’t focus on CASH. You don’t focus on that 1 million or 10 million in your bank account.
To retire, you focus on CASHFLOW. How much money you can receive each month when you are not working!
If when you retire, you own 4 fully paid off properties that will pay you 3k per month, you are well taken care of no matter how long you live! You can spend all your money with your new China wife or Vietnam wife or you can donate all your money to charity every month without worrying about yourself.
Because like old time, you know, next month, you have new money coming in. And better still, you won’t be fired because you don’t have a job! This is call “passive income”.
Isn’t this so much simpler than trying to predict how much to save and how long you will live? Isn’t this much more simpler than having to budget how much you can spend each month, how much you can donate, and what “grade” of China wife you can afford?
Your goal of retirement is to build passive CASHFLOW, not CASH.
For working adults, the most easy path is through rental properties.
That means, you are buying properties with the plan to rent it and not to sell it. And in your working life, you accumulate these rental properties and build up your cashflow.
For example, if you own 5 apartments in KL when you retire and the rental you collect is 4k, basically you are financially free for you entire life! This is very different than having a few millions in your bank account because you really don’t need to budget much and you can spend everything you have every month. Even if you can’t rent out 2 apartments, you are still covered by 3. Unless tsunami wiped off KL or you like to visit Genting Highlands, your financial is well taken care of. Plus rental income can keep up with inflation so your income will increase for years to come.
If you don’t want to own properties directly, you can own them indirectly through buying REITs. REITs are listed stocks in the stock market which their main business is to own properties and get rental income from it, then they will distribute the rental income it to its shareholders. There are many advantage and disadvantage of REITs but it is really a great tool for working adults. The best is you can start with very little money since REITs are mostly RM1 or RM2 stocks.
I will write more about REIT in another post. But to give you a quick example, say AXREIT (best REIT listed in Malaysia so far) is around RM2 and they pay dividend quarterly. One year you are likely to receive 16 cents after tax as dividend and that would means a 8% yield. If you have RM1 million invested on it, you can expect to receive RM80k per year (or RM20k payment per quarter to be exact).
More elaboration later but the main idea is with RM80k per year passive cashflow, it makes your life much more easier than having a big chunk of money in your bank account that you need to decide how much to be taken out for consumption. You don’t have budgeting problem anymore.
At last…
These are very simple concepts. Most people can grasp it at once. But some people find it very hard to understand. And unfortunately, it is true that for people who can’t “get it” at once, usually they will need a lot of time to understand it. And since they usually don’t invest that extra time, they will have no choice but to screw up later.
If you are that person, my question to you is, “Do you prefer to screw up when you retire, or you prefer to spend some hard time and effort to understand the concept of cashflow?”
It’s your choice. If you have read this article, that means GOD has somewhere somehow given you a choice in your life. [GOD can’t show you his face and talk to your directly… he use many ways to tell you things…]
If you still screw up, please don’t blame GOD or anyone. It is you who have decided to give up. You’ve make a choice today.
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Yes, I read Robert Kiyosaki’s books many years ago too. I understand what you want to put forward but then again letting out properties in Malaysia is not as easy as compare to US. You might end up knocking on the doors every month for the overdue rental, you cannot do much if they don’t pay, yes you can sue them & take them to court, but for a few thousand RM a month rental, not practical at all.
Some said they will let it to expatriates but the true is, got so many angmo who want to rent your apartment in Malaysia meh ? maybe the idea is only workable in certain area in KL.
As for AXREIT, the problem is most of us do not have RM1 Million to invest , ok I mean I don’t have RM1 Million. Some of you already have have your first million ringgit. LOL.
Anyway, thank you for taking time to write about “Rich Dad Poor Dad” it bring back lots of memories…….
Since you are unemployed. How you earn your leaving?
or you have build your cash flow?
but at your age how could afford to buy properties to earn rental income?
Doesn’t have a job is not equal to unemployed! This is something many people hard to understand and this is exactly what “Rich Dad Poor Dad” is all about. What’s in our brain is what’s our “poor dad” teach us – Get a Job! “Cashflow Quadrant” will talk more about what does financial freedom means. You need to read them badly (so as everyone else). Many of us also have a misconception of linking age to money. Why is it only old people can have money? Of course if you are like everybody and you want to be normal like them, you will be poor, unhappy and unhealthy. That’s why do you want to be like everybody? Do you want to be “normal”?
The book and my blog post talk about WHY more than HOW. The WHY part is the most important part that will lead to real actions. The WHY part is a perspective change in your mind. Only with that change will lead to further actions. When you know WHY, the HOW will come. Since you know WHY and WHAT you want, you will seek the HOW to archive what you want and there are billions of ways to do that.
I own no properties other than my house. My HOW is not on real estate or REITs. My HOW is on the stock market (that will take many blog posts to write). But if I have to leave something to my wife or kids, I would prefer to leave them rental properties or REITs. Learn more from Rich Dad Poor Dad and Cashflow Quadrant, I learn all the WHY from there and probably I can rewrite the whole book.
REIT is good because you don’t need to invest $1 million in it. You can buy every few months when you have money (only if the price is right!!!), since each stock trade at RM2. You only need RM2,000 to but 1,000 units. And you can accumulate from there. 8% yield from REIT is more favorable than purchasing individual apartments where you need to collect rents manually. But for REIT, bank don’t give you loan to buy.
More about REIT later.
dear ah yap,
u always say more on this more on that later… but the topic u say u wana cover never appears (maybe sometimes). Like how u said u gonna cover on china investment or some shit… but nvr see also.
Not to mention the rate u have 1 post is like 1 millenium per post. Anyway, other than REIT what else that have better guaranteed cashflow return than 8%. Fixed deposit have just slightly lower return.
> what else that have better guaranteed cashflow return than 8%
My friend, there is nothing guaranteed in this world other than DEATH.
many ppl are skeptical, narrow minded n unwilling to think in other perspective. tha’ts why they r ordinary ppl doing their routine & ordinary things.
tq ahyap
Ah Yap, i also interested to know what you did after your graduation since you didn’t look for a job.
Basically i am still under employment and I am thinking WHAT to do to generate passive cashflow every month. Until now I have not found any answer yet. I invested in share market. There are some earning i made and some loss as well. I want to create a passive cashflow which is more permanent than at share market. Any idea…
But truly i really wanted to know what you did after graduation!!
> there is nothing guaranteed in this world other than DEATH.
(And tax).
Buy ICAP,sell few shares a year and retire happily!
Hi Yap,
There’re so many version of “Rich Dad Poor Dad” currently available in market.
Which version should I buy and read before going another version? Or it’s already enough of reading one version?
There is only one book with the exact title “Rich Dad Poor Dad”. The other are simply Rich Dad series. You only need 2 books. The other one being “Cashflow Quadrant”
Different people will have different things to do, even working adults can accumulate wealth (instead of spending wealth). Even my aunt that work simply as school teacher can get a few rental properties and I think most Uni graduates makes more money here. The idea WHY is simple, the HOW is where you need to put in effort.
I used the internet, so basically I am a SOHO. But for exactly what and how I do it, they will need to be kept secret.
If you have read cashflow quadrant, you know that you can’t jump start to the stock market. You still got to be an employee or self-employee first and start from there… if you don’t have bullets, how do you invest?! 8% on 1 million is still a lot more than 80% on RM10,000. Read the books.
You forgot to consider how difficult it is to sell properties you owned if you badly need cash for your medical expense when old.
e.g. need to undergo surgery to remove something etc. I think best is to have a more tangible asset like REIT, but then how transparent is our BURSA in overlooking listed companies? Best is to buy GOLD account la. Public Bank and Maybank are offering these accounts. You just slowly sell them out for your expenses montly and the nett balance still appreciate with time.
To kc,
Those medical expenses can be covered by Insurance. There’re the must before you going to do any investment without any concern.
Hi. I am new to this site. Firstly, thanks Yap for sharing this platform. Investing on fundamentals is key to long term sustainability especially when one is building a nest egg for cash flow. Property is one way but there are many other ways eg REITs and high dividend equities. Then, there are convertible bonds, T-Bills, commodities and metals, and other instruments. The point is to have real cash flow in the pocket. Properties are fine but the cash returns in the pocket is usually small as the bulk of it goes to pay interest and capital yields are ‘locked’ up in the property. I agree this can be unlocked when one sells but really one should see how to get cash in the pocket. Afterall, cash is King, and cashflow is Queen.
I’ve read this book when I was only 18 years old (I’m 22 now) and ya I do understand what it takes to gain a financial freedom. But as a young adult who is just about to embark upon the working world, i.e. starting to have +CF instead of -CF(my parent’s pocket, sad when I come to think about that), the only way i through MLM(Multi Level Marketing like Amway). And actually how reliable is such mlm scheme? I did before and seriously not everyone can do it, but for those who can, kudos to them. Properties on the other hand would take some time before I even reach to such stage. It’s all about location, location, location. Sounded too cliche, ain’t I? Cuz it’s not all about that. Timing is important, as well as network. Good stuff are always sold fast, how can the small fish like me get the deal? I understand that u’re just trying to educate us about them, but life is always filled with uncertainties, and that makes it more challenging and interesting! No one way out to everything. I might even consider selling wonton mee or bak kut teh and become a rich taikun.
Btw, I got to know ur website when u wrote and article about TTB and how good his Closed-End Funds(ICapital) is.
wow… nice … i agree what you said… as u said every1 cant predict when is our life going to end… this is the fact…as you said if u r gone u will leave rental for ur wife and children?? good idea.. but how can u predict u can live tat long to pay all ur instalment? lets say if u gone in 5 years later the rest 10-15years who going to pay?? god?? ur parent?? ur wife?? or ur child?? u leave burden to them la?? rental?? property?? If u buy properties is there any guaranteed if u r gone u no ned pay the instalment? But saving in the insurance company there are guaranteed if u r gone company will pay lum sum Cash to ur family to pay all the loan. If tomorrow i live,it is saving. If tomorrow i gone,it is an Insurance. Ohter than insurance any ohter idea can guaranteed i can give CASH to my family after i gone? Our family preffer cash or sympathy？I know you are smart but dun thinks tat everything tat u think is 100% correct. Not every1 like you can no ned work n play share market at home.
ah yap. i followed ur blog for quite sometime ago. u were quite humble in the beginning (much earlier post), and starting to be cocky now.
i wonder if ur just a hoax or the real thing. you can always argue about everything, doesn’t mean ur right.
what bother me is, u gave quite reasonable arguments and input regarding investments but never revealed what u have achieve.
can i give u 100k u invest for me? and we split 60-40. dare?
@don,
Very very good observation. I am happy you can see that, that means you are reading what I write. It’s more easy for me to write stuff like health than on money because I don’t feel comfortable discussing about my wealth. I am simply not Azizan Ali. I can’t write several books and put my big head-shot photo on all of them and tell you how rich I am. Because I am not drive my “significant” [or the word "glory" or "face"]. This blog is a blog for me to contribute back to the society. It makes no money nor it shows my face or my name. I didn’t expect to help everyone, but I believe somewhere somehow, someone who has the same frequency with me, will benefit from it. Whether my writings got “meat” or no “meat” is up to the reader. You may again think I am cocky but I am not interested in fishing for someone. I am more interested in teaching people how to fish.
> I know you are smart but dun thinks tat everything tat u think is 100% correct.
I am sorry that’s your observation. For me, my own observation about myself and everyone else is, “We are not smart and 100% of what we think are wrong”.
@derek
>lets say if u gone in 5 years later the rest 10-15years who going to pay??
Hey dude, have you ever been listen Mortgage b4? It is a common sense for everyone to have mortgage after owning a properties. You can just “die” without leaving any “payment shit” to them but a real properties let them receive monthly rental every month~wow (remember it is cash which you keep specify)
And, I think I got what ahyap means. Ahyap think investing in properties and share are the way to broaden wealth as you think insurance is your favourite investment scheme. You fully trust on insurance since it’s 100% correct, at least for you, even though there’re still lots of ppl think insurance is totally a fraud. What I wan to say is there’re big difference of risk tolerance among every1. For those who cant bear of high risk for sure they cant obtain highest return but you can sleep well everynite.
–There is really 100% correct for you own once you fully understand and believe a thing regardless of other opinion.
you know ahyap, in a way, I’m jealous of you. You don’t have to worry about sickening bosses attitute, wake up 6.30am every damn day in the morning, to “berjuang untuk negara”.
dont get me wrong, I do feel good contributing to my country’s economy, but sometimes I just wish that I don’t have to work. I want to make my money work for me. I’m sure everyone does.
Robert kiyosaki’s theory is easier said than done, and I think I speak for the majority of us. I do understand his concept. I understand it perfectly. But not everyone of us have the luxury of a startup capital.
So I would extend my thanks to you for contributing back to society.
And if you did teach us how to “fish”, thank you for that too.
I have the Rich Dad Poor Dad book but I never finished it and I wonder where I kept it. I will have to go look for it and start reading it again. But basically, I get what you mean. But money saved can also bring income right? For example, if I saved RM3 Million in the bank and I get 3% interest pa, I will get an annual income of RM90K. Anyways, I must thank you for this timely article which reminded me to plan for my retirement.
However, I was wondering (excuse me for I am no a economist), if everyone is getting passive income then who is going to do the work? It is still important for people to do the work to keep the economy and country running, right?
Statistically and economically (supply demand), it is impossible for everyone to be rich. The statistic distribution chart will always look like a bell curve will the middle being normal. So it is in relative basis and not absolute basis. So if everyone in Malaysia is rich and have more than 1 million ringgit in the bank account, those that have the least millions will have to sweep the street and clean toilet.
Making money is difficult. Building cashflow is even more difficult. Many people don’t like difficult stuff. So at the end many people will give up even they like money and like cashflow. The question is whether you are the one giving up?
Giving up is OK if you can accept things as it is. But most people are in denial mode. How to know? Can you share the happiness and joy of someone doing better than you? Or are you angry and jealous about them? There are just 4 modes of happiness
Mode 1 – You have lots of money and you need a lot of things. So you work hard for money and spend it. Happy.
Mode 2 – You have lots of money and but you don’t need things. You work hard, hide the money under your bet and count them everyday. Happy.
Mode 3 – You don’t have money but you don’t need things. You enjoying doing what you do disregard of money. Happy.
Mode 4 – You don’t have money but you want things!!! You hate what you do. You are unhappy with your life. You think everyone is better than you, especially those that look like doesn’t need to work as hard as you but makes a lot more money than you. You felt your life unjustified and unfair. You think you are being taken advantage of by the rich. You angry, you envy and you jealous… you say things like, “He is lucky because he is born in a rich family… so his father give him big business, so he can go to good college …”, you say things like, “You think everyone is like you meh ….” You don’t want to learn, you just want to blame. So… you are unhappy.
Aha… i am waiting the ‘more on REITs’. I am recently looking into this instrument too …. Ah Yap waiting for your update ya …..
another good article from ah yap on cash vs cashflow, passive income, retirement. i think not everyone can do what ah yap is doing. writing a long interesting article that keeps our brain thinking and he deserves to be cocky sometimes
. the best part is not having job after graduate.
every human being is unique and not every investment tools are suit to everyone. i like a say of “it is not a gold, shares, property, forex that makes one rich but the knowledge (a depth knowledge) on those things that makes one rich.
dear ah yap, keep doing what u are doing now and you are doing great. And I will continue read “free” newspaper only
@kerapusenangin, wah I like your comment! very motivated. will definitely write more! thanks! [but tomorrow vacation for a week, keke]
@everyone, I mean I do not have a 9-5 job with a boss/office/factory, I still got to work at home and work very hard esp at the beginning. Sorry the confusion between “work” and “job”.
I bet you are IM or AM which could be pretty lucrative especially if you spend enough time to build it. I know some SOHOs are actually doing much better than people with 9-5 day job.
well, your blog is one of a kind but i like it. keeps on, i like this one of a kind “Newspaper”
Thanks for your sharing, AhYap, hopefully more to come!
Btw, is it possible to reveal what you are doing? Anything in general will do, like buying stocks, property, online trading…. stuff like that… cause I am really curious to know! Haha…
Maybe we can join force and learn together in stock market.
Funny to read that financial planning is bullshit. In an ideal world, whatever Mr T.Kiyosaki and you proposed would be the best thing done.
However, in a real world, it doesn’t work that way.. Not everybody will have the same idea as you (although it may be, almost logically, the best solution) for planning their retirement. Some may not have the opportunity at all, some may be too old by the time they read your post, some may be to unlucky… etc etc.. (what a lottery based world)
Anyways, I think it’s a pretty well written post regarding financial health. Kudos, and keep up a good work.
@Khek, that’s why I have a post call the flies and the bees to explain what you have noticed. In the real world, we will always need more flies than bees.